Cinemax Private Limited
Our Company was incorporated on May 22, 2002 under the Companies Act as Cineline Entertainment (India) Private Limited to primarily carry on the business of building, owning, and operating Multiplexes, Theatres and entertainment centres. The name of our Company was changed to Cinemax Cinemas (India) Private Limited on December 23, 2005. We were converted to a public limited company by a resolution of the members passed at the AGM held on June 12, 2006. The fresh certificate of incorporation consequent to the change of name of our Company was issued by the RoC on July 27, 2006. Our Company was incorporated with its registered office at Acme Commercial Arcade, 4th Floor Trikamdas Road, Kandivali (W), Mumbai-400067, which was subsequently shifted to 5th Floor, 349 Business Point, Western Express Highway, Andheri (East), Mumbai 400069 consequent to the approval of the Board on March 28, 2006. Pursuant to the approval of our Board on August 25, 2006, the registered office of our Company was shifted from 5th Floor, 349 Business Point, Western Express Highway, Andheri (East), Mumbai 400069 to 805, 8th Floor, 349 Business Point, Western Express Highway, Andheri (East), Mumbai 400069, where it is presently situated. Our Company had carried out a restructuring exercise, wherein seven of our group companies i.e. Rupam Private Limited, Hariyash Theatres Private Limited, Kanakia Shelters Private Limited, Kanakia Creators Private Limited, Vrushti Theatres Private Limited, Cineline Cinemas (India) Private Limited, and Cineline Multiplex Theatres (India) Private Limited (hereinafter referred to as the “merged entities”) were merged with us with effect from April 1, 2006. The High Court of Bombay sanctioned
the Scheme of Amalgamation on March 24, 2006. The restructuring exercise was done with a view to consolidate the Theatres and Multiplexes operated by us through various subsidiaries under the brand name of CINEMAX and also to facilitate cost effective regulatory compliance
Major Events
• December, 1997: Commencement of first Theatre at Goregaon - West (Mumbai) which was owned and operated collectively by the merged entities Kanakia Creators Private Limited and Kanakia Shelters Private Limited.
• February, 1998: Commencement of second Theatre at Kandivali - West (Mumbai), which was owned and operated by the merged entity Hariyash Theatres Private Limited.
• August, 1998 Commencement of Theatre at Andheri - East (Mumbai) which was owned and operated by the merged entity Vrushti Theatres Private Limited.
• October, 2000: Commencement of first Theatre with multiple screens at Sion (Mumbai) under the brand name CINEPLANET, which was owned and operated by the merged entity Rupam Private Limited.
• December, 2003: Commencement of first Multiplex at Wonder Mall, Thane (near Mumbai) - under the brand name CINE WONDER.
• May, 2004: Commencement of Multiplex at Mira Road (near Mumbai) - under the brand name CINE PRIME and at Nashik under the brand name of CINE ZONE.
• April, 2005: All the Theatres/Multiplexes renamed to CINEMAX to create a chain of Theatres/ Multiplexes, centred around the brand CINEMAX.
• September, 2005: For the first time we operated a Multiplex at Versova under a conducting arrangement through our subsidiary Vista Entertainment Private Limited.
• April, 2006: Carried out restructuring exercise pursuant to which our erstwhile subsidiary companies (Rupam Private Limited; Hariyash Theatres Private Limited; Kanakia Shelters Private Limited; Kanakia Creators Private Limited; Vrushti Theatres Private Limited; Cineline Cinemas (India) Private Limited; and Cineline Multiplex Theatres (India) Private Limited) were merged with us with effect from April 1, 2006. All the Theatres/Multiplexes were now owned directly by our Company, except Cinemax - Versova and Cinemax – Kandivali (East), which we operate under conducting agreements.
• May, 2006: Opening of the Eternity Mall with Multiplex and the first Giggles - The Gaming ZoneTM
Company Analysis
The company has revenues coming from diverse streams. Theatres or Movie screening, construction (commercial and retail) and also in gaming.The income from construction is not regular. The company has a history in construction with more than 5 million square feet constructed space till date. In movie screening they have more than 9000 seats across 10 theatres. They have a very significant presence in Mumbai with 9 theatres and 21 screens. The company has two important subsidiaries that is involved in constructing and the other in maintaining multiplexes.
SWOT ANALYSIS
Strengths
• The company is focussed in increasing multiplexes across the country with close to 100 screens in the next couple of years from the current 33 screens. This will increase the seat size by 3 times.
• The biggest strong point for the company is the current location of its theatres. They are mostly centrally located. Also, unlike its competitors, they have 8 properties with 7 in Mumbai giving free rental cost (only opportunity cost involved).
