PVR, INOX came together to improve balance sheet & bring momentum in building more screens in India: Ajay Bijli, CMD, PVR

Ajay Bijli, Chairman and Managing Director, PVR LTD & Siddharth Jain, Board Member, Inox Leisure Ltd, talks about the merger and its benefit for the industry, synergies of the merger, digital OTT platforms and vision related to PVR INOX Branding and expansion plans among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: How will you explain this merger and what does the merger means for the industry as well as the company?

Ajay Bijli: First of all, I would like to say that consolidation and M&A activities are happening in the sector for a long time. Maybe it is international or in India, a lot of M&A activities is going on because this business is about scale, which is important. But in the last two years, the way we, the industry, has been impacted by the pandemic, we felt that if we come together then it will improve our balance sheet. At the same time, the negative impact that the sector had, the slowdown that happened, all that can get accelerated as well. As far as shareholders' benefit is concerned, we had a focus on the stakeholders, which is the consumer. I think, out of home movie-going is still the number one entertainment form in India and that was getting impacted. We believe that if we come together, we will be able to ensure that we continue the momentum of building more screens. At the same time, the habit of people has changed in the last two years as they were seeing movies at home and were not moving out. The biggest rationale of the merger was to re-create momentum in the exhibition sector and all the stakeholders will be benefitted from it, if we are able to create momentum in it once again, maybe it is the film fraternity or real estate developers or the government whose GST collections were hit or the consumer. So, we thought if we can come together, i.e., two brands who have the same vision and same approach towards customer experience, it will be beneficial for the industry.

Q: What is your view on this merger and what kind of synergies will be created through this merger for INOX?

Siddharth Jain: Two iconic brands are coming together and it is very big news for the entire industry. It is a very important move. For a simple reason, as Mr Ajay has said, the entire theatrical exhibition industry was hit hard in the last two years because of the pandemic. As March 2022 arrived, it has been two years, exactly, since the time the pandemic hit us and we are finally getting out of it and coming back to the pre-pandemic days. We didn't have any growth in the last 2 years and as far as balance sheets are concerned, we both had to raise money, dilute the stakes but now, we have enough funds and it is time for us to restart the investment cycle once again. So, the entire focus in terms of synergies, apart from regular revenue, cost synergies, is also going to be on the growth synergies with a stronger balance sheet together.

Q: In your press release, you mentioned one of the reasons that the consolidation is happening in order to compete effectively against digital OTT platforms. Do you now see OTTs as a threat to your long-term business sustainability or do you feel that both can co-exist together or one will lead over the other?

Ajay Bijli: Now, it has been named OTT, earlier, it used to be home entertainment, which included watching movies on VHS or colour television way back then satellite and now OTT platform. This has always been there and it is good for the industry, overall pie. Theatrical has got its own grace in the sun because theatrical generates revenue, people are fond of moving out, even the film fraternity has a likeliness for the theatricals. After that, the movie comes on OTT and satellite. So, the revenue pie of any content gets created only becomes bigger and that money goes back to the film industry and they get encouraged to make more movies. So, I have never considered that to be a threat, it is just that our shutters were closed for two years which means people were sitting in their homes and were entertaining themselves by seeing the movies. Even, the film fraternity is quite fragmented in India and they have also sold many movies directly. But as soon as the capacities of cinemas were increased, the movies have started coming to the cinemas once again.

Q: Will there be a CCI approval required for this merger as we understand that the turnover of the target entity is less than Rs 1,000 crore?

Siddharth Jain: That is exactly what our counsels have currently advised us that due to the threshold limit there will be no need for CII's approval. But as we both are publicly listed companies, we have to follow the due process of law whether it is about getting SEBI's approval, shareholders' approval, going to NCLT, all the due process, which will take around six to nine months. And in the meantime, if there are any queries from any of the regulatory bodies of course we will not only answer them but will comply with them as well.

Q: Your existing respective chains of both of you will continue as it is with the same branding while the new that will be opened will have PVR INOX branding. Is that correct? Going forward, what is the plan and vision as you come together how many of the screens will be opened as you both already have 1,500 screens together across the company?

Ajay Bijli: Both the companies have their respective pipelines as many shopping centres and malls are coming into the country across small towns, tier-II and III cities. Both of us are opening roughly 60-80 screens every year. So, there is a plan that the combined entity will open close to 180 to 200 screens a year. You have touched upon the branding, now, capital will be deployed for only the new built. There is no point in changing branding, so, a PVR will continue to be PVR and Inox will continue to be Inox. Both of us have the same vision, the way we treat the customer and the experience is pretty similar. So, there is no need to do much but the screens that will come in the future pipeline will be co-branded as PVR-INOX.

Q: With this, there will be cost savings for both companies. So, with this consolidation, what is your assessment for improvement in the bottom line and profitability and as one entity, what kind of savings will be made? 

Ajay Bijli: Line by line in every cost item, of course, there will be saving because of the economy and that will only benefit the shareholders but we have not made any such calculations till now. Even in capital expenditures, there will be savings because bulk buying will be done of all the equipment that is needed. There will be a saving in capital expenditures (CapEx) as well as operating expenses (OPEX).

Q: You are focusing on domestic markets. But is there any plan to look towards the international market as a combined entity?

Siddharth Jain: Currently, we have a lot of work in India itself. PVR is already present in Sri Lanka but apart from that as I mentioned earlier, we have such a large pipeline to deploy our capital in India. In fact, India has the largest movie-going consumer base in the world and I think, that they deserve a better quality cinema viewing experience in as many locations as possible and that is going to be our first focus area to take care of the Indian consumers.

Q: What would you like to say to our audience and your shareholders on this merger and how should they see this sector and your companies?

Siddharth Jain: First of all, just not only see the reaction of the stock market right now, which is pretty much euphoric and the shareholders are pretty excited. But apart from that, one thing should be seen that two iconic brands, who used to be fierce competitors are coming together for one common goal for the benefit of all the stakeholders, whether he is the consumer or shareholders. It is largely in the interest of the industry. I think, there can be nothing more important than that.