Financial Accoun+ng- IV NMIMS, Bengaluru 1

PVRINOX
Merger
Merging Margins or Margins of Error? A Deep Dive into Financial Projections

PROJECT SUBMITTED BY:

AYUSH AGARWAL- 74012200369
ANKUR GUPTA- 74012200123
DIA SUVARNA- 74012200235
JINAY S- 74012200703
NAMAN AGARWAL- 74012200601
PRANAY GUPTA- 74012200949
Financial Accoun+ng- IV NMIMS, Bengaluru 2

A Little Bit About The India Cinema Industry:

The Indian film industry is a vast force, regularly coming in first place worldwide in terms of
the number of films produced annually. Here's a look at this vibrant world:

Multilingual Marvel: The most well-known feature is Bollywood, the Mumbai-based Hindi
language film industry. But it's only a single component of the whole. India is home to several
regional film industries, including Marathi, Bengali (Kolkata), Kannada (Bangalore),
Malayalam (Kochi), Tamil (Chennai), Telugu (Hyderabad), and others. Telugu generated 20%
of movie office receipts in 2022, while Hindi films accounted for 33%.

Box Office Boom: India's average ticket price is lower than that of other major cinema markets,
despite the country's enormous viewership. It's enormous, nevertheless, because of its sheer
volume. In 2022, the industry brought in ₹15,000 crore, or US$18.6 billion.

Changing Dominance: Bollywood has long been at the top, but things are starting to change.
Telugu film emerged as the front-runner in terms of box office receipts in 2021. This
demonstrates the increasing influence of local cinema.

Experience the theatre: India offers a distinctive blend of contemporary multiplexes and single-
screen theatres. This makes it possible for films to suit a variety of budgets and audiences. In
India, going to the movies is a social event, and the high admissions are partly due to the
continued affordability of tickets.

A Deeper Dive into the Multiplex Giants: PVR & INOX:

The two biggest companies in the Indian mul+plex market at one point were PVR and Inox,
but things have altered drama+cally since then. This is the narra+ve:

Former Rivalry: With a substan+al market share, PVR and Inox were the two main rivals in the
mul+plex industry. PVR was known for providing high-end experiences, but Inox concentrated
on reaching a larger audience, which included smaller communi+es.
Financial Accoun+ng- IV NMIMS, Bengaluru 3

Merger Mania: PVR and Inox combined in February 2023 to form PVR INOX Ltd., a massive
organisa+on. Their supremacy in the Indian mul+plex sector was cemented by this
combina+on.

Market Spread: The merged company has a considerable market reach, below are a few
details:

• More than 1,650 screens dispersed among 350 loca+ons in 110 ci+es.
• 43 percent of India's mul+plex screens.
• The largest multiplex market share in all significant national regions.

In the Indian multiplex sector, PVR INOX Ltd. is essentially the dominant player at the
moment.

Here are a few more things to think about:

Box Office Powerhouse: The combined company also has substantial power over the box
office receipts:

• 30% of the total money made at the box office.

• More than half of the box office revenue from multiplexes.

Future Prospects: It is anticipated that the combination will increase negotiating strength and
operational efficiency, which could result in more market consolidation and growth.

It's crucial to remember that, despite PVR INOX Ltd.'s dominance, India is home to a number
of different regional and single-screen theatre chains. Nonetheless, PVR INOX Ltd. is the
industry leader in the multiplex sector.

Let’s dig deeper on the merger and If it was a success! Below is a detailed report that aims to
provide the reader with great insights on the same.
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From Popcorn Rivals to Powerhouse Partners!

PVR Cinemas:
PVR (Priya Village Roadshow) Cinemas
originated with the transformation of Priya
Cinema in Vasant Vihar, Delhi, in 1990, under the
leadership of Mr. Ajay Bijli. This renovation
marked the start of a journey that would
eventually lead to the formation of one of India's
leading cinema chains. PVR Cinemas was
founded in 1995 as a joint venture between Priya
Exhibitors and Village Roadshow, with Mr. Ajay
Bijli at the helm. With a vision of revolutionizing the movie-going experience, the company
began commercial operations in 1997 and quickly made its mark in the entertainment industry.

