Economy

Multiplex industry may see more consolidation

Meenakshi Verma Ambwani New Delhi | Updated on November 29, 2017 Published on December 16, 2014

Wider footprint Acquisitions help achieve economies of scale   -  Bijoy Ghosh

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2014 has been the year of consolidation for multiplexes. With the slowdown in new mall development leading to sluggish organic growth, players are going in for acquisitions to achieve economies of scale. Experts believe the industry could see more such buys in the coming months.

While Inox Cinemas acquired Delhi-based Satyam, Carnival Cinemas bought a 100 per cent stake in Big Cinemas. Meanwhile, Mexican chain Cinepolis is said to have acquired Essel Group’s Fun Cinemas. The official spokesperson for Cinepolis refused to comment, but sources said both companies are expected to make an official statement in January as some approvals are yet to come.

Some strong regional players could fuel further consolidation.

Vivek Gupta, Partner, BMR Advisors, said: “Organic growth of the multiplex industry is closely linked with and limited by the growth of new real estate. Further consolidation is perhaps inevitable as there are still some players that operate out of marquee locations and would be of interest to acquirers.” He said, depending on the expansion plans and gaps in the portfolios of national players, there could be more acquisitions. Key regional players in the multiplex industry include DT Cinemas in the north, and Sathyam Cinemas (SPI) in the south, besides Wave Cinemas and SRS Cinemas. Some of these players enjoy strong leadership presence in certain regions or in tier 2 cities.

Wider footprint

Deepak Asher, Director, Inox Group, said acquisitions help multiplex companies get a wider footprint and achieve economies of scale through higher ticket, food and beverages and advertising revenues, besides optimising costs. “There are still 15-20 strong regional players and there is scope for consolidation. Such acquisitions could help big multiplex companies add key locations in metros and help them get a stronger foothold in smaller cities and towns,” he said.

Jehil Thakkar, Partner and head of media and entertainment, KPMG India, said scale is critical for multiplex players and gives them leverage when they strike financial agreements with film distributors.

“India is still one of the most under-screened countries and there is huge headroom for multiplex operators to grow, both organically and inorganically,” he said.

Published on December 16, 2014
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