What Does This Merger Of The Century Mean For The Silver Screen Experience and Brands?

Lights, camera, action! Get ready to witness the biggest blockbuster event of the year - the merger of PVR and INOX! It's like when Thor teamed up with the Hulk, but with more popcorn and less smashing.

This is not just a merger of two brands; it's a merger of two cinematic powerhouses that have redefined how Indians watch movies. PVR and INOX have been setting standards high for years, and now they're coming together to create something even more extraordinary.

This merger could be a game-changer for the cinema industry, and we're here to give you a front-row seat to all the action. We've got you covered, from the financial details to the impact on the silver screen experience. So, without any further ado, let’s dive in. 

How Will The Merger Impact the Silver Screen Experience?

PVR is already a big shot in the cinema world, with 871 screens across 181 properties in 73 cities. But advertising in INOX is no slouch either, with 675 screens across 160 properties in 72 cities. Now imagine what they can achieve together! It could be like Iron Man and the Hulk fusing into one superhuman entity - unstoppable and legendary.

With their combined reach, PVR and INOX can now provide an even more immersive cinematic experience to audiences across India. From cutting-edge technology to comfortable seating and delicious snacks, they've got it all covered. Plus, with their expanded network, they can reach more movie lovers in more cities, bringing the magic of the silver screen to even more people.

What’s impressive is that the power duo will have a whopping 1,546 screens in India, making them the big bosses with a 16-17% market share of all screens (even the small ones!). And guess what? They're going to own a massive 44%-50% share within multiplex screens! With more screens on the horizon, the possibilities for movie magic are endless! This means that there's a chance for more multiplexes in smaller towns, giving even more people access to the silver screen experience.

Plus, with their size and influence, they will have some serious bargaining power over the whole ecosystem - customers, real estate developers, content producers, technology services providers, the state exchequer, and even their employees! How cool is that? Now, let’s understand how this deal benefits both brands!

How Does the Merger Benefit Both the Brands?

 

• Increased Market Share: The merger will result in the creation of the largest cinema chain in India, with a combined market share of approximately 45%. This will give the merged entity greater bargaining power with distributors and film producers, and better economies of scale.
• Diversification of Offerings: PVR and Inox have different offerings aimed at different customer segments. By merging, they can offer a wider range of experiences to customers, from the affordable PVR Utsav to the luxury PVR Luxe and Director's Cut, and Inox's various viewing experiences catering to customers across all income levels.
• Branding Synergies: While existing multiplex screens will retain their brands, new cinemas opened post-merger will be branded as PVR Inox. This will enable the companies to leverage each other's brand recognition and create a stronger brand identity.

What Does the Deal Mean for Investors?

According to the experts, the swap ratio is a total win for INOX investors by a cool 12%, all thanks to their zero net debt status compared to PVR's net debt of Rs 857 crore. And guess what? The stock market totally agrees - on Monday, INOX shares skyrocketed by a whopping 20%, while PVR's shares only managed to climb 10%. Looks like INOX is totally killing it!

Moreover, according to the share-swap deal, INOX is valued at a whopping Rs 6,400 crore (with an EV per screen of Rs 10 crore), while PVR is currently sitting at a valuation of Rs 11,000 crore (EV per screen of Rs 12 crore). But wait, there's more - after the merger, INOX's promoters will be the proud owners of a 16.7% stake in the combined entity! Now that's what we call some serious business moves!

The Looming Risk and Threats

It's like a game of Monopoly - this merger between Inox and PVR is an actual win-win situation for both companies. But wait, it needs to get that final approval from CCI because let's face it, we don't want a monopoly situation in the multiplex industries!

Also, even though there's a massive opportunity for screen growth, the management team is well aware of the OTT platforms and how they affect occupancies and screen-level profitability metrics. But wait, hold your horses! They're not too worried because they think the whole OTT thing is just a storm in a teacup. Sure, they acknowledge the threat, but they also think it's being blown out of proportion. The economics of releasing a movie directly on OTT for a reasonable budget flick that could still be shown in theaters just isn't that convincing!

Final Say

Despite all the good that is to come through this merger, it is clear that the merged entity is going to have to work its butts off to fix up its balance sheet and show those lenders that they're totally capable of generating enough free cash flows to keep that debt under control. 

And that’s not it. Although cinema halls rake in the big bucks for blockbuster films, the truth is that only certain genres, like the flashy big-budgeted spectacles or rib-tickling family comedies, guarantee success. But until the line between cinema and OTT is blurred, one thing is for sure: the OTT craze, which was fueled by the pandemic, is here to stay.