Aryaman Pratiraj - B009

Aryan Nanda- B010

Ayushi Kothari- B011
Bindiya Vasudeva- B012
Introduction
Indian M&E industry
- Growth of over 13% from the previous year 2017.
- Huge amount of movie certifications and releases with the total number of
movies certified amounting to more than 2,000 each year.
- The industry employs more than 4 million people and is emerging as one
of the key- drivers of India’s economic growth owing to the advancement
of technology and growing desire of audiences for versatile and relevant
content.
 PVR
- PVR Ltd. was incorporated on April 26, 1995 as Priya Village Roadshow
Ltd as a result of the joint venture agreement between Priya Exhibitors Pvt
Ltd and Village Roadshow Ltd.
- It is the market leader in terms of screen count in India. Since its inception,
the brand has redefined the Indian cinema industry and the way in which
people watch movies in the country.
- Over the years PVR has added screens, both organically and inorganically,
via acquisitions and strategic investments.
- As of 2018-19 they operate around 845 screens in 176 cinemas in 71 cities
in India and Sri Lanka with a total seating capacity of around 1.82 lakhs
seats.
- They generate revenue from box office and non-box office which basically
includes revenue from sale of food and beverages, convenience fees,
advertisement income, etc.
 Future Prospects
- Achieving the annual target of opening more than 100 screens and to reach
the milestone of 1000 screens in the near future.
- Expanding overseas and into high growth potential locations of India
including the Tier III cities.
- Introduction of PVR Talkies
- Special programme to widen the scope of movie viewing for the differently
abled.
Macro and Micro level factors

 Macro factors affecting the industry as a whole:

- Income and Demand
- Growth of the industry
- Government regulations and taxation
 Micro level factors affecting PVR:
- Corporate Governance
- Competition
- Level of debt and operations
- Direction and goals
Current and Future Competitive Strength
Dividend Policy

 PVR is currently in an expansion phase.

 PVR follows a stable + extra policy.
 A company of PVR’s stature and repute HAS to take care of its shareholders.
 PVR’s stable + extra policy is an extremely healthy sign for shareholders
 Reassuring as their interests are being actively taken care of by the company.
 Graphs

Dividend Payout Dividend Rate Dividend Yield

60.00% 60.00% 4.00%
55.00%
3.50%
50.54% 3.50%
50.00% 50.00%
3.00%
40.00% 40.00%
2.50%
30.00%
30.00% 30.00% 2.00%
22.88% 19.35% 1.50%
20.00% 17.00% 18.00% 20.00% 18.46% 17.21%
10.00% 0.92%
18.51% 1.00%
10.84% 0.62%
10.00% 7.00% 8.00% 10.00% 0.47% 0.23% 0.14%
5.00% 0.50% 0.27%
10.00% 9.25% 8.90% 8.58% 0.14% 0.12% 0.10%
0.00% 0.00% 0.00%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sustainable Growth Rate
Sustainable Growth rate
14.00%

12.13% 12.02%
12.00%

10.57%

10.00%
8.77%
7.92%
8.00%

6.00%
4.71% 4.63%

4.00%

2.39%
2.00%

0.00%
0.00%
2010 2011 2012 2013 2014 2015 2016 2017 2018
Bonus/Buy Back

 PVR has not announced any bonus so far.

 On March 31, 2011 the company's board approved buyback of about 18 lakh
shares for Rs 26.22 crore. This totalled to 6.90% of paid-up share capital and free
reserves. The board set the price limit at Rs 140 per share.
Conclusion

 PVR was listed on 2006. Never failed to pay dividends.

 The company should continue with the Stable dividend + Extra policy.
 PVR needs to retain profits to fund its acquisition strategy.
VALUATION
NET ASSET VALUE
(NAV)
PVR LTD.
NAV CALCULATIONS….

