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.