Cinemax India has lined up a massive expansion plan for the next two years. The multiplex chain currently has 55 screens over 17 properties across the country.
MUMBAI: Cinemax India has lined up a massive expansion plan for the next two years. The multiplex chain currently has 55 screens over 17 properties across the country.
By fiscal 2010, Cinemax — owned by real estate players Kanakia Group — is planning to scale up its presence to 299 screens across about 100 properties.
The total investment outlay for this is around Rs 350 crore, of which Rs 108 crore was raised in February 2007 through an IPO.
“We have properties under construction in Nagpur, Ahmedabad, Kolkata and Hyderabad. The sale of the Nagpur property should yield about Rs 70-80 crore,” said Jitendra Mehta, CFO, Kanakia Group.
The Mumbai region hosts 10 Cinemax properties and also contributes to about 60% of its revenues. Therefore, for its expansion, the company has set its sights majorly on other metros since it expects high returns from these areas.
Mehta reasons that the increasing average ticket price (ATP) and food and beverage spend (F&B) in the metros will be instrumental in delivering more returns.
“Since FY07, the ATP has already increased from Rs 120 to Rs 132 in metros. Over the next two years, we expect this to go up to Rs 200. Even F&B spends which are currently Rs 30-40 will reach Rs 70-80.”
The company is opting for the “Wherever the mall goes, we follow” approach. “Rentals are much cheaper at the top floor of malls. We plan to take our presence at such locations so that it helps on cutting down costs. The presence of the multiplex ensures that there are higher footfalls in the mall.”
However, in their December 2007 research report on Cinemax, analysts from ICICI Direct.com caution that the company’s future prospects depend on how quickly the company rolls out multiplexes.
“While Cinemax will be leasing out space in malls for its new multiplexes, there is no control on the time taken to construct the mall. Regulatory and licensing delays could dampen the profitability,” it said.
Further delays could be possible due to delays in receiving clearances and licenses from different states.
“By May 2008, we will roll out 4 gaming zones and 3 food courts. With average spends per head of about Rs 70-80, we expect both the businesses to contribute about 15-20% to our overall revenues in FY10.”
Cinemax is also exploring the food court and gaming business to supplement its primary multiplex business.
Analysts Ankit Kedia and Suraj Makhija from ICICI Direct in their January 4 Result Preview for Cinemax state that the successful roll out of its gaming and food court business within the multiplex premises will help the company garner revenues of Rs 2 crore per year.
Meanwhile, the company is still to foray into film production and distribution. This is something that could prevent it from diversifying its businesses in a way multiplex chains like Pyramid Saimira, PVR and Shringar Films have done.
Mehta said: “We would like to achieve a certain mass and scale using our real estate muscle in the exhibition business. Film distribution and production is therefore not on the radar, at least for the next two years.”
c_arcopol@dnaindia.net
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