PVR and Inox will merge to form the country’s biggest multiplex chain

Leading film exhibition companies PVR Ltd and INOX Leisure Ltd announced a merger agreement on Sunday, creating the country’s largest multiplex chain with over 1,500 screens.

Investors will receive 3 PVR shares for every 10 INOX Leisure shares, based on the share swap ratio. Analysts believe the ratio benefits INOX investors by about 12%, owing to the company’s zero net debt versus PVR’s net debt of Rs 857 crore.

Operational Synergy

  • This merger will undoubtedly place the merged entity in a dominant position, with an overall screen share of more than 30% and nearly 50% in the premium segment.
  • The benefit of having one entity will allow PVR-Inox to leverage better market share in terms of advertising while also increasing yield, which could translate into an additional revenue of 20-25 percent on top of organic growth of 15 to 20%.
  • PVR operates 871 screens across 181 properties in 73 cities. INOX, on the other hand, owns 675 screens across 160 properties in 72 cities. The combined entity would be operating 1,546 operating screens across 341 properties and 109 cities.

Shareholding and the composition of its board of directors

  • PVR Promoters will have a 10.62 percent stake, while Inox promoters will have a 16.66 percent stake in the combined entity.
  • Pavan Kumar Jain to be the non-executive chairman of the board and Ajay Bijli to be appointed as the managing director of the merged entity.

Financial Performance

Will the Competition Commission of India approve this transaction?

The deal may benefit from exemption available to transactions involving small targets from notification to CCI. INOX’s total revenue in FY22 will be below Rs 1,000 crore due to Covid-19, the threshold, and hence CCI rules may not come into play. But, we think this is a grey area and is subject to interpretation,” Nirmal Bang said.

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