<article><a style="color: #000080;" href="http://www.dealstreetasia.com/?s=Eros+International">Eros International Media Ltd</a>, producer and distributor of movies, may buy back equity shares from the market even as its parent Eros International Plc fights allegations of financial misreporting.</article>

<a style="color: #000080;" href="http://www.dealstreetasia.com/?s=Eros+International">Eros International Media Ltd</a>, producer and distributor of movies, may buy back equity shares from the market even as its parent Eros International Plc fights allegations of financial misreporting.
The company is well-funded and will not change its accounting practices despite the allegations as its top investors are standing by the firm, Jyoti Deshpande, group chief executive officer and managing director at Eros International Plc, said in an interview on Wednesday.
“We are flush with funds for the expansion for the forseeable future. All our top shareholders are with us. Buyback of shares was always an option. We have not finalized anything on this matter. We will approach the board on this to take a decision,” Deshpande said.
Eros International Plc, the first Indian media firm to list on the New York Stock Exchange, is the parent company of Eros International Media Ltd, which is listed on the local bourses. Eros International has been fighting allegations of financial misreporting linked to its business from the United Arab Emirates (UAE).
<a style="color: #000080;" href="http://www.dealstreetasia.com/?s=Wells+Fargo" target="_blank">Wells Fargo</a> analyst Eric Katz cut his rating on the shares to market perform, saying he wasn’t comfortable with explanations about the company’s growing business and receivables from the UAE, according to a 24 October Bloomberg report.
“We are happy with our accounting practices. We will change this only if there is any change in revenue models. For instance, if our digital vertical starts contributing over 35% to the group. At the moment, we have no plans to change accounting practice,” Deshpande said.
The company’s audit committee has engaged the US law firm Skadden, Arps, Slate, Meagher and Flom Llp to conduct an independent review, said Kishore Lulla, chairman of Eros International.
Lulla said shares of Eros International fell due to co-ordinated short selling by some investors. The company’s lawyers are looking into the issue, he said.
Shares of Eros International Media Ltd gained 4.98% to Rs.213.90 on Wednesday on BSE, while the benchmark Sensex lost 1.48% to 25,482.52 points.
Eros International has lost 52.03% since 15 October, while the Sensex lost 5.66%.
In October, investment blog Alpha Exposure wrote that due to aggressive accounting practices, Eros’ reported earnings are significantly overstating the economic reality of its business model.
Deshpande said no new facts about the company have come to light since the filing of 2014-15 financial results or the fiscal first quarter results when market sentiment was positive.
“Those were baseless allegations. We were not unique. There were similar attacks to <a style="color: #000080;" href="http://www.dealstreetasia.com/?s=Apple" target="_blank">Apple Inc</a>, <a style="color: #000080;" href="http://www.dealstreetasia.com/?s=Netflix" target="_blank">Netflix Inc</a> and Amira Nature Foods Ltd too,” Deshpande said.
On Tuesday, Eros International Media reported that its fiscal second-quarter net profit increased 80.23% to Rs.90.3 crore from Rs.50.1 crore a year ago.
Speaking about the business, Deshpande said the company will adopt a new three-pronged strategy starting January to pursue further growth now that the first phase its growth plan has been achieved by hitting the milestone of having 30 million registered users for Eros Now.
She said the firm will introduce music, new movies and original television shows at stimulating pricing points ofRs.50 and Rs.100 to add more customers to Eros Now. Deshpande said the firm is planning to launch offline services under its distribution strategy to cope up with poor bandwidth in the country.
“We are also going big on regional cinema that can be the game changer for the company. We are already big in Telugu and Tamil cinema. We have started producing movies in Malayalam, Punjabi, Bengali and Marathi. We are also exploring Kannada,” she said.
The company is expecting to release at least 100 movies a year for the next three to five years with the help of regional movies and at least 20 Bollywood movies.
In a 18 November report, the research unit of Jefferies Group Llc said that with a record quarter the brokerage believes Eros International is in a position to drive strong long-term growth.
“3G (third generation) penetration is expected to grow in India at a 60% compounded annual growth rate, which makes this a medium term issue rather than a game changer. Additionally, Eros’ 3,000 film library puts a floor on the intrinsic value of the asset as Eros always has the option to license or sell this content should Eros Now fail to gain traction,” the Jefferies report said.
“We like the long-term growth story, but remain on the sidelines until we see improvement in receivables, positive free cash flow, and Eros Now monetization,” wrote Katz of Wells Fargo Securities Llc, Bloomberg reported on Wednesday.
Katz kept Eros’ rating at market perform while cutting the 12-month price target to as low as $9 from $20 to $22.
Also Read:
<a style="color: #ff0000;" title="Indian film production house Eros acquires UK’s music messaging company Ping Tune" href="http://www.dealstreetasia.com/stories/indian-film-production-house-eros-acquires-uks-music-messaging-company-ping-tune-15833/" rel="bookmark">Indian film production house Eros acquires UK’s music messaging company Ping Tune</a>
<a style="color: #ff0000;" title="Temasek unit to buy 10% stake in Eros Now: Report" href="http://www.dealstreetasia.com/stories/temasek-unit-to-buy-10-stake-in-eros-now-report-8885/" rel="bookmark">Temasek unit to buy 10% stake in Eros Now: Report</a>
<a style="color: #ff0000;" title="On-demand services launching across Asia but paid subscriptions will be a challenge" href="http://www.dealstreetasia.com/stories/on-demand-services-launching-across-asia-but-paid-subscriptions-will-be-a-challenge-12054/" rel="bookmark">On-demand services launching across Asia but paid subscriptions will be a challenge</a>

Eros International Media Ltd may buy back equity shares from the market even as its parent Eros International fights allegations of financial misreporting.

India: Eros International Media considers share buyback

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief

India: Eros International Media considers share buyback

Start your deal-making journey now!

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief