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Pentamedia Graphics plans theme parks foray

India's leading animation and special effects developer Pentamedia Graphics Ltd, emulating the Disney business model, is venturing into theme parks, according to a senior company official.

Pentamedia, which announces its results for the October-December quarter later on Friday, recently acquired a theme park-cum-entertainment complex, Maayajaal (Illusions), by buying its developer, Hotel Whales Pvt Ltd, for Rs 694 million in stock. The park is located just outside Madras.

"We want to use the digital assets created from our animation work like Walt Disney did with their characters, and plan to make this first-of-its-kind digital theme park," Pentamedia chief operating officer K Srinivasan said.

"One projection dome is ready and we expect Rs 150 million in revenue from this in the first year. So when we have all nine domes, including a digital zoo, ready in about 15-18 months, then we can look at real revenue from this business."

Madras-based Pentamedia started operating a decade ago mainly as a business software developer. But it quickly diversified into animation and special effects and today is ranked among the world's leading companies in the industry.

It has worked for some major Hollywood Studies, including for Warner Bros on the animated movie King & I" and on Sinbad: Beyond the Veil of Mists, a full length 3D animated film.

Yet Pentamedia's shares, which are one of the most actively traded on the Bombay Stock Exchange, have fallen sharply over the past year.

The stock is off a whopping 90 per cent from its 12-month high of Rs 2,344 hit on February 23. In early trade on Friday, the shares were trading at Rs 282, up about one per cent on the day and just 2.5 per cent from their 12-month low of Rs 275 on January 9.

Targeting Hollywood

Recent moves by the firm to consolidate its position as a provider of animation and special effects to Hollywood's entertainment industry include the acquisition of a majority stake in Emmy award winning American animation firm Film Roman.

Srinivasan said the firm was now close to wrapping up a $10 million equal joint venture deal with another leading US-based special effects creator, Digital Domain, for taking on special effects projects for Hollywood.

"The due diligence has been completed and the final legal paperwork is being done and it should be completed by March 31 and this venture will help us bid for more projects at more competitive rates as we can produce them out of India," he added.

An analyst with a local securities firm, who was the only one -- among several analysts contacted -- willing to comment on the company, said Pentamedia's recent addition of a motion capture technology studio would help the firm cut delivery time.

"This should help them finish their projects more quickly and add significantly to their margins," said Pratish Krishnan, equity analyst with Cholamandalam Securities.

Krishnan expects Pentamedia to post a net profit of about Rs 520 million for the quarter to December, on sales of about Rs 1.6 billion. It posted a net profit of Rs 258 million in the July-September quarter on sales of Rs 1.35 billion.

The company, which hived off its business software division in the third quarter last year, posted a net profit of Rs 357.1 million on sales of Rs 1.06 billion in the July-September quarter of 2000.

"The firm should continue to maintain a sequential growth of around 15-18 per cent in the fourth quarter as well," he added. But one factor which could weigh on the firm's growth was its capacity utilisation, he said.

"Right now they are hardly using about 50 to 60 per cent of their capacity and this cannot go up very sharply very quickly either as there is some lag in bringing a project to market as it requires very specialised work."

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