Reliance Capital has agreed to sell the multiplex business of Reliance MediaWorks (RMW) to Carnival Cinemas for ₹700 crore, signalling further consolidation in the Indian cinema exhibition space.

The deal, touted to be the largest merger and acquisition transaction among multiplex operators, will make Carnival Cinemas the country’s third largest operator after PVR and Inox Leisure.

The deal excludes real estate owned by RMW at IMAX Wadala (Mumbai) and other properties, which will be separately monetised for about ₹200 crore, RMW said in a media statement.

“The proposed transaction is in furtherance of Reliance Capital’s stated objective of focusing on its core financial services businesses, significantly reducing exposure to non-core investments in the media and entertainment sector, and reducing overall debt,” said Sam Ghosh, Chief Executive Officer of the Anil Ambani group company.

RMW currently operates a chain of 250 multiplexes under the ‘Big Cinemas’ brand.

Whenever Carnival goes for a listing, Reliance Capital will retain an option to acquire a stake in pre-IPO stage “at an appropriate discount”.

With this deal, Carnival Cinemas will have 250 multiplexes. Shrikant Bhasi, Chairman of Carnival Group, said the company is targeting to achieve 1,000 screens by the year 2017.

Mumbai-based Carnival has diversified business in hospitality, media, real estate, entertainment and multiplexes. Sumit Mahajan, Director, Walker Chandiok & Co, said: “Theatrical release window in India, as compared to certain overseas markets, is fairly high and a significant portion of movie revenues are driven by box office collections. With enhanced presence within the unpenetrated markets coupled with higher number of releases each year, increased foreign film releases and improved quality production of regional films, this sector is expected to grow in double-digits in the coming years.”

This deal marks a significant landmark in the cinema industry, which has been witnessing mergers and acquisitions, but at relatively smaller ticket sizes.

Other buys

Recently, Inox acquired Satyam Cineplex for ₹240 crore, while Carnival mopped up HDIL’s Broadway Cinemas for ₹110 crore.

In 2012, PVR bought out Cinemax in a deal pegged at ₹395 crore. In July, RMW had struck an agreement with Prime Focus to merge its film services division.

The RMW-Carnival transaction is expected to close within the current financial year.

EY and KPMG acted as deal advisors for Reliance Capital and Carnival Group, respectively.

The article appeared in Hindu Business Line. The article can be found here.