PVR, Inox Leisure Fall As Advocacy Group Files Plea With CCI Against Proposed Merger
Consumer Unity and Trust Society said such market power will result in possible competition concerns.
Shares of PVR Ltd. and Inox Leisure Ltd. fell after a non-profit advocacy group filed a request with India's competition regulator, urging it to investigate possible anti-competitive effects of their proposed merger agreement.
In a statement, an arm of the Consumer Unity and Trust Society said PVR is already the largest film exhibition player in India, followed by Inox and the merger will "eventually lead to them having a significant combined market share in most cities in India”.
“PVR-Inox is likely to become the largest player in 43 cities, with market share in excess of 50% in at least 19 cities, consequently substantially increasing the concentration levels.”
The body said such market power will result in possible competition concerns including:
Reduction in consumer choice, that is, consumers will have no effective option but to visit the multiplexes of PVR-Inox.
High-ticket prices, and a possible deterioration in food and service quality.
High bargaining power of PVR-Inox will likely lead to onerous terms for distributors, food and beverage suppliers, technical equipment suppliers, etc.
“The CCI (Competition Commission of India) has a duty to prevent and eliminate practices having an appreciable adverse effect on competition, promote and sustain competition, and protect the interest of consumers,” Pradeep S Mehta, secretary general of Consumer Unity and Trust Society, said in the statement.
PVR, in an exchange filing in July, had said its merger with Inox Leisure is “progressing well”.
“Both the companies have received ‘no objection certificates’ from the two stock exchanges (BSE and NSE) on the proposed scheme of merger. We are on track to file our application for the approval of scheme of merger before the National Company Law Tribunal in the next couple of weeks,” it had said.
PVR-Inox merger does not need the CCI approval since the deal does not meet the asset and turnover threshold that triggers a regulatory filing.
PVR has yet to respond to BQ Prime's queries.
Shares of PVR fell as much as 6%, the most since May 24, before closing 5.7% lower on Friday. Of the 31 analysts tracking the company, 27 maintain a 'buy' and two each suggest a 'hold' and a 'sell', according to Bloomberg data. The 12-month consensus price target implies an upside of 20.5%.
Shares of Inox Leisure Ltd. fell as much as 6.6%, before ending 6.1% lower on Friday. The stock has lost for the sixth consecutive session now.
Of the 22 analysts tracking the company, 20 maintain a 'buy' and two suggest a 'hold'. The overall consensus price target implies an upside of 32.9%.