Mukta A2 Cinemas to have 100 screens by end of FY16
As the movie exhibition business undergoes a consolidation phase, Rahul Puri-led Mukta A2 Cinemas, the exhibition arm of Subhash Ghai’s Mukta Arts, is looking at occupying the mid-level spot, with a screen presence of around 100 screens by the end of the next fiscal. Currently operating 30 screens across 10 properties, the cinema chain will be ramping up its presence in tier-II and tier-III areas. The outfit started operations around three years back. With an average of three screens per property, the multiplexes have a ticket price range of Rs 120 to 150.
The latest expansion has been in Bhopal and in the coming months, Puri and his team plan to take brand Mukta A2 Cinemas to territories like Gurgaon, Panvel and Dehradun. In the long run, the chain may look at strategic investment from bigger chains, but for now, the focus is on brand building and organic expansion.
“We expect the annualised revenues (for the current fiscal) to be around Rs 40 crore. This number will grow as we expand our footprint in the country over the next 18 months. The EBITDA is around 15% and we expect to break-even by the end of this fiscal. In the meantime, we want to expand in places where there is appetite for movies and scope to increase margins as well. As we scale up, we want to cater to the mid-level segment of the audience and hence the ticket pricing is between Rs 120 and 150,” says Puri.
He adds that eventually, the capex required would increase and that is the time they would look at strategic investment. “At no point will we divest 100% stake. However, eventually, we will require a capex of around Rs 100 crore and we may look at investment at that time,” he says. He estimates that the current screens will take around two and a half to three years to break-even on an average.
The cinema chain operates on a revenue share model with its mall partners. The split follows an occupancy-based slab model. The exhibitor (Mukta) shares upto 30% of the revenue with the mall partner for occupancy levels above 40%. If the occupancy is between 30 and 40%, the revenue share of the mall partner is around 20% and for occupancy up to 30%, the share is 10% of the revenue.
Since the expansion is in the tier-II and III regions, Puri informs that regional films also play a major role in driving occupancy and hence revenues. “With digitisation of cinema screens, it is now possible to shuffle shows and reschedule at short notice. Many a times when the Hindi movie does not do as well as expected, the regional movie starts seeing a rush. We have had some Gujarati and Marathi films that have seen very good occupancy in such cases,” he adds. In addition to Indian expansion, the cinema chain will be establishing its presence in the Middle East starting with Bahrain. Mukta Cinemas will open a six screen property in Bahrain next year. “In the cinema exhibition business, Bahrain does not require you to have a local partner. The prospects for margins are also better since taxation is more rationalised than (it is) in India. We see an opportunity there and are exploring that market,” says Puri.
Apart from launching multi-screen properties, the company is also exploring the option of renovating single screens in Uttar Pradesh and Bihar. The former’s government gives up to 50% subsidy for such projects and the region provides good scalability. However, this part of the business will be secondary and the main expansion will come through multi-screen properties, reiterates Puri.
The latest expansion has been in Bhopal and in the coming months, Puri and his team plan to take brand Mukta A2 Cinemas to territories like Gurgaon, Panvel and Dehradun. In the long run, the chain may look at strategic investment from bigger chains, but for now, the focus is on brand building and organic expansion.
“We expect the annualised revenues (for the current fiscal) to be around Rs 40 crore. This number will grow as we expand our footprint in the country over the next 18 months. The EBITDA is around 15% and we expect to break-even by the end of this fiscal. In the meantime, we want to expand in places where there is appetite for movies and scope to increase margins as well. As we scale up, we want to cater to the mid-level segment of the audience and hence the ticket pricing is between Rs 120 and 150,” says Puri.
He adds that eventually, the capex required would increase and that is the time they would look at strategic investment. “At no point will we divest 100% stake. However, eventually, we will require a capex of around Rs 100 crore and we may look at investment at that time,” he says. He estimates that the current screens will take around two and a half to three years to break-even on an average.
The cinema chain operates on a revenue share model with its mall partners. The split follows an occupancy-based slab model. The exhibitor (Mukta) shares upto 30% of the revenue with the mall partner for occupancy levels above 40%. If the occupancy is between 30 and 40%, the revenue share of the mall partner is around 20% and for occupancy up to 30%, the share is 10% of the revenue.
Since the expansion is in the tier-II and III regions, Puri informs that regional films also play a major role in driving occupancy and hence revenues. “With digitisation of cinema screens, it is now possible to shuffle shows and reschedule at short notice. Many a times when the Hindi movie does not do as well as expected, the regional movie starts seeing a rush. We have had some Gujarati and Marathi films that have seen very good occupancy in such cases,” he adds. In addition to Indian expansion, the cinema chain will be establishing its presence in the Middle East starting with Bahrain. Mukta Cinemas will open a six screen property in Bahrain next year. “In the cinema exhibition business, Bahrain does not require you to have a local partner. The prospects for margins are also better since taxation is more rationalised than (it is) in India. We see an opportunity there and are exploring that market,” says Puri.
Apart from launching multi-screen properties, the company is also exploring the option of renovating single screens in Uttar Pradesh and Bihar. The former’s government gives up to 50% subsidy for such projects and the region provides good scalability. However, this part of the business will be secondary and the main expansion will come through multi-screen properties, reiterates Puri.