The year 2003 marked a watershed moment for PVR Cinemas when ICICI Ventures invested
critical funds in the company. This investment supported PVR's expansion plans and paved the
way for ground-breaking innovations. Among these was the introduction of PVR Gold Screens
at Forum Mall in Bengaluru, which set a new standard for luxury cinema experiences. Such
initiatives demonstrated PVR's commitment to ongoing growth and innovation in the
entertainment industry, cementing its position as a trailblazer in the Indian cinema landscape.
Financial Accoun+ng- IV NMIMS, Bengaluru 5

INOX LEISURES:
INOX Leisure, also known as INOX
Movies, has emerged as a prominent
Indian multiplex chain based in
Mumbai. Established as a public
limited company in November 1999, it is a subsidiary of the INOX Group of Companies. The
company began its operational journey in 2002 with the opening of its first four-screen
multiplex in Pune, followed by another in Vadodara. Rapid expansion followed, with
multiplexes opening in Kolkata, Goa, and Mumbai by 2004.

INOX Leisure underwent a significant transformation in 2006, when it went public, issued
equity shares, and sold existing shares. The infusion of capital facilitated further growth,
allowing for the addition of more screens in cities such as Bangalore, Chennai, Hyderabad,
Jaipur, and Indore, among others. The company increased its presence in the eastern region by
acquiring 89 Cinemas, expanding into West Bengal and Assam. Additionally, the acquisition
of Satyam Cineplexes Limited expanded its portfolio by granting ownership of multiplexes in
the NCR, Mysuru, and other regions. Notably, INOX made strides in sustainability, with its
Metro INOX multiplex in Mumbai becoming India's first solar-powered cinema in 2018.
Additionally, in 2021, the company installed electric vehicle charging stations at a few
multiplexes in Pune and Vadodara, demonstrating its dedication to sustainable practices. By
December 2022, INOX Leisure had established itself as a major entertainment enterprise under
the INOX Group, with 74 cities nationwide and a vast network of 170 multiplexes and 722
screens.
Financial Accoun+ng- IV NMIMS, Bengaluru 6

PVR INOX MERGER

The biggest movie theatre chain in India, PVR Cinemas, and INOX announced their intention
to merge on March 27, 2022, sending shockwaves through the film industry. When the Mumbai
bench of the National Company Law Tribunal (NCLT) approved the integration of PVR and
INOX on January 12, 2023, the merger gained impetus. This was a significant development for
the entertainment sector. By combining with rival INOX Leisure in February 2023, PVR
cemented its position and created the biggest multiplex chain in India.

After the merger, a strategic choice was made to keep the branding of the PVR and INOX
properties separate, but to rebrand all newly created properties as "PVR Inox." As a result, PVR
changed its name and became PVR INOX Ltd., consolidating its position as the world's fifth-
biggest chain of multiplexes by screen count. Beyond just name changes, there were also plans
to replace PVR Privilege and Inox Rewards with a single rewards program that would apply to
both PVR and INOX properties. In addition, a single booking app and portal are in the works,
replacing the separate PVR and INOX systems.

In the future, the combined company has big plans to open more than 150 screens a year and
expand into Tier 3 and Tier 4 cities all over India. With this calculated action, the magic of
films will be accessible to a wider range of people and the cinematic experience—which was
previously limited to Tier 1 and Tier 2 cities—will become more inclusive.
Financial Accoun+ng- IV NMIMS, Bengaluru 7

Unveiling the Deal: A Look at the Acquisition

Terms of Merger-

1. After the merger, the newly opened theatre will be named PVR INOX

2. the share exchange ratio will be three shares of PVR for every 10 shares of INOX.

3. The PVR promoters will own 10.62% of the combined entity, while the INOX promoters
will own 16.66%.

4. The appointment for directorship in the transferee company (PVR) would be as follows-

· Mr. Pavan Kumar Jain will be titled Chairman of the Transferee Company in addition to
serving as a non-executive non-independent director;

· Mr. Siddharth Jain will be designated as the Transferee Company's non-executive, non-
independent director;

· · The Transferee Company will elect Mr. Ajay Bijli as its executive managing director.

· Mr. Sanjeev Kumar shall be appointed as the executive director of the Transferee
Company,

5. Transferee company (PVR) would issue stock options to relevant eligible employees of Inox
Limited under the old scheme.

DISSOLUTION OF TRANSFEROR COMPANY:

The Transferor Company will be dissolved immediately upon the effective date of this Scheme,
without further act, instrument, or deed.

