In this article, we will be discussing the 2 stocks which have recently announced their merger. These 2 stocks are PVR Limited and INOX Leisure. What are the merger updates, and what’s in there for the investors, let’s dig it out in this article as we move ahead.
Merger of PVR and INOX:
- Firstly if we briefly compare the Indian Cinema Industry with China then we could see that there are 70,000 movie screens in China whereas it is less than 10,000 screens in India.
- Cinema Sector was one of the highly affected sectors due to the Covid-19 pandemic on account of a sharp downfall in the footfalls.
- Both the companies- PVR and INOX are having quite a high borrowing where PVR is having a debt to equity ratio of 3.56 times while the same is 3.96 for INOX.
- PVR is currently having 871 screens and INOX is having 675 screens which will take the total screens to count to above the 1,500 mark post-merger.
- If we took the odd figure of total movie screens in India of around 9,000 then, both these companies hold around 17%-18% market share in terms of screen share.
- PVR Limited is having a market capitalization of around Rs. 11,400 Cr. (as of 25th March 2022), and INOX Leisure is having a market capitalization of Rs. 5,700 Cr.
- Moving ahead to the Trailing Twelve Month (TTM) Sales, then this amount is Rs. 975 Cr. and Rs. 457 Cr. for PVR and INOX respectively.
- In the Pre-Pandemic period, the peak sales of PVR were Rs. 3,414 Cr. and Rs. 1,866 Cr. for INOX.
- Currently, the cinema industry is facing some challenges from the OTT industry and digital platforms like Youtube, but the opening up of the malls, etc. can contribute to any extent to the revival of the cinema industry.
- This merger decision of PVR and INOX by the Board of Directors will have to await approval from the Securities and Exchange Board of India (SEBI), Competition Commission of India (CCI), Shareholders, and other stakeholders as well.
- Ajay Bijli from PVR Cinemas will be the Managing Director of the newly merged entity and Siddharth Jain from Inox Leisure will be the Executive Director of the company. Promoters of INOX Leisure will hold a stake of around 16.66% post-merger, whereas PVR’s promoters will hold a stake of 10.62%.
- The Shareholders of INOX will get 3 shares of PVR for 10 shares of INOX.
- The new entity will be termed PVR INOX Limited.
What Should Investors Do?
It will be an interesting thing to watch how the merged entity will plan to raise the capital as such a higher level of Debt to Equity ratio is not sustainable for the company. Also, this merger decision awaits validation from the respective authorities and parties and hence it will be interesting to see how things will develop over the period.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.