Shares of PVR Limited and INOX Leisure Limited surged up to 17% to reach fresh 52-week highs on Monday’s early trade after the multiplex players announced a merger on Sunday.
Inox Leisure gained 17% and was trading at ₹563.60 per share on the BSE, while PVR Limited gained 7% and was trading at ₹ 2010.35 apiece on the BSE.
The Board of Directors of these multiplex chains approved an all-stock merger of the companies on Sunday. The merged entity will be named PVR Inox Limited and will be India’s largest film exhibition entity with a network of more than 1,500 screens. Existing screens will continue as PVR and INOX respectively, while new cinemas will be branded as PVR INOX.
The amalgamation is subject to the approval of the shareholders of both the companies, stock exchanges, SEBI and such other regulatory approvals as may be required. These approvals might take six to nine months. The merged entity will operate 1,546 screens across 341 properties and 109 cities. The companies are looking forward to opening 180-200 new screens every year, especially in small towns and the hinterland, which are grossly under-screened.
Once the merger becomes effective, INOX will merge with PVR and the promoters of INOX Limited will own a 16.66% stake in the combined entity, while PVR’s founders will own a 10.62% stake. The promoters of INOX will become co-promoters in the merged entity along with the existing promoters of PVR. Shareholders of INOX will receive 3 shares of PVR for every 10 shares of INOX.
Pandemic-led closures of theatres and the rise in popularity of streaming platforms led to the consolidation in the industry. Cinema chains found it difficult to invest in new properties and easier to partner with rivals to ramp up screen count, due to the cash crunch caused by these prolonged closures, as per analysts.
“There is no question that the (film exhibition) industry did get impacted by the pandemic, being one of the few businesses around the world that were down to zero revenues. However, we believe in the long-term story of the theatrical business, and mergers have always been on the table because this industry is about consolidation and scale,” Ajay Bijli of PVR, said.
“PVR is stronger in the north, west and south whereas Inox has more screens in the east. The combined entity may gain from smaller chains and single screens that have struggled due to the covid situation,” Karan Taurani, an analyst at Elara Capital Ltd, said.
He added that the merged entity would have a share of 42% (Hindi and English content), apart from a screen share of 50% within the Indian multiplex space.
Cumulative gross box office collections for 2020 and 2021 in India totalled just ₹5,757 crores, almost 50% (and ₹5,000 crores) lower than what the country’s film industry had grossed in 2019 alone, according to a recent report by media consulting firm Ormax.
Ajay Bijli would become the managing director of the merged entity and Sanjeev Kumar Bijli would be executive director. Pavan Kumar Jain, who is currently the chairman of INOX will be appointed as the non-executive chairman. Siddharth Jain, director at INOX would be appointed non-executive non-independent director in the combined entity. The company’s board would have 10 directors and the families of both the promoters would have an equal representation in the board with two seats each.
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