• The company has a strong experince in building and construction. Also, there is a brand of 'Cinemax' to be considered. I do not know if can be translated into revenues. They have a premium theatre too. The utilisation of this could probably indicate the pricing power for the company.
• The companys's average ticket size is still above Rs. 100 but with the introduction of cheaper tickets, this is bound to reduce.
Weakness
• High dependance on distributor for showing films in every theatre and for every film. This gives a very unstable business model when one compares with Adlabs which are in the other end of the value chain.
• The biggest weakness for any investor, which is mentioned rightly in the risk factors is the capital structure. It is so unfair for the retail investor. The bonus issue last year has diluted the earnings in a very big game.Further, there is also an issue of a preference share issue at no cost. This has diluted the earnings even further.
• The promoters have been investing in multiple business' streams. This is an area of concern as it looks like the promoters' are willing to enter into many areas with a motive of profit. The promoters have more than 25 different companies, partnerships etc and only 4 are operational. There are too many construction/building companies. I do not understand the existance of such companies.
• Alternate mediums like DTH, DVD or VCDs can become popular making the business unattractive.
• Existing competition is with Adlabs, Inox, PVR cinemas and Shringar. Adlabs is expected to be the largest player with a strong backward integration. Given this level of competition, efficiency or utilization rate is one of the key parameters for success. There is no strong pricing power with any of these competitors. Given, that they can't reduce the price to a 'non multiplex' rate, the downside pricing to increase volumes is lost too. Also, the competitors are expanding very aggressively. Incase, they are represented in most areas, specially in prime areas, that Cinemax is operating, this can lead to loss of business.
• Currently, the projection medium is traditional. Newer digital forms can force the company to incur substantial capital expenditure.
• The issue size exceeds the current networth by 5 times. That is a lot of funding under the present capital structure.
Opportunity
• There is a big demand for theatres across the country given the poor quality currently in existance across places. Also, most theatres are willing to open in Sec B and C cities and move into small towns too.
• They are willing to work on different model for pricing tickets depending on time/day
• The contribution of Multiplexes has been increasing constantly and is close to 20%
Threat
• Success of theatres are movie specific and this can tilt towards failure with poor movie scripts.
• Alternate sources of entertainment such as DTH, DVD can lead to lower sales.
• Removal of entertainment tax benefits can risk profitabilty if lower pricing power is not passed to the customer.
Our Company was incorporated on May 22, 2002 under the Companies Act as Cineline Entertainment (India) Private Limited to primarily carry on the business of building, owning, and operating Multiplexes, Theatres and entertainment centres. The name of our Company was changed to Cinemax Cinemas (India) Private Limited on December 23, 2005. We were converted to a public limited company by a resolution of the members passed at the AGM held on June 12, 2006. The fresh certificate of incorporation consequent to the change of name of our Company was issued by the RoC on July 27, 2006. Our Company was incorporated with its registered office at Acme Commercial Arcade, 4th Floor Trikamdas Road, Kandivali (W), Mumbai-400067, which was subsequently shifted to 5th Floor, 349 Business Point, Western Express Highway, Andheri (East), Mumbai 400069 consequent to the approval of the Board on March 28, 2006. Pursuant to the approval of our Board on August 25, 2006, the registered office of our Company was shifted from 5th Floor, 349 Business Point, Western Express Highway, Andheri (East), Mumbai 400069 to 805, 8th Floor, 349 Business Point, Western Express Highway, Andheri (East), Mumbai 400069, where it is presently situated. Our Company had carried out a restructuring exercise, wherein seven of our group companies i.e. Rupam Private Limited, Hariyash Theatres Private Limited, Kanakia Shelters Private Limited, Kanakia Creators Private Limited, Vrushti Theatres Private Limited, Cineline Cinemas (India) Private Limited, and Cineline Multiplex Theatres (India) Private Limited (hereinafter referred to as the “merged entities”) were merged with us with effect from April 1, 2006. The High Court of Bombay sanctioned
the Scheme of Amalgamation on March 24, 2006. The restructuring exercise was done with a view to consolidate the Theatres and Multiplexes operated by us through various subsidiaries under the brand name of CINEMAX and also to facilitate cost effective regulatory compliance
Major Events
• December, 1997: Commencement of first Theatre at Goregaon - West (Mumbai) which was owned and operated collectively by the merged entities Kanakia Creators Private Limited and Kanakia Shelters Private Limited.
• February, 1998: Commencement of second Theatre at Kandivali - West (Mumbai), which was owned and operated by the merged entity Hariyash Theatres Private Limited.
• August, 1998 Commencement of Theatre at Andheri - East (Mumbai) which was owned and operated by the merged entity Vrushti Theatres Private Limited.
