Signalling consolidation in the film exhibition industry, two of the country’s leading multiplex chains, PVR and Inox Leisure, on Sunday decided to merge their operations in an all-stock deal to create a network of 1,546 screens spread over 109 cities across 341 properties.

After the merger, which was approved by the boards of the two companies, Inox promoters will have a stake of 16.66%, while PVR promoters will hold 10.62% in the combined entity.

As per the agreement, Inox will merge with PVR in a share swap ratio of 3 shares of PVR for every 10 shares of Inox.

PVR chairman Ajay Bijli will be appointed the managing director and joint MD Sanjeev Kumar will be the executive director of the merged entity. Inox group chairman Pavan Kumar Jain will be appointed the non-executive chairman of the board, while Inox Leisure director Siddharth Jain will be appointed non-executive, non-independent director in the combined entity.

The combined entity will be named PVR Inox with the branding of existing screens to continue as PVR and Inox, while new cinemas opened after the merger will be branded PVR Inox.

After the merger, the promoters of Inox will become co-promoters in the merged entity along with the existing promoters of PVR.

The board of directors of the merged company will be reconstituted with total board strength of 10 members and both the promoter families having equal representation on the board with two board seats each.

The merger is subject to approval of the shareholders, stock exchanges, Securities and Exchange Board of India (Sebi) and other regulatory approvals.

According to media analysts, the PVR-Inox merger decision stems from two factors — the pandemic-induced losses/disruptions in the film exhibition business as well as a resultant increase in over-the-top (OTT) movie releases or digital-first releases in the past two years, which have posed an issue for box office revenues.

Speaking to FE after the board approval, Bijli downplayed the OTT threat part. “The pandemic bruised the film exhibition business for two years, so the rationale to merge became just that much more relevant,” he said. According to Bijli, “the decibel of OTT platforms may have increased during this period. With shutters down, theatres naturally couldn’t compete. But I would say OTT and theatrical releases will continue to coexist — one won’t eat into the other’s business”.

Bijli said both PVR and Inox have existing synergies when it comes to giving a certain “quality of big screen entertainment” whether on their luxury format or regular screens. “Currently, only 15% of our portfolio is luxury screening. India is a disparate market, and the average ticket prices for us are sub-Rs 200.”

Currently, PVR, the largest multiplex chain in India, operates 871 screens in 73 cities, whereas Inox is a close number two, with 675 screens in 72 cities. Other players include Carnival Cinemas with 450 screens, followed by Cinepolis (360 screens) and Miraj Cinemas (147 screens).

The PVR-Inox combine plans to focus on expanding to more tier-II and tier-III cities.

Until recently, both PVR and Inox had separately been in talks with Mexican company Cinepolis for a possible merger, with PVR leading the race to close the deal. With this development, the Cinepolis buyout now looks unlikely. According to a recent Ormax report, the pandemic severely impacted the Indian box office, with the cumulative gross box office collections from 2020 and 2021 combined being just Rs 5,757 crore, against Rs 5,000 crore the industry grossed in 2019 alone. The year 2020 saw an 81% drop in box office collections compared with 2019.PVR’s consolidated net loss narrowed to Rs 10.2 crore in the third quarter of FY22, owing to the easing of pandemic-related restrictions at that point. Its total income stood at Rs 709.71 crore, compared with Rs 320.13 crore in the third quarter of FY21.

Inox Leisure had a similar story: its consolidated net loss narrowed to Rs 1.32 crore in the third quarter of FY22 against a net loss of Rs 102.5 crore during the same quarter of FY21. Sales for Inox rose to Rs 296.47 crore in Q3FY22 against Rs 14.88 crore in Q3FY21.

The PVR-Inox combine is bullish about FY23, with new releases lined up for theatrical releases with 100% occupancy allowed across most big cities and states currently.