BackJury out on PVR-Inox merger benefits
While existing multiplex screens will retain their brands, new cinemas opened post the merger will be branded as PVR Inox
PremiumWith NCLT approval in place, India’s two largest multiplexes — PVR and INOX Leisure — are one step closer to the proposed merger, but it has left the film and exhibition industry divided as to what may lie ahead. While some are speculating aggressive tactics to armtwist producers and distributors on share of box office revenue and food and advertising vendors for rates that suit them, others are saying the stage is set for other players like Cinepolis and Miraj to build on expansion plans and benefit from lower rentals that the merger could result in, for the industry, in general. Single screen owners, meanwhile fear, producers may begin to look at limited releases with the two chains to reduce costs in case of niche films.
In March last year, the boards of PVR Ltd and Inox Leisure Ltd, had approved an all-stock merger of the companies to create India’s largest film exhibition entity with a network of more than 1,500 screens.
While existing multiplex screens will retain their brands, new cinemas opened post the merger will be branded as PVR Inox. The merged entity will be named PVR Inox Ltd. With the pandemic having devastated the film exhibition business, the post-merger turnover of the two companies falls below Rs. 1,000 crore, enabling exemption from seeking CCI approval.
“There was already a certain duopoly in the (film exhibition) market and while we can argue on the merits and demerits of the merger, the truth is there is now need for stronger competition because this new entity will be three to four times larger than the next big player," Rahul Puri, managing director, Mukta Arts and Mukta A2 Cinemas said. Chains like Mukta will not be competing for premium properties in A-list cities, Puri said, but will continue to expand footprint in the Hindi-speaking heartland, especially in the Mumbai and Gujarat region, besides Andhra Pradesh and Telangana, where they already have decent presence.
Ashish Kanakia, chief executive officer, MovieMax Cinemas agreed the merger will pose tight competition for new and emerging cinema chains. “Every cinema chain has their own plan of action and strong backing with quality teams. We are looking at getting into places where either you do not have a multiplex or it needs revival," Kanakia said adding that the company has signed a deal to add more than 100 screens in India in the coming months.
PVR and INOX did not respond to Mint’s queries on possible implications of the merger. Cinepolis, the third largest player, too didn’t respond.
A senior multiplex chain executive said on condition of anonymity there are opportunities for players like Cinepolis, Miraj Cinemas and other emerging chains to expand presence given that the screen count of Carnival Cinemas has come down from 400 to less than 100 in the past few months. The company that has been struggling with debt, is unlikely to get back into the game and screens it has lost over the past few months are now up for grabs. “That said, together PVR and INOX together could renegotiate several terms and other players have bear the brunt until they don’t gain significant market share themselves. For example, if a major chunk of cinema advertising budgets go to the merged entity, there won’t be much left for players with only 1-2% of market share," the person said.
A single screen theatre owner who declined to be named said while non-national multiplex chains and independent cinemas have always been bullied, the going could get tougher for them. “They could set the terms and others will have to follow. If we don’t agree to the revenue share decided by them, we would have to give up the film altogether. Plus, with a lot of smaller films, producers may limit releases to the top two chains to control costs, we will be deprived of content then," the person said.
However, some players continue to see hope. “It could be positive for the entire industry. Rentals are our biggest cost and the merger could result in at least 20-40% reduction in real estate prices, in the short to mid-term for all players," said Amit Sharma, chief executive at Miraj Cinemas that has signed 150 new screens in 2022 and currently has 35-40 properties ready for fitout.
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