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Eros’ stock woes continue as it fights allegations on revenue and releases


Movie production house Eros International continues to face allegations of overstating its revenues and theatrical releases and was forced to issue a statement yesterday. Terming them “baseless”, the company was responding to an article published by Alpha Exposure where it said that Eros had released only 52 films in 2014 and 2015 rather than 134 films as said in its disclosures.

Eros said that its management attended a conference hosted by Wells Fargo where “where it did not disclose any new information to the market and only reinforced its business fundamentals.”

“No statement was provided concerning the Alpha Exposure article dated November 10, 2015 which made further baseless allegations about the Company’s core business, its content library and film slate,” Eros added.

Digital business market share

The Alpha Exposure story also took aim at Eros’ digital and ancillary business and said the company faked the segment’s revenues. According to the story, Eros had claimed revenues of $60 million and $48 million in 2014 and 2015 respectively. The story highlighted a KPMG report (pdf) where it said the market size of the digital film  distribution was $158 million. “Eros’ reported revenue implies 42% and 38% market share of the industry’s total Cable and Satellite Rights and the industry’s total Digital and Ancillary revenue, respectively. These levels of penetration seem implausible based on the much smaller proportion of gross box office receipts represented by Eros’ reported theatrical revenues,” it further read.

Readers will note that Eros’ digital and ancillary business revenues have been falling over the last three quarters. Digital revenues stood at $21.3 million at the end of Q3 FY15, $18.7 million at the end of Q4 FY15 and $6.3 million at end of Q1 FY16.

Earlier in the month, Eros issued a clarification  on the number of users on its digital platform Eros Now. Earlier in October, Eros had said that crossed 30 million registered users as of September 30. The 30 million registered users reported by ErosNow as of 30th September 2015 are a combination of web, WAP and APP users, the company said.

Stock downgrade by Wells Fargo

Earlier in October, Eros’ stock was downgraded by Wall Street Bank Wells Fargo. According to the investment bank, Eros’ continued increase in revenues from the UAE is unexplained. The company said  Eros International Plc,  consolidates its subsidiary financials, and cancels out all inter-company transactions between the group companies and only reports the third party revenues, costs and profitability and that analyzing subsidiary financials which in isolation can be extremely misleading, in its explanation.

Push for digital

In June, Eros canned its television network plans following investor calls to focus on their digital platform ErosNow. Eros CEO Kishore Lulla, in an analyst call, said that the company has shelved its plans for a TV network at least for a year after a group of shareholders led by UK-based investment firm Knight Assets cautioned against launching a television network and asked them to focus on their digital products.

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