PVR, Inox Leisure book ticket to a JV; combined entity to run 1,546 screens

Film exhibitors PVR and Inox Leisure’s boards have approved an all-stock amalgamation of both the firms and the combined entity would be named PVR Inox. Once all approvals are obtained, merger between the two companies would become effective. The companies will need approval of PVR and Inox shareholders, the stock exchanges, the Securities and Exchange Board of India (Sebi) and other such regulatory bodies as may be required.

The management of both the companies expect the merger to go through in the next six to nine months. Inox shareholders will receive three shares in PVR for 10 shares of Inox, PVR said in a stock exchange filing.

Axis Capital provided a fairness opinion to PVR on the share-exchange ratio while Ernst & Young Merchant Banking Services gave the fairness view to Inox.

In the merged entity, PVR promoters will have 10.62 per cent stake while Inox promoters will have 16.66 per cent.

SSPA & Co, chartered accountants, and Drushti Desai, registered valuer and partner at Bansi S. Mehta & Co — the independent valuers appointed by PVR and Inox, respectively, — have recommended a share exchange ratio, accepted by both boards.

“Post the merger, the promoters of Inox will become co-promoters in the merged entity along with the existing promoters of PVR. Upon effectiveness of the scheme, the board of directors of the merged company would be reconstituted with total board strength of 10 members. Both the promoter families have equal representation on the board with two board seats each,” PVR said in a filing.

Ajay Bijli would be appointed managing director (MD) and Sanjeev Kumar would become executive director. Pavan Kumar Jain would be non-executive chairman of the board. Siddharth Jain would be appointed non-executive and non-independent director in the combined entity. The branding of existing scree­ns will continue as PVR and Inox while new cinemas opened post the merger will be branded as PVR Inox.

Bijli, chairman and MD, PVR, said in a release, “The partnership of these two brands will put the consumer at the centre of its vision and deliver an unparalleled movie-going experience to them. 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 long-term survival of the business and fight the onslaught of digital OTT platforms.”

Jain, director, Inox Leisure, said, “As we head into the industry’s revival, this partnership will bring in enhanced productivity through scale, a deeper reach in newer markets and numerous cost-optimisation opportunities.”

PVR currently operates 871 screens across 181 properties in 73 cities while Inox has 675 screens at 160 properties in 72 cities. The combined entity will become the largest film exhibition company in India and will operate 1,546 screens across 341 properties in 109 cities.

While countering the adversities posed by OTT platforms and the pandemic, the combined entity would also work towards taking world-class cinema experience closer to the consumers in tier-2 and 3 markets.

Elara Capital — in its report on the merger — said it believes the merged entity will lead to better yields on advertising. It may even command a further premium over the medium term.

In terms of box office revenue, Elara Capital said that both the entities have a combined box office share of approximately 42 per cent (Hindi and English content), which becomes irreplaceable.

“Market share may trend up as the combined entity may gain from smaller chains and single screens that have struggled due to Covid,” the report said.

Elara Capital also pointed out that the merged entity will have a screen share of 50 per cent within Indian multiplexes. It added that PVR is stronger in the north, west and south whereas Inox has more screens in the east.

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