Companies

‘Focus is on organically growing our multiplexes’

Bindu D Menon Mumbai | Updated on January 22, 2018

SHRIKANTH BHASI, Chairman, Carnival Group

Carnival Group chief terms the buy from L&T a good entry-level deal



NRI Shrikanth Bhasi-promoted media and entertainment firm Carnival Group has closed its fourth largest deal. The company acquired a mixed use development project from engineering major Larsen & Toubro’s for a whopping ₹1,785 crore. The Group had previously also bought out the Big Cinemas multiplex business of Anil Ambani’s Reliance Group for ₹700 crore and Glitz Cinemas. It had also acquired Leela Infopark (Kochi) and Leela Technopark (Thiruvananthapuram) for ₹142 crore. Earlier, it had acquired HDIL’s multiplexes business for ₹110 crore.

The diversified Carnival Group owns brands such as DBell, Café Sabrosa and Rasam in their hospitality stand along with Carnival food courts. In an interview with BusinessLine, Bhasi (46), Chairman, Carnival, says that the company is strengthening its foothold at any place where there is opportunity to expand the scope of its multiplex and food business. And in deals such as these, real estate acts as cash-yielding investment portfolio.

What was the strategic advantage to acquire this project?

Multiplex is a focused area for us. We bought the Leela estate earlier. This is not a business but an investment portfolio, which generates cash flows from rent yields. The interest rate will go down as the country is heading there. The interest rates are much lower than we started two years back. In deals like these, there is a huge debt component and if you reduce your borrowing cost, then your yields will go up. So, we are focusing on good commercial properties and multiplexes.

Are you looking at expanding your multiplexes businesses through such acquisition?

Not exactly. This is a strategic investment for us where if the yield goes up to 14-15 per cent then it is good business. We got a good entry level deal so we bought the property.

Are you looking to acquire screens or malls?

Screens (multiplexes) is our core business and will continue to be our bread and butter. We are not keen on acquiring any new multiplexes at the moment. We are focusing on organically growing our multiplexes business. Our plan is to have 1,000 screens by 2017. It will entail an investment of ₹ 450 crore.

When it comes to multiplexes business you seem to be betting big on mid-tier cities. What is the logic?

We are focussed on mid-tier cities with an average population of 1.5 lakh. Over the last three years, the income of these cities has moved up. From the beginning our focus is on the second tier cities. The occupancy rate in multiplexes will go up and our focus will remain in such towns.

How have you been funding these large scale acquisitions?

A major portion of our funding is through debt. It is a combination of debt and internal accruals.

You also have a café business. What is the roadmap for the same?

Food and entertainment grow hand-in-hand.

So, we have the food business. It is not just about watching a movie but also selling food.

So is commercial real estate on an upswing?

The growth in commercial is still slow. But rental yield is good in the projects we have acquired. So our debt is taken care of. The project that we acquired is a mixed use. It has mall, a hotel along with some commercial space. As long as your occupancy is good, there is no cause for concern.

Are you largely looking at inorganic growth?

We are not into Greenfield projects in malls or commercial spaces as we don’t have an expertise in it. We look at ready assets. For multiplexes, however, we understand that market, hence, we are looking to grow organically. Currently, we have no more plans to acquire.

Published on September 30, 2015

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