Particulars Value
Non Current Assets 278751.20
Current Assets 22853.00
Total Assets 301604.20

Non- Current Liabilities 108153.00

Current Liabilities 94757.00
Total Liabilities 202910.00
Net Asset Value 98694.20
NAV/Share 21.12
ANALYSIS :

 Net asset value (NAV) helps assess the fair market value in case the company plans to
liquidate.
 The NAV of PVR Ltd was Rs.98694 lakhs and a NAV per share of Rs.21.11, which indicate
the value shareholders will get per share in case of liquidation.
 Nav is the apt method to value PVR due to its huge capex for an aggressive acquisition
strategy.
 The shareholders will see and appreciation in the value per share due to the huge capital
appreciation in the share price due to high number of acquisitions.
 Company has asset to liability ratio of 7:3 indicating the huge value of assets that affects
the NAV.
 However a debt to asset ratio of 3 which is a red flag.
DIVIDEND
DISCOUNT MODEL
Dividend Distribution Model (DDM)

 Total number of shares - 467.39 (In Lakhs)

 Company Valuation - 23823.30 (In Lakhs)

Values ₹₹ /Share %
VHGP 9.10 18%
VSGP 41.87 82%
To tal Value 50.97 100%
RESIDUAL INCOME
Residual Income

 The Historical growth rate of R.I is = -76.3%.

 PVR is depleting wealth of its shareholders.
 Large Divergence in the prediction of the model and the real life.

Values ₹₹
VHGP -1274.94
VSGP -5079.6
+Book Value 0 230.253
To tal value -6124.29
FCFF AND FCFE – Historical Growth
Rates
Year FCFF HPR FCFE HPR
2010 -128948191 -365863219
2011 -71583378 -44.49% -268860644.5 -26.51%
2012 -743192598 938.22% -1051864407 291.23%
2013 -609178189 -18.03% 563715180.2 -153.59%
2014 498200000 -181.78% -996361715.2 -276.75%
2015 -356200000 -171.50% -1123700000 12.78%
2016 1077900000 -402.61% -327406804.6 -70.86%
2017 -2911700000 -370.13% -4203810956 1183.97%
2018 873600000 -130.00% -504877681.9 -87.99%
2019 4300000000 392.22% 4919718245 -1074.44%
Average g 1.32% Average g -22.46%
FCFF AND FCFE – Current Year

Base year is 2018-19

tax rate 36.58%
Interest amount 10522
(Rs in lakhs) Cost of equity 10.47%
CFO 81651 growth rate 1 1.32% (for FCFF)
(-) Capex 38651 WACC 8.310%
FCFF0 43000 growth rate 2 0.00% (sgp taken as 0%)
(-) Interest(1-t) 6673.0524 growth rate 1 -22.46% (for FCFE)
Net Borrowings 12870
FCFE0 49196.9476
 FCFF - 2 Stage Model
Year FCFF PVF @ WACC PVD
1 43,568.36 0.923277931 40,225.70 V6 45,917.91
2 44,144.23 0.852442138 37,630.40
3 44,727.71 0.787041013 35,202.54 Terminal Value 552,578.91
4 45,318.91 0.726657598 32,931.33
5 45,917.91 0.670906924 30,806.65 Vsgp 370,729.02

Vhgp 176,796.62

Value of firm 547,525.64 (in Lakhs)

Year FCFE PVF @ ke PVD

1 38,147.31 0.905197392 34,530.8484 V6 13790.0913
2 29,579.43 0.819382318 24,236.8591
3 22,935.89 0.741702737 17,011.6105 Terminal Value 131671.0043
4 17,784.49 0.671387382 11,940.2802
5 13,790.09 0.607738107 8,380.7640 Vsgp 80021.48691

Vhgp 96,100.3622

Value of equity 176,121.85 (in Lakhs)

FCFF AND FCFE - ANALYSIS

 Current year – positive FCFF and FCFE

 Difference in the model interpretation and the reality
 Not a suitable method for valuating PVR
 Erratic values
 Expansion stage
Relative Valuation

In this we calculate the industry averages by taking comparable companies for several ratios and
then assume the same ratios to the firm in question, in order to calculate the value per share / value
of share price and value of the firm as per Enterprise Value (EV).
Comparable companies taken for this purpose are:

 Zee Entertainment
 Sun TV Network
 Tips Industries Ltd.
 TV18 Broadcast
 Inox Leisure
 Shemaroo Entertainment Ltd.
 Saregama India Ltd.
 Eros international
 Ufo moviez
 Balaji telefilms
Particulars P/E P/S P/BV EV/EBITDA EV/EBIT EV/CFO EV/Sales EV/Assets

