"Future consolidations of Indian acquisition are on cards"

Nitin sood | January, 2013

Nitin Sood is the Group CFO at PVR, one of India's leading Filmed Entertainment Companies. He has played a key role in building the organisation from a start up stage to one of the premier Entertainment Companies in India and has been instrumental in raising capital from Banks, Institutions & Private Equity investors to fund company's growth plans. Apart from the above he plays an active role in key strategic decisions, oversees accounting and compliance for various group companies, evaluating and leading any M&A opportunities etc.
 
What was the idea and rationale behind acquiring Cinemax? 
From our prospective, if we see the business, it depends upon where we are locating our business. It is more like a retail business. Our business model is fundamentally depended on ‘location strategy’. Place and location plays a major role in our strategic decisions. If we see retail market of Delhi and Mumbai, we will find that there is no new place to build and construct new malls. Take for instance Delhi, there is no likelihood of new malls coming up in next 3-5 years. The only growth happening are in suburbs of Gurgaon, Faridabad, Noida and Gaziabad. So with Delhi there is no real-estate space for growth. Similarly, in Mumbai the growth is happening around the suburbs only. This is where Cinemax comes into the picture. Cinemax is having 13-14 new cinema halls in Mumbai alone, which we think carries a long term market potential. People are spending more of their disposable income on entertainment sectors and food and lifestyle. Thus this acquisition would help us expand our reach in the heart of the two metropolitan cities without having to hunt for new real-estate properties for constructing new movie halls.
 
What strategic benefit will this M&A give PVR?
I think from M&A perspective, this was the first acquisition that we successfully completed. In November 2012, we struck a deal to acquire the entire 69.27% stake held by Cinemax promoters in a deal backed by PE firms Multiples and L Capital. In the same line, we have completed the open offer and upped stake in the company to 93 per cent. The acquisition would create the largest movie exhibition chain in India with a combined strength of 351 screens at 85 locations with a total capacity of 84,190 seats.
 
How will this acquisition augment your business?
We are a market leader in North India. We are also market leader in south India, but there the margin is quite less, compared to the North and the West. Our strong presence in North, West as well as South makes us the largest market leader of India. On top of it, we are leaders in 8 out of 10 markets in India. It makes our leadership position strong in term of scale and size, which acts as a big differentiator for us. This M&A will allow us to increase the scale and size of our business and capture a bigger market share. 
 
What is your understanding with L Capital and what does it bring to the table?
We are having multiple private equity funds that were handled by Renuka Ramnath. She is the first investor of ICICI avatar. She invested in private equity of the company in 2003. The idea is that to understand the business and also to understand the long term strategy direction, both the investors should understand the business and they should also have a vision to expand their business out of the domestic borders. L Capital recognized the management strength of PVR that we bring to the table. We would like to leverage in domestic markets by reaching out to the corporate sector, banks, and institutions, at large. And lastly they are investing in another retail format which will give an access to a new market altogether and take things to a next level. This will create benefits for us in the long term as well. Apart from delivering money, L capital helps us in licensing works on globally level. PVR is gradually tying up with private equity partners to expand their ambit across entrainment business, food & lifestyle and globally investor in the business of entertainment and lifestyle. We are also looking globally to invest and also negotiating with numerous foreign investors to invest in India. 
 
According to you how merger and acquisitions plays a significant role compare to traditional organic growth?
Our business is something different. As I said earlier, in our business it all depends on location. If there is no good location or good places we can’t think about our business. Like if we take an example of Saket (Delhi) where we can build one additional mall. No matter how much money you have if you don’t have location you cannot grow and you cannot build. In Delhi and Mumbai in spite of we being at a No.1 position and in spite of having near about 300 competitors and there is no further scope. PVR also contributes to Hindi movie thorough our 20-25 box offices and 40% percent to all Hollywood movie box office collection comes from PVR across all channels ranging from raw materials, distribution standing in the market places and over all entertainment business - giving us an edge in the market which is relevant to the any business.
 
What are the future plans of PVR with the respect of future M&A?
Future consolidations of Indian acquisition are on cards. As there are lot malls that are coming up and they need are looking out for brands, especially entertainment brands, which will help them in attracting customers and increasing footfall in their shopping complexes, PVR is all set to enter such market place. PVR is not looking for any such future changes because we are not going for any new strategy or contemplating on a new business model for future. Our main strategy would be on banking on our current partners and current business than on opting new strategies or business transformation. However, we would definitely consider any new acquisition which has a potential of bigger market for us in the future.

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