INOX Leisure Ltd (INOXLEISUR) Update Call Pertaining to INOX PVR Merger Announcement

INOX Leisure Ltd (NSE:INOXLEISUR) Update Call Pertaining to INOX PVR Merger Announcement dated Mar. 28, 2022

Corporate Participants:

Siddharth Jain — Director

Analysts:

Sanjesh Jain — ICICI Securities Limited — Analyst

Abneesh Roy — Edelweiss Financial Services — Analyst

Arun Prasad — Spark Capital Advisors (India) Private Limited — Analyst

Harit Kapoor — Investec — Analyst

Aditya Gupta — Tara Capital Partners India Pvt Ltd — Analyst

Naval Seth — Emkay Global Financial Services Lt — Analyst

Aasim Bharde — DAM Capital Advisors — Analyst

Hansal Thacker — Lalkar Securities — Analyst

Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the update call pertaining to Inox PVR Merger Announcement hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sanjesh Jain from ICICI Securities. Thank you and over to you, sir.

Sanjesh Jain — ICICI Securities Limited — Analyst

Thanks, Isaac. Good evening, everyone. Thank you for joining on for Inox Leisure conference call to update announced merger of Inox Leisure Limited and PVR Limited. We have Inox Leisure’s management: Mr. Siddharth Jain, Director; Mr. Alok Tandon CEO; Mr Kailash Gupta, CFO. I would like to invite Mr. Siddharth Jain to initiate with his opening remarks, post which we will have a Q&A session.

Over to you, Siddharth ji.

Siddharth Jain — Director

So first of all, thank you. Sanjay, and thank you, Isaac, for organizing the call. Very good afternoon, good evening to everyone, the entire analyst community. Most of you know that I usually don’t participate in these calls, but certainly today is an extremely historic day for all of us; for the industry, for our company, and I thought it’s important that I address all of you and get your questions as well and answer your questions. So, I’d just like to begin by saying that we have — as Inox Leisure, we have just completed 20 years of opening our first cinema which started in Pune back in 2002 and it’s been two decades quite a journey. We have 675 screens, almost 8,000 employees, and funny enough this month of March will most probably be a historic month for us not only in terms of this deal, but also in terms of footfalls and revenues.

I think it’s a culmination of many things coming together. It has always been our stated desire to be a leading player in this field and more importantly to bring our absolute the best quality movie watching experience to our customers. The difficulty we faced in the past two years of not being able to spend money either in upgrading our existing screen or in continuing our capex growth is one of the main reasons that has driven us to this decision. I think it’s similar for PVR as well. The combined strength of the balance sheet will enable us to raise money in any form required to continue this growth cycle. As we have seen from the results of the movies in the month of February and March that the consumers are absolutely dying to go back to the theatrical experience. Everybody is tired of sitting at home and excited to go out with their families and friends and enjoy good quality cinema on the big screen.

This merger is — the proposed merger between our two companies is there’s a share exchange ratio of 10 shares of — for every 10 shares of Inox, we will be given 3 shares of PVR. I’m sure if you’ve read the press release, I don’t want to repeat all the information in it. It’s pretty self explanatory. There are obviously going to be tremendous synergies going forward not only on revenue, cost, opex, capex growth. But above all, I think is our desire to really double this company from where we are today. India is certainly a very large market for us, but nothing is going to stop us from expanding globally as well. And if we’re able to satisfy all our Indian customers, we certainly will consider going international as well. So I mean it’s a pretty simple merger, not very complicated in terms of the share exchange ratio.

And maybe I’ll just hand it over now back to you guys for Q&A. So Sanjay, over to you.

Operator

This is the operator. Sir, we are not able to hear you.

Siddharth Jain — Director

This is Siddharth Jain. You can — all I said it’s over back to you for Q&A.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Abneesh from Edelweiss. Please go ahead.