CHANGE OF NAME OF THE TRANSFEREE COMPANY:

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Following the approval of the relevant Registrar of Companies, the name of the Transferee
Company was changed to "PVR INOX Limited" upon the effective date of this MERGER.
This was accomplished by simply filing the necessary forms with the Governmental Authority;
no additional act, procedure, instrument, or deed, nor registration fees, shall be required under
the Act.

The following clause will thus be added in place of clause I of the Transferee Company's
Memorandum of Association, in accordance with Sections 13, 232, and other applicable Act
provisions, without the need for any act, procedure, instrument, or deed, and it will read as
follows: "The name of the Company is PVR INOX Limited."
Financial Accoun+ng- IV NMIMS, Bengaluru 9

RATIONALE FOR THE MERGER

A strategic imperative to strengthen competitiveness against formidable online adversaries like
Netflix and Amazon drove the merger of PVR and INOX. The companies wanted to accelerate
growth without upending the equilibrium of the market, so they joined forces. Moreover, the
combination was intended to establish a leading position in the Indian theatre market,
strengthening the company's negotiating position and opening doors to unexplored tier 1 and
tier 2 cities.

A dedication to improving operational efficiency was demonstrated by the merged entity's

efforts to streamline administrative procedures. However considering the possible
consequences of monopolistic tendencies, that regulatory clearance must be obtained from the
Competition Commission of India (CCI). Although there are potential advantages, such as
combined profits and enhanced profitability, it is advisable to exercise prudence when it comes
to taking on risky investments in the context of rising stock prices.

The combination also involves possible difficulties brought on by differences in organizational

cultures and delays in obtaining regulatory approval. To guarantee smooth integration and the
achievement of the anticipated synergies and benefits of the merger, navigating these obstacles
with strategic foresight is essential. Therefore, even though the merger offers PVR and INOX
both great opportunities, careful management and wise decision-making are necessary to
maximize its sustainability and long-term value.
Financial Accoun+ng- IV NMIMS, Bengaluru 10

TIMELINE:
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Financial Accoun+ng- IV NMIMS, Bengaluru 12

Post-Merger Shareholder Breakdown: Who Owns What Now?

FURTHER EXPLANATION ON CHANGE IN EQUITY:
1. Securities Premium:
Securities premium reserve increased by 6,24,639 in 2023 when compared to 2022 because
of the issue of 3,67,01,729 equity shares as purchase consideration to Inox Leisure Limited
and stamp duty payable on such issue amounted to approx. 5000 lakhs which was also
debited from Securities Premium Reserve.

2. Share Option Outstanding Account:

The reason behind increase in Share Option outstanding account can be the: expansion
of Workforce: If PVR Inox expanded its workforce significantly during this period, it might
have granted more stock options to employees as part of their compensation package.

• Retention and Motivation: ESOS can be used as a tool to retain and motivate
employees. As the company grows or faces increased competition for talent, it may
offer more stock options to attract and retain skilled personnel.

• Performance Incentives: Companies often use ESOS as a means to incentivize

performance. If PVR Inox experienced strong financial performance or achieved
certain milestones, it might have rewarded employees with additional stock options.

• Market Conditions: Favourable market conditions or a bullish outlook on the company's

stock might have prompted PVR Inox to grant more stock options to employees,
aligning their interests with shareholders.

• Changes in Compensation Strategy: PVR Inox might have revised its compensation
strategy during this period, placing greater emphasis on equity-based compensation
such as ESOS to attract and retain talent.

• Regulatory Compliance: Changes in regulations governing ESOS or employee

compensation might have influenced the decision to grant more stock options during
this period.
Financial Accoun+ng- IV NMIMS, Bengaluru 13

Company Growth and Future Prospects: If PVR Inox experienced growth in its business or
anticipated future growth, it might have increased ESOS grants to employees to align their
interests with the company's long-term success.

3. Share Application Money Pending Allotment:

The increase in Share Application money pending allotment by 25 lakhs, can be analysed
because of the following reasons: Merger-related Capital Infusion: If the merger involved
a capital infusion or issuance of shares to the shareholders of the merged entity, it could
lead to an increase in share application money pending allotment as investors subscribe to
the newly issued shares.

• Increased Investor Interest: The merger may have generated increased investor interest
in PVR Inox Ltd, leading to more subscriptions for its shares and thus contributing to a
higher amount of share application money pending allotment.

