Manmohan Shetty, chairman and managing director, Adlabs, told Business Standard: "We are in talks with the leading players of the home video segment for an acquisition. Nothing has materialised as yet."
One of the conditions for the acquisition was that the company must have a robust distribution network, he added. Investment banking sources said Adlabs had sounded out all the established players in the industry for a possible buy out.
The list includes Shemaroo, Excel Home Videos and Ultra Group. They added the deal should be clinched in the next quarter.
When contacted, Shemaroo, Excel Home Videos and Ultra Group confirmed that they wanted to raise funds through dilution of their shareholdings and said they were in talks with Adlabs.
However, they were still debating whether to exit the business completely or retain a part of their holdings.
Susheel Kumar Agarwal, managing director, Ultra Group, said he wanted to raise Rs 100 crore (Rs 1 billion) by selling 25 per cent stake, which valued his company at Rs 400 crore (Rs 4 billion).
"We are looking at an equity partner and are currently in talks with several national players including Adlabs as well as international players, " he said, adding that the international companies might offer a better valuation. The Ultra Group will entrust an investment banker with the task of fund raising.
M N Kapasi, managing director, Excel Home Video said, "We are in talks with several companies, and Adlabs is one of them. We are currently chalking out our business plan and are also in talks with two venture capitalists." Excel has appointed Yes Bank for looking at strategic investors.
Hiren Gadda, business development head, Shemaroo Videos, pointed out, "It is too premature to talk about the any deal right now. Although, Adlabs is looking at some kind of tie-up with us, but definitely not for acquisition."
The other players who also eyeing the home entertainment sector are Sahara One and UTV, who currently already are into production and distribution of movies.
The official home video entertainment market size currently is between Rs 180 - 190 crore (Rs 1.8-1.9 billion) and the total market size is close Rs 1000 crore (Rs 10 billion).