Eros looks to generate $850 mn cash flow over next three years

MUMBAI: Film studio Eros Plc is eyeing a cash flow of $850 million over the next three years. The company feels that the cash flow will help it fund the Capex requirements over the next three years. The healthy cash flow will ensure that the company will not have to raise debt.

Eros plans to spend $750 million over the next three years on original digital content for Eros Now and the studio business. Eros’ plan is to roll-out over 100 originals over the next 18 months in multiple languages.

Eros Now’s content strategy hinges on two pillars, films, and original web content. The digital rights of films produced and co-produced by Eros rest with Eros Now. The studio produces, co-produces and acquires about 50 to 60 movies per year.

The OTT platform is slowly and steadily building up its original slate. In the last one year, Eros Now has premiered more than 100 titles, new titles, and short videos.

“Within the next 18 months, we will roll-out 100 new originals in different languages. The scripts for the originals have been agreed to. Our Capex guidance for the next three years is about $750 million, which is inclusive of the studio slate and as well as the originals which we are planning every year,” Eros Plc executive chairman and CEO Kishore Lulla.

“And within the next three years also the cash flow generation is more than $850 million. So we’re not going to incur a lot of debt to fuel this growth. It is coming from the internal cash flows because we have a deep library which is generating money from the syndication, and especially the new markets which are opening up for us also like China.”

Lulla also said that the company is betting heavily on overseas markets to fuel revenue growth over the next three years. “So for China which has become a big market also whether for the theatrical releases or whether for the online also is going to fuel our growth in the next three years for our revenues. And not just China, it is the other markets which other markets like Russia, Poland, Indonesia, Thailand, Malaysia, all those markets are embracing Bollywood in a big way,” he added.

Lulla also said that digital business, which contributes around 14% to the total revenue, will start contributing 50% to 60% revenue because of the growth in subscriber base going forward.

The studio is also de-risking its business model by shifting to smaller budget content-driven films. The big budget films, Lulla noted, have been failing at the box office whereas the smaller budget films have performed better.

“So that, in fact, gives you a better profiling and better revenues and better margins on your business of theatrical. So say suppose, even if a small B movie does bigger than the A movie, that’s what we’re looking for. So that will produce a better ROI for your business,” Lulla stated.

Talking about the company’s China strategy, Lulla said that the studio will release its recent releases in the market. ‘Bajrangi Bhaijaan’, which released in March, collected more than $48 million at the box office. Two more releases are on the anvil.

“We receive about 22% of that box office net of the P&A in our earnings. So we have now two more releases, which we’ve finalised from our catalog, which should be released before the March this the fiscal year-end and that should be quite well received for us,” he added.

The second strategy is to make available its film titles on digital streaming platforms. The company made an in-road into the China market through a licencing deal with iQiyi. “So it’s not only the theatrical side but we are also syndicating to the online and as well as to the broadcasters and the terrestrial television like CCTV and other platforms in China. And we’re seeing more and more kind of that deals, which will generate and straightway add to the bottom line,” Lulla noted.

The third part of the China strategy is the co-production. Two of Eros’ scripts have been approved by the local partners and the production will start next year. The budget for co-productions is $20-25 million even both Eros and the Chinese partner equally funding the projects. The Indo-China co-productions are slated to release in 2020.

Meanwhile, the company has also appointed a committee and the committee to look into simplifying the structure of the India unit. “The board has appointed a committee and the committee is looking at simplifying the structure that how we can have the best structure for the investors, whereby we have today a structure on New York-listed company and we’ve got a structure in India. So if we can simplify India structure and have better returns for our investors,” Lulla stated.

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