PVR: SEBI, Stock Exchange approve the PVR-INOX merger proposal What’s next?


New Delhi: PVR and has received approval from SEBI and stock exchanges in relation to the proposed merger, three months after the merger was announced.

Next step for two multiplex owners is to get company approval National Company Law Tribunal (NCLT), according to Nirmal Bang Institutional equities may take another six months.

The Competition Commission of India (CCI) has not raised any objection to the merger in the last three months, which Street feared.



As time passes, the chances of CCI raising an issue become less. However, given its power to step in at any time during the merger, CCI remains a key watchdog till the merger ends, the brokerage said.

“Our understanding is that CCI could potentially be incorporated post-merger, if the merged entity is seen to be abusing its considerable influence within the film exhibition ecosystem. This would mean that business practices, particularly It cannot see price escalation and abuse of landlord-tenant and buyer-supplier relationships across its various business segments,” said Nirmal Bang.

Sector Outlook

MK Global said that the recent performance of Bollywood films has clearly been tremendous, with many medium to high budget films failing to make a mark at the box office. Bollywood accounted for 60 per cent of the film exhibition industry’s total collections in the 16 quarters before the pandemic.

On the other hand, regional (South) films have been successful in attracting the audience to theatres. That said, it raises some important questions: Is Bollywood battling with weak content? Are anti-Bollywood social media campaigns affecting performance, or is it just cyclicality as seen in the past?

“In our view, the success of films like The Kashmir Files and Bhool Bhulaiyaa 2 indicates that there is no hatred towards the industry, and the audience is ready to support quality content, which has been missing so far. Given the strong content line-up, we expect Bollywood to bounce back, leading to an improvement in the overall box-office collections,” said Emkay Global, suggesting a target of Rs 2,165 on PVR and Rs 640 on Inox.

MK said major risks include the recent resurgence in Covid cases and the continuing disappointing box-office shows of Bollywood films.

“We believe a turnaround in Bollywood’s fortunes is key to sustaining box-office collection growth, as regional films (South and non-South) have exposure beyond their core markets,” the brokerage said.

Nirmal Bang said that Gross Average Ticket Price (ATP), F&B Expenditure Per Capita (SPH) and Per Screen Advertising Revenue for PVR have witnessed CAGR of 3.3 per cent, 10 per cent and 15 per cent respectively in FY 2014-FY20. ,

It said that despite premiumisation, ATP growth during this time frame has been below CPI inflation. SPH has shown higher growth than CPI, it said, due to lower base, a rich mix of F&B products and premiumization of screens.

The advertising revenue per screen seems to be higher on account of higher CAGR, very low base, premiumization of screens and increase in ad minutes.

“We expect ATP growth to probably accelerate somewhat in the FY2010-FY24 time frame to catch up with inflation, but we expect SPH and AD rates to probably be slower than before. But will be mixed. We believe that ad rates may increase the fastest of the three,” said Nirmal Bang.

What’s next for PVR, stocks?

Nirmal Bang has a target of Rs 1,788 on PVR and Rs 482 on Inox Leisure.

Edelweiss said the merged entity would dominate 1,546 screens within the multiplex industry. Number three and four players — Cinepolis and Carnival — are much smaller in terms of screens (420 to 450 each) and weaker markets, it noted.

“With the renewed demand for cinemas, regional films gaining pan-India attention and creating a void by shutting down 1000 single screens, the merged entity will come at the right time to take advantage of the positivity in the industry. The poor performance of Hindi films in the recent past is a matter of concern. Continue ‘Buy’ with a target of Rs 2,106.

An average price target of Rs 2,008 for PVR indicates a rise of 11 per cent. Inox, on the other hand, has an average target of Rs 611.50, which suggests a potential increase of 25 per cent, as per data available with Trendline.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)

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