According to a statement from CUTS, the combined company, PVR-Inox, will succeed to become the biggest participant in the Indian cinema exhibition sector after the merger, eventually giving them a sizable combined market share in most of the Indian cities.
Shares of multiplex chains PVR Ltd and Inox Leisure Ltd fell over 2 percent on Friday after a non-profit group, Consumer Unity and Trust Society (CUTS), asked the Competition Commission of India (CCI) to investigate their proposed merger. CUTS alleged that the deal would have anti-competitive effects on the film exhibition industry.
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At 11 am, shares of PVR were trading at Rs 1,873.45, down 2.29 percent while shares of Inox Leisure fell 2.48 percent at Rs 512.20 on the BSE. Both the stocks have been on a losing streak for the past seven days. While PVR fell 11.41 percent in the period, Inox lost 12.91 percent in the same time.
In March, India’s top two multiplex chains approved an all-stock merger of the companies to create India’s largest film exhibition entity with a network of over 1,500 screens.
Following the merger, promoters of Inox will hold a 16.66 percent stake in the new company, while the founders of PVR will hold a 10.62 percent stake. Ajay Bijli, chairman and managing director of PVR, would serve as managing director, and Sanjeev Kumar Bijli would be the executive director of the combined company.
The two businesses had earlier mentioned that CCI certification was not necessary for the merger because the epidemic forced both of them to close for months, which reduced their total income to less than Rs 1,000 crore.
According to a statement from CUTS, the combined company, PVR-Inox, will succeed in becoming the biggest participant in the Indian cinema exhibition sector after the merger, eventually giving them a sizable combined market share in most of the Indian cities.
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With a market share of more than 50 percent in at least 19 cities, PVR-Inox will likely overtake the competition as the leading player in 43 cities. According to CUTS, this will result in decreased consumer choice, forcing customers to attend the multiplexes owned by PVR-Inox, high ticket costs, and a potential decline in the quality of the food and services they receive.
Additionally, PVR-Inox's strong negotiating position may result in unreasonable conditions for distributors, suppliers of food and drink, suppliers of technical equipment, and other parties.
According to CUTS, the PVR-Inox agreement would not have qualified for exemption from the necessary merger review by CCI if it weren't for COVID-19 lockdowns. The information was filed on 27 July 2022, and the group awaits to hear from the CCI.
It also noted that over the past 12 years, the movie theatre business has gradually consolidated as a result of multiple mergers and acquisitions, reducing the number of key operators from 11 in 2009-2010 to only five in 2022— namely, PVR, Inox, Carnival Cinemas, Cinepolis, and Miraj Cinemas.
(Edited by : Nishtha Pandey)
First Published: IST