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PVR Inox Cinemas

PVR Inox is the merger of two of the biggest companies in the media and entertainment
industry. PVR pioneered the multiplex revolution in India by establishing the first multiplex
cinema in 1997 at Saket, New Delhi. In 2022, PVR Cinemas achieved the milestone of
completing 25 years in the business. As of December 2023, PVR Inox has 1712 screens
across 359 properties in 114 cities Erstwhile rivals PVR and INOX Leisure completed their
merger in February 2023, to become the country's largest cinema multiplex chain with 1,689
of India's estimated 9,000 screens. The newly merged PVR INOX's screens are spread across
361 cinemas in 115 cities in India and Sri Lanka. PVR’s capital structure mainly involves
debt and equity. The debts or liabilities include long term borrowings and provision, short
term borrowings and provisions. On the other hand, the equity and shareholder’s fund include
reserves, surplus and equity share capital. Now let’s break down and analyze whether they
have a feasible capital structure or not.

Analysis: That’s one of the primary reasons why the company is unable to raise much money
through debentures due to the high-risk factor involved. Most shareholders would prefer to
purchase debentures that were backed by securities. In the case of unsecured debentures, the
company did not pledge any assets if they fail to repay the money of their shareholders The
non-convertible debentures of the company are performing well. Non- convertible debentures
(NCDs) are fixed-income instruments that are usually issued by high- rated companies in the
form of a public issue to accumulate long-term capital appreciation. They are a type of debt
instrument that cannot be converted into equity or stocks. Non-convertible gives the company
the funds required without giving up any power of decision making to these investors.
Moreover, the rate of interest for debentures is much lower than the interest to be paid if the
company were to take a loan from the commercial banks. The reason for the drastic increase
in short term provisions is primarily the provision for tax. There was a rampant increase in
taxation especially for the entertainment sector. This increase in taxes makes the
entertainment sector the highest tax paying sector in India. According to Money control,
“Entertainment tax is an indirect tax applicable to all commercial entertainment activities like
film and music festivals, classical shows, cricket matches, etc. The government imposes this
tax to collect revenue from such activities, which is used for the entertainment sector’s
growth development.
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Financial Structure

Financial Structure refers to a company’s mix of debt and equity to finance its operations.
 Financial Structure shows the pattern of total financing.
 It measures the extent to which total funds are available to finance the business’s total assets.

Financial structure = Total liabilities

BALANCE SHEET OF PVR INOX (in Rs. MAR 23 MAR 22 MAR 21 MAR 20 MAR 19
Cr.)

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 97.97 61.00 60.76 51.35 46.74