• Diversification of Shareholder Base: The merger might have attracted new investors or
shareholders to PVR Inox Ltd, resulting in a larger pool of subscribers for its shares and
consequently increasing the share application money pending allotment.

• Delayed Allotment Process Post-Merger: Mergers often involve complex legal and
administrative procedures, which could lead to delays in the allotment process of
shares. This delay could result in a higher amount of share application money pending
allotment. Regulatory Approvals and Compliance: Post-merger, there could be
regulatory approvals or compliance requirements that need to be fulfilled before shares
are allotted, leading to an increase in share application money pending allotment.

• Strategic Integration Activities: Integration activities following a merger, such as

restructuring or realignment of business operations, could temporarily delay the
allotment process of shares, contributing to the increase in share application money
pending allotment.
Financial Accoun+ng- IV NMIMS, Bengaluru 14

• Market Conditions: External market conditions prevailing at the time of the merger,
such as favourable investor sentiment or industry trends, could result in higher demand
for shares of PVR Inox Ltd, leading to more subscriptions and thus a higher share
application money pending allotment.

4. Capital Reserve:
Capital reserves remain unchanged; however, if revaluation nevertheless yields an
excess of the fair value of acquired net assets over the whole amount transferred, the
gain is recorded in OCI and added to equity as a capital reserve. The gain is recognised
by the corporation immediately in equity as a capital reserve rather than passing through
other comprehensive income if there is no evident evidence of a bargain purchase.

5. General Reserve:
There has been no alteration to the general reserve, which is occasionally utilised to
transfer retained earned revenues for appropriation reasons. Items contained in the
General reserve will not be reclassified after the Statement of Profit and Loss because
the General reserve is established by a transfer from one equity component to another
and is not an item of other comprehensive income.

6. Retained Earnings:
The retained earnings decreased by approx. 33240 and moved from (106838) in 2022
to (140078) in 2023. Retained earnings comprise of the Company's accumulated
undistributed earnings after taxes including Other Comprehensive Income(OCI).

NON CONTROLLING INTEREST

Change in non-controlling interest post-merger:
The change in non-controlling interest (NCI) from -0.26 pre-merger to -0.67 post-merger for
PVR Inox Ltd was influenced by several factors.

1. Merged Entity's Financial Performance:

The merger might led to changes in the financial performance of the combined entity. If the
post-merger performance of PVR Inox Ltd. was different from the pre-merger expectations, it
could affect the valuation of the non-controlling interest.
Financial Accoun+ng- IV NMIMS, Bengaluru 15

2. Revaluation of Assets and Liabilities:

The merger process involved a revaluation of assets and liabilities. The differences in the fair
value of assets and liabilities post-merger compared to pre-merger impacted the calculation of
non-controlling interest.

3. Change in Ownership Structure:

The merger resulted in changes to the ownership structure of PVR Inox Ltd. Due to changes
in the percentage of shares owned by non-controlling shareholders, the calculation of non-
controlling interest was affected

4. Impacts of Merger Synergies:

Merger synergies, such as cost savings or revenue enhancements, that materialized post-
merger, lead to changes in the financial performance of PVR Inox Ltd, impacting the valuation
of non-controlling interest based on the subsidiary's post-merger performance.
Financial Accoun+ng- IV NMIMS, Bengaluru 16

Changes in capital reserve pre and post-merger:

There was no change in pre and post-merger capital reserve.
Financial Accoun+ng- IV NMIMS, Bengaluru 17

ANNUAL REPORT EXTRACT OF PROMOTERS:

PARTICULARS PVR INOX PVR-INOX (POST MERGER ENTITY)

PROMOTERS 17 10.6

PROMOTERS 44 16.5

PUBLIC 83 51.9

PUBLIC 56 21

Note:
The promoters of INOX and the current promoters of PVR will be considered promoters in
the combined firm following the merger, in accordance with article 9 of the Scheme.
To further address the makeup of the combined entity's board of directors, Clause 10 has
been inserted.

The post-merger entity's chartered documents were amended through the plan to ensure smooth
operations and prevent any conflicts between the promoter groups of Inox and PVR. Following
the scheme's implementation, the merged company's Board of Directors was reorganized, with
ten members overall and equal participation from the promoter groups—Inox and PVR—each
holding two board seats.

Additionally, each group has fall-away board rights if their ownership is diluted. Each promoter
group could nominate one director if their share falls between 7.5% and 5%; if their share falls
between 5% and 5%, they will forfeit their ability to nominate directors.

