Eros Share Discussion Threads

[soul limbo] 19/11/2015 13:19

Eros Letter to the SEC

[soul limbo] 19/11/2015 13:18

Eros: Understanding The Organizational Structure And Writing To The SEC

Nov. 19, 2015 1:35 AM ET | 13 comments | About: Eros International Plc (EROS)

Summary

By isolating the financials of the divisions belonging only to Eros Plc (and not to EIML), we highlight additional absurdities in the Eros saga.

The holding company’s wholly owned operations report low net revenues and collect negligible amounts of cash, yet have 60% of the consolidated entity’s assets.

Eros’ India geographic reporting segment grew revenues 87% quarter-over-quarter, while Eros’ publicly listed India subsidiary, EIML, grew revenues only 5% in US dollars quarter-over-quarter.

Eros reported another quarter of negative free cash flow as well as increasing trade and other receivables.

We have written a letter to the enforcement division of the SEC. A link to it is provided in this article.

[eurofox] 19/11/2015 09:14

posted on "Fixed Income Investor"

Eros Says Rock Solid Backing by Temasek to Counter Short Sellers
2015-11-18 15:09:09.590 GMT
By Ameya Karve
(Bloomberg) -- Eros International Plc said backing by its two largest investors Capital Group Cos. and Temasek Holdings Pte will help the Bollywood film producer counter short sellers who have pummeled its New York traded stock.
The shares tumbled 79 percent from its Aug. 19 record of
$37.60 through Tuesday, making it the worst performer on the Bloomberg World Entertainment Index, after anonymous Twitter users and a blogger called Alpha Exposure cast doubt on the company’s financials, the number of subscribers at its Eros Now digital service and its revenue derived from the United Arab Emirates. U.S.-based short seller Glaucus Research Group’s Director Soren Aandahl on Nov. 5 said the company’s shares are worth $0.
“We have rock solid shareholders, such as Capital and Temasek, who are standing by us like pillars and giving us good advice,” Eros Chief Executive Officer Jyoti Deshpande said in an interview in her office in Mumbai. “They said just put your head down and get to work.”
Shares at the company’s Indian unit rose the most in two weeks after Eros on Tuesday reported profit that beat analysts estimate. The producer of “Bajrangi Bhaijaan,” featuring Salman Khan in the lead role, is focusing on expanding its Eros Now service, said Chairman Kishore Lulla. The digital platform has
30 million registered users and the company will be “happy” if it can convert as many as 10 percent into paying subscribers, he said.

Anonymous Blogger
“Eros’s performance in the second quarter seems quite in contrast to the allegations and the company seems to have managed to convince the people on most of the parameters,” said Jigar Shah, an analyst at Mumbai-based Kim Eng Securities Pvt.
Kim Eng recommends buying shares of Eros’ Indian unit.

Stake Sale
“We are expecting significant contribution to revenue from Eros Now in fiscal year 2018,” CEO Deshpande said.
Eros was in advanced talks in July to sell a 10 percent stake in Eros Now to Singapore-based Fullerton Fund Management Co. that would value the unit at $800 million, people with knowledge of the matter said then. Lulla declined to comment on the stake sale.
“The stake sale in Eros Now will be a very positive news for the company as it will boost the cash flow and bring in external investor credibility,” Kim Eng’s Shah said.

[lonrho] 18/11/2015 23:19

Yes but netflix for instance can't produce a multi year back catalogue overnight to fill up their programme library or viewing channels. Shares up about 10% in states, their two major institutional shareholders Capital Group and Temasek have confirmed their backing according to Bloomberg. Part of Temasek, which is Singapore state owned is named as negotiating to buy 10% of Eros Now.

[loglorry1] 18/11/2015 22:51

Ummm but they can produce their own movies by the dozen for not much money if Eros is to be believed.

[lonrho] 18/11/2015 22:38

The problem with worthless programme rights is that netflix , the murdoch empire and others are looking to launch in India. Their issue is that indians like indian content and they haven't got any. There are recent articles in the FT where companies are supposedly negotiating to buy 10 percent of Eros Now for $80 million and it hasn't even properly launched yet at least in subscription form.

