EROS reads SORE Backwards ! ~ On Lower Circuit at Rs 213 ~ S’o’rely facing Class Action Sore time !
EROS Media is listed on NSE & BSE where it’s reeling at 10% lower circuits of Rs 213.75 & 213.85 respectively
The FY 15 Annual Report Boasts of ‘The Big Picture’ of Producing Hit after Hit ! & in Investing in Winning Scripts !
The Reality Now is that’s it’s a Rapid Losing Scrip taking Hit after Hit !
The reason is the US Class Action suits launched by many US law firms to recover loss for Investors from Investments in the period June 17,2014 to October 30,2015 and some suits also carry the days from November 2013 at the IPO time to current November 2015 in the NYSE listed EROS INTERNATIONAL PLC & here & here & here
The NYSE Listed EROS has dropped by 45%+ in just five days and over 66% from January 1,2015 this year to just over US $ 7 currently .It was US $ 39 on August 13,2015 just three months ago
Those Indian Broking Firms who have recommended Eros Media for Investment in India are now recommending an Exit !
Pray how does one exit on lower circuit !?….stand in the queue to sell and pray your order gets executed
Eros International Media Listed on BSE recorded a 52 Week high of Rs 644.40 on July 20,2015 just four months ago & is down over 66% from this high to lower circuit of Rs 213 today
Here are some of the accusations stated in the US lawsuits and in critical reports and they are seriously serious and reek of acute Corporate Governance Issues and violation of US Federal Securities Laws by the NYSE listed EROS INTERNATIONAL PLC :
- Defendants issued materially false and misleading statements to investors and/or failed to disclose that: (i) Eros’ reported earnings significantly overstated the economic viability of Eros’s business model; (ii) Eros’ accounting policy for amortization was unjustifiably aggressive in light of the impact of piracy on the long-term value of Eros’s assets; (iii) despite Eros’ reported profitability, Eros generates no cash; (iv) Eros has only been able to stay afloat by issuing stock and taking on debt; (v) Eros significantly overstated the number of Eros distributed and Eros’ theatrical revenues during fiscal years 2014 and 2015; and (vi) as a result of the foregoing, Eros’s public statements were materially false and misleading at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.
- The above accusations leveled in the lawsuits drew from an October 30 2015 report that was published on Eros International Plc by an investment blog Alpha Exposure asserting, among other things, that: (1) reported earnings are significantly overstating the economic reality of its business model (2) The financials of subsidiary revealed a lack of free cash flow and raised many questions about the company’s accounting and (3) Company has enriched the promoters’ family at the expense of shareholders through a series of related-party transactions. Further, on November 10, 2015, Seeking Alpha reported that Eros International Plc has overstated its theatrical revenue by 82% and 104% during fiscal years 2014 and 2015, respectively and overstated the number of movies it has distributed by 124% and 200% during fiscal years 2014 and 2015, respectively.
There is no mention of the class action suit developments in USA as the Interim Results are dated November 9,2015 while Law Suits are dated after this.However what started this whole Problem was the Critical Accusatory Report of Alpha Exposure of October 30,3015
There is as required,mention of 14 Investor complaints received in the July to September 2015 quarter and none remained unresolved at September 30,2015….what was the nature of such complaints and whether they were resolved to the satisfaction of the Investor is not known
EROS is promoted by Sunil Lulla who serves as Vice Chairman & MD.The Promoter Holding is 73.66% as on September 30,2015 while another 8.2% is held by 5 other Institutional Shareholders as on the date
The auditors,Walker Chandiok & Co LLP, have given a clean review of the interim FY 16 results and have relied on the review of the interim results of the 12 subsidiaries and step down subsidiaries by other auditors.Their Audit Report of FY 15 also does not carry any qualifications or reservations or adverse remarks
A Red Flag could be as to why the Indian Listed Company skipped dividend for FY 15 even while boasting of a 26.4% jump in Revenues,a 20.6% jump in EBIT & a 23.7% jump in PAT over FY 14….Revenue streams were more or less equally split one third each from Theatrical,Overseas & Others & Consolidated Diluted EPS was Rs 26.43 ! and yet not even Rs 1 or 10% Dividend was declared…this would have been even less than 4% of the Profits shown of Rs 247 crs !…the Annual Report stated that to strengthen the financial position of the company the Directors are not recommending any Dividend !
Question has arisen on the quality of both, Corporate Governance exercised by the Indian Promoters & of the Indian Audit on which Indian Investors have to rely
SEBI & ICAI will have to react on these developments and investigate EROS here in India
I’m just wondering how many listed Companies on Indian Bourses must have holes in their Accounting that when revealed,like Satyam,will deflate the Share Price Bubble instantly !
Like I often jocularly state at my workshops ” There are over 4000 listed companies on the BSE…that’s over 4000 mistakes you can make !”
Henceforth I may not say this jocularly anymore !