PVR to share 15% revenues with DLF

Multiplex company PVR has called an extraordinary general meeting to issue shares on a preferential basis to DT Cinemas, a subsidiary of real estate major DLF. It is separately seeking approval for issuing shares to Major Cineplex Group Public Company, a Thailand-based multiplex operator.

PVR had earlier announced the acquisition of DT Cinemas’ multiplex business, marking DLF’s exit from non-core areas. It was to pay Rs 20 crore in cash and 25,57,700 in shares, which would be approximately valued at Rs 40 crore. While the consideration seemed relatively low, it can be explained by the revenue sharing arrangement.

  • PVR has said that it will pay 15% of the net revenues (net of taxes) from these multiplexes to DT, as lease rentals to DLF. PVR’s payout is thus dependent on the income it generates from the multiplexes and is not a fixed payout. The arrangement aligns their interests ensuring that they focus on growing the multiplex business.
  • PVR gets the right to put up a multiplex at all of DLF’s future malls. That is a valuable right, as it does not have to compete with others to bid for the space, and DLF’s properties can be expected to be prime ones. It is not clear if the new developments too will have a similar revenue sharing arrangement.
  • PVR has said in the EGM notice that it has been exploring inorganic growth opportunities to not only consolidate the multiplex business in the North but also cut down the gestation period. Entertainment and retail companies have been having problems get possession of properties on time in the past few years, due to construction delays by real estate developers.
  • PVR has about 108 screens across the country to which it will add 29 more from the DT Cinema stable. Its concentration in the North will go up as a result.
  • In addition, PVR is issuing 25,57,000 shares to Major Cineplex for a consideration of Rs 42 crore. It will use this money for capital expenditure and for its future multiplex projects.
  • Its share price is up by 10% over a month ago, at Rs 148.

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