Abneesh Roy — Edelweiss Financial Services — Analyst

Thanks and congrats to the management on this deal. My first question is this deal obviously will take six to nine months in terms of approval and there is slight concern whether CCI could raise some questions at a later stage. I do understand you don’t need to pre-apply. So till then in terms of expansion plans, how aggressive will you be in terms of finding new properties? Whatever is in pipeline in terms of fitouts, I understand those anyway will happen. But in terms of finding new properties, will you remain quite aggressive?

Siddharth Jain — Director

Thank you, Abneesh, for your good wishes as always. You’ve been a very keen supporter of the multiplex industry and we deeply appreciate that. Coming to your question on CCI. As rightly pointed out by you that we’ve been advised by our counsel that it doesn’t require notification to the CCI. But regardless being publicly listed companies, we have to comply with all the regulatory matters. So whatever it maybe; whether it’s NCR or we have to go through the NCLT, SEBI, and all those other procedures which all of you are aware about; and if CCI has any questions, we’ll be more than happy to answer them. When it comes to the expansion that as a publicly listed company, both of us, we must continue operating exactly the way we would prior to the merger during the interim period and we will continue to be extremely aggressive in our expansion plans the way we have been in the past. It is our charter, it is our mission to increase our size, and that’s what we’re going to keep doing, Abneesh.

Abneesh Roy — Edelweiss Financial Services — Analyst

Sure. My second and last question is obviously there is a gap when we compare the two players in terms of ad revenue per screen, convenience fee, SPH. So once you come together say after all the approvals, how easy will it be to bridge those gap in terms of ad revenue per screen, convenience fee, SPH? Does it happen almost fully covered by bringing entities under same management or it depends largely on the location because advertising revenue is based on the demographic, right, the footfalls which happen. So, how much that bridge can happen because of the merged entity?

Siddharth Jain — Director

So, certainly ad revenue is something that can happen the soonest. As you have — just to be sometimes in stock prices, you have rerating of company’s PE ratios, I feel that the merged entity not just Imox, the merged entity with potentially 200 million footfalls at some point in time. The merged entity at 200 million — we will have rerating of the ad demand for our entire chain. And I certainly think that’s the lowest hanging fruit and we have — both our teams combined will be able to successfully do that. When it comes to SPH, as mentioned by you, that’s more location based. I don’t think it’s to do with chain based, that certainly is location based. And lastly on convenience fee, once again that is a little more location based. There is no difference in the per head SPH. It’s only on the number of people who book online tickets. So maybe we are both in certain geographies where in Tier 1 cities, more people book online tickets and in Tier 3 cities, less people book online tickets. Hope that answers your question, Abneesh.

Abneesh Roy — Edelweiss Financial Services — Analyst

Yes, sir. That was very helpful., And I have just one last small follow-up so that’s more of a personal question and to the promoter family of Inox. So Siddharth, you have been extremely passionate on this business. You were extremely aggressive versus Inox’s past in terms of expansion, in terms of scaling up your premium brands, etc. So now we see you in the non-executive role. So wanted to understand from Inox promoter family on a day-to-day basis or in terms of strategic inputs, how aggressive or how active will you be and the family will be when the merged entity happens?

Siddharth Jain — Director

So Abneesh, as you’re aware even currently in Inox Leisure, I’m a Non-Executive Director and Alok Tandon is the CEO and he along with his 8,000 strong workforce has been — done a stellar job over the past two decades in bringing the company where it has. My father and I have always provided strategic advised guidance at Board level and sometimes even more minutely on the direction in which the company should go. And as you very rightly pointed out that over the past five to seven years that we have gotten more aggressive and that’s been a decision at the Board level. The execution has always happened at the management team level. Going forward even with the merged entity, it will be the same. Ajay and I share an extremely good rapport, we are great friends, and we have a tremendous respect for each other brands. Now we both in the past would compete with each other, try and outdo each other only with one end goal of satisfying the customer and I think that will continue to happen. And he has always had many partners in the past and he’s always used a very consultative collaborative approach and it’s going to continue in the same manner, Abneesh.

