PVR Inox merger: How shareholders of this stock may earn 6.7% premium

PVR Inox merger: Shares of multiplex chain PVR and INOX have been surging after the SEBI's nod for the merger of the two multiplex chains. Both the stocks have surged more than 11 per cent in last one month and market analysts are still bullish on both the stocks as INOX PVR merger would lead to emergence of largest multiplex chain in India that will cover more than 80 per cent of the multiplex market in India with around 1500 screens. 

However, there is a catch for PVR shareholders who can earn around 6.70 per cent from this PVR INOX deal even when there is no movement in both the stocks till the amalgamation process is complete.

Speaking on how a PVR shareholder can earn around 6.70 per cent premium from this INOX merger deal, Saurabh Jain, Vice President — Research at SMC Global Securities said, "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 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, percentage premium available to PVR shareholders in this share swap deal is around 6.70 per cent."

The SMC analyst went on to add that if a PVR shareholder books profit in his current PVR shareholding and takes fresh position in INOX shares, assuming merger would happen in due course, he or she will be able to book around 6.70 per cent [{( ₹6132 - ₹5720)/ ₹6132} x 100] premium available for the PVR shareholders.

Expecting uptrend in both PVR and INOX shares, Punit Patni, Equity Research Analyst at Swastika Investmart said, "PVR Ltd. and INOX Leisure Ltd. have generated good investor interest and rose more than 10 per cent in the last month. The robust upcoming movie lineup, prolonged runs of movies at theatres before debuting on OTT Platforms, and normalization of business as covid has now subsided are some of the reasons that have led to such good performance of such stocks."

Speaking on PVR share price outlook, Ravi Singhal, CEO at GCL Securities said, “After SEBI's nod for INOX PVR merger deal, both the stocks are in uptrend and we are expecting PVR to go up to ₹2600 apiece levels in next 5-6 months time horizon.”

Once PVR INOX merger deal becomes a reality, promoters of PVR will have 10.62 per cent stake in the combined new multiplex chain whereas INOX promoters will have 16.66 per cent stake in the new entity.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.