A de-risked business model, healthy cash flows and its three decades of experience in film distribution are positives for Eros International Media (EIML). The company, in the business of acquisition, production and distribution of film content in India and abroad, is raising Rs 350 crore (at Rs 158-175 per share) to acquire and co-produce movies.
De-risked model
In addition to co-production , which splits the costs and allows EIML to work on many films at the same time, the company also relies on a portfolio approach. It bundles movies, both new and from its library (1,000 titles), across budget sizes and languages and markets these through diversified distribution platforms such as theatres, satellite, DTH, DVD, music CDs and mobiles. This helps it to spread its bets on a large number of movies, as well as distribution platforms.
| HIT SHOW | |||
| In Rs crore | FY09 | FY10 | Q1, 2010 |
| Sales | 626.0 | 640.0 | 126.0 |
| Ebitda | 114.0 | 125.0 | 25.8 |
| Ebitda (%) | 18.2 | 19.5 | 20.5 |
| Net profit | 73.0 | 82.0 | 15.5 |
| Source: Prospectus, Pinc Research | |||
Revenue visibility
Apart from India, a significant chunk of revenues will also come from its global parent, Eros International. In lieu of the rights to distribute the products globally, Eros International will pay 39 per cent of the film cost. Going ahead, EIML believes the trend of rising discretionary spending, increase in multiplex screens and diversified media should help it to improve its revenues. A FICCI-KPMG study believes that given the rise in per capita levels and disposable incomes, the Indian theatrical market will grow by 25 per cent to $2 billion by 2013. While the company’s revenues have grown 59 per cent annually over the FY06-FY10 period, the industry has grown by only five per cent. For FY10-12, EIML’s revenues are likely to grow by 21 per cent, believes Angel Broking. A large part of this growth could come from eight major releases, with leading stars lined up for the next two years.
At Rs 158, the IPO is priced at 14 times its 2010-11 earnings, which is at a discount to peers. Subscribe.