[loglorry1] 18/11/2015 20:04

No what I mean is the film rights end up being worth very little say $10m in a fire sale abd that just pays off some of the senior secured. I've seen nothing in the accounts to suggest older films are worth much have you?

[spectoacc] 18/11/2015 19:49

@log - the money's not tucked into the back catalogue like it's Grattons! The films - the real ones - have a value. Net asset value (assuming the bears are correct) could well be negative, but the debit side is the bond liability.

Eg if they've $400m of debt, and $250m of film rights, he bonds get something back. Not sure the relevance of your "burning cash" point - I'm not talking about cash, and if they raise more debt it can't rank above ERO1 (probably shown by the fact they've done two substantial equity raisings).

There's probably a final doomsday scenario where the ownership of the film library has been hived off somewhere.

[loglorry1] 18/11/2015 17:23

@Specto this makes no sense. If the real situation is that EROS is burning cash which looks likely then their asset value is pretty close to zero. Simply put they've poured millions of pounds into producing films with little of no pay back. There won't be any money in the back catalogue to speak of. You might get a tiny amount in a fire sale but the administrator fees and maybe other senior secured debts will rank above you.

In my opinion recovery on the bonds in a wind up will be negligible.

[loglorry1] 18/11/2015 13:15

@SpectoAcc I think you are making an error here. If there is fraud then the only way you'll see value in the bonds is when the company is wound up and that will be if someone buys the assets. If fraud is uncovered then the equity will be worthless and they won't be able to trade because the law suits will descend on them like a plague of locusts.

What will the assets be worth in a fire sale? I've no idea but I doubt very much at all.

If there has been no fraud then you are buying a very good income stream. I suspect though that the equity will do even better from here if in fact there's been no fraud.

Simply put there isn't much grey area here. Both equity and bonds likely a zero if fraud proved.

Log

[spectoacc] 18/11/2015 12:16

@Log - pinning my hopes on the film library/content value if the very worst happened, but agree that 100p in the £ would be unlikely.

I still say the bonds have traded far too low compared to the shares - but accept the shares may be the ones at the wrong price!

[hpcg] 18/11/2015 12:02

smurfy - longevity is no protection I'm afraid; Madoff could string it out for years. Similarly a lot of roll-up / buy to build firms. The music stops when the new cash stops.

[lonrho] 18/11/2015 11:51

loglorry

I think people are assuming this is a fraud because globo, which was obviously very suspect, turned out to be a massive fraud. Eros is a real company and is externally rated as the number one film producer in bollywood. It has appointed the number 3 legal firm in the USA to carry out an independent review.

Its Previous FD left after 9 years and paid a glowing tribute to Eros. If you are a party to a huge fraud as the FD you don't leave and he was replaced by an ex Goldmans and Jefferies employee.

OK receivables are way too high and since via the voting structure this is effectively family controlled there are red flags and that is why I have only bought the bonds. They have, if you believe the balance sheet $150m of cash $220 m of debtors , $240m of payments made in advance for future films plus about $500 million for film,music back catalogues etc against about $400m of debt including creditors only about $80m of which is secured. This to my mind gives a pretty big backing for the bonds at 40p ish even if the accounts are not totally pristine.

[smurfy2001] 18/11/2015 11:30

So are the bears suggesting financial fraud since 1977 when the company was founded?

[lonrho] 18/11/2015 09:01

Well they have $150 million in cash which is virtually unchanged over the last six months. They state that debtors are targeted to reduce by about $50 million by next march and that they will be free cash flow positive for the year. Have you looked at the 77 comments on the seeking alpha guys latest missive, the vast majority are explaining in fairly factual terms why the author is talking rubbish.

[spectoacc] 18/11/2015 09:01

If you assume the bears are right - and they may be - then the bonds are surely the place to be, because the co (& shares) would implode before 2021. As Senior Debt, the bondholders should get something back from the wreckage, unlike shareholders.

