Shares of PVR jumped 10% at Rs.2010.35 per share on BSE, while INOX Leisure soared nearly 20% at Rs.536.60 share on BSE. The combined entity is expected to become the largest film exhibition company.
The Big Multiplex giants PVR and INOX had announced the merger deal after the board of directors agrees to the all- amalgamation subject to the approval of shareholders of PVR And INOX, stock exchanges, and others. New cinemas after the merger will be renamed PVR INOX.
INOX investors will receive PVR shares in exchange for INOX at an approved swap ratio. Shareholders holding 10 equity shares (Rs. 10 each fully paid up) of INOX will receive three equity shares of Rs. 10 each fully paid up of PVR as declared in INOX ‘press release’.
The merger was announced at a time the multiplex is looking at a crisis as Covid-19 cases have sharply reduced throughout the country and sharp competition from OTT platforms.
The consolidated entity will now offer 1,546 screens, implying a market share of 16-17% in total screens in India and 44-50% share within multiples screens.
What the deal means for the Investors
According to the research of analysts, the swap ratio is favorable to the INOX investors by about 12%, due to its zero net debt compared with PVR’s net debt of Rs.857 crores.
The stock market on Monday was also in favor of INOX as its shares surged by 20% whereas PVR shares rose only 10%.
Elara Capital also said the INOX valuation has been pegged at Rs. 6,400 crores whereas PVR is currently valued at Rs.11,000 crores, based on the share-swap arrangement.
Experts believe that this merger will take around six months as National Company Law Tribunal (NCLT), Security Exchange Board of India (SEBI), and Competition Commission of India (CCI) approvals are necessary.
Despite the growth and huge opportunity coming in screen additions, the management is concerned about the threat posed by OTT platforms. The management also said that taking a reasonable budget movie directly to OTT platforms isn’t compelling.
Ajay Bijli, Chairman and MD of PVR told: “The film exhibition industry has been severely affected by the pandemic and it is now critical to create scales for achieving efficiencies for long-term survival, also mention the tough competition from OTT platforms”.
