Why did you decide to hive off the multiplex and real estate businesses into separate companies?
The best way to attract investors is to divide the two segments of business. They can enjoy their own valuations and investors. For instance, the investors in real estate may not necessarily want to take exposure in the multiplex business. We got Infrastructure Leasing & Financial Services Ltd (IL&FS) to pick up a 26 per cent stake in E-City Entertainment, which handles real estate development like setting up malls, for Rs 1 billion.

Are you in the hunt for an investor in the multiplex business as well?
Fun Multiplex Pvt. Ltd. still needs to scale up as we ended the last fiscal with a turnover of just Rs 450 million and a net profit of Rs 60 million. We are planning to pump in Rs 2.5 billion and have 150 screens by FY08. We have already put in Rs 300 million. We plan to raise money in a debt-equity ratio of 1.5:1. Our target in FY08 is to have a total income of Rs 2.5 billion and operating profit of Rs 720 million by FY08.

What makes you project such a fast rate of growth in two years?
The revenues will come mainly because of newer developments. We have 23 screens and are opening up three properties this month. We, in fact, will be adding 10 more screens by 15 August.

Do you see revenue growth also coming from increase in ticket rates?
Pricing power will continue to be more a movie-based strategy rather than a rate hike in tickets across the board. In case of Krrish, we increased the ticket rates. We will also see the emergence of differential pricing for off-time shows. We have, for instance, lowered the rates for early morning screenings.

Multiplex operators are in a build up phase and Inox has even taken the acquisition route in Kolkata to enhance its pan-India presence. How are you planning to scale up your operations?
We are also planning to take the inorganic route. We will be acquiring single screen theatres across the country. We aim to have 100 single screens by FY08. This will be in addition to the 150 multiplex screens we will have by then.

Multiplex operators have been made to pay more for premium film content by Yash Raj Films (YRF). When YRF asked for an increase in revenue share for the Aamir Khan blockbuster Fanaa, you took a hard stance. What made you compromise later?
Initially, all the multiplex operators protested against the hike. But the unity didn't stay and some of them went ahead to sign the new terms with YRF. Let me reiterate here that we were in a pure business deadlock and not a confrontation of any kind.

Has YRF, with a lineup of Hindi blockbusters like Fanaa, Krrish and Kabhie Alvida Na Kehna, started a trend where film content distributors would push for higher revenue shares from multiplex operators?
We are not in a position where we can take a hard stance against YRF. We have a business relationship going with them and are showing Krissh. The new terms are exceptional to YRF but with such high ratios, we can only break even. The future trend could be special alliances between distributors and multiplex operators.

Are you in any such alliance with a big distributor?
It is too early to carve out such relationships. In fact, we urge the distributors not to start hiking rates or getting into special relationships with certain multiplexes at this stage. The industry needs to scale up the infrastructure, there is an opportunity sitting out there. We should take measures that grow rather than kill the industry at this early stage.

Have you taken a cautious approach in the film distribution business?
E-City Films (ECF) has distributed Hindi movies like 36 China Town in Gujarat where we control 90 theatres. The market is fragmented and will take time to consolidate. Some companies are also acquiring some movies for distribution at unrealistic prices. We are cautious and have no plans to set up a film distribution outfit overseas. For international movies, our strategy is to distribute 10-12 a year. In the past, we have distributed Alexander (December 2004), One Dollar Curry (February 2005), Million Dollar Baby (March 2005) and Sahara (July 2005). Among ECF's recently acquired movies are Astronaut Farmer, Babel, Miss Potter and Michael Clayton.

Have you closed down your content syndication business?
It is in a state of lull now, but we have revival plans.

What are the expansion plans for E-City Entertainment after IL&FS has taken a stake in it?
We are investing Rs 1 billion each for the Kanpur and Coimbatore properties. Lucknow will attract a further funding of Rs 250 million. We have already pumped in Rs 2.17 billion in developing four projects (Rs 600 million for Andheri in Mumbai, Rs 750 million in Lucknow, Rs 550 million in Ahmedabad and Rs 270 million in Chandigarh). We will have 10-15 properties by FY08. We expect our turnover to climb from Rs 210 million to Rs 800 million by then. As these are rental incomes, E-City Entertainment will always be a profitable venture.

How are you funding these properties?
We will be raising fresh equity. But we have not started talking with anybody yet.

When is E-City Digital Cinemas starting satellite delivery of movies to cinema theatres?
We plan to launch it by the end of this month. We will be using the uplinking facility of Essel Shyam at Noida near Delhi. Currently, the hard disk is physically distributed to the 22 theatres in Gujarat (we control 90 theatres there) which we have taken on long term hire basis. We are using Real Image's encryption technology so that piracy is safeguarded. The movie is first converted into digital master using the telecine machine, after which it can be taken on to D5 tape or captured directly on the encoding server. After encryption and compression, the movie is uplinked to the satellite via transmission server and downloaded at the playout local server which is installed at the theatre. A digital projector is used for screening of the film. E-City Digital Cinemas will target A-class towns where the current net collections are over Rs 100,000 per week.

How many theatres will have the digital system?
We plan to digitise 500 screens by FY08. We have already acquired 30 cinemas including a few in Mumbai. The business operates on low margins and, on a turnover of Rs 300 million last fiscal, we have reached a break even situation. As we ramp up theatre acquisitions, we expect our revenues to touch Rs 2.5 billion by FY08.

So will E-City Holdings go for an initial public offering (IPO) or will the different entities have separate listings?
We haven't decided anything yet. We have no IPO plans, as of now. But by FY08 the entire venture will be a Rs 5 billion company.