TOTAL SHARE CAPITAL 97.97 61.00 60.76 51.35 46.74

Reserves and Surplus 7,252.40 1,326.9 1,771.3 1,406.5 1,162.8

9 6 5 7

TOTAL RESERVES AND SURPLUS 7,252.40 1,326.9 1,771.3 1,406.5 1,162.8

9 6 5 7

TOTAL SHAREHOLDERS FUNDS 7,350.37 1,387.9 1,840.4 1,463.2 1,209.6

9 2 2 1

NON-CURRENT LIABILITIES

Long Term Borrowings 1,272.28 1,033.1 979.99 913.44 867.98

4

Deferred Tax Liabilities [Net] 0.00 12.11 52.37 57.09 25.23

Other Long Term Liabilities 5,770.00 3,438.2 3,451.2 3,635.9 213.55

0 5 7

Long Term Provisions 26.02 8.56 17.09 12.57 12.73

TOTAL NON-CURRENT LIABILITIES 7,068.30 4,492.0 4,500.7 4,619.0 1,119.4

1 0 7 9
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CURRENT LIABILITIES

Short Term Borrowings 519.18 470.50 118.99 185.56 74.39

Trade Payables 487.01 291.26 189.41 293.25 330.70

Other Current Liabilities 965.85 652.67 797.05 767.12 542.48

Short Term Provisions 35.24 2.61 4.09 4.18 2.80

TOTAL CURRENT LIABILITIES 2,007.28 1,417.0 1,109.5 1,250.1 950.37

4 4 1

TOTAL CAPITAL AND LIABILITIES 16,426.6 7,297.5 7,450.6 7,332.4 3,279.4

9 3 6 0 7

ASSETS

NON-CURRENT ASSETS

Tangible Assets 8,275.68 4,148.9 4,175.0 4,559.1 1,259.7

3 4 2 6

Intangible Assets 5,864.79 1,183.5 1,197.1 1,211.2 443.73

1 2 2

Capital Work-In-Progress 247.31 64.42 217.10 154.71 190.04

Other Assets 0.00 0.00 0.00 0.00 0.00

FIXED ASSETS 14,387.7 5,396.8 5,589.2 5,925.0 1,893.5

8 6 6 5 3

Non-Current Investments 148.40 95.91 62.29 61.09 694.27

Deferred Tax Assets [Net] 471.60 590.92 395.67 201.97 0.00

Long Term Loans And Advances 11.04 11.64 281.32 266.82 204.69

Other Non-Current Assets 696.84 391.15 160.11 183.33 179.13

TOTAL NON-CURRENT ASSETS 15,715.6 6,486.4 6,488.6 6,638.2 2,971.6

6 8 5 6 2

CURRENT ASSETS

Current Investments 0.21 0.47 0.90 1.17 1.08

Inventories 59.67 31.42 23.25 28.96 25.84

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Trade Receivables 158.02 63.00 19.85 171.22 149.90

Cash And Cash Equivalent 336.98 566.67 721.53 320.06 23.14

Short Term Loans And Advances 15.01 3.43 58.45 58.33 28.57

Other Current Assets 141.14 146.06 138.03 114.40 79.32

TOTAL CURRENT ASSETS 711.03 811.05 962.01 694.14 307.85

TOTAL ASSETS 16,426.6 7,297.5 7,450.6 7,332.4 3,279.4

9 3 6 0 7

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES,
COMMITMENTS

Contingent Liabilities 542.64 232.58 274.75 361.82 286.10

Financial Structure
Year 2023 2022 2021

Financial Structure 9075.28 5909.05 5609.61

(In crore Rs)

Capital Structure

 Capital Structure refers to the kinds of securities and the proportionate amounts that make capitalization
 It is the mix of different long-term sources such as equity shares, preference shares, debentures, long term
loans and retained earnings.
 Capital structure is a permanent financing of the company represented primarily by long term debt and
equity.

Capital Structure= Financial structure – Current liabilities

Year 2023 2022 2021

Financial Structure 9075.28 5909.05 5609.61

Total Current Liabilities 2,007.28 1,417.04 1,109.54

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Capital Structure 7068 4492.01 4500.07

2023

1) Equity

The equity in PVR mainly includes preference shares, equity shares, 0.001% non-cumulative
convertible preference shares. According to the company’s annual report the Authorized
share capital of the company Rs.292,90,960,800 consisting of :

1) 27,27,50,000 equity shares of face value Rs10 each

2) 590,000 0.001% Non-Cumulative Convertible Preference Shares of face value

Rs 341.52 each

3) 10,000 Preference shares of face value 10 each.

During the period under review, the paid-up equity share capital of the Company was
increased consequent upon allotment of following equity shares of the Company: • 5,499
Equity Shares of face value of ` 10 each was allotted under PVR Employees Stock Option
Plan 2022 to the
specified employees.

2) Debt:

Debt mainly includes long term borrowings and provisions and short-term borrowings and
provisions. The company mainly issues unsecured debentures and non-convertible
debentures as part of its long-term borrowings. The company also has incurred long term
loans to fund their expansion plans across the country. The long-term borrowings include
1272 crores which was an increase of 200 crores since 22. Provision increases by nearly three
times to 26.02 crores in 22. Short term borrowings increased by 100 crores whereas short
term provisions increased 16 times to 35.24 crores from 2.61 crores.

Summary of Capital Structure

Equity Share capital 97.97 crores

Reserves and surplus 7252.40 crores

 16

Long term borrowing 1272.28 crores

Long term provision 26.02 crores

Short term borrowing 519.18 crores

Short term provision 35.24 crores

Total capital 9203.09 crores

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Capital Ratios (Three year analysis)

2023

1) Equity to debt ratio: Total debt/ Total equity

Total debt: 9075.58

Total Equity: 7351.11

Equity to debt ratio: 9075.58/ 7351.11 = 1.23

Interpretation: A good debt to equity ratio is around 1 to 1.5. PVR has

maintained a stable ratio indicating that investment in such a company’s shares
will not be that risky.

2) Current Ratio: Current assets/ Current liabilities

Current Assets: 711.03

Current Liabilities: Rs. 2007.28 Cr

Current Ratio: 0.354

Interpretation: The Current Ratio is less than 1, which indicates that the
company might not be able to meet its short-term credit needs. PVR is unable to
put its current assets into efficient use. There has been a more than 50% decline in
current investments. This indicates that the company should focus on investing in
better projects that would guarantee greater returns.

3) Liquidity ratio:

Current Assets – Inventory- Accrued Income Tax / Current Liabilities

Current Assets: 711.03- 59.6= 651.43

Current Liabilities: Rs. 2007.28 Cr

Liquidity Ratio: 651.43/ 2007.28=0.32

Interpretation: PVR does not have a very good cash reserve to meet its short-term
credit needs thereby making its current liabilities risky. Liquid assets can be easily
converted into cash within a span of one year. Having a high liquidity gives the
company flexibility to meets its short term credit needs.
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4) Cash Ratio

Cash Ratio: CASH & CASH EQUIVALENTS/ CURRENT LIABILITIES

CASH & CASH EQUIVALENTS= 336.98 CR (Rs)

CURRENT LIABILITIES=2007.28 CR (Rs)

CASH RATIO: 336.98/ 2007.28= 0.17

Interpretation: The Cash ratio of not lower than 0.5-1 is usually preferred. The
cash ratio figure provides the most conservative insight into a company's liquidity
since only cash and cash equivalents are taken into consideration. PVR is clearly
very low in its cash reserves.

5) Dividend payout ratio

Dividend payout ratio: DIVIDEND PER SHARE/ SHARE PRICE

DPR; 0

No dividend

6) Interest coverage ratio

ICR: Earnings before interest and tax (EBIT)/ Interest dues

EBIT: 362.63 Cr
Interest payments: 268.62

ICR: 362.62/ 268.62= 1.35

While an interest coverage ratio of 1.5 may be the minimum acceptable level,
two or better is preferred for analysts and investors. Th company’s earnings
are just 100cr over its finance costs making it a risky bet.
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2022
1) Debt to Equity ratio: Total debt/ Total equity

Total debt:5610.24
Total Equity:

Debt to Equity Ratio: 5909.05/1390 = 4.25

2) Current Ratio: Current assets/ Current liabilities

Current Assets: 811.05 Cr

Current Liabilities: Rs. 1417.04 Cr

Current Ratio: 0.572

Interpretation: The Current Ratio is less than 1, which indicates that the
company might not be able to meet its short-term credit needs. PVR is unable to
put its current assets into efficient use. There has been a more than 50% decline in
current investments. This indicates that the company should focus on investing in
better projects that would guarantee greater returns.

3) Liquidity ratio:

Current Assets – Inventory- Accrued Income Tax / Current Liabilities

Current Assets: 811.05 - 31.42= 779.63

Current Liabilities: Rs. 1417.04 Cr

Liquidity Ratio: 779.63/ 1417.04=0.550

Interpretation: PVR does not have a very good cash reserve to meet its short-term
credit needs thereby making its current liabilities risky. Liquid assets can be easily
converted into cash within a span of one year. Having a high liquidity gives the
company flexibility to meets its short term credit needs.

4) Cash Ratio

Cash Ratio: CASH & CASH EQUIVALENTS/ CURRENT LIABILITIES

CASH & CASH EQUIVALENTS= 566.67Cr (Rs)

CURRENT LIABILITIES=1417. 04CR (Rs)
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0

CASH RATIO: 336.98/ 1417.04 = 0.24

Interpretation: The Cash ratio of not lower than 0.5-1 is usually preferred. The
cash ratio figure provides the most conservative insight into a company's liquidity
since only cash and cash equivalents are taken into consideration. PVR is clearly
very low in its cash reserves.

5) Dividend payout ratio

Dividend payout ratio: DIVIDEND PER SHARE/ SHARE PRICE

DPR; 0

No dividend

6) Interest coverage ratio

ICR: Earnings before interest and tax (EBIT)/ Interest dues

EBIT: 590 Cr
Interest payments: 493.94 Cr

ICR: 590/ 493.94 = 1.19

While an interest coverage ratio of 1.5 may be the minimum acceptable level,
two or better is preferred for analysts and investors. Th company’s earnings
are just 100cr over its finance costs making it a risky bet.
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1

2021

1) Equity to debt ratio: Total debt/ Total equity

Total debt: 9075.58

Total Equity: 7351.11

Equity to debt ratio: 9075.58/ 7351.11 = 1.23

Interpretation: A good debt to equity ratio is around 1 to 1.5. PVR has

maintained a stable ratio indicating that investment in such a company’s shares
will not be that risky.

2) Current Ratio: Current assets/ Current liabilities

Current Assets: Rs 962.01 CR

Current Liabilities: Rs. 1,109.54 CR

Current Ratio: 962.01/ 1109.54 = 0.87

Interpretation: The Current Ratio is less than 1, which indicates that the
company might not be able to meet its short-term credit needs. PVR is unable to
put its current assets into efficient use. There has been a more than 50% decline in
current investments. This indicates that the company should focus on investing in
better projects that would guarantee greater returns.