• October, 2000: Commencement of first Theatre with multiple screens at Sion (Mumbai) under the brand name CINEPLANET, which was owned and operated by the merged entity Rupam Private Limited.
• December, 2003: Commencement of first Multiplex at Wonder Mall, Thane (near Mumbai) - under the brand name CINE WONDER.
• May, 2004: Commencement of Multiplex at Mira Road (near Mumbai) - under the brand name CINE PRIME and at Nashik under the brand name of CINE ZONE.
• April, 2005: All the Theatres/Multiplexes renamed to CINEMAX to create a chain of Theatres/ Multiplexes, centred around the brand CINEMAX.
• September, 2005: For the first time we operated a Multiplex at Versova under a conducting arrangement through our subsidiary Vista Entertainment Private Limited.
• April, 2006: Carried out restructuring exercise pursuant to which our erstwhile subsidiary companies (Rupam Private Limited; Hariyash Theatres Private Limited; Kanakia Shelters Private Limited; Kanakia Creators Private Limited; Vrushti Theatres Private Limited; Cineline Cinemas (India) Private Limited; and Cineline Multiplex Theatres (India) Private Limited) were merged with us with effect from April 1, 2006. All the Theatres/Multiplexes were now owned directly by our Company, except Cinemax - Versova and Cinemax – Kandivali (East), which we operate under conducting agreements.
• May, 2006: Opening of the Eternity Mall with Multiplex and the first Giggles - The Gaming ZoneTM
Company Analysis
The company has revenues coming from diverse streams. Theatres or Movie screening, construction (commercial and retail) and also in gaming.The income from construction is not regular. The company has a history in construction with more than 5 million square feet constructed space till date. In movie screening they have more than 9000 seats across 10 theatres. They have a very significant presence in Mumbai with 9 theatres and 21 screens. The company has two important subsidiaries that is involved in constructing and the other in maintaining multiplexes.
SWOT ANALYSIS
Strengths
• The company is focussed in increasing multiplexes across the country with close to 100 screens in the next couple of years from the current 33 screens. This will increase the seat size by 3 times.
• The biggest strong point for the company is the current location of its theatres. They are mostly centrally located. Also, unlike its competitors, they have 8 properties with 7 in Mumbai giving free rental cost (only opportunity cost involved).
• The company has a strong experince in building and construction. Also, there is a brand of 'Cinemax' to be considered. I do not know if can be translated into revenues. They have a premium theatre too. The utilisation of this could probably indicate the pricing power for the company.
• The companys's average ticket size is still above Rs. 100 but with the introduction of cheaper tickets, this is bound to reduce.
Weakness
• High dependance on distributor for showing films in every theatre and for every film. This gives a very unstable business model when one compares with Adlabs which are in the other end of the value chain.
• The biggest weakness for any investor, which is mentioned rightly in the risk factors is the capital structure. It is so unfair for the retail investor. The bonus issue last year has diluted the earnings in a very big game.Further, there is also an issue of a preference share issue at no cost. This has diluted the earnings even further.
• The promoters have been investing in multiple business' streams. This is an area of concern as it looks like the promoters' are willing to enter into many areas with a motive of profit. The promoters have more than 25 different companies, partnerships etc and only 4 are operational. There are too many construction/building companies. I do not understand the existance of such companies.
• Alternate mediums like DTH, DVD or VCDs can become popular making the business unattractive.
• Existing competition is with Adlabs, Inox, PVR cinemas and Shringar. Adlabs is expected to be the largest player with a strong backward integration. Given this level of competition, efficiency or utilization rate is one of the key parameters for success. There is no strong pricing power with any of these competitors. Given, that they can't reduce the price to a 'non multiplex' rate, the downside pricing to increase volumes is lost too. Also, the competitors are expanding very aggressively. Incase, they are represented in most areas, specially in prime areas, that Cinemax is operating, this can lead to loss of business.
• Currently, the projection medium is traditional. Newer digital forms can force the company to incur substantial capital expenditure.
• The issue size exceeds the current networth by 5 times. That is a lot of funding under the present capital structure.
Opportunity
• There is a big demand for theatres across the country given the poor quality currently in existance across places. Also, most theatres are willing to open in Sec B and C cities and move into small towns too.
• They are willing to work on different model for pricing tickets depending on time/day
• The contribution of Multiplexes has been increasing constantly and is close to 20%
Threat
• Success of theatres are movie specific and this can tilt towards failure with poor movie scripts.
• Alternate sources of entertainment such as DTH, DVD can lead to lower sales.
• Removal of entertainment tax benefits can risk profitabilty if lower pricing power is not passed to the customer.