Abneesh Roy — Edelweiss Financial Services — Analyst

Sure. That’s all from me. Thanks a lot, Siddharth and Alok. Thank you.

Operator

Thank you. The next question is from the line of Arun Prasad from Spark Capital. Please go ahead.

Arun Prasad — Spark Capital Advisors (India) Private Limited — Analyst

Thank you. Thank you for the opportunity. My question is towards Siddharth. Siddharth, how this merger idea got originated? Did you approach PVR? They approached you or is it something which was there in your mind during the last two years of the disruption caused during the COVID?

Siddharth Jain — Director

Hi Arun. Thank you for your question. This has been, we’ve been in the same industry for 15 plus years and we’ve been talking on and off, but it actually got precipitated during the COVID period wherein we were almost on day-to-day matters on industry issues and it would keep coming out when all our cinemas were shut that, what is the future of this business going to be? How are we going to survive? What’s going to happen? And that’s what kind of precipitated it, but then as cinemas started opening up and our Q3 was great, our November-December shows were there, we just thought, okay, we are back to normal and our balance sheets look, good cash flows back again and we will continue.

And from there, the kind of discussion moved into so what’s next? What’s the future? These OTT players are really large, they’ve got a big check book, films are being made with larger and larger budgets now and we realized that we — unless we grow and offer a platform so large to the content creator, which kind of attracts them more to theatrical just by sheer scale, that’s what’s going to drive more content onus to come to the theaters. So, we said that in order to do that, we really need to combine our balance sheets and that’s the way this kind of originated Arun.

Arun Prasad — Spark Capital Advisors (India) Private Limited — Analyst

Okay, clear. Is there anything in the agreement we have with the PVR promoters stating that what they can do and what you cannot do regarding the operations of the combined entity or a strategic positions? You said you will be in a non-executive position, but how would you address it if there is something that you are not comfortable with doing with? Is there any way for you to control it even as I understand, there are two feed at a presentation. But beyond that, how would you do that?

Siddharth Jain — Director

So Arun, we have — as we have been the single largest shareholders, we do have some rights under shareholders’ agreement where — which only at purely at a strategic level. Apart from that, if I were to ever see anything which I felt was out of place, I wouldn’t hesitate at all to call the management and give them my suggestions. And at the end of the day, we’ve entrusted the business on Ajay and his ability to grow this business and run the company and I have full faith in him, and I’m sure he’ll always take constructive criticism if any at all.

Arun Prasad — Spark Capital Advisors (India) Private Limited — Analyst

Okay. Okay, that’s clear. Just to continue with the — from the previous participant. It was very clear that both INOX and PVR came out with the COVID disruption relatively unhurt. INOX was more because your balance sheet remained debt free. And INOX had a better experience of operating Tier 2, Tier 3 cities where probably the bulk of the upcoming opportunities are also coming. So basically from the perspective of an outsider INOX was in driver seat. I understand the merger synergies and consolidation part and all but again, isn’t it giving up the control of the organization you had — you have been running for last 20 years. Is it worth for the synergies that you are building is the synergy so large?

Siddharth Jain — Director

So Arun the giving up of control is from both sites, right, both companies and that’s the kind of leap of faith, which we’re trying to explain to you the world at large that went to promoter driven groups come together first of all, this hasn’t really happened very often, but we are so excited about this simply because we have a shared vision. And our shared vision is to offer the finest movie-going experience in the world to our Indian audience, which is the largest movie going audience in the world and when you have that simple shared vision everything else, really doesn’t matter. We have seen him run his company for the past two decades and he have seen us do it and we both share a tremendous respect for each other and we trust each other and that’s the motivational factor behind us.

Arun Prasad — Spark Capital Advisors (India) Private Limited — Analyst

And you were increasing — you means, your family was increasing let’s say equally INOX before this especially after all the demerger process happens with the other rest of announced. So you would continue to increase the stake in the combined entity also, would you be interested in that?

