PVR will buy a 69 percent stake from Cinemax's founders for 203.65 rupees per share, a 16 percent premium to Wednesday's close. Listing rules mean PVR must make an offer for up to 26 percent of Cinemax held by public shareholders.
PVR, which also operates a film distribution and production business, will manage about 350 screens after the deal, compared with a little more than 200 now.
A growing middle class and rising spending power in India has seen moviegoers flock to multiplexes where tickets cost less than half as much as the older single-screen theatres they are fast replacing.
Multiplexes make up fewer than 15 percent of the country's nearly 12,000 movie screens. Still, they accounted for a third of box office takings in 2011, according to a KPMG report.
The deal will boost PVR's bargaining position when negotiating film distribution terms, analysts said.
PVR said its board had approved raising about 2.6 billion rupees via an issue of preferential shares.
Rival BIG Cinemas, a unit of billionaire Anil Ambani's Reliance MediaWorksRELM.NS, has 253 screens, according to its website.
Cinemax shares rose by their daily limit of 5 percent to close at 184.40 rupees on Thursday. Shares in PVR, which has a market capitalisation 6.8 billion rupees, ended up 6.4 percent at 252.15 rupees after rising as much as 16 percent during the day to their highest level in 4-1/2 years.
Editing by Tony Munroe and Dan Lalor