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Eros Q1 net up 22% to Rs 35.8 crore

MUMBAI: Five Hindi film releases and the success of Tamil film ‘Kochadaiiyaan’ helped Eros International Media give a strong financial performance for the first quarter ended June 2014.

The company’s consolidated net profit grew 22.2 per cent year-on-year to Rs 35.84 crore (Rs 358.4 million) in the fiscal first quarter while revenue advanced 29.6 per cent to Rs 241.49 crore (Rs 2.41 billion).

However, the company saw a steady drop in net profit growth in the last two quarters.

In Q4FY14, the company’s net profit increased 30.3 per cent, whereas in Q3FY14 it clocked a rise of 41.1 per cent. Revenue had grown 37.8 per cent during Q4FY14.

Eros hopes to end FY15 on a strong note riding on new technology and monetising its film library through distribution on various digital platforms.

Eros MD Sunil Lulla said, “The fiscal year commenced on a positive note led by healthy performance of our film portfolio across revenue streams along with the ongoing monetisation of library films. We continue to work towards expanding our film content through a diversified approach of acquiring a mix of high, medium and low budget movies across Hindi and other regional languages.”

Meanwhile, at the operational front, the company did well by reporting stronger growth in operating profit even though operational costs remained elevated. A sharp rise in film acquisition costs caused operating expenses to increase exponentially.

Overall expenses during the quarter stood at Rs 184.68 crore (Rs 1.85 billion) vis-a-vis Rs 148.08 crore (Rs 1.48 billion) recorded in the year-ago period.

Film acquisition costs were at Rs 170.46 crore (Rs 1.70 billion), up 30.2 per cent, and accounted for 92 per cent (88 per cent in Q1FY14) of total operating expenses. Employee costs and amortisation expenses also witnessed a steady increase. Nevertheless, the company reported 48.6 per cent rise in operating profit (EBITDA) to Rs 56.81 crore (Rs 568.1 million).

This resulted in an EBITDA margin expansion of 300 basis points to 23.5 per cent (20.5 per cent Q1FY14) during the quarter under review.

Film business

Monetisation of film library across multiple platforms, coupled with new film releases in Hindi, Tamil and other regional languages, drove the company’s Q1 revenue.

Eros released nine films during the quarter under review. Of the total movies released, there were one high-budget and eight medium-to-low-budget films. Clearly, lack of big-budget film releases caused a slide in its film business collections, which resulted in the company falling short of the analysts’ expectations.

Of late the company has been acquiring a lot of regional-language films. Acquisition of the Rajinikanth-starrer Tamil film ‘Kochadaiiyaan’ is one such example. The blockbuster opened with a worldwide collection of Rs 42 crore (Rs 420 million).

New media content distribution

Eros has been witnessing a growth in monetisation of catalogue movies on new platforms along with an increasing demand on its existing platforms.

Explaining the company’s future strategy, Lulla said, “We are focused on driving our new media content distribution strategy through ErosNow and took various strategic initiatives to further strengthen the platform. The acquisition of a controlling stake in Techzone, a leading mobile value-added services provider, brings on board expertise in technology and solid distribution reach of mobile digital content. Our partnership with Hathway Cable to launch a subscription-based movie streaming service will enable their broadband subscribers to watch our library films from the ErosNow platform.”

Techzone claims to have executed an average of 25 million SMS, WAP or IVR transactions per month over the past three years across 12 major telecom operators in India. It bills the customers directly through its billing platform.

ErosNow, the dedicated online entertainment platform offering full-length movies and music videos, launched a movie streaming service called ‘Broadband Movies’, in partnership with multi-system operator (MSO) Hathway Cable & Datacom.

Lull is optimistic about Eros’ growth prospect. “Given our well-defined business model, unique offerings and an extensive film library, we are best positioned to leverage existing and emerging opportunities in the Indian media and entertainment industry,” he said.

Eros’ shares on the BSE settled the day almost flat at Rs 222.20. In last one month, the stock has been up 2 per cent.