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L Capital Eco Ltd, a subsidiary of the $ 640-million global private equity (PE) firm L Capital Asia, will invest Rs 108 crore in lieu of equity stake in PVR Ltd, boosting the theatre chain’s growth plans in the cinema exhibition and in-mall retail space.
L Capital Asia is the the PE arm of Louis Vuitton Moët Hennessy (LVMH), the world’s biggest luxury goods group.
The PE company has already made two other investments in India — an eight per cent stake acquisition in retail chain Fabindia and a 40 per cent buyout in two tranches in Genesis Luxury Fashion. It has also been in the race to pick up a majority stake in kidswear chain Lilliput, where promoters and their partners are involved in a major dispute.
“We are inducting L Capital as a strategic investor to grow our business. The firm will pick up 10 per cent stake in PVR Ltd under the preferential allotment route,” said Ajay Bijli, chairman and managing director of PVR. “Besides, L Capital will enter into a joint-venture agreement and invest in a new subsidiary being set up by PVR to grow footprint in the retail space.”
Under the agreement, L Capital through an investment of Rs 57.7 crore would subscribe to 2.88 million equity shares in PVR at a price of Rs 200 per equity share (a premium of about 21 per cent over the closing stock price of Rs 165.95 on NSE on July 31).
PVR is looking at setting up 500 screens across the country by the end of 2014. PVR currently operates 179 screens across 24 cities in India. Investments are under way to add another 69 by the end of the current financial year.
The two companies will also enter into a joint venture to invest in various in-mall entertainment, gaming, food and leisure formats. L Capital will initially invest Rs 50.1 crore into a new subsidiary being set up by PVR. The theatre chain’s existing investment in PVR bluO Entertainment Ltd (its bowling alley arm) will now be held through this new subsidiary company. The formation of the joint venture is, however, subject to the receipt of the Foreign Investment Promotion Board’s approvals.
“L Capital has a strong global reach and has already made introduction to multiple international entertainment, leisure and F&B concepts. With their active involvement, we expect to be able to bring multiple such concepts to India,” said Bijli.
PVR’s net profit declines
PVR’s net profit declined 64.5 per cent to Rs 7.98 crore in the quarter ended June 30, compared to Rs 22.47 crore in the corresponding period last year. The decline has been on account of exceptional income registered last year on sale and lease back of Phoenix Mills property in Mumbai. Bijli added: “If you compare on a like-to-like basis our net profit has increased from Rs 5 crore to Rs 7.98 crore.”
On the back of robust footfalls at its theatres, revenues from the exhibition business grew 33 per cent during the quarter.PVR recorded 7.53 million footfalls at its theatres, an increase of 36 per cent over the first quarter last year. Total income from operations increased 51.6 per cent to Rs 158.74 crore against Rs 104.70 crore a year ago.
Shares of PVR closed at Rs 185.40 on BSE on Wednesday, 12.6 per cent higher than the previous close. The BSE benchmark Sensex gained 0.12 per cent on Wednesday to close at 17,257.38 points.