First mover

Sumant Bhargava of Stargaze Entertainment talks to Aabhas Sharma about the pros and cons of setting up multiplexes in Tier II and III cities.

The multiplex revolution seems to have passed by small-town India — most multiplexes are concentrated in larger metro cities. Recognising the gap between demand and supply of movie halls in small towns, Sumant Bhargava of Stargaze Entertainment, has over the past two years opened multiplexes in towns like Ajmer, Kurukshetra, Dehradun and Bilaspur. “The cities we went to or are planning to go had no multiplexes or at the most one. So we had the first-mover advantage,” says Bhargava, who is an engineer from the Delhi College of Engineering and a graduate of IIM-Lucknow and who worked for a while with Coca Cola, and Satyam Cineplex for over five years before starting his own venture. Bhargava’s multiplexes go by the Glitz brand name.

In 2008, Bhargava set up the first cinema — ironically in New Delhi’s upper middle-class New Friends Colony neighbourhood — but it was on Tier II and III cities that he had his sights set. He now says that he chose Delhi because he found the right space. A year later, he got funding from Capital 18, a venture of Network 18. Since then, he has set up 22 screens in around eight cities. “It was easier to set up as malls were coming up in these cities and they were looking for a multiplex partner,” he explains. Bhargava has invested about Rs 45 crore in the last three years and the company posted a turnover of Rs 13.5 crore in 2010-11.

Stargaze offers three differentiated products — Glitz Lounge, Glitz Max and Glitz 3D. “It’s a myth that people don’t want to spend on watching movies in small towns,” Bhargava claims. The average ticket price at Glitz cinemas is around Rs 139. Bhargava believes that the quality of service he provides is at par with bigger players like PVR or BIG Cinemas.

The cost of setting up each screen is about Rs 1 crore, according to Bhargava. Food and beverage contributes about 20-30 per cent to Glitz’s revenues while the average expenditure per seat is only about Rs 40.

Setting up a multiplex does not require too much capital expenditure as that is taken care of by the mall builder. “The major investments are made by real-estate players. We only manage the soft part of building the multiplex, the auditorium, sound and lights,” he explains.

When Bhargava started out with Glitz, he used to pay about Rs 2 lakh a month to a distributor or producer. “Now we can pay them as much as Rs 10 lakh a week,” he says highlighting the growth trajectory in small towns. Bhargava says his biggest challenge has been to find the right manpower in these towns.

Being in the movies business, Bhargava naturally watches movies but says candidly that he doesn’t watch more than 30 minutes of it unless it is really good. With commercial real estate on a shaky ground lately, Bhargava admits that the number of malls coming up might go down. He still intends to expand operations to 17 locations and 50 screens in places like Palwal, Bhilai and Bokaro by 2013. “The first-mover advantage has been immense for us and should work for us in the future as well,” he says.

Next on his agenda are Yamunanagar, Jaipur, Kota, Raigarh, Bhilai and Bokaro where the next Glitz multiplexes will come up.