3) Liquidity ratio:

Current Assets – Inventory- Accrued Income Tax / Current Liabilities

Current Assets: 962.01 - 23.25 = 938.76

Current Liabilities = 1,109.54 CR

Liquidity Ratio: 938.76/ 1,109.54 = 0.85

Interpretation: PVR does not have a very good cash reserve to meet its short-term
credit needs thereby making its current liabilities risky. Liquid assets can be easily
converted into cash within a span of one year. Having a high liquidity gives the
company flexibility to meets its short-term credit needs.
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2

4) Cash Ratio

Cash Ratio: CASH & CASH EQUIVALENTS/ CURRENT LIABILITIES

CASH & CASH EQUIVALENTS= 721.53 CR (Rs)

CURRENT LIABILITIES=1,109.54 Cr (Rs)

CASH RATIO: 336.98/ 1,109.54 = 0.30

Interpretation: The Cash ratio of not lower than 0.5-1 is usually preferred. The
cash ratio figure provides the most conservative insight into a company's liquidity
since only cash and cash equivalents are taken into consideration. PVR is clearly
very low in its cash reserves.

5) Dividend payout ratio

Dividend payout ratio: DIVIDEND PER SHARE/ SHARE PRICE

DPR; 0

No dividend

6) Interest coverage ratio

ICR: Earnings before interest and tax (EBIT)/ Interest dues

EBIT: 281.84 Cr
Interest payments: 200 Cr

ICR: 281.84 / 200= 1.41

While an interest coverage ratio of 1.5 may be the minimum acceptable level,
two or better is preferred for analysts and investors. Th company’s earnings
are just 100cr over its finance costs making it a risky bet.
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3

Cost of capital

1) Cost of equity
Method one: Dividend Payout Method

D1/MP

D1: Dividend per share

MP: Markey price per share

D1: Rs 6
MP: Rs1389

Ko: 6/ 1389 x 100 = 0.43%

Method two: Risk free return

Risk free rate + beta x ERP

Risk free rate: This figure is based on the government bond yield.
Beta: Stock’s volatility relative to the market
ERP: Extra return over the risk-free investment

RFR: 7.1%
Beta: 0.88%
ERP: 4.57%

Ko: 7.1%+0.88 %x 4.57% = 11.12%

2) Cost of debt

Interest payment/ Total debt

Kd : 6807.5/ 71661.633 = 9.4995%

3) Weighted average cost of capital

WACC = Ko x Equity Weight + Kd x Debt weight

= 11.12% x 76% + 9.4995% x 24%

= 845.12+ 227.988/100
=10.73%
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4

Dividend Policy

Ex/EFF CASH DECLARATION

TYPE RECORD DATE
DATE AMOUNT DATE

31/03/2023 CASH 0 - 31/03/2023

5/03/2022 CASH 0 - 5/03/2022
18/03/2021 CASH 0 - 18/03/2021
05/03/2020 CASH ₹4 28/02/2020 07/03/2020
16/07/2019 CASH ₹2 10/05/2019 18/07/2019
18/09/2018 CASH ₹2 04/05/2018 20/09/2018
17/07/2017 CASH ₹2 30/05/2017 19/07/2017
20/09/2016 CASH ₹2 27/05/2016 22/09/2016

Analysis:

Up until 2020, PVR Inox followed a regular dividend policy. The amount of dividend varied
but payment to shareholders was done on a regular basis. Till the year 2020, the stock price
of PVR Ltd (XNSE: PVR) has remained constant at 0.055 for the past three years. There
hasn't been any capital appreciation in PVR shares during this period. Over the past five
years, there has been a decline of Rs 31.10 or 2.15% on an average in the value of each share.
PVR has seen continuous loss over the past three years. In the year 2020, it recorded a profit
of 30.16 crore however in the next three consecutive years, it has recorded a loss of 723.50Cr,
478.93Cr and 332.98 Cr respectively. Its losses have significantly reduced since its merger
with Inox. The company faced heavy losses during these years due to the pandemic. The
margins of PVR has also reduced due to it its increased operation expenses. Securing popular
and engaging movie content at reasonable prices is crucial for the success of cinema chains.
Rising content acquisition costs impacted PVR's margins and profitability. The cash and cash
equivalents has reduced by 30% since the previous years. Thus, a lack of reserves, profits has
led to significant drop in the dividends for PVR Inox and its shareholders.
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5