Top multiplex players PVR and INOX on March 27 announced merger after the Board of Directors of PVR Limited and INOX Leisure Limited at their respective meetings held today, approved an all-stock amalgamation of INOX with PVR.
It was also decided that Ajay Bijli will be the Managing Director of the combined entity and Sanjeev Kumar would be appointed as the Executive Director.
Chairman of INOX Group Pavan Kumar Jain will be appointed as the Non-Executive Chairman of the Board. Siddharth Jain will be appointed as Non-Executive Non-Independent Director in the combined entity, said the two firms in an exchange filing.
The amalgamation is subject to the approval of the shareholders of PVR and INOX respectively, stock exchanges, SEBI, and such other regulatory approvals as may be required. EY is the financial advisor on the transaction.
Upon obtaining all approvals, when the merger becomes effective, INOX will merge with PVR. Shareholders of INOX will receive shares of PVR in exchange for shares in INOX at the approved share exchange (swap) ratio.
The combined entity will be named PVR INOX Limited with the branding of existing screens to continue as PVR and INOX respectively. New cinemas opened post the merger will be branded as PVR INOX.
Post the merger, PVR promoters will have a 10.62 percent stake while INOX promoters will have a 16.66 percent stake in the combined entity.
PVR currently operates 871 screens across 181 properties in 73 cities and INOX operates 675 screens across 160 properties in 72 cities the combined entity will become the largest film exhibition company in India with 1,546 screens across 341 properties across 109 cities.
"INOX's ad revenue per screen is at 33 percent discount versus that of PVR as on FY20. We believe both entities getting merged will lead to better yields on advertising, wherein Inox will come on par with PVR and the combined entity may even command a further premium over the medium term," said analyst Karan Taurani, senior Vice-President, Elara Capital.
He added that in terms of convenience fee too, INOX derives a much lower convenience fee per screen (50 percent lower than PVR), which too will be revised upwards. "We believe there is a synergy benefit of Rs 150 crore on EBITDA due to above two metrics ( about Rs 90 crore and Rs 60 crore benefit on ad and convenience fee respectively)," said Taurani.
According to Taurani, the merged entity will have a screen share of 50 percent within India multiplexes and also have a broad-based presence in pan India. PVR is stronger in the north, west, and south whereas INOX has more screens in the East.
In terms of box office revenue, PVR and INOX have a combined box office share of 42 percent for Hindi and English content.
"Combined entity will have much higher bargaining power in terms of rentals, content cost, marketing spends, F&B sourcing, and savings in many cost items," said analyst Abhneesh Roy, Edelweiss.
He added that this merger will make the multiplex industry a two-player market.
"Multiplex year over the past decade has seen massive consolidation. The combined entity will become much bigger than Cinepolis (India). With around 400 screens, Cinepolis will be less than one-third of the merged company.
Need to see how regulators see this as in many markets there is overlap between the PVR, Inox in a given micro geographical segment. If at all a regulator approves, screens in overlap areas may need to be carved out," Roy added.
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