PVR INOX Merger – OTT & Pandemic Reshaping Multiplex Industry in India

  • Exhibition companies are facing challenges globally. Film exhibition industry has been one of the most hit by the epidemic
  • OTT platform is posing a serious threat to exhibition business
  • Deal will synergise cost-cutting potentials and will result in scaling the business

The Boards of Directors of PVR Limited (PVR) and INOX Leisure Limited (INOX) have approved an all-stock merger between the two companies. Scheme has to be approved by the shareholders of both the companies, Regulators and stock exchanges

INOX and PVR will merge and INOX shareholders will get PVR shares depending on the swap ratio. Following the merger, the promoters of INOX will join the existing promoters of PVR as co-promoters of the amalgamated firm. Board of the amalgamated company will be reconstituted and will have a total strength of 10 members. Representation on the Board will be equal for both the promoter families. Each promoter family will have two board seats each.

PVR INOX Limited will be the combined entity’s name, with existing screens continuing to be branded as PVR and INOX, respectively. New theatres that will open as a result of the merger will be branded as PVR INOX. Post-merger, PVR promoters will have 10.62% and INOX promoters will have 16.66% stake in the combined entity.

Changing consumer preferences for OTT platforms and the economic impact of Pandemic is driving the change in the entertainment industry across the World. The combination of PVR and INOX would focus on combining the assets of both companies to give Indian moviegoers with an unmatched customer service and cinema experience. Consumers in Tier 2 and 3 markets will benefit from the combined entity’s efforts to bring world-class movie experiences closer to them.

PVR has 871 screens spread across 181 locations in 73 cities, whereas INOX has 675 screens spread across 160 locations in 72 cities. Following the merger, the combined organisation will be India’s largest film exhibition company. The combined company will have 1546 screens spread across 341 buildings in 109 cities.

Employees, customers, real estate developers, content producers, technological service providers, and the government will all benefit from the merger, which will promote synergies and create value for the Indian cinema exhibition business.

AS on 28th March, INOX Leisure has a Market Cap of 6397 Crore and PVR has a Market cap of 11489 Crore. Commenting on the Merger, Mr Ajay Bijli, Chairman and Managing Director of PVR recognised that the film exhibition industry has been one of the most hit by the epidemic, and scaling up to achieve efficiencies is vital for the business’s long-term viability and to combat the onslaught of digital OTT platforms.

Expressing views on merger, Mr. Siddharth Jain, Director of INOX Leisure Ltd, stated that the combination would result in increased productivity due to size, a broader reach into new markets, and several cost-cutting potentials.

Shareholders of the merged entity will receive 3 PVR shares for 10 INOX shares. The amalgamated entity’s Managing Director will be Ajay Bijli, while the Non-Executive Chairman of the Board will be Pavan Kumar Jain.

OTT platform is posing a serious threat to exhibition business. During the pandemic, streaming services acquired a lot of traction. The time between a movie’s theatrical premiere and subsequent availability on other channels has shrunk dramatically since the introduction of OTT services. Indian entertainment landscape is significantly changing. Trend is moving towards OTT. Retaining the market valuation will be tougher for exhibition companies as more and more consumers are increasingly preferring OTT platforms. 

Earlier Zee Entertainment Enterprises Ltd (ZEEL) has entered into merger agreement with Sony Pictures Networks India (SPNI). Invesco Developing Markets Fund indicated that it had chosen not to call an EGM to appoint six independent directors since Zee’s merger with Sony would satisfy its goal of improving board governance. With a 28-30% share of TV viewership, Sony-Zee (Merge Co) will become India’s number one entertainment broadcast network, bolstering Zee and Sony’s OTT positions.

Exhibition companies are facing challenges globally.  Kansas headquartered, AMC Theatres which is one of the World’s largest theatre chains and operates thousands of screens in Europe and US is also facing financial turbulence. During Dec 2021 its quarterly loss stood at $134 million.

Studios are increasingly releasing their movies on OTT. PVR INOX merger is a broader reflection of changing economics in the entertainment industry and the changing customer preferences driven by OTT platforms.

Staff Galactik Views

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