Siddharth Jain — Director

Yes, we would.

Arun Prasad — Spark Capital Advisors (India) Private Limited — Analyst

Okay, okay. Thank you. That’s very, very clear. Thank you very much Siddharth. All the best.

Operator

Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead.

Harit Kapoor — Investec — Analyst

Yeah, hi, good evening. Congratulations. I just had a couple of questions, the first thing is — PVR looks at other alternative streams in terms of distribution, a few years back — into production. They have a small popcorn investment, etc. Just wanted to get your sense on how you see some of these additional alternatives apart from the basic business and whether you believe that maybe incrementally because your largest focus will probably be fastest screen expansion. Some of these other investments, kind of take a little bit of a back seat in the combined entity. Maybe it’s a bit too forward but just wanted your thoughts on that.

Siddharth Jain — Director

Harit, thank you for your question and great question. I think the power of — sum of the parts sometimes is greater than one. And especially when their distribution business and popcorn business and whatever else has a larger platform to kind of play with and we’re very excited with those businesses. I think they are extremely accretive to the business and we look forward to supporting them and expanding it across our network as well jointly. So, certainly the other businesses is a big positive for us Harit.

Harit Kapoor — Investec — Analyst

Okay, very clear, very clear. And obviously, you did kind of allude to be your longer-term commitments saying that you would eventually also look, we would want to take up stake. I just wanted to. I just had one question. You both have run these businesses fairly immaculately in terms of the centers business. One or two things that you believe PVR does really well in terms of best practices or anything of that sort that you admire from them, which we believe can get further enhanced in the combined business.

Siddharth Jain — Director

So I certainly feel that the F&B offering is great. The look and feel of many of the cinemas some of the marketing programs are excellent and even there, the way they go ahead and select properties and when they find a good property, the price doesn’t matter they go after it. So I think there are tremendous best practices on both sides that will be shared. And I think we are so complementary in nature because we, in the business and we know each other. That’s what makes us even more exciting.

Harit Kapoor — Investec — Analyst

Great, that’s it from me. Congrats once again, thanks.

Siddharth Jain — Director

Thank you.

Operator

Thank you. The next question is from the line of Aditya Gupta from Tata Capital Partners. Please go ahead.

Aditya Gupta — Tara Capital Partners India Pvt Ltd — Analyst

Hi, good evening, and thanks for taking the questions. First on the shareholding again, I think you mentioned you would run off in your stake, is there a agreement in place between the two promoters where one wants to sell out the other one gets the right of offer on the block first?

Siddharth Jain — Director

Those terms are there are nothing of that sort, but both promoters are free to increase their stake, just as the way you would be allowed in keeping acquisition.

Aditya Gupta — Tara Capital Partners India Pvt Ltd — Analyst

Okay, got it. Second, I think you mentioned something on international expansion also, so any more color on that? I mean what kind of milestones to look at?

Siddharth Jain — Director

Right now our focus first is on — we have almost 2,000 screens in our pipeline combined, which would require our stated goal is in the next 7 years we want to double our size is going to require at least INR4,000 crores of capex over the next 7 years. So we really want to reach out and improve the offering to our Indian consumer first before stepping out with any kind of large capex plan.

Aditya Gupta — Tara Capital Partners India Pvt Ltd — Analyst

Got it, thanks. Last with on the synergies that you said would be significant. So how should one think about retaining those synergies in the P&L versus investing them for growth maybe smaller town, increasing affordability, adding more premium seats at affordable price, so what’s the view on retention of margin?

Siddharth Jain — Director

Synergy and capex I would say are two different things. Capex has its own identity synergy would lead to potentially more affordable. We want to attract the consumer and make it as affordable as possible, Aditya. That is absolutely our stated goal and we will do everything in our power to achieve that.

Aditya Gupta — Tara Capital Partners India Pvt Ltd — Analyst

So growth over margin stand right?

Siddharth Jain — Director

Absolutely. No, we don’t want to be seen as somebody there’s no profiteering happening are happening here. We want to expand the pie, that’s the aim.