Swap Ratio:
For every ten (10) equity shares of Inox valued at INR 10 (Indian Rupees Ten) each, 3 (Three)
fully paid-up equity shares of PVR was awarded at the merger's effective date.

IMPACT OF THE SHARE SWAP:

A premium of about 6.70 percent was earned by PVR shareholders from the INOX merger deal.
"PVR INOX merger is a share swap deal in which INOX will merge with PVR. The share swap ratio
in this deal is 3 shares of PVR for 10 shares of INOX. As PVR stocks closed at ₹2,044 per share levels
Financial Accoun+ng- IV NMIMS, Bengaluru 18

on Thursday, 3 shares of PVR costs ₹6,132. Likewise, INOX share price ended at ₹572 per share levels
on Thursday that means 10 shares of INOX would cost around ₹5,720. Hence, current premium
available to PVR shareholders in the existing share swap deal is ₹412 on each deal. So, the percentage
premium available to PVR shareholders in this share swap deal is around 6.70 per cent."

As the merger occurred in its due course, a PVR shareholder who books a profit on his existing PVR
shareholding and opens a new position in INOX shares waw able to book about 6.70 percent [{(₹6132
- ₹5720)/₹6132} x 100] of the premium available to PVR shareholders.

Promoters of PVR and INOX own 10.62 percent of the merged new multiplex network after the merger
agreement is finalized, while INOX promoters own 16.66 percent of the new company.

Pre & post-merger book value of share analysis

Pre-Merger face value of shares:
Inox leisure ltd
Book value- ₹58.03
Face value- ₹10

PVR pictures ltd

Book value – N/A
Face value- N/A

Post-merger face value of shares:

PVR INOX ltd
Book value- ₹757.61
Face value- ₹10

Reason for the change: Change in Capital Structure. The merger lead to changes in the capital
structure of the combined entity. Since the merger involved issuing new shares or redeeming,
it impacted the face value of shares.
Financial Accoun+ng- IV NMIMS, Bengaluru 19

Post-merger effect on stock price:

PVR Inox's stock dropped 4% on Tuesday following the multiplex owner's release of its first-
ever quarterly earnings following the merger.

The stock dropped 4.12% on the BSE, reaching a low of Rs 1,404.

"Revenue and EBITDA were ahead of our estimates; PVR Inox reported a loss of Rs 330 crore.
ATP/SPH stood at Rs 239/Rs 119. Footfalls stood at 3.05 crore in Q4FY23. It plans to open
150 to 175 more screens in FY24. The company plans to shut down approximately 50 cinema
screens and has charged depreciation of Rs 10.58 crore towards the same in Q4FY23. With
improving line-up of Hindi movies and a strong pipeline for the overall cinema industry (across
languages) in FY24, we reiterate our positive stance on multiplexes over medium/long term,"
[Reference to ]

Reason behind the drop

Motilal Oswal Securities pointed out the underperformance of movies to be the cause of lower
occupancy and margins. It mentioned that PVR Inox has only released financial data for
combined companies. The combined entity's occupancy decreased 290 basis points year over
year to 22.2% from 25.1% in the corresponding quarter last year, according to the report. With
a 5.1% margin. It predicted a 70% YoY decline in pre Ind-AS EBITDA with 5.1 per cent
margin.
Financial Accoun+ng- IV NMIMS, Bengaluru 20

CAPITAL SIZE OF THE COMPANIES:

PARTICULARS PVR INOX PVR-INOX POST MERGER

Paid up capital 60,99,65,870 122,33,90,940 97,65,63,150

Face value 10 10 10

No. of shares 6,09,96,587 12,23,39,094 9,76,56,315

PVR has double the amount of paid up capital despite being half the size of Inox
Financial Accoun+ng- IV NMIMS, Bengaluru 21

Accounting Treatment of Assets & Liabilities Taken Over:

Since Inox and PVR are currently controlled by separate promoter groups, the merger will be
recorded in PVR's books using the "Acquisition Method" as specified in Indian Accounting
Standard 103, "Business Combination." However, since the merger is actually a business
combination, the "Pooling of Interest Method" has been used.

The transferor company, Inox, recorded its assets and liabilities at fair value as on the
acquisition date (Appointed Date). The difference between the fair value of the assets and
liabilities and the amount of consideration paid (issued shares) has been adjusted as
"Goodwill."

