What do PVR and INOX have in common? Quite a bit, as it turns out. Both companies are leaders in the Indian entertainment industry, with a strong focus on film distribution and exhibition. And now, they’re coming together in what is being called a “big bang merger”.
So, why did PVR and INOX decide to join forces? There are a few reasons. For starters, both companies are looking to expand their reach into new markets. The Indian entertainment industry is growing rapidly, and PVR and INOX want to make sure they’re well-positioned to take advantage of that growth. In addition, the merger provides substantial dealing power over the entire ecosystem, including customers, real- estate innovators.
NEW ENTRANT: OTT PLATFORM
OTT platforms have been a huge disruptor in the entertainment industry, and PVR and INOX are no exceptions. In fact, the merger could be a major boon for OTT platforms. With PVR and INOX’s combined resources and clout, we can expect to see some truly innovative offerings from them in the near future. Stay tuned!
Multiplexes are not at risk from streaming services over-the-top in India. In fact, during the lockdowns only 40 movies were sent directly to OTT.
Both theatres as well as OTT will co-occur. The OTT challenge is, according to us, a storm in a tea mug. We are aware of the problem, but we think it is exaggerated because the economics of moving a movie to OTT for a reasonably-priced movie that won’t find a theatrical release isn’t compelling.” Nirmal Bang Institutional Equities reported.
If a movie is released directly to OTT it will likely get a modest 15-20% return on its cost. If the movie is a decent success, the OTT profit will be higher.
PVR & INOX’s rivalry
PVR and INOX have long been competitors in the Indian entertainment industry. Both companies are strong players, and each has its own strengths and weaknesses. So what does this merger mean for their rivalry?
1. Threats from the Competition Commission of India
This is due to the fact that, in 2016 there were fewer deals between PVR theaters and DT theaters. However, some defenses had been divested in order for the deal to be cleared the CCI.
The PVR INOX Junction is a positive, offering compelling profit-cost community and consolidating sector with strong growth ahead. We retain our deal conditions for both PVR, INOX,” CLSA recommended.
Nirmal Bang has given a ‘buy’ rating to both stocks, estimating a target price for PVR at Rs 594 and INOX at Rs 594. The target price is a combination of a 30% and 26% downside for each stock.
JM Financial believes the merged reality will be stronger and more attractive, considering the possibility of earning increase through solidarity. Multiplex chains PVR Ltd, and INOX Leisure Ltd decided to merge to create the largest entertainment company in the nation.
2. MERGERING OF PVR & INOX
PVR currently operates 871 defenses on 181 properties across 73 cities, and INOX 675 defenses on 160 properties across 72 cities. The combined reality will be the largest film exhibition company India with defenses operating across 341 properties across 109 cities.
Ajay Bijli will be the managing director, while Sanjeev Kul would be the administrative director. Pavan Kumar Jain will be the non-executive chairman of the board, while Siddharth Jin will be the nonexecutive, independent director in the combined reality.
Drushti Dasai, Registered Valuator, Partner at BansiS. Mehta & Co, and SSPA & Co chartered accountings were the independent valuers that INOX and PVR appointed independently. Ernst & Young Merchant Banking Services LLP provided the fairness opinion for INOX. Axis Capital gave a fairness opinion for PVR regarding the share exchange rate.