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Buzzing | INOX Leisure, PVR shares hit 52-week highs post merger announcement

Buzzing | INOX Leisure, PVR shares hit 52-week highs post merger announcement

Buzzing | INOX Leisure, PVR shares hit 52-week highs post merger announcement
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By Dipti Sharma  Mar 28, 2022 10:01:18 AM IST (Published)

Multiplex stocks: Shares of PVR and INOX Leisure jumped in early trade on Monday after the multiplex operators announced that they would merge. At 9:22 am, shares of PVR gained 5.2 percent at Rs 1,921.85 and tested their 52-week high at Rs 2,010.35 while INOX Leisure soared 12.3 percent to Rs 527.4 hitting their 52-week high at Rs 563.6 on BSE. Two of India’s biggest cinema exhibition brands – PVR and INOX Leisure – have announced they would merge their might to deliver an “unparalleled” consumer experience with a network of more than 1,500 screens. Their joint statement indicates that the onslaught of over-the-top (OTT) or streaming platforms had a role to play in the consolidation.

Shares of PVR and INOX Leisure jumped in early trade on Monday after the multiplex operators announced their merger.

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At 9:22 am, shares of PVR gained 5.2 percent at Rs 1,921.85 and tested their 52-week high at Rs 2,010.35 while INOX Leisure soared 12.3 percent to Rs 527.4 hitting their 52-week high at Rs 563.6 on BSE.
Two of India’s biggest cinema exhibition brands – PVR and INOX Leisure – have announced they would merge their might to deliver an “unparalleled” consumer experience with a network of more than 1,500 screens. Their joint statement indicates that the onslaught of over-the-top (OTT) or streaming platforms had a role to play in the consolidation.
Post the merger, the promoters of INOX Leisure will become co-promoters in the merged entity along with the existing promoters of PVR, PVR said in an exchange filing.
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Upon effectiveness of the scheme, the Board of Directors of the merged company would be re-constituted with total board strength of 10 members and both the promoter families having equal representation on the Board with 2 board seats each, PVR added.
Post the merger, PVR Promoters will own a 10.62 percent stake while INOX Promoters will hold a 16.66 percent stake in the combined entity. Meanwhile, INOX shareholders will receive 3 shares in PVR for 10 shares of INOX.
The combined entity will be named PVR INOX Ltd with the branding of existing screens to continue as PVR and INOX respectively. New cinemas opened post the merger will be branded as PVR INOX.
The combined entity will become the largest film exhibition company in India operating 1546 screens across 341 properties across 109 cities.
Ajay Bijli, Chairman and Managing Director of PVR said that the partnership of these two brands will put consumers at the centre of its vision and deliver an unparalleled movie-going experience to them.
“As we head into the industry’s revival amidst headwinds, this decisive partnership would bring in enhanced productivity through scale, a deeper reach in newer markets and numerous cost optimization opportunities, and continue to delight cinema fans with world-class experiences and landmark innovations,” said Siddharth Jain, Director – INOX Leisure.
According to CLSA, the merger offers compelling synergy. The brokerage firm has retained its ‘buy’ recommendation on shares of PVR and INOX Leisure shares. The merger will likely take over six months and be subject to approvals though, the brokerage firm added.
Market Expert, Prakash Diwan, said that this has been a very surprising development over the weekend and the beauty about this is that while it does create an almost monopolise entity in this space, there are some rationalisation elements, which probably help it justify.
“Otherwise, the CCI could probably not let it go through in a pure sense, because it does create a very, very strong entity with the rest of the single-screen cinema and the smaller multiplexes being on one side. But what it does is it kind of starts an era of consolidation in an industry where we thought there could be enough headroom for more players,” Diwan said.
“But if I had to buy something at this point in time, I would wait for the consolidated entity to emerge and then the scenario to be evaluated. But if somebody had to take a trading point, it probably looks like INOX is the way to go at this juncture,” he added.
“Key synergy of both companies will be bargaining power in costs (especially rental) wherein they compete for premium space as well revenues such as advertisement
The domestic brokerage added that the companies would have higher leverage in the convenience fee deals (with Bookmyshow and Paytm) and distribution revenues. Some administrative cost rationalisation on overlaps is also possible, it said.
Even the combined entity target multiple and subsequent market value could be rerated given superior market share and reach and synergy, according to ICICI Direct Research.
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