Indian Multiplex Majors in Merger Talks

By Patrick von Sychowski | March 8, 2022 7:02 am PST
PVR and Cinepolis in Merger Talks

Two of India’s largest multiplex operators are said to be in advanced merger talks. PVR is India’s largest chain and Cinépolis India, part of the Mexican cinema major, the country’s third-largest cinema chain. Such a deal would transform the Indian cinema market, which has struggled to grow at the same pace as neighbouring China. Indian cinema operators have been under financial pressure due to extended COVID-related closures and lack of local film content.

According to several sources, the merged entity would be controlled 20% by Cinépolis, with PVR controlling between 10% and 14%. Ajay Bijli, the current chairman and CEO of PVR, would run the merged entity for at least the first three years. The merged company would have a 35% to 37% market share in India, assuming that it is not forced to divest of any existing properties. PVR has previously acquired several smaller Indian cinema chains, but been blocked from expanding further in the market such as the greater Delhi region, as a result. Cinépolis surprised many when it set out in India, but has grown rapidly and sees India as having more growth potential than its other markets in Mexico, the United States and Europe. It has also extended its Indian presence into the Gulf and Saudi Arabia.

“A merger will enable the combined entity to have a screen share of 42 percent within the multiplex segment and a screen share of 15 percent in the overall India screen ecosystem. A bigger market share in the multiplex ecosystem may lead to a duopoly as PVR/Cinepolis and INOX Leisure will command around 50 percent box office revenue share together.”

Karan Taurani – Analyst, Elara Capital

According to analyst Nitin Menon of NV Capital, a credit fund for the media and entertainment sector, Cinépolis India could be valued at INR 90 million (USD $1.17 million) per screen, which would be a 25% discount compared to PVR. PVR currently has 846 screens in India compared to the 417 Cinépolis runs, yielding a combined operation of 1,263 screens. Currently the second largest operator INOX has 160 multiplexes and 675 screens, i.e half of what the merged PVR-Cinépolis would have, while fourth-place Carnival has been struggling with paying creditors.

News of this potential merger highlights the devastating effect the COVID-19 pandemic has had on the Indian cinema sector, with extended lockdowns, which unlike most Western economies, did not see the government support cinemas with either furlough payments for staff or grants and loans. As such, the Indian authorities may have no choice but to allow the merger to go ahead (possibly with conditions) as a means for the Indian cinema sector to rebuild itself. It may lead to a duopoly situation, particularly if, as a result, INOX acquires Carnival, which was said to previously be in merger discussions with Cinépolis India before the pandemic.

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