PVR-INOX goes hand in hand 🍿
PVR and Inox have announced the merger to create the largest multiplex chain in the country.
Welcome to Rubric's Newsletter
We share a weekly email newsletter talking about some unconventional topics and keynotes that makes a lot of noise on the internet.
Sign up to experience the best-curated content here!!
The two of the biggest multiplex chains in India have plotted a master move to dominate the Indian Cinemas. PVR Cinemas and INOX Leisure recently announced their merger. The combined entity will be named PVR INOX Ltd. with the branding of existing screens to continue as PVR and INOX. PVR presently operates 871 screens in 181 properties whereas INOX has 675 screens in 160 properties. Their merger will have a total combined screen of 1546 across 109 cities.
The two-year-long pandemic has squeezed all the multiplex players. Cinemas were the first entity to close and were the last ones to open after the pandemic. The box-office collection fell through the roof (The Indian film industry lost at least ₹15,000 crores in the process) and to make things worse, OTTs have emerged as a primary source of entertainment. Netflix, Amazon Prime, and Disney plus Hotstar had an exponential rise in the number of audiences in 2020-21. These streaming platforms have signed exclusive deals with the big production houses, creators, shows, and major sports leagues to stream their content (Disney plus Hotstar and Marvel Cinematic Universe, Netflix and Magic Quill Productions, Amazon Prime and New Zealand Cricket, etc.). Taking a step further, OTTs have started producing content in regional languages choosing the tier 3 audience. In 2021 alone, 47% of OTT originals and 69% of films released on platforms were not in Hindi. Plus the multi-streaming platforms can sustain an average subscription cost of ₹500 monthly which cinemas can't imagine.
OTTs run on an algorithm while Cinemas don't.
Collaboration over Competition
The merger offers more breathing room to both companies and may even help them to build their monopoly in the Indian market. With around 40% of cinemas in hand, the PVR-INOX will have solid negotiating power with all the players in the funnel. The box-office share, the advertisement cost, food-beverages cost, etc. The only thing stopping both the players till now was the cut-throat competition. They were fiercely competitive with each other. You would find low-price food and beverages at INOX but a more comfortable experience at PVR. Despite the increase in real-estate value/rental cut, the Cinemas were unable to change their ticket size because of rivalry.
But now!! The balls are in their court.
With over 1600 Cinemas in India, they will have a strong monopoly. They can nearly dictate their shares with the producers, advertisement spots, ticket size, food and beverage cost, and whatnot.
This merger is not so easy
The Competition Commission of India (CCI) has not passed any statement on the merger till now. The rules mentioned by CCI states that companies do not need explicit approval to merge if their combined revenues don’t exceed One Thousand Crores (₹1,000 crores). Thanks to Covid and major shutdowns, this is not a problem for both companies. However, they will have to prove to the committee that they won't be creating their virtual monopoly in the market (lol).
Win-Win Pact
PVR brings diversified geographies (North, West, and South India) while INOX has the money to reduce the former's debt (Will have a beautiful balance sheet).
Stock prices of both companies have already rallied.
As per the agreement, the swap ratio is 3:10 (3 shares of PVR for 10 shares of Inox). Post-merger, the board will be reconstituted and will have ten members keeping both promoter families with two seats each.
Huh!!
Cinephiles don't have to worry further. Same experience, but more expensive!!
If you liked today’s read!! Hit a like below 👇🏻
Ciao
Nishchal from Team Rubric