PVR Justifies Higher Valuation for DT Cinemas

PVR's acquisition of DLF's multiplex subsidiary DT Cinemas for Rs 500 crore has been termed as expensive by some analysts. PVR will pay Rs 500 crore for 29 existing screens of DT Cinemas; 10 additional screens will come up at DLF's cost over the next year. .This translates in to an acquision price of Rs 12.82 crore per screen for 39 screens. This is costlier than earlier deals such as the Inox- Satyam Cinema deal, which took place at Rs 5.8 crore per screen and the Carnival-HDIL deal struck at Rs 3.3 crore, analysts say. .PVR management however justified the higher valuation of DT Cinemas citing asset quality and earnings potential. PVR's chief financial officer Nitin Sood told NDTV that screens at any two locations are not comparable.(Watch interview) ."DLF has built great quality cinemas at some of the best locations. I think that is the key driver for us to go ahead with this transaction," he added. .The company added that the deal will be earnings accretive for PVR as DT Cinemas has higher operating margin compared to PVR. It expects revenue of Rs 200-Rs 250 crore from all 39 screens of PVR once the balance screens come up. .PVR's valuation expectation for the deal is 11 times EV/EBITDA, which means PVR expects DT Cinemas to deliver an EBITDA (gross profit) of over Rs 45 crore from all its 39 screens annually. ."PVR operating metrics at a country level is much lower but at this circuit (Delhi-NCR) level their (DT Cinema) operating metrics are much better, ticket price has been high, occupancy levels are higher, the overall realisation metrics is also superior because this is in a bigger city. This will also help us in improving our overall metrics," Mr Sood said. .Per seat food and beverage revenue of DT Cinema is also higher compared to PVR, the company said. .PVR expects to finance large part of the deal through equity and some part through debt. .Shares in PVR ended 3.77 per cent lower at Rs 641.25 on Wednesday, after earlier gaining over 5 per cent in morning trades.

PVR Justifies Higher Valuation for DT Cinemas

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