L Capital Invests $19 Million in Indian Theatrical Chain PVR Ltd.
NEW DELHI - L Capital Eco Ltd, a subsidiary of the $ 640-million global private equity (PE) firm L Capital Asia, will invest about $19 million (Rupees 1.08 billion) in exchange for a 10 percent stake in theatrical major PVR Ltd. New Delhi-based PVR opened India's first multiplex in 1996 and now runs 179 screens across 24 cities. PVR is looking at setting up 500 screens across the country by the end of 2014.
L Capital Asia is backed by Louis Vuitton Moët Hennessy (LVMH) - the world’s biggest luxury goods group - and Group Arnault. This is L Capital's third investment in India after it picked up an eight percent stake in lifestyle retail chain Fabindia and a 40 percent buyout in two tranches in Genesis Luxury Fashion which has local partnerships for various international brands such as Canali, Paul Smith and Jimmy Choo.
“We are inducting L Capital as a strategic investor to grow our business. The firm will pick up 10 percent stake in PVR Ltd under the preferential allotment route,” said PVR Ltd chairman and MD Ajay Bijli. “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. L Capital has a strong global reach and has already made introduction to multiple international entertainment, leisure and food and beverage (F&B) concepts. With their active involvement, we expect to bring these concepts to India.”
Under the agreement, L Capital - through an investment of Rupees 577 million - would subscribe to 2.88 million equity shares in PVR at a price of Rupees 200 per equity share (a premium of about 21 percent over the closing stock price of Rupees 165.95 on the National Stock Exchange on July 31).
The joint venture to invest in various in-mall entertainment, gaming, food and leisure formats will see L Capital initially investing Rupees 501 million into a new subsidiary being set up by PVR. The theatre chain’s existing investment in PVR Blu-O Entertainment Ltd (its bowling alley joint venture with Thailand's Major Cineplex Group) will now be held through this new subsidiary company. The formation of the joint venture is subject to approval by India's Foreign Investment Promotion Board.
Meanwhile, PVR released its financial results for the quarter ending June 30 reporting that its net profit declined 64.5 percent to Rupees 79.8 million. In the same period last year, PVR reported a net profit of Rupees 224.7 million, a large chunk of which was due to the sale and lease back of PVR's Phoenix Mills property in Mumbai. “If you compare on a like-to-like basis our net profit has increased from Rupees 50 million to Rupees 79.8 million,” clarified Bijli. Total income from operations increased 51.6 percent to Rupees 1.58 billion against Rupees 1.04 billion a year ago. PVR shares closed at Rupees 185.40 on the Bombay Stock Exchange on Wednesday, 12.6 percent higher than the previous close.