- PVR & INOX, two of the largest companies in the cinema industry, are all set to merge to create a behemoth.
- The shares of both companies touched 52 weeks high after the announcement of the merger. With this deal, the investors see another media giant being created in the rapidly expanding India’s media & entertainment market.
PVR & INOX, two of the largest companies in the cinema industry, are all set to merge to create a behemoth. The combined entity will be named PVR INOX Limited 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.
Post the merger, PVR promoters will have a 10.62 per cent stake while INOX promoters will have a 16.66 per cent stake in the combined entity. The shares of both companies touched 52 weeks high after the announcement of the merger. With this deal, the investors see another media giant being created in the rapidly expanding India’s media & entertainment market.
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PVR currently operates 871 screens across 181 properties in 73 cities and INOX operates 675 screens across 160 properties in 72 cities the combined entity will become the largest film exhibition company in India with 1,546 screens across 341 properties across 109 cities.
“INOX’s ad revenue per screen is at 33 percent discount versus that of PVR as on FY20. We believe both entities getting merged will lead to better yields on advertising, wherein Inox will come on par with PVR and the combined entity may even command a further premium over the medium term,” said analyst Karan Taurani, senior Vice-President, Elara Capital.
He added that in terms of convenience fee too, INOX derives a much lower convenience fee per screen (50 per cent lower than PVR), which too will be revised upwards. “We believe there is a synergy benefit of Rs 150 crore on EBITDA due to above two metrics (about Rs 90 crore and Rs 60 crore benefit on ad and convenience fee respectively),” added Taurani.
The Indian M&E industry touched a total revenue of more than 2.35 lakh crore rupees by 2021 with a double-digit Compound Annual Growth Rate (CAGR) in the last few years. Digital media and online gaming will lead the industry over the next few years with a CAGR of 12 per cent and 35.4 per cent respectively.
“The M&E sector has a significant opportunity, given India’s young demographics. The growth of digital infrastructure is further enabling Indians to fulfill the need for personal content consumption, across languages and genres. There is a large shift in consumer behaviour from mass produced content to specific content defined for audience segments. The sector has an opportunity to serve a billion screens in India and globally,” said Ashish Pherwani, Partner and Media & Entertainment Leader, EY India.
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The growing consumption of mass media in India has put the industry on a growth pedestal. The industry grew by 13.4 per cent in 2018 which is 3.2 per cent more than the nominal GDP growth of the country for (10.2 per cent) the same year. The Indian M&E sector is entering a phase of accelerated growth.
Although the M&E industry does not form a large part of the Indian economy, it is crucial to project the soft power of the country. The impact of Bollywood and Cricket is enormous in many countries across the globe. The foreign market of Indian film accounts for more than 6,000 crore rupees with even countries like Pakistan airing the Indian content.