Eros International Plc (EROS), the distributor of Bollywood’s most-expensive film, is reviving a plan to sell shares in the U.S. as it seeks valuations similar to Hollywood studios such as Lions Gate Entertainment Corp. (LGF:US)
Eros plans to withdraw its shares from London’s Alternative Investment Market and list on the New York Stock Exchange, Chief Financial Officer Kamal Jain said. The shares have dropped 2 percent on the AIM this year, compared with a 6.5 percent gain on the Financial Times-Stock Exchange AIM Media Index (AXMEDI), of which Eros is the biggest component. The number of companies listed on the AIM has dropped 34 percent in five years.
“The AIM market is illiquid, Eros has outgrown it,” Jain said in an interview in his office in Mumbai, home to the Hindi- language movie industry known as Bollywood. “Listing on the NYSE will give us a better valuation as we will be compared with the world’s biggest studios listed there.”
The distributor of the Hindi superhero movie “Ra.One” forecasts a listing on the NYSE will help it tap an estimated 10 percent growth over the next four years in Bollywood, the world’s most prolific film industry. Eros trades at a 32 percent discount to Lions Gate, producer of the “The Twilight Saga: Breaking Dawn - Part 2,” and is 70 percent cheaper than the global average.
The company, India’s second-largest movie producer by value, first planned to sell shares in the U.S. in March, according to a regulatory filing.
‘Very Long Way’
“It’s good to make a vision statement by listing on the NYSE and wanting to be compared with some of the world’s biggest studios, but it’s a very long way for Eros to go on that track,” said Ambareesh Baliga, chief operating officer at Mumbai-based Way2Wealth Brokers Pvt. “The question is when will they achieve that vision?”
Eros’ Indian unit’s net income may rise 16 percent in the year ending March 31 to 1.71 billion rupees ($31.5 million), according to the median estimate of 8 analysts compiled by Bloomberg. Sales may increase 21 percent to 11.4 billion rupees, according to the survey. Lions Gate, the independent film studio that produced “The Hunger Games,” reported sales last year that were sevenfold higher than that of Eros.
Eros International Media Ltd. (EROS)’s shares in Mumbai have gained 4.5 percent this year, compared with a 25 percent increase in the BSE India Sensitive Index. (SENSEX) The stock rose 1.4 percent to 212.50 rupees in Mumbai. The company’s shares on the AIM trade at 7.6 times its estimated earnings. Lions Gate is valued at 11.22 times earnings for Lions Gate, data show.
Eros’s films have grossed just over $11 million in the U.S. this year, about the same as in 2011, according to data from Box Office Mojo. Lions Gate and its unit Summit Entertainment’s films made more than $1.2 billion, the data show.
The Indian company, which plans to spend $140 million in developing film content in the year ending March 31, is ranked 22nd in box-office proceeds in the U.S. this year, with a share of 0.1 percent of the market, according to the data.
India’s movie industry revenue may rise 10 percent to 150.3 billion rupees by 2016 after advancing 0.1 percent in the four years to 2011, according to a March report by KPMG and the Federation of Indian Chambers of Commerce and Industry.
A listing on the NYSE may help Eros capitalize on rising patrons for Indian movies, both at home and overseas, as local productions look to shed their image of being formulaic, three- hour, song-and-dance extravaganzas. That, combined with growing number of multiplexes and increased consumer spending in the world’s second-most populous nation, is poised to draw a wider audience to the silver screen.
“If you compare India to China, Mexico or Brazil, we have fewer screens relative to the number of people,” said Jehil Thakkar, head of media & entertainment at consultancy KPMG in Mumbai. “More theaters will get built and almost all of them will be multiplexes, which tend to have higher ticket prices.”
Eros’s upcoming releases include Tamil-language films such as “Rana” and “Kochadaiyaan - The Legend,” both of which feature superstar actor Rajnikanth.
“We anticipate that our costs associated with the co- production and acquisition of film content are likely to increase over time as we continue to focus more on high-budget Hindi films,” the company said in the U.S. filing. Eros considers movies with production costs of more than $8.5 million as high-budget films, it said.
The company’s “English Vinglish,” an atypical Bollywood film about an Indian housewife seeking to learn English, made $1.8 million in the U.S., the second-most successful movie for Eros in that country this year after action-drama “Agneepath.”
Eros, set up in 1977, distributed “Ra.One,” which featured Shah Rukh Khan, and cost more than 850 million rupees, the Bollywood actor said in October last year. In the movie, Khan plays a superhero G.One, who battles the evil Ra.One in cyberspace amid 3,500 visual effects.
“People don’t necessarily always want to see the same old formulaic brand of movies,” KPMG’s Thakkar said. The new brand of Indian movies “has potential beyond the diaspora market.”
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