Prime Focus to form advertising and virtual reality JV in India

Prime Focus Group has informed the BSE and NSE about the sale of its 30 per cent stake in Digital Domain-Reliance, LLC (DD-Reliance) to the existing holder of the remaining 70 per cent stake in DD-Reliance, which is ultimately wholly-owned by Hong Kong- headquartered Digital Domain Holdings Ltd (DDHL) and whose shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited. The parties have also signed a MOU regarding the proposed formation of a 50:50 JV with DDHL to carry on virtual reality and advertising businesses in India. The total consideration payable to the Prime Focus Group for the 30 per cent stake sale and possible formation of JV is US$55 million worth of shares in the Hong Kong listed DDHL based on an issue price of HK$0.596 per share. The above transactions are subject to, inter alia, due diligence and customary regulatory and other stakeholder approvals.

The consideration for the 30 per cent stake sale (through an international wholly-owned subsidiary of Prime Focus) is US$30 million. As part of the possible JV transaction worth US$25 million, Prime Focus Group will, inter alia, infuse US$5 million into the new JV.

The proceeds from the sale, as and when they are monetised, are expected to be partly used for expansion of its advertising business, to catalyse the growth of virtual reality in India and also to pare down debt.

Commenting on the transactions, Namit Malhotra, Founder, Executive Chairman and Global CEO, Prime Focus Ltd, said, “We are very excited about working with the DDHL team on the possible new JV and grow the domestic advertising, virtual reality and related business opportunity. Advertising has always been a core focus area for the company and this possible new JV will help us further enhance our credentials and penetrate the market.”

He further said, “Virtual reality (VR) is at the cusp of exponential growth across the globe, with its plethora of applications. The global VR technology market is estimated to reach US$16 billion by 2020 (Source: marketsandmarkets.com) and India with its massive smartphone base is expected to play a key role in its adoption and growth. We believe we are entering the market at the right moment to capitalise on the tremendous potential in the segment.”

Malhotra added that this monetisation would also help the company partly to pare down debt. “Prime Focus will always continue to explore and evaluate opportunities to bring down debt across the Group,” he said.

As part of the merger with Reliance Mediaworks’ FMS Business in India, Prime Focus had also inherited a 30 per cent stake in Digital Domain-Reliance LLC.