Analysts are positive on cinema exhibition major PVR Ltd's decision of buying out Cinemax India promoters' entire stake for Rs 395 crore. Edelweiss has maintained a 'BUY' status for PVR after it announced the deal to acquire Cinemax shares at Rs 203.65 per share. “We need to monitor how PVR manages the two brands—PVR and Cinemax—and possible concentration of screens in some geographies. We will revise our numbers once we have more details, but remain positive as we expect PVR’s bargaining clout to increase and operating synergies to kick in,” Edelweiss said. PVR, which will also launch an open offer for additional 26 per cent of Cinemax as per Sebi guidelines, has got approved from its board to raise Rs 260 crore via preferential issue of around 10.6 million shares at Rs 245 per share.
On the upside, PVR will be the largest multiplex operator in India with 351 screens, well ahead of peers. Edelweiss also said that ability to execute the deal without putting a significant strain on the debt level is a laudable positive for PVR. “Key negative from this deal is a 36.7% dilution of minority shareholders. We like PVR’s aggression and ability to tie up funds quickly. At CMP, the stock is trading at P/E of 16.0x and 13.3x FY13E and FY14E, respectively. We maintain ‘BUY’ and rate it ‘Sector Performer’,” it said. Currently, PVR’s net debt is Rs 150 crore and it needs to raise Rs 135 crore additional debt.