INOX PVR Merger Announcement Conference Call Insights

Key highlights from INOX Leisure Ltd (INOXLEISUR) PVR Ltd (PVR) Merger Announcement Concall

Management Update:

• INOX said it completed 20 years of opening its first cinema recently with a total of 675 screens and almost 8,000 employees.

• The company said the main reason behind the proposed merger was the difficulty it faced in the past two years of not being able to spend money either in upgrading the existing screen or in continuing the capex growth.

• The deal exchange is for every 10 shares of INOX, the company would be given 3 shares of PVR.

Q&A Highlights:

• Abneesh from Edelweiss asked if the company would remain aggressive in terms of expansion until the merger approval process of 6-9 months. Siddharth Jain Director said that as a publicly listed company, both PVR and INOX must continue operating the way it would prior to the merger and will continue to be extremely aggressive in expansion as in the past.

• Abneesh from Edelweiss also asked about the gap between PVR and INOX in terms of ad revenue and how easy will it be to bridge the gaps. Siddharth Jain Director replied that the company feels the merged entity with potentially 200 million footfalls at some point in time will have rerating of the ad demand for the entire chain and both teams combined will successfully do that.

• Arun Prasad with Spark Capital enquired if there is anything in the agreement that restricts or allows INOX or PVR to do or to not do some things. Siddharth Jain Director answered that INOX being the single largest shareholder, it does have some rights under the shareholders’ agreement that’s purely at a strategic level. Overall, INOX said the business is entrusted on Ajay and his ability to grow the business.

• Arun Prasad with Spark Capital asked if INOX family would continue to increase its stake in the combined entity going forward. Siddharth Jain Director answered that the company would be interested in increasing the stake going forward.

• Harit Kapoor of Investec asked if INOX would support PVR’s other alternative business streams like distribution and popcorn investment kind of businesses post-merger. Siddharth Jain Director replied that the company would look forward to supporting them and expanding it across the network jointly.

• Aditya Gupta with Tara Capital queried about international expansion. Siddharth Jain Director said that the company has almost 2,000 screens in its pipeline combined, with a stated goal to double the size in the next 7 years, which would require about INR4,000 crores of capex. Therefore, the first priority will be to improve the offering to the Indian consumer first.

• Aasim Bharde from DAM Capital asked that on the 200 odd screen additions planned for next year for the combined entity, if it would be on an asset-light model or own capex. Siddharth Jain Director replied that it would be on the company’s own balance sheet, the INR2.5 crores a screen kind of capex.

• Sanjesh Jain of ICICI Securities clarified that with the promoter having the right to buy more stake from the open market, if there’s any threshold level between the two entities. Siddharth Jain Director replied that there is no threshold level.