PVR 44.472 2.797 6.352 17.826 25.319 11.925 3.544 2.969

Industry
Average 26.765 2.929 2.442 17.713 25.067 18.237 3.463 2.012

50

45

40

35

30

25 PVR
20 Industry Average

15

10

0
P/E P/S P/BV EV/ EV/EBIT EV/CFO EV/Sales EV/Assets
EBITDA
 Particulars As per Relative Valuation As per Actual data

Value per share 1114.37 1,644.15

Value of the firm (in
lakhs) 1006373.20 973693.49
Working Capital Management
HISTORICAL WORKING CAPITAL
1447438868
627400000
695170808
194700000 380866930

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
-524248336
-860613381

-1986900000

-3544700000

-4221300000

Total Current Assets and Current Liabilities

7,000,000,000.00
6,000,000,000.00
5,000,000,000.00
4,000,000,000.00
3,000,000,000.00
2,000,000,000.00
1,000,000,000.00

-
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
TOTAL CURRENT ASSETS TOTAL CURRENT LIABILITIES
Particulars WORKING CAPITAL
2009-10 695170808 Particulars TOTAL CURRENT ASSETS
TOTAL CURRENT LIABILITIES
2010-11 1447438868 2009-10 1192318002 497147194
2011-12 -524248336 2010-11 1972859342 525420474
2011-12 579590382 1103838718
2012-13 -860613381
2012-13 798420278 1659033659
2013-14 627400000
2013-14 947900000 320500000
2014-15 -1986900000
2014-15 1265900000 3252800000
2015-16 194700000
2015-16 4070400000 3875700000
2016-17 -3544700000
2016-17 2244500000 5789200000
2017-18 -4221300000
2017-18 2422300000 6643600000
2018-19 380866930 2018-19 3078500000 2697633070
 A company's working capital changes over time as a result of several
operational situations. Hence, working capital can serve as an indicator of how
a company is operating. A very high working capital indicates more funds are
blocked in daily operations, in turn indicating that the company is being too
conservative with its finances. Inversely, too little working capital could be
indicative of less money being devoted towards daily operations, and hence
could be a red flag that the company is being too aggressive.
 The working capital of PVR has had huge fluctuations in the last decade with
minimal working capital. Hence, the Woking Capital Policy of PVR is an
aggressive one. This is quite common for companies in the Media industry
 5 out of 10 years the working capital has been negative. This happens when
the drivers of current liabilities are more than that of the current assets.
MERGER AND
ACQUISITION
PVR LTD AND MIRAJ CINEMAS
MIRAJ CINEMAS COMPANY
INTRODUCTION
 Division of Miraj Entertainment Ltd, entertainment wing of Miraj group of Companies.
 5th largest Cinemas chain in India
 Hue presence mainly in tier ii and tier iii cities
 Current screen count is 128 with presence across India.
WHY MIRAJ CINEMAS

 PVR Ltd caters to almost all markets and demographics

 Provides special products like Playhouse(kids), IMAX,4DX, PVR gold etc.
 Has a pan india presence mainly in tier i cities and internationally.
 Miraj has huge presence in Tier ii and iii cities which is an untapped market for
PVR.
 Miraj is looking for a buyout.
SWOT ANALYSIS
STRENGTH

 miraj’s presence in tier ii and iii cities – additional revenue source.

 First mover advantages to PVR
 Revenue from advertisers looking to sell product in these markets.
 An acquisition will further lead to capital appreciation attracting shareholders and
sustaining them.
 Increase in stock value will lead to increase in investor confidence.
 Ready made infrastructure and thus less expenses on the same
Weakness

 Knowledge gap of people in these cities– increase in advertisement expenditure.

 Alter pricing of tickets due do low level of income of people.
 Revamp the existing Miraj cinemas to meet quality standards.
 High capex might create ambiguity for risk averse shareholders.
Opportunity

 Increase in market share without much increase in cost

 Increase in growth rate
 Reduce its competitors clearing pathway to be only largest cinemas chain.
 Lack of OTT channel usage in these cities will lead to more revenues.
Threats

 Risk of conflict of interest may lead to failure.

 Strategic and managerial issues.
 Competition from local cinemas in these cities
 Taxation and valuation issues
 Lack of consumer footfall.
CONCLUSION
 Mergers and Acquisitions have all been a strategy for PVR and looking at past experience,
there are high chances of this being a success and thus increase market penetration.
THANK YOU