Aditya Gupta — Tara Capital Partners India Pvt Ltd — Analyst

Got it. I mean profit sharing, but there will be some automatic synergies that will happen in the, because of the size of the new entity if it goes through and that you are willing to invest to grow the business faster and take it deeper versus, got you.

Siddharth Jain — Director

Absolutely.

Aditya Gupta — Tara Capital Partners India Pvt Ltd — Analyst

Got it. Thank you so much. Have a good day.

Siddharth Jain — Director

Thank you.

Operator

Thank you. The next question is from the line of Naval Seth from Emkay Global. Please go ahead.

Naval Seth — Emkay Global Financial Services Lt — Analyst

Yeah, thank you for the opportunity. I have two questions. First is on food menu. So just wanted a clarification that is food menu similar in terms of non-veg, veg, both the entities serve that, I mean PVR and INOX? If not then will that be the case for the merch as well?

Siddharth Jain — Director

So Naval, currently what we’ve decided is both entities will continue to operate just, I’m sorry, both, wherever there is the INOX brand, wherever there is the PVR brand initially will continue to operate exactly in the same manner. The new screens will all be merged and they’ll be branded together and the food and beverage service will be as the Managing Director decides whatever it may be absolutely fine. If you look at the margins of INOX product, I’m sorry of INOX Leisure, the margins that we have — EBITDA margins even by serving vegetarian food very healthy indeed. So I don’t think really a choice of veg or non-veg has a huge impact at all on either the profitability on spend per head. Because in Tier 1, Tier 2, Tier 3 towns wherever we are not for knock in comparison, depending on the spending propensity of the customer. They actually spend the same amount of money in either cinema.

Naval Seth — Emkay Global Financial Services Lt — Analyst

Understood, understood. And second question is on CCI although you as a merged co you need not require to go to CCI because of the clause what they have, which is less than INR1,000 crore revenue but is that clause basically or does that clause has a provision that it is applicable for normal circumstances and not on the forced closure kind of impact on the business also something of that sort?

Siddharth Jain — Director

Naval, not that I’m aware of. The lawyers haven’t told me anything of that sort, I haven’t read it line by line, but no, if it was, they would have told me, I don’t think it’s there.

Naval Seth — Emkay Global Financial Services Lt — Analyst

Understood, understood. Thank you and wish you all the best Siddharth.

Siddharth Jain — Director

Thank you Naval.

Operator

Thank you. The next question is from the line of Aasim Bharde from DAM Capital Advisors. Please go ahead.

Aasim Bharde — DAM Capital Advisors — Analyst

Yeah, hi, good evening. So firstly, are these screens in your pipeline currently which may overlap with those of PVR’s pipeline and would you reconsider the ones that capex has not started in that case?

Siddharth Jain — Director

So Aasim, whenever we would sign up a new pipeline and I’m sure it would be on their side as well. It’s very rare that I would sign up something new, if I was across the road from a PVR and vice versa. So naturally, I mean it just so happens that I mean. Sure. Out of the 2,000 screens, maybe the 50 screens that may be competing with each other, but a majority of them would not compete with each other. Even more owners won’t put it up across the road from each other because they know there’s really no point doing that and we haven’t looked at it that deeply yet to see whether there are any places, which we may not go ahead. We haven’t dug that deep into it.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay. Sure, sure. And on the 2,000 odd green pipeline rather than 200 odd screens additions that are planned for next year for the combined entity would this be increasingly on an asset-light model or would this will be our own capex and asset-light model expansion might be over and above this?

Siddharth Jain — Director

No, this would be on our own balance sheet, the INR2.5 crores a screen kind of capex.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay, okay. And just one, one question on the shareholding at the promoter level so GFL would become a shareholder of the combined entity. Any plans of restructuring this and moving it away from GFL?

Siddharth Jain — Director

No, not yet.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay. Sure. Thanks a lot and all the best.