(Rupees in lakhs, unless otherwise indicated or per share data)

The following is the fair value of the identified assets bought and the liabilities assumed as of
the acquisition date, after adjustment for measurement period adjustment:

There was little variation in the measuring period and final valuation. The book balance has
been adjusted to reflect the alignment of accounting standards and procedures, as well as the
transactions between the Transferor Companies and the Company.
Financial Accoun+ng- IV NMIMS, Bengaluru 22

Unpacking the Deal: A Financial Ratio Deep Dive

The current liabilities ratio measures a company's ability to cover its short-term obligations
with its current assets. A ratio of 0.35 in FY 2022-23 indicates an improvement compared to
the previous fiscal year (FY 21-22), where the ratio was 0.57. This suggests a better ability to
meet short-term obligations in FY 2022-23, potentially reflecting improved liquidity or more
efficient management of short-term debt.

Debt Equity Ratio:

Assesses the proportion of debt financing relative to equity financing in a company's capital
structure. A ratio of 0.24 in FY 2022-2023 indicates a substantial decrease from 1.08 in FY
2021-2022. This decline suggests a significant reduction in the company's reliance on debt
financing and a potentially healthier balance between debt and equity. Such a shift may enhance
the project's financial stability, decrease financial risk, and improve the company's ability to
withstand economic challenges.

The debt service coverage ratio (DSCR):

Evaluates a company's ability to cover its debt obligations with its operating income. A DSCR
of 1.86 in FY 2022-23 marks a substantial improvement from 0.23 in FY 21-22. This significant
increase indicates a strengthened capacity to meet debt obligations through operational
earnings. Such enhancement suggests improved financial stability, reduced default risk, and
potentially increased lender confidence.
Financial Accoun+ng- IV NMIMS, Bengaluru 23

The return on equity (ROE):

Measures a company's profitability relative to shareholders' equity. With an ROE of (8%) in
FY 2022-23 and (30%) in FY 21-22, there's a notable decline in profitability over the fiscal
years. The negative ROE in FY 2022-23 indicates that the company incurred a loss relative to
shareholders' equity during that period. This decline may raise concerns about operational
efficiency, financial performance, or market conditions impacting profitability.

Trade receivable turnover ratio:

The increase in the trade receivable turnover ratio from 26.71 times to 31.08 times indicates
that PVR Inox is collecting its accounts receivable more efficiently. It means they are
converting their receivables into cash at a faster rate, which could suggest better management
of credit policies or improved collections processes.

Trade payable turnover ratio:

The increase in the trade payable turnover ratio from 3.56 times to 5.41 times suggests that
PVR Inox is paying its suppliers at a faster rate. This could indicate improved liquidity or
negotiation power with suppliers, allowing them to settle their payables more efficiently.

Net capital turnover ratio:

A negative net capital turnover ratio typically indicates that a company is generating less
revenue than the value of its net assets. In the case of PVR Inox, the decrease from -2.51 times
to -2.81 times suggests that the company's revenue generation relative to its net capital has
slightly worsened. This could be due to various factors such as decreased sales or increased
capital investment without a corresponding increase in revenue.

Net profit ratio:

The improvement in the net profit ratio from -31% to -9% for PVR Inox indicates a positive
trend. While still negative, the company has managed to reduce its losses significantly. This
could be attributed to various factors such as cost-cutting measures, increased revenue, or
improved operational efficiency. Overall, it suggests a move towards profitability, albeit from
a negative starting point.
Financial Accoun+ng- IV NMIMS, Bengaluru 24

Return on capital employed:

PVR Inox's return on capital employed (ROCE) increased from -10% to 11%, indicating a
notable improvement in the business's profitability and capital utilisation efficiency. A shift
from a negative to a positive ROCE signifies that the business is currently making more money
than it spent on capital. This could be the consequence of a number of things, including higher
income, improved cost control, or more efficient use of resources. All things considered, it
points to an improvement in the business's financial results.

With a consistent Return on Investment (ROI) of 5% for both FY 2022-23 and FY 21-22, the
project maintains stability in generating returns relative to its investment. While the ROI
remains unchanged, it suggests a consistent performance in utilizing resources to generate
profits over the two fiscal years. This stability in ROI may indicate efficient resource allocation
and investment strategies.

WAS THE RATIONALE BEHIND THE MERGER ACHIEVED?

