HONG KONG – INOX Leisure, India’s second largest cinemas chain, is to acquire the privately-owned Satyam Cineplexes chain.

INOX told the Bombay Stock Exchange that it has agreed to pay $30.2 million (INR1.82 billion) for the chain which operates 9 multiplexes with a total of 38 screens in 6 cities.

The move allows INOX to expand into the North of India as Satyam has sites in New Delhi, Rohtak, Amritsar, Jaipur and Indore. In the South Satyam is present in Mysore. INOX has 80 multiplexes with a total of 313 screens in some 44 cities.

The acquisition is the third by INOX in the past seven years and follows its purchase of Calcutta Cine in 2007 and Fame India in 2010.

Further mergers and acquisition activity in the sector seems likely. There has been intense speculation recently that Satyam, smaller operator Carnival, or financier Navis Capital Partners are each in negotiations to buy or merge with the Reliance Big Cinemas chain, that is currently part of the beleaguered Reliance MediaWorks. Credible reports recently suggested that RMW was also speaking to PVR Cinemas and INOX, respectively the biggest and second largest circuits in the country.

Carnival is a regional player with some 75 screens, but has apparently got the backing of the Advantage Overseas conglomerate to engage on a building and acquisitions spree that would give it a further 300 screens. Navis is an East Asian private equity fund that in 2012 became the third largest exhibitor in Malaysia when it first bought the MBO chain and then acquired Reliance MediaWorks’ Malaysian circuit, previously known as Big Cinemas Lotus Five Star.

The exhibition scene in India is a complicated one. While most analysts suggest that the country is fundamentally under-screened, which deprives the industry of theatrical revenue, consolidation is proving easier to achieve than organic growth.

Land ownership issues and limitations on the modernization of the retail sector have severely crimped new cinema construction and most companies’ forecasts of growth have proved wildly optimistic.

The majority of cinemas in India remain privately-held single screeners, but they have a slowly declining economic importance. Multiplexes currently account for only 25% of cinema screens, but some estimates say that they account for 70% of gross revenue. (Absolute numbers of tickets sold appears to be declining in India, but ticket prices in multiplexes are significantly higher than that in smaller complexes.) That in turn gives an incentive for well capitalized companies to pursue a multiplex growth strategy – albeit one driven by acquisitions.

After a bounce last year, Indian box office in the first half of 2014 appears to have dropped by 10-15%. However, numbers for this week’s Eid holiday, in particular hit “Kick” have been strong.