Operator

Thank you. The next question is from the line of Hansal Thacker from Lalkar Securities, please go ahead.

Hansal Thacker — Lalkar Securities — Analyst

Hi, gentlemen, congratulations on a historical event. It’s truly heartening to know that we are on a firm footing again with some solid box office collections after a rather unfortunate period. But sir, I was just surprised to notice that like the previous participant was saying that GFL was excluded from the current scheme of arrangement. So should we continue to expect the merger of GFL with the operating underlying, or I mean you had indicated that in the September 2020 con call?

Siddharth Jain — Director

No, GFL is a completely separate entity and it’s not part of this merger at all and it GFL is going to be the single largest shareholder of this entity. There is no plan to merge it into this at this stage.

Hansal Thacker — Lalkar Securities — Analyst

Because I mean if that would have happened and eventually at some point it will become extremely tax inefficient, right?

Siddharth Jain — Director

But although, this call is for the shareholders of INOX Leisure.

Hansal Thacker — Lalkar Securities — Analyst

No, no, I understand, but I think given that it’s such a large event I mean all stakeholders would be equally curious to know, I would think.

Siddharth Jain — Director

But I don’t see anybody asking just from a GFL perspective because I don’t think this is a GFL Investor Call.

Hansal Thacker — Lalkar Securities — Analyst

Fair enough. I mean at some point. I hope the management give some clarity on this, sir. Thank you so much.

Operator

Thank you. The next question is from the line of Jayesh Gandhi from Harshad H Gandhi Securities. Please go ahead. The line for the current participant has got disconnected. We will move on to the next question from the line of Nikhil from Galaxy International. The current participant has left the question queue. We’ll take the next question from the line of Sanjesh Jain from ICICI Securities. Please go ahead.

Sanjesh Jain — ICICI Securities Limited — Analyst

Good evening. Thanks for taking my question. Few from my side. First, we have already tied up for 2,000 screen both PVR plus INOX plus we have an ambition to go deeper into the smaller cities. First, I wanted to understand, does this 2,000 screen, which we have signed up amply cover the ambition of going deeper into the regional market or we are talking of incremental more sign up happening over a period of time beyond this 2,000 screen, which will be more focused around Tier 3 and Tier 4 kind of cities? That’s number one. Number two in terms of economic model. Are we seeing different model both entity put together, which is more suited for the smaller and regional market or the portfolio which the combined entity have enough space to accommodate or has enough economical model to sustain even in smaller cities?

Siddharth Jain — Director

So I’ll actually combine both those questions, Sanjay, it’s kind of connected to each other. Every market needs to be segmented. You always have different paying propensity of people, it’s like when you fly Bombay-Delhi, the people who can pay INR1,000 a ticket or they can pay INR1 lakh a ticket or INR10 lakh a ticket but the end goal is to get from Bombay to Delhi. Very similarly, we might show the same movie, but the audience that is watching it is — it’s extremely diverse and they could be anywhere from INR50 a ticket to INR5,000 a ticket.

Now, it is our job to provide the INR50 a ticket person a great environment to watch the same content in and similarly the INR5,000 a ticket person something commensurate to what they’re willing to pay. And when it comes to your question on Tier 2, 3, 4, 5, we will just the way we will execute the 2,000 screens that we have, we will continue to add more screens as well and it would be diverse, it will be across tiers because our aim is to expand, take some to all Indians. It’s not that we want to take the movie only to certain Indians. We want to take it everywhere wherever we have potential and there is a market.

Similarly on the economics on the model that you asked about, the economics and the model are driven by the amount we invest in these properties to show that same content. And as we have very successfully shown, we are already present in multi-tier cities and we are very profitable across them. Pre-pandemic, we were doing almost 20% EBITDA margins, ROCE north of that. It just goes to show that regardless of which tier we’re in, if management is right and they know to run the business and you manage your cost structure correctly you can achieve profitable business regardless of the tier in which you are.

