Eros International Plc enters into formal review process to explore strategic alternatives

MUMBAI: Embattled entertainment company Eros International Plc has said it is exploring strategic alternatives for the company. The company further stated that the review process might or might not result in a transaction.

It has engaged Citigroup Global Markets Inc. as its strategic advisor and Gibson, Dunn & Crutcher LLP as legal advisor.

“Eros International Plc (EROS), a Global Indian Entertainment Company, announced today that its Board of Directors has decided to enter into a formal review process to evaluate and explore strategic alternatives for the Company,” Eros International Plc said in a statement.

It further stated, “There can be no assurance that this review process will result in any transaction or that any transaction if pursued, will be completed. The Company has not set a timetable for the conclusion of its review and does not currently intend to disclose further developments with respect to this process, unless and until its Board of Directors approves a specific transaction or otherwise concludes the review of strategic alternatives, or has determined that further disclosure is appropriate or required by law.”

The move comes at a time when the company’s credit rating was downgraded by Moody’s and its outlook was changed to negative from stable. CARE Ratings had also downgraded Eros International Media due to default by the company in servicing debt.

The rating was downgraded after Eros Plc’s 62.4% owned Indian subsidiary Eros International Media confirmed on 6th June that there were delays in the payment of interest and amortising principal on its bank loans for the months of April 2019 and May 2019.

Making matters worse, a US-based forensic financial research firm Hindenburg Research in a report had alleged potential wrongdoing at Eros International Plc. The research firm had stated that much of the receivables that the company had claimed might not be existing, and accused its promoters of engaging in “highly irregular related party transactions” which “appear designed to hide receivables”.

To assuage the fears of the investors, Eros International Plc had announced a $20 million share repurchase programme. It had also announced that Eros Now has 18.8 million paid subscribers as of 31st March 2019.

The company had also reiterated its positive business fundamentals and strong financial position after its stock plunged nearly 20% on 7th June.

“We are very excited to announce that our Eros Now platform has risen to 18.8 million paid subscribers and 154.7 million registered users as of March 31, 2019, far exceeding our target for the full fiscal year 2019 of 16 million subscribers. This represents a 138% increase in paid subscribers over the past 12 months and an 18% increase over the prior quarter,” Eros International Group Chairman and CEO Kishore Lulla had stated.

“Our success in building our subscriber base will further increase the visibility of our earnings and move the company towards a more annuity-based business model which will deliver continuing and profitable growth.”

On the ratings downgrade by CARE Ratings, Lulla had commented, “Additionally, I am pleased to inform shareholders that we now have a strong financial and operating position and our management team are making it a priority to work with CARE Ratings, the regulatory agency, to have our credit rating revised upwards in due course.”

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