Eros International’s value has gone up post the Reliance deal: Kishore Lulla

MUMBAI: Eros International executive chairman and CEO Kishore Lulla has said that the company’s value has seen a significant jump post the joint venture (JV) partnership with Reliance Industries Ltd (RIL).

In February 2018, RIL through its wholly owned subsidiary Reliance Industrial Investments and Holdings had acquired 5% equity stake in Eros International Plc at a price of $15 per share, thereby investing funds amounting to $48.75 million in Eros.

Additionally, Eros International’s India subsidiary Eros International Media Ltd (EIML) and RIL had also decided to equally invest up to approximately $150 million in aggregate to produce and acquire Indian films and digital contents across all languages.

Speaking with analysts during the Q3 FY19 earnings conference call, Lulla had said that the company’s value is anywhere between $30 to $50 based on the DCF (discounted cash flow) method.

“If you calculate the DCF method, you’d calculate the EBITDA multiples, you calculate every method, the company is totally undervalued. I think the company’s value is anywhere between north of $30 or $50 today. Also if you take different methods of – and the peer’s competition and the library valuation we have,” Lulla said.

He also stated that Eros has the largest library on all formats and for digital rights besides having largest the paying subscriber and registered subscribers on its over the top (OTT) platform Eros Now. “Then also JV with China, reaching out in the different markets, low debt company, I think you’re very well aware of all those factors when Reliance invested in at $15. So I don’t think so nothing has changed. In fact, the company value has grown from that date,” he added.

Talking about the content production JV with Reliance, Lulla said that the company will get 7.5% as a distribution fee from the net revenues and after that the profiting will be done in the 50:50 ratio. On the digital side, both Jio and Eros Now will exploit the rights on all platforms.

“In that way it’s a great partnership to be there whereby we get the Jio distribution network in India which is the largest today,” Lulla noted.

In terms of the subscriber growth for Eros Now, he noted that the strategy paid off whereby it first integrated with telcos, which was the B2B and B2C model. Without spending a lot of money on acquisition of subscribers, the platform gained momentum in acquisition of subscribers, he added.

“What is happening is the subscribers are getting more and more traction from our content, the premium content which we are producing. And that will help us to gain more market share in the next quarters to come whereby the subscribers will grow. And this ARPU growth will come slowly and slowly whereby the telcos are also increasing the ARPU per quarter and they’re not going to subsidise,” he stated.

Eros Now, which reached 15.9 million paid subscribers in Q3 FY19, has set a target of over 50 million paid subscribers with at least 20% being direct-to-consumer over the next three years.

“I hope to achieve this as soon as possible because the traction is getting better and better. And I think with the current scenario whereby the telcos will start increasing their ARPUs in India now and they will concentrate more on D2C. So you will see a lot of traction from the next quarter whereby we will gain a lot of traction in this D2C and the D2C subscribers directly and also with the big hits of our originals which has taken place whereby we’ll see a lot of traction coming from and we can play with the windowing of the premium and the basic service that could really help us to get the traction and the focusing on that,” he explained/

Eros Digital CEO Rishika Lulla said that Eros Now’s growth is due to the originals launched and also the platform had premiers during the quarter. “So with Smoke which was a super kind of large budget glossy original, Side Hero, with the launch of Quickies and we also had two large post-theatrical digital premiers on the platform as well, that really drove a lot of the usage time, subscription, everything up this quarter quite aggressively. So we really do believe that we will continue to experience high growth especially since the roll out of our originals is already well underway.”

India, she noted, presents a unique opportunity with the huge subscriber opportunity as the country continues to undergo a digital revolution. “There are 1.8 billion South Asian audiences around the world and the democratisation of video distribution via online has garnered the potential reach that the creator can drive for a specific piece of content. Eros Now aims to be the platform providing that reach as we believe we can achieve over 50 million paid subscribers with at least 20% being direct to consumer over the next three years.”