The topic of today is the merger of PVR and Inox Leisure, as well as what may have prompted them to shake hands. On March 27, 2022, the merger was announced. The two companies will merge in an all-stock transaction.
PVR and Inox will merge to form a network of 1540+ screens, with PVR currently operating over 870 screens and INOX currently operating over 670 screens.
Moreover, PVR Ltd Chairman and Managing Director Ajay Bijli will lead the combined entity following the merger.
However, the merger is currently subject to shareholder approval. PVR Inox will be the name of all new theatres that open after the merger. Inox Leisure shareholders will receive three PVR shares in exchange for ten Inox shares.
PVR promoters will own 10.62 per cent of the combined entity after the merger, while Inox promoters will own 10.66 per cent.
A 10-member board will be formed, with equal representation from both promoter families (two seats each).
They plan to keep around 10% to 15% of the properties in the premium format after the merger.
Reason Behind PVR and Inox merger
Operating a multiplex is a difficult business because it requires a lot of capital and has high operating costs. As a result, multiplexes struggle to generate free cash flow, even in a fast-growing market like India.
Because of the high cost of real estate, the foregoing is true. The cost of tickets is not rising at the same rate as the cost of real estate and property.
As the number of movie theatres in the country grows, so does competition. The main problem that these multiplex owners face is a lack of high-quality real estate at affordable prices.
The majority of the hardware and accessories used in multiplexes are imported; similar equipment costs 30-40% less in developed countries like the United States, and ticket prices are one-fourth or one-fifth of what they charge in the United States and the United Kingdom.
The equipment has a higher cost structure and rental rates, and revenue streams account for one-fifth of the total.
To address these issues, the companies may have decided to merge their businesses in an attempt to gain market share, lower operating costs, expand into new territories, unite common products, increase revenues, and increase profits, all of which will benefit the company’s shareholders.
PVR and Inox merger- Beneficial for the growth of Multiplex industries
Changing your way of life: The increased footfall at multiplexes is due to the preferences of a young and large working population.
In addition, the lack of out-of-home entertainment options in India, as well as a great aural and visual experience, a pleasant atmosphere, and comfortable seating, are driving this demand.
Superior technology: Multiplexes that use the most up-to-date market technologies (video, audio, and seating, among others) are able to provide customers with a premium cinematic experience.
Increased number of shopping malls: Over the last decade, the number of malls has increased dramatically.
Previously, they were only found in Tier-I cities, but they are now spreading to Tier-II cities. The expansion of multiplexes will be aided by the increased footprint.
Permeation of the theatre: Despite being a film-loving country, India has one of the lowest screen penetration rates in the world.
This will benefit both Inox and PVR (PVRs in the north and south, and Inox in the east and west), as both are well-known for their presence across India.
Each year, the combined entity plans to open 200 to 220 screens. The focus is on expanding into Tier-II and Tier-III cities while also providing the best possible customer service.
Single-Screen Owners Shutdown: Single screens, which are typically owned and operated by regional players, are gradually declining, and Covid-19 has taken a heavy toll on them, allowing multiplex operators to increase their screen count.
A lack of better movie-watching options could also be a factor in the closure of these small screens.
As a result, customers are looking for a more sanitary environment, better sound and viewing quality, and an upgraded experience that only a multiplex can provide.