Positive Impacts Achieved (Partially):

• Cost Savings and Revenue Growth: The merger aimed to streamline operations by
combining procurement, marketing, and administrative functions. This could lead to
cost reductions in areas like advertising and food & beverage sourcing. Additionally,
the increased market share could allow PVRINOX Ltd to negotiate better deals with
film distributors, potentially increasing revenue.
• Improved Bargaining Power: With a larger screen presence, PVRINOX Ltd has more
clout when negotiating with distributors and studios. This leverage could translate into
better deals for screening rights, potentially leading to a wider variety of films and
potentially higher ticket prices.
• Enhanced Customer Experience: The merger might allow for improvements in
cinema infrastructure and technology upgrades across a larger theatre network. This
could lead to a more attractive cinema experience for moviegoers.
Financial Accoun+ng- IV NMIMS, Bengaluru 25

Challenges and Uncertainties:

• Integration Challenges: Merging two large companies can be complex, and there's a
possibility of facing hurdles in integrating operations, staff, and brand identities.
• Debt and Leverage: The merger might have involved taking on additional debt to
finance the deal. Effectively managing this debt is crucial for the company's financial
health.
• Evolving Movie-Going Trends: The success of the merger also depends on how well
PVRINOX Ltd adapts to changing consumer preferences. The rise of OTT platforms
and changing movie watching habits pose a significant challenge that the merged entity
needs to address.

Unfolding Story:

It's important to remember that the merger is relatively new. While initial signs look promising,
a few years are needed to understand the full impact on the company's financial performance,
market share, and customer experience.
Financial Accoun+ng- IV NMIMS, Bengaluru 26

SYNERGIES
A convergence of complementary competitive advantages will benefit the combined company,
increasing synergy. With a combined 44% market share in the Indian multiplex sector, the
combined company is well-positioned to exercise significant negotiating power, allowing it to
set strategic prices and promote long-term growth in revenue and profit.

Furthermore, the combined entity has a strategic advantage due to its pan-Indian presence.
With 871 screens, PVR is the largest operator in the northern and southern regions; in the
eastern and western regions, INOX is the largest operator with 675 screens. This geographic
diversification provides the combined company with a thorough understanding of a variety of
markets, enabling accelerated expansion initiatives driven by mutual market intelligence.

According to a JM Financial report, single-screen theatres are mostly to blame for India's screen
count decline over the previous five years. Since single screens make up about 70% of theatres
in India, PVR-INOX is well-positioned to take advantage of the unorganized single-screen
theatres' decline in market share and strengthen their position in the industry.
In addition, traditional movie theatre businesses have faced difficulties due to the increase in
demand for online content during the pandemic, which was met by several over-the-top (OTT)
platforms. PVR-INOX is in a strong position to take advantage of these chances and overcome
these obstacles in smaller towns, where growth prospects are still bright.

Before the merger, PVR had higher revenue per capita than INOX. Nonetheless, it is
anticipated that the merger will greatly increase their revenue, bringing it into line with PVR's,
helping both businesses.
Financial Accoun+ng- IV NMIMS, Bengaluru 27

CONCLUSION
Given that PVR has 800 screens across the country, its merger with Inox represents a major
turning point in the history of the Indian multiplex industry. These former rivals' cooperation,
spurred by the pandemic's catastrophic effects on the film industry, emphasizes how important
it is to adapt and work together during difficult times.

The entertainment industry's competition has intensified due to multiplexes facing formidable
challenges from the growth of over-the-top (OTT) platforms and the surge in digital
connectivity. Nonetheless, PVR and INOX's combination is well-positioned to increase their
combined resistance to these kinds of shocks by combining their unique advantages to
successfully negotiate changing market conditions.

With Inox's domination in the East and PVR's strength in the North, West, and South, the
combined company will have significant negotiating power and improved chances of surviving
industry obstacles. However, the merger's complexity and significance are highlighted by the
potential transformation of the movie theatre industry as well as regulatory scrutiny and
financial sustainability considerations.

The merger decision's developing ramifications will be closely watched while it awaits
approval from pertinent authorities and stakeholders. Although the possibility of monopolistic
behavior calls for close supervision, the combination has the potential to transform the Indian
film festival scene and strengthen the multiplex industry's resilience going forward.
Financial Accoun+ng- IV NMIMS, Bengaluru 28

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