ABSTRACT
At 6.00 p.m., August 12, 2018, Kathy Rose received a call from her boss Krish Subramanian. It was Sunday evening, and Kathy was out with her friends heading towards the famous Marina Beach in Chennai, a southern Indian city. Both Kathy and Krish worked for Sevenstar Capital Partners as buy-side analyst and fund manager, respectively. Kathy looked after India's entertainment sector, and Krish managed a US$ 1 billion worth of India-focused portfolio. It was rather unusual for Krish to call her over the weekend, and she knew something needed urgent attention. As it turned out, it was urgent. Krish told her that he wanted a base case valuation and sensitivity analysis for SPI Cinema Pvt. Ltd, (SPI), the company was running the iconic chain of Sathyam cinemas in Chennai and holding a dominant Tamilnadu movie exhibition business presence. PVR announced Sathyam Cinema's acquisition at close to Rs 1,000 crore in cash plus equity transaction. According to PVR, the deal would be EPS accretive from year one. It would further strengthen PVR's position as the market leader in the Indian Multiplex industry; Krish was concerned about the price paid for SPI's acquisition. Based on PVR's closing price on August 10, 2018, PVR was valued at Enterprise Value (EV) of Rs 10.5 crore per screen, whereas it paid Rs 13.2 crore 1 EV 2 (per screen) for the acquisition of SPI.