Missing a bond payment likely to be the final straw, though knowing Eros they'd offer a generous scrip alternative first!

[hpcg] 18/11/2015 08:26

Specto - indeed. Though they are burning cash and the bond payments can't be made without. As I say, they can string it out for a while yet potentially. In some sense the equity price is not so irrational. One only has to find a greater fool to buy the shares whereas the bonds have an end date where they will be worth nothing.

[spectoacc] 18/11/2015 07:02

Interest payments on the retail bonds are only c.£3.25m per annum, so doubt the first fault line would be there. Redeeming them in 2021 could be more of an issue!

[hpcg] 17/11/2015 23:49

Made a mistake closing my shorts. Forgot that they couldn't be re-opened. I was expecting a bit more follow through on the results where, as you say Soul, profits up but cash down. However I think this will take a while to go bust, it will be strung out as long as the cash lasts. I guess bond interest payments are worth watching.

[smurfy2001] 17/11/2015 16:01

Something going on here.

Institutional Ownership now at 70.13%

Last time it was showing ~51%.


Increased Positions 72 7,614,667
Decreased Positions 32 2,849,595
Held Positions 10 11,964,138
Total Institutional Shares 114 22,428,400


New Positions 35 4,416,076
Sold Out Positions 9 372,629



Read more:

[yorkie52] 17/11/2015 15:33

Erosnow has definite potential and could bring in significant revenues in future. I've topped up signficantly at 7.8 and 9.4 recently and also bought bonds at 75 and last week at 35 so heavily invested here. Bonds in particular are looking very cheap and to a large extent are relatively safe

[blusteradjuster] 17/11/2015 15:09

Is that cashflow breakeven reliant on ErosNow performing?

It's quite possible that the real cash-cow, going forward, isn't box-office takings.

[yorkie52] 17/11/2015 14:41

On target to be cash flow positive by end of fiscal 2016 reiterated

[smurfy2001] 17/11/2015 14:38

Operational Highlights

Robust release of strong portfolio of films supported by healthy contribution from theatrical, overseas, satellite and other revenue streams. Theatrical revenues during the quarter were driven by worldwide releases such as ‘Bajrangi Bhaijaan’, ‘Srimanthudu’ (Telugu), ‘Welcome Back’, ‘Hero’, ‘Life of Josutty’(Malayalam) and other regional language releases.

Bajrangi Bhaijaan released in the quarter ended September 30, 2015 crossed $77 million worldwide, smashing multiple records and Welcome Back grossed $20 million box office worldwide. 8 out of the top 15 films in CY 2015 as of September 30, 2015 are Eros films including Top 2 films.

The Company released a total of 20 films in the three months ended September 30, 2015, of which three were high budget films (two Hindi and one Telugu), three were medium budget films and the rest were low budget films.

Trinity Pictures, the Company’s exclusive franchise studio division is developing five big universes, characters within those universes and stories based around those characters. Three of those Universes are Kids and Teens, Action and Adventure and Gods and Kings which have films under development including a couple of scripts specifically tailor-made for Indo-China co-productions. The Company hopes to produce and release at least 3-4 films under the Trinity label in fiscal 2017.

The Company shared detailed milestones for Eros Now, its OTT platform, at the Company’s maiden investor day on October 13, 2015. The Company’s new pricing in India and internationally is now live, as are many new product features. Eros Now's flagship feature, offline viewing, will be live before the end of this calendar year and with its Eros Now originals slated to launch in January 2016, the Company will continue to build marketing momentum.

The Company’s third quarter has an exciting release of the much anticipated magnum opus of Sanjay Leela Bhansali‘Bajirao Mastani’ which is a Christmas release and the remainder of the fiscal year has a string of high profile movies that include the Tamil film, Suriya’s ‘24’; Telugu films, ‘Dictator̵7; and Pawan Kalyan’s ‘Sardar Gabbar Singh’ and the much travelled film festival favorite, ‘Aligarh’;. We have also picked up momentum in the regional markets with releases lined up in Punjabi, Marathi, Bengali and Malayalam.