India's two largest multiplex firms said last week, that they would merge to create a giant cinema operator with more than 1,500 screens across 109 cities as the entertainment industry recovers from the Covid-19 pandemic.
According to the statements, the merger will unlock significant complementarity and growth potential, as well as compelling revenue and cost synergies.
PVR currently has 871 screens spread across 181 properties in 73 cities, while INOX has 675 screens spread across 160 properties in 72 cities. PVR has a stronger presence in the north, west, and south, while INOX has a larger presence in the east.
“The combined entity will become the largest film exhibition company in India operating 1,546 screens across 341 properties across 109 cities,” the filings said.
For the fiscal year ended March 31, 2021, INOX Leisure had a turnover of 148 crores, including other income of 42 crores. Its total assets are valued at Rs. 3,784 crores.
On the other hand, PVR had a turnover of ₹698 crore, including other income of ₹472 crore in FY 2020-21. Its total assets were ₹7,450 crore.
The merged entity will operate as PVR-INOX however, existing screens will continue under their respective brand names. Inox’s promoters will be the co-promoters of the merged entity and they will own 16.6% (16.3mn shares) in PVR-INOX while PVR’s promoters will own a 10.6% stake (10.4mn shares).
What the deal for Investors
According to analysts, the swap ratio is favourable to INOX investors by about 12%, due to its zero net debt situation compared with PVR's net debt at ₹857 Crore.
Based on the swap ratio of 3:10 (3 shares of PVR for 10 shares of Inox). The reconstructed board will consist of 10 members wherein both the promoter families will have equal representation with 2 seats each.