A new script

New fiscal begins with a stake sale for Eros International promoters

Soumik Kar

Sequels don’t always work. Chaar Sahibzaade 2, Rock On 2 and Kahaani 2 haven’t done wonders on the box office as evident in the numbers of Eros International Media, headed by Sunil Lulla as the executive vice-chairman and MD. The movies which were released in the third quarter of FY17 didn’t rub off on revenues, which fell 0.7% to Rs.335.8 crore. In fact, for the nine months of FY17, revenue growth fell 7.1% against 35% growth for the previous corresponding period.

Incidentally, profit has grown at a healthy pace of 19% in comparison to 9MFY16. For the third quarter, profit grew 149.8% to ₹102 crore. The bottomline performance largely came on the back of pre-sales across all revenue streams and catalogue sales across television and other distribution channels. As per Ace Equity data, between FY12 and FY16, profit has seen a CAGR of 8.53% against 11% sales CAGR.

What’s interesting to note is that even before the fourth quarter results have come out, the promoters have been paring their stake. Since the current fiscal (FY18), promoter entity Eros Worldwide FZ LLC's stake has fallen to 43.28% from 49.94%. The entity has sold 62.9 lakh shares in five transactions. The latest tranche of sale happened between May 5 and May 8, 2017, when the entity sold 34.9 lakh shares, worth Rs.77.87 crore in a bulk deal at Rs.223.28 a share. Between April and May 8, the top management, too, sold Rs.2.9 crore worth of shares. The combined value of stake sale by the promoters and top management, since the beginning of the fiscal, works out to Rs.145 crore. As on March 2017, the overall promoter holding stood at 73%.

Over the past one year, the production and distribution company has mirrored the gain in the Sensex with the stock rising 16% against 17% for the benchmark index. Among the public shareholders, foreign portfolio investors hold the largest stake at 10.94% as of March 2017, marginally falling over the previous corresponding quarter when the stake stood at 11.34%. The promoter has largely hovered around 73% during this period.

Eros currently has a production slate for about 50 movies in CY17. It is also banking on its partnership with Chinese film companies and Trinity Pictures (a subsidiary created to focus only on franchise feature films) to propel revenues in the coming years. Analysts, however, reckon that the longer receivable cycle of catalogue sales remains a matter of concern as it would lead to operational inefficiencies. The company’s receivables were pegged at Rs.550 crore in FY17 versus Rs.428 crore in FY16.