Expect 35% margin from Bahrain multiplex: Mukta Arts

The investment in Bahrain cost around Rs 15 crore and the company expects to breakeven in about two and half years, says Rahul Puri, MD of Mukta Arts.

A wholly-owned subsidiary of Mukta Arts has started operations of a six-screen multiplex in Bahrain. The investment in Bahrain cost around Rs 15 crore and the company expects to break even in about two and half years, says Rahul Puri, MD of Mukta Arts.

In an interview with CNBC-TV18, he said that the cinema occupancy during weekends in Bahrain is almost 100 percent and margin of around 35 percent is expected from the multiplex.

Below is the verbatim transcript of Rahul Puri’s interview to Reema Tendulkar and Prashant Nair on CNBC-TV18.

Reema: Some more details about your multiplex in Bahrain. The total investment when do you expect breakeven and what could be the extent of revenues in the coming 2-3 years?

A: The extent of investment in 6 screens in Bahrain is approximately Rs 15 crore. We would expect us to breakeven on that investment in about two to two and a half years and we expect probably in Indian terms the entire operating profit that the company currently makes will be doubled by Bahrain in its first year.

Prashant: Do you have other screens in Bahrain or that part of the world and why essentially Bahrain?

A: We don't have any other screens at the Bahrain at the moment, so Bahrain is our first on foreign soil, but Bahrain came to us as an opportunity. It is a small market, but it is a market that is well visited by a very large Saudi market on weekend and so there was a burgeoning opportunity there for a very large premium property cinema, which is what we built at Juffair Mall in Manama and what we seen is that Bahrain is quite unscreened and so are a number of other countries around GCC apart from obviously Dubai and so we see a great deal of opportunity in that region to now expand our base from there and add more screen.

Prashant: You said that the market is small, do you have the number how annually what would be the size of the exhibition market in Bahrain and also you said other GCC countries also there is less penetration underserved. Are you looking at more screens there in GCC countries?

A: As I said, Bahrain is a small market because it is a small island country, but on the weekends it gets a lot of expatriates from Saudi Arabia, they are coming to spend the weekend in Bahrain and so its weekend business is extremely strong. If you look at it as a market on the weekends which for Bahrain would be Thursday, Friday and Saturday its occupancy of cinemas is almost 100 percent so it is almost full on those dates, which is what makes it such an exciting opportunity and I think there coupled with obviously with a very strong currency, a very, very strong retail demand that makes this property for us an extremely important one and would be an extremely profitable one as well. That then let us to explore a bunch of other countries in GCC, Oman for instance, Abu Dhabi for instance and of course in and around Bahrain to see where we can add more screen opportunities and we were happy to see that there are certainly a number of opportunities because as I said the region is relatively under screened apart from Dubai.

Reema: Once screen hits maturity level then what would be the expected margins?

A: Because Bahrain does not have tax rates from that point of view, we would expect to see margins of about 35 percent.

Reema: At earnings before interest, taxes, depreciation, and amortization (EBITDA) level or net profit level?

A: At the EBITDA level and even at net profit level you see a far higher net profit because obviously there is no taxation.

Reema: That’s much better than what you enjoy in India, so are you looking to expand more in these Gulf countries rather than in India. Walk us through your expansion plans in terms of screen addition this year as well as next year?

A: We are still very much focussed on India that remains our domestic market and we still got an opportunity here in India. We opened two more screens in Ahmedabad at Diwali than we got Gurgaon, we got Pune, we got Nainital so lined up over the next 3-4 months, but accidentally the GCC is an area of concentration for us now we got a company there. We got an operation up and running there. It is easier for us to sort of scout potential opportunities and then move very quickly on them. We already got two properties that we have identified and that we are looking at and we hopefully will be closing those properties in the next couple of months.

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