E-City plans IPO to fund expansion

E-City Entertainment, an Essel group arm that operates multiplexes across the country, is planning to hit the equity market with an initial public offering (IPO) by next year. The firm has embarked on a Rs 450 crore mega expansion programme to be accomplished by the end of the calendar year 2005.

E-City is setting up around 12 family entertainment multiplexes across 10 cities at an investment of around Rs 350 crore. These entertainment malls will house 4-7 cinema screens, food courts, departmental stores and other retail activities.

The company is planning to invest around Rs 100 crore in acquiring the programming rights of over 500 cinema theatres across the country. This essentially means that the it will pay a royalty to these theatre owners and in return will have the right to air movies in these theaters. The company plans to digitally telecast movies in these theatres.

Atul Goel, chief executive officer of E-City Entertainment, said, "The idea is to be the largest out-of-home entertainment firm in the country. There is a potential for one multiplex per 50 lakh population. Our expansion plans would be funded by a Rs 100 crore loan and the rest in equity. We plan to go for the IPO in a year or two."

According to a recent Unesco report, India should have 20,000 screens. Most of the developed countries have 40 to 110 screens per million population. In contrast, the comparative figure in India is only 11. There are around 14,000 cinema screens in India and each movie print costs around Rs 60,000 to be developed. More than the cost, the crucial part is the time taken for a movie to reach the masses. It gives enough room for piracy to develop.

According to Goel, piracy in Indian cinema industry eats around Rs 2,000 crore out of the Rs 5,000 crore industry.

"Digital transmission of movies through satellite to theatres across geographies will not only result in saving in print cost and reduced capital employment, but will also enable instant viewing," Goel added.

The Rs 35-crore company expects to do business worth Rs 150 crore in 2005 with the accomplishment of its expansion plans. It currently operates three multiplexes at Ahmedabad, Mumbai and Chandigarh under the brand name Fun Republic.