Explained: Significance of PVR-INOX merger, and its impact on entertainment industry

What does the deal entail?

After the merger, the promoters of INOX will become co-promoters in the merged entity along with the existing promoters of PVR. Further, the board of directors of the merged company would be re-constituted with a total board strength of 10 members. Moreover, both the promoter families will have equal representation with two board seats each.

With PVR currently operating 871 screens across 181 properties in 73 cities and INOX operating 675 screens across 160 properties in 72 cities, the combined entity will become the largest film exhibition company in India, operating 1,546 screens across 341 properties in 109 cities.

PVR shares closed with a gain of 2.84 per cent at Rs 1,827.60 on the BSE on Friday. INOX Leisure shot up by 6.10 per cent to Rs 469.70.

How does it change the market dynamics?

The merger is expected to augur well for the growth of the Indian cinema exhibition industry, besides ensuring tremendous value creation for all stakeholders, including customers, real estate developers, content producers, technology service providers, the state exchequer and the employees.

Ajay Bijli would be appointed as the managing director and Sanjeev Kumar would be appointed as the executive director. Pavan Kumar Jain would be the non-executive chairman of the board while Siddharth Jain would be appointed as the non-executive, non-independent director in the combined entity.

“The combined entity will be named as PVR INOX Limited with branding of existing screens to continue as PVR and INOX respectively,” PVR said in a statement.

New cinemas opened after the merger will be branded as PVR INOX. While strongly countering the adversities posed by the advent of various OTT platforms and the after-effects of the pandemic, the combined entity would also work towards taking world-class cinema experience closer to the consumers in tier-2 and tier-3 markets, PVR and INOX said.

INOX had posted a revenue of Rs 296.47 crore and a loss of Rs 1.31 crore for the quarter ended December 2021. PVR made a loss of Rs 24.53 crore on a turnover of Rs 546.94 crore for the third quarter.

Ajay Bijli, Chairman and Managing Director of PVR, said, “The film exhibition sector has been one of the worst impacted sectors on account of the pandemic and creating scale to achieve efficiencies is critical for the long-term survival of the business and fight the onslaught of digital OTT platforms.”

Siddharth Jain, Director, INOX Leisure, said, “As we head into the industry’s revival amidst headwinds, this decisive partnership would bring in enhanced productivity through scale, a deeper reach in newer markets and numerous cost optimization opportunities, and continue to delight cinema fans with world-class experiences and landmark innovations.”

Drushti Desai, Registered Valuer, Partner at Bansi S. Mehta & Co and SSPA & Co chartered accountants, the independent valuers appointed by INOX and PVR respectively, have recommended a share exchange ratio. Ernst & Young Merchant Banking Services LLP provided the fairness opinion to INOX, while Axis Capital provided a fairness opinion to PVR on the share exchange ratio.

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