Business of Inox
Inox is primarily a film exhibition company, which is involved in the business
of setting up, operating and managing multiplexes. Inox was incorporated in
Nov 1999 and today has a presence in 7 cities with 8 units having 32 screens
and a total capacity of 9,290 seats. It is the second largest multiplex operator
in the country with PVR being the first. While PVR and its other competitor
Shringar Cinemas dominate the Delhi and Mumbai market Inox has set up multiplexes
in tier 2 cities like Pune, Vadodra, Goa and Jaipur. This gives them an edge
because of exemption of certain entertainment taxes and consequently their operating
margins are at around 35%, which is quite higher than what PVR enjoys. The IPO
is intended to raise money for expansion in cities like Hyderabad, Chennai,
Lucknow, Vishakapatnam, Raipur, Kolkata, Darjeeling, Bangalore and Jaipur.
Inox also has a preferential agreement with Pantaloon Retail, which would give
them preferential access to the real estate developed by Pantaloon.
Financials
Inox had total revenues of Rs.673 million in the previous fiscal and net profits
of Rs. 72.24 million. So far in the half year ended September this fiscal the
company has already garnered profits of Rs.97.32 million on increased revenue
of Rs.508 million. The profits have grown rapidly since inception and on an
annualized basis the EPS
for this fiscal comes out at Rs.4.32. The price band is between Rs. 100 –
Rs.120 and on the upper end of the valuation the P/E
comes to about 28 times. While this appears stiff the rapid growth of the company
should also be considered.
Conclusion
The company is an industry with strong growth potentials and has emerged as
a big player in the short duration that it has existed which speaks volumes
about the top management capability. However one must keep in mind that the
industry itself is high risk and depends on a host of factors. On top of it
there are several litigations, which if they go against the company can dent
the bottomline. The Inox IPO is attractive but then only people with high-risk
appetite may go for it.
