PVR – Cinepolis Merger: Breakdown of This Rs 13,600 Crore Deal

PVR-Cinepolis Merger

When it comes to cinema halls, two companies shine at the top. Those are PVR and Cinepolis. These two multiplex theater giants have been in the news since last year. Why? Due to the upcoming PVR-Cinepolis merger! Yes, they are going to be one. The deal is worth Rs.13,600 crore.

PVR-Cinepolis Merger

Your mind must be hovering with questions like- Why is PVR desperate to acquire Cinepolis? What will be the outcomes of the deal? And so on.

In this article, we will delve into the breakdown of the PVR-Cinepolis merger.

Stay tuned!

Pan-India Presence 

The prime reason for PVR to acquire the Indian sub-division of Cinepolis is to create a dense presence all across the country. Is acquisition the only possible way to establish a pan-India presence? Well, it is not the only possible way but it is a highly cost-effective strategy. At least you won’t have to bear the headache of time-consuming methods like building new multiplex theaters! 

Also, this is not the first time that PVR is going to acquire a well-established company. It acquired numerous theater companies in the past too! Let’s have a look at the brief history of PVR’s acquisitions-

YearCompanies Acquired by PVRValue of the dealNumber of Screens Region
2013Cinemax CinemasRs.395 crore138The Western part of India
2016DT CinemasRs.500 crore32Delhi-NCR
2018SPI CinemasRs.900 crore76The Southern part of India
Companies acquired by PVR

Do you know why PVR is highly interested in Cinepolis? Because it ranks in 4th position when it comes to the number of screens in India. Here is the ranking-

Name of the Theatre CompanyNumber of Screens
PVR (Priya Village Roadshow)860
Inox667
Carnival Cinemas450
Cinepolis400
Number of screens of various theatre companies

If this deal commences successfully then the merged entity will have 1,260 screens in total. How? You may ask. See, 860 screens of PVR and 400 screens of Cinepolis will be represented together by the merged entity.

Expectations from the PVR-Cinepolis Merger

Apart from getting 1,260 screens, the merger will be also valuable for the individual companies involved in the deal. How? You may ask. The successful completion of the deal will increase the valuation and market cap of the participants. Here’s the expected data-

EstimationsAmount in INR
Valuation of CinepolisRs.5000 crore
Market Cap of PVRRs.14,000 crore
Valuation of the Merged EntityRs.13,600 crore
Expected values from the PVR- Cinepolis Merger

Shareholding Pattern of the merged entity

Let’s look at how much stake each participant will take from the merged entity-

Individuals Companies (Participant of the Merger)Shareholding Stake (%)
Cinepolis20%
PVR Promoters10-14%
Shareholding Pattern of the merged entity

Both companies will have board seats in the merged company. However, Ajay Bijly will have complete management control of the unified company. Because he will retain the position of CMD (Chief Managing Director) in the merged entity too! Till when? For the upcoming three years after the merger.

Hurdles in the merger

Just like Zee and Sony merger, the PVR and Cinepolis merger is also going through numerous ups as downs. Even though the outcomes of the unification of PVR and Cinepolis (India) seem highly fruitful. But the process will not be as easy as it sounds. Why? You may ask. Due to the disappointing financials of the PVR (acquiring company)-

  • Debt Surge: Rs.8051.91 crore
  • Revenue: Rs.3559.17 crore
  • Expenses: Rs.3832.23 crore
  • Loss: Rs.332.98 crore

After looking at the financials, you may hover over a doubt. How does a company having a pile of debts and losses acquire another company?

By taking loans! You may say. But the ravaged balance sheet has reduced the chances of getting loans from the banks.

So how will the deal be completed? Look at the next section to find it out.

Strategy for commencing the merger despite debt & losses

Seeing the hurdles described above, you may wonder how the deal will be executed. No loans, huge debts, nothing. Then how? 

By no-cash and all-stock deal…

Really? Yes! 

As per the sources, PVR will issue a fresh share to Cinepolis for being a strategy partner. There will be no involvement of cash. 

How is it beneficial for the soon-to-be parent company (PVR)? Well, with an all-stock deal without involving cash, PVR will be able to maintain its debt. At least it won’t surge into more debt.

Final Words

The PVR-Cinepolis merger’s biggest problem that still exists is passing through the Competition Commission of India. Because it suspects that the merger can create a monopoly in the future. However, as per the officials, the merger won’t kill the Indian outlet of the Cinepolis brand. Also, the all-stock deal will benefit both participants. Also, Cinepolis will get the powerful position of “Board of Directors” in the entity worth Rs.13,600 crore and 1,260 screens.

Thus, there is a high chance that the PVR-Cinepolis merger will be a success! 

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Published By: Supti Nandi
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Shivangi Kant
Shivangi Kant
10 months ago

PVR & Cinepolis mergers are in talks of a merger.Yes from the article I can see Cinepolis will hold 20% and PVR in between 10-14% stake in merged company.Yes I too think deal is critical but somehow if it takes fruition we will be able to see PVR 860 screens and Cinepolis 400 screens in the country.Although the deal is critical so beacuse PVr screens are spread in west side and in NCR much, but Cinepolis have presensce in Pan india.

Akash
Akash
9 months ago

I have been hearing about PVR-Cinepolis merger since last year. Why haven’t they merged yet?