MUMBAI: Inox Leisure Ltd has acquired 43.3 per cent in Fame India Ltd for Rs 664.8 million, making it the second largest multiplex operator in the country and signaling consolidation in a sector that requires oodles of cash to fund expansion.

Inox acquired the stakeholding of the promoters, the Shroff family, through a block deal executed on the BSE in opening trades.

Inox will make a mandatory open offer for an additional 20 per cent as per regulatory guidelines in the next 3-4 days.

"With this acquisition, we have become the largest multiplex operator in terms of revenue. We have also accelerated our expansion on a pan India basis," says Inox Leisure chief executive officer Alok Tandon.

The Inox-Fame combine will have 204 screens from 55 multiplexes. While Inox has 30 operational properties with 109 screens and a seating capacity of 31401 in 21 cities across India, Fame has 25 operational multiplexes with 95 screens and a seating capacity of 26487 in 12 cities.

The transaction is entirely funded by Inox's promoter company, Gujarat Fluorochemicals, as a shareholder loan.

Inox has a debt of Rs 550 million and $13 million FCCBs (foreign currency convertible bonds). "The FCCBs are due for redemption in March, 2011," says Tandon.

Inox will continue to be a separate company. The company is yet to take a final call on whether Fame should be delisted and on how the brands are going to operate in the marketplace, Tandon adds.

Inox plans to add 55 screens across 15 multiplexes by December 2010. "Fame also will be adding 25 screens by December this year," says Tandon.

Fame also has subsidiaries such as Big Picture Hospitality Services - its food business JV, Headstrong Films - its film production JV and Shringar Films, its film distribution business.

Enam Securities acted as the investment banker for Inox while Yes Bank advised Fame.

So will Inox pursue further acquisitions? "We have an appetite for inorganic growth. We will make acquisitions if we see the right opportunities," says Tandon.

Earlier, Inox had acquired Calcutta Cine Pvt. Ltd. (CCPL) a Bengal Ambuja company. The acquisition gave Inox access to an additional nine multiplexes in West Bengal and Assam.

Inox shares, which rose 20 per cent in the session, ended Wednesday at Rs 85.65 on the BSE, up 11.74 per cent from the previous close. Fame shares touched the upper circuit and closed at Rs 46.10, up by 4.89 per cent.