Pick of the week

Fame India Ltd (formerly Shringar Cinema)

BSE Code: 532631

CMP: Rs.12.90

Book Value: Rs.26.77

Price to Book: 0.48

Market Cap: Rs.44.89

Introduction: Fame India Ltd incorporated in 1999 and which commenced operations in the same year was formed with the core objective of providing cinema goers a unique movie viewing experience.

In 2001 in order to encourage investment in the sector, the Maharashtra government announced significant tax benefits for multiplex operators, which made investments in this sector more attractive. Sensing this opportunity, the company decided to invest further capital into the Multiplex business. It raised fresh equity capital from GW Capital (one of the leading venture capital funds, and now know as India Value Fund) and commenced operations.

Currently, it operates more than 74 screens and around 21500 seats across 11 cities in India with presence in states of Maharashtra, Gujarat, Haryana, West Bengal, Jharkhand and Karnataka. The company benchmarks itself with global multiplexes, and strives to enhance its service offering in line with the emerging trends globally. To provide exceptional consumer experience, it has introduced the ‘Gold Class’ screens which feature natural leather recliners, where each recliner stretches to 150 degrees, super size screens, state of the art projection and sound systems. Apart from popcorn and soda, the company also offers specialty food, which can be ordered and delivered on ones seat.

The Company has two subsidiary companies in which it holds 100% shareholding namely M/s. Shringar Films Limited and M/s.Big Pictures Hospitality Services Pvt. Ltd. M/s. Shringar Films Limited is mainly into distribution of films and M/s. Big Pictures Hospitality Services Pvt. Ltd. is into food court business.

Shareholding Pattern: The promoters hold 43.7% while the general public holds 56.3%. Among the promoters, Shravan Shyam Shroff (on behalf of South Yarra Holdings) holds 43.28% of the shares of the company.

Financials: For FYO8 on standalone basis, the total sales of the company came out to be Rs.90.4 Cr (Rs.105.2 Cr on consolidated basis) as against Rs.62.42 Cr in the same period previous year. The net profit of the company on standalone basis for FY08 came out to be Rs.12.42 Cr as against Rs.9.83 Cr in the same period previous year. This gave an EPS of Rs.3.84 as against Rs.3.11 in the same period previous year.

For Q3FY09, the company came out with increased topline and dismal bottomline. For Q3FY09, the total sales of the company came out to be Rs.34.6 Cr as against Rs.24.6 Cr in the same period previous year. The net profit of the company suffered due to higher depreciation (Rs.3 Cr in Q4FY09 as against Rs.1.5 Cr), Employee Cost (Rs.3.3 Cr in Q4FY09 as against Rs.2.75 Cr), higher interest cost (Rs.1.05 Cr in Q4FY09 as against Rs.71.1 lakhs in the same period previous year), etc. But major loss in Q4FY09 came from Foreign Exchange fluctuations. The net loss of the company for Q4FY09 came out to be Rs.3.5 Cr as against a net profit of Rs.3.6 Cr in the same period previous year. Moreover, both the net and operating profit margins came out to be negative in Q4FY09 as compared to the same figures previous year.

Triggers:

• The company has commenced its operations at Fame - Panchkula; Chandigarh w.e.f. February 13, 2009 which consists of 3 screens and 652 seats, out of which 42 seats are the fully automated gold class seats which have been introduced in Panchkula / Chandigarh area for the first time.
• The Company commenced operations in the last quarter at 2 (two) new multiplexes viz. (a) Fame - Dhanbad, Jharkhand which consists of 4 screens and 1042 seats. Out of the 1042 seats, 22 seats are the gold class seats which have been introduced in the Jharkhand Bihar area for the first time and (b)Fame Shalimar - Bharuch, Gujarat which consists of 3 screens and 922 seats. Out of the 922 seats, 17 seats are the gold class seats which have been introduced in Bharuch for the first time.
• The Company last year commenced operations of its new multiplex at Fame Raghuleela - Vashi, Navi Mumbai w.e.f. July 11, 2008. The new multiplex has 6 screens including one exclusive Gold Class screen of 62 seats which is accompanied with an exclusive Gold Class Lounge. The multiplex has an overall capacity of 1015 seats. It has also commenced operations at the 4-screen, 993-seat Fame Lido multiplex in Bangalore from January 25, 2008. One of the key differentiators of this multiplex is the introduction of Gold Class Recliners, which is a first in the central business district (CBD) of Bangalore.
• Fame India (Fame) has tied up with HDIL through its 100% subsidiary for programming content for the realty major’s upcoming multiplexes. The subsidiary has also has signed up four more properties in Pune for programming. This apart, Fame has opened a 4-screen property in Bangalore with 993-seats.
• Fame also proposes to foray into film production with an investment of Rs.100mn. The board earlier authorised managing director, Shravan Shroff, to explore various business models in this regard.
• Shringar Films (SFL), the 100% subsidiary of Fame India, has also signed on four Pune-based properties for programming, namely Rahul (two screens), Vaibhav-Hadapsar, Ashok-Pimpri and Arun-Dapodi (one screen each).
• Company continues to use the latest technologies for improving the productivity and quality of its services and products, wherever possible.

Conclusion and recommendation: The Indian M & E industry has surpassed the performance of the Indian economy and most other industries in 2007. According to the latest FICCI-PwC report, the industry is estimated to post a compounded annual growth rate (CAGR) of 18% between 2008 and 2012 supported by immense growth potential in almost all segments. The trends of foreign investment in the sector (Rs.8.5 bn in 2007), Private Equity funding, strategic alliances, inorganic growth of medium sized corporates to grab opportunities in emerging media etc. are expected to reach new heights in the near future.

Indian film industry is projected to double its size to reach Rs.176 bn in 2012 from present Rs.96-Rs.100 bn aided by increase in number of admissions/ticket prices on the exhibition side, momentum of increased popularity for Indian content overseas and growing ancillary revenue streams. India is witnessing a sea change in the way films are produced. More than half of the movies released during the year under review were produced by corporates. While large number of domestic & international players are announcing foray into film production, Indian film industry is marching in direction similar to that of large Hollywood studios and are concentrating on big budget movies with clear focus on quality pre-production and innovative marketing tactics, better budget/timelines management and ability to handle multiple projects simultaneously.

It is interesting to note the fact that upto 97% of the urban youth prefer to watch movies in multiplexes, according to the latest AT. Kearney report which is self explanatory on the considerable growth potential of multiplexes in future. Digitalisation of film exhibition is expected to change the face of film exhibition ensuring simultaneous release of films across the nation including smaller cities which will also curb piracy to a great extent. Needless to add, the consumer experience would be much better with superior film delivery.

Considering all the factors mentioned above it is found that the stock of Fame India Ltd is trading at the price of penny considering the potential to rise up. A year back Religare Securities Ltd recommended the scrip with a price target of Rs.105.

According to the charts the stock has a strong support around Rs.11.80 which will be difficult to break on the downside. On the upside there is as resistance at Rs.14.5—Rs.15.5 ranges, which needs to be cracked for the scrip to move up. The first target seems to be Rs.21 and the second target is Rs.32. Keep a SL of Rs.11.5 for any short term trade.

NOTE: THE STOCK WAS RECOMMENDED TO THE PAID (Premium) GROUPS ON THIS SUNDAY, 10TH MAY, 2009 (10-05-09).