FinShiksha - PVR Inox Merger Decoded - What does the merger tell us

PVR and Inox decided to merge over the last weekend. This creates the largest Indian cinema exhibition entity, with nearly 1500 screens. This is nearly more than 15% of India’s total screens, and around half of India’s multiplex screens. The benefits - better bargaining power with distributors, and malls.
On the other hand, does the merger hide some underlying issues with the industry? The combined revenue of PVR and INOX has grown by nearly 18% over 2015-2020, while the CAGR in number of screens is 12%. Thus revenue growth per screen has grown only at a CAGR of 5-6%. It tells us something - this is an industry that shows higher growth by adding screens.
Once the screen addition stops, the revenue growth stops. Would you pay a premium valuation for the industry in that case?
Disclaimer: Please do not treat this video as a buy or sell recommendation on any security.
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[@mruggaurang3509]

Insightful...thank you sir for sharing❤️

[@FinShiksha]

Glad you liked it!

[@karthik007]

This is some top tier content. 🔥🔥

[@FinShiksha]

Thanks!

[@vikinshah3693]

Great to hear this perspective

[@FinShiksha]

Glad you enjoyed it! Please do share in your network

[@srajanagadi3270]

For most people going to the cinema is actually a social event. Even though we can watch all sorts of content on our phones, laptops and on our home theatre, somewhere I feel that when cinema is collectively consumed it adds tremendous value to the movie-watching experience. The family structure is getting nuclearised and also there are tons of reports and articles on the loneliness epidemic. The majority and the movie buffs will always crave for the collective watching of the cinema than the individualized. So in my opinion OTT as a threat to the exhibitors industry can be discounted. I completely get and support your point that exhibitors should start investing in content creation and take a bigger role in the value chain.
With the increased bargaining power PVR-Inox should definitely work reducing on their costs. This increased cash flow should help them reduce debt off their books.
And they can only survive if they keep passing the benefits to the consumer. I don't think so they can make money if they go the premium experience way.(Kingfisher way). Rather they should go the Indigo way and think how they can increase their occupancy rate.

[@FinShiksha]

Valid points.. Pricing increase will make it difficult for the industry. If they can manage their profitability while keeping pricing constant, or even reducing pricing, then they have a much better chance of surviving.