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Rediff News  All News  » Business » Cinemax finds tier- II cities good location, to invest Rs 350 crore

Cinemax finds tier- II cities good location, to invest Rs 350 crore

August 14, 2007 09:18 IST

To meet the growing demand for entertainment venues, Cinemax India will invest Rs 350 crore (Rs 3.5 billion) over the next three years to build new multiplexes in 15 locations, mostly in tier-II cities.

The operator's screen capacity will be augmented by over two-thirds this year, from the 39 screens it currently operates in 13 locations in India. In 2007-08, Cinemax will add 60 more screens in Hyderabad, Ahmedabad, Bangalore, Kolkata, Panipat, Kochi, Indore, Nagpur, Rajkot and Siliguri among others.

The company aims to have a total of 100 screens operational by the end of FY08, with an investment of Rs 110 crore (Rs 1.1 billion) across 25 cities, and 300 screens operational by March 2010.

Chennai and Mysore will be among the locations where Cinemax will have a presence by the end of next year. Chennai, Bangalore and Rajkot will have 4-screen multiplexes, with the rest being 3-screen systems. 

The company's horizontal expansion drive aims at a rather steep target of 500 screens up and running by March 2011, and will be part-financed from the Rs 108.5-crore (Rs 1.08 billion) corpus raised via an initial public offering in February this year.

Cinemax has already used Rs 29.93 crore (Rs 299.3 million) from the IPO proceeds to set up new theatres this year. The company is likely to raise additional expansion funds via liquidation of a portion of its land bank spread over eight properties in Mumbai, totalling 155,000 square feet.

"Sales from the asset bank could be used to raise additional funding, besides the option of floating a second IPO. By March 2008, we will examine further options to raise the remaining funds," Devang Sampat, vice-president, marketing and programming, Cinemax India, said.

The operator has signed property deals with real estate developers for space within upcoming malls in Chennai and Mysore. Cinemax did not disclose the identities of the developers.

Sampat said that at an average investment of Rs 70,000-75,000 per seat, Cinemax would be looking at a 1,000-seat per screen capacity on an average.

Cinemax will follow an almost 100 per cent leasing model for its multiplexes, which would be situated within malls. While its new multiplex at Bandra in Mumbai is owned by the company, the leasing model is a more viable option in tier-II cities.

"Even the Himmatnagar facility (in Gujarat) was acquired, but where real estate prices are high, outright purchases are not on, and the leasing model is preferable," Sampat said.

With the mall development business now moving to the Kanakia group, the upcoming multiplex projects will be wholly executed by Cinemax. Cinemax controls about 30 screens in Mumbai and Thane alone, and recently launched three multiplex properties in Guwahati, Himmatnagar and Mumbai.

Ravi Menon in Chennai