SP Tulsian of sptulsian.com told CNBC-TV18, "Cinemax India is a clear merger play with PVR. The swap ratio has already been decided that for every seven shares of Cinemax one is going to get four shares of PVR. If one takes the present price and calculate the working, the effective cost works out at about Rs 400 per share of PVR."
He further added, "The kind of run up which we have seen in PVR in the last three months probably indicates that the counter has come in a strong grip because of the good institutional holding into the company. So, probably if one has a time horizon of three months one can have clear arbitrage gain of about 30 percent. As PVR is ruling at Rs 550 and one is getting the effective cost via this merger route which in my view will get over by this year end, we will get the share at Rs 400 and because of the positive view on the multiplexes – sector going ahead, this is a good case. Those who are holding PVR, and those who have longer time horizon they should logically look to exit the stock and move into Cinemax."
"PVR has acquired Cinemax, Inox has acquired Fame and there also Fame is getting merged. If one sees the performance of both the companies effectively one can say that Inox is 80 percent of PVR," Tulsian said.
He further said, "The enterprise value of PVR is about Rs 3,000 crore while the enterprise value of Inox is about Rs 1,000 crore because if one takes the market cap of Rs 800 crore plus Rs 200-220 crore debt of Inox. Apart from that Inox has some properties in their books, while that is not the case or that is very rare cases in the multiplex industry. On a comparative basis also, Inox has not really caught on."
"It has a very strong promoter in the form of Gujarat Fluorochemicals who have been cash rich promoter having stake close to about 70 percent. So taking all this into consideration INOX Leisure which is ruling about Rs 83-84-85 can move to a level of about Rs 120 in the next 2-3 months time to catch on with PVR," Tulsian said.
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