Sanjesh Jain — ICICI Securities Limited — Analyst

Fair enough, sir. Just one follow-up in 2,000 screen, are we having significant presence in the smaller cities and regions. And if you can just share we are combined have presence in close to 110 cities where will we be say three years down the line or four years down the line in terms of city penetration?

Siddharth Jain — Director

Sanjay, I don’t have the details of their sign ups and which cities. This is just a number that we are aware of, but I don’t have those details. So I can’t comment on that, but it’s very, very it’s distributed even the 1,000 that we’ve signed up, it’s evenly distributed across the country. I’m sorry across tiers. And going forward currently, we have 109 unique cities combined. I wouldn’t be surprised if in the next three to four years we may be a 120, 130 unique cities and additional 20 or 30 unique cities.

Sanjesh Jain — ICICI Securities Limited — Analyst

Fair enough, sir. Just on the second question, a follow-up. We did mention that both the promoter have the right to buy more stake from the open market. Any threshold level between the two that we have or it is open or it’s a free in that anybody can?

Siddharth Jain — Director

No threshold.

Sanjesh Jain — ICICI Securities Limited — Analyst

And any booth seat based on the shareholding pattern? Is that also a part of clause?

Siddharth Jain — Director

I’m not aware of the details. The shareholders’ agreement is yet to be done.

Sanjesh Jain — ICICI Securities Limited — Analyst

Fair enough, sir. Fair enough. That’s it from my side. Thanks and best wishes.

Siddharth Jain — Director

Thank you.

Operator

Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead.

Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst

Yeah, thanks for the opportunity. Sir, I just need one small clarification, does the current swap we should take into account the real estate, which we have on our balance sheet. And just in case if we plan to liquidate it going ahead, will we have seen that or will the combined entity would decide something on that matter.

Siddharth Jain — Director

So Jinesh certainly the real estate has been taken account into the swap ratio and in the future if the merged entity decides to liquidity for any reason it was certainly require Board approval.

Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst

Sure. And secondly, can you just talk about what kind of middle level organizational changes will we see in the combined entity? Will the I mean the current CEO, CFO, how will they be absorbed in the new entity? What will be the defined rules for them and are we going to see any kind of retrenchment, given a lot of duplication of work will be there and some rural reversals can happen? So your thoughts on that.

Siddharth Jain — Director

So first of all, we haven’t had time to discuss that in detail, but one thing is for sure. All the employees of both companies will have some dual or the other in the merged entity. This is before we — the merger is complete, we will have alignment on the future management team of the merged entity. And one thing people must realize that the scale of this business is so large and the growth potentials in new verticals are so large that we’re going to have new roles being created as well from the existing set of people.

Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst

Sure. One last question from my side. I know that we have not quantified any synergy benefits in terms of numbers, but would just like to know your thoughts, especially on the film higher distribution cost side, given the fact that the combined entity will have about 1,500 odd screens, so do you think that structurally, we’ll be able to bargain for improved share going ahead and that is how it can actually play out or I mean thoughts on that?

Siddharth Jain — Director

So you know I think we must realize that without the films there is no cinema. And we’ve all lived a very good symbiotic life for the past 15 years and I see no reason to change that going forward.

Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst

Okay, sir. Thank you so much.

Siddharth Jain — Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aasim Bharde from DAM Capital Advisors. Please go ahead.

Aasim Bharde — DAM Capital Advisors — Analyst

Yeah, hi, thanks for the follow-up, just one question, I think you mentioned this earlier, but of the 2,000 odd screen pipeline, how is this spread out in terms of number of cities, and if possible if number of properties can be shared that would be helpful?

Siddharth Jain — Director

I’m sorry, Aasim. I don’t have that data on me and I certainly don’t have PVRs data and my data to is not handy with me something we can share with you later, Aasim.

Aasim Bharde — DAM Capital Advisors — Analyst

Sure sir. No problem. Thanks a lot.

Siddharth Jain — Director

Thank you.

Operator

[Operator Closing Remarks]