PVR and Inox : Multiplex giants merge into a gamechanger

Multiplex companies INOX Leisure Ltd and PVR Ltd have announced the merger of their two companies. Inox will have a 16.66% stake in the new firm and PVR will have a 10.62% stake.

After the formalities of the merger, the company will be known as PVR Inox Limited.

Ajay Bijli will be Managing Director and, Sanjeev Kumar will be executive director and Pavan Kumar Jain will be non-executive chairman of the consolidated board.

Impact on the number of screens and revenue

PVR operates 871 screens across 181 properties in 73 cities. INOX operates 675 screens across 160 properties in 72 cities. They both have a combined pipeline of 2,000 screens. They aim to double this size in the next seven years, entailing an investment of Rs 4,000 crore.

The PVR-Inox combine will have a market share of over 40% in Goa and the National Capital Region. That will be above 30% in Punjab, Maharashtra, and Rajasthan, according to industry data. The market share may get further diluted if single screens that are not online in these five markets are included.

According to industry data, the top seven cities—Mumbai, NCR, Hyderabad, Chennai, Bengaluru, Kolkata, and Pune—account for 1,954 screens. It is 28.5% of the total screens, generating more than half of the industry revenue.

PVR and Inox together have 51.3% of their screens in these seven cities, giving the combined entity bigger leverage in negotiations with film producers. The new entity would also have better pricing power over rivals. It will be in terms of tickets and food on account of good formats or prime locations.

Who would promote who?

As per the agreement, Inox will merge with PVR in a share swap ratio of 3 shares of PVR for every 10 shares of Inox. Post the merger, promoters of Inox will become co-promoters in the merged entity along with the existing promoters of PVR.

Impacts of the merger

• A good step to get back to the world of theatres in the post covid era, which saw a drastic downfall in the past 2 years.

• The merger will put the merged entity in a dominant position with an overall screen share of over 30%-plus and almost 50% in the premium segment.

• Food and beverages and ticket prices will see an upside.

• General administration cost will however see a downside because of optimization and removing any duplication of cost heads.

• Increase in investments and benefits to shareholders.

• The manpower costs, the cost of other entities that are engaged by the multiplexes, all of those can be brought down by achieving a certain degree of the scale.