Bollywood producer and distributor Eros International to raise funds in the US dollar bond market

EROS International is a leading integrated studio, involved in Production, Acquisition & Distribution of Films.

Bollywood is all set to premiere in the US dollar bond market, as Eros International (India’s biggest distributor) prepares its debut high-yield offering.

Eros International plans to raise $200 million, plus an undisclosed greenshoe, through five-year bonds with a call option after three years, according to a source close to the deal. Deutsche Bank is sole global coordinator and joint bookrunner with Barclays, while Jefferies is lead manager.

Read more here.

EROS International: Leading Studio Involved in Production, Acquisition & Distribution of Films

Eros International is a well-established Indian motion picture production and distribution company that is currently making waves in the pool of global entertainment and media distribution.

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Founded by Arjan Lulla in 1973, Eros co-produces, acquires and distributes Indian language films in multiple formats worldwide, including theatrical, television syndication and digital platforms.

A paradigm shift in India’s entertainment industry and technology advances is also helping EROS grow at a much faster rate. The company has the potential to grow from a regionally recognized company to a major global player in media and entertainment industries.

Address: 201, Kailash Plaza, Plot No. A-12,,Opp Laxmi Industrial Estate, Mumbai – 400053
Website: http://www.erosintl.com



Indian Media & Entertainment Scene

The theatrical and media industries of India are on the cusp of a great change. The change is being driven through the confluence of diverse factors ranging from the increasing discretionary income of the growing middle class, the average age of the population, technology, changing perspective and government regulation within the Indian film industry, and the increasing ease with which international business can be conducted.

This conclusion can be arrived at simply by listening to the words of almost every executive in the Indian film industry, through paying attention to industry events, actions taken by the Government of India, and through the actions of non-Indian media and entertainment companies.

"India is standing on the threshold of an experience and entertainment economy. It is at the cross roads of an exciting phase that will shape its cultural and social framework forever." – Reliance Entertainment

Big Metamorphosis Taking Place

In the realm of Indian cinema, media, and entertainment a broad metamorphosis taking place. Driving this is the increased spending power of a growing middle class that is composed of the youngest age group anywhere in the world. Technology changes and digitization are paving the way for new platforms, integrations, and monetized content. The ratio of cinema screens to population density has created a huge push towards screen expansion in which many domestic and international companies are investing. We have also covered in brevity the landscape of India’s movie production, how segmented it is, and through abstract principles the inference is made as to how lucrative the industry has the potential to be.

So where does Eros fit into all of this and what signs are hinting that they are a good long-term investment?

"The rapid adoption of technology and broadband is bound to have a profound influence on the behavior of Indian consumers. Much more than moving from physical to digital media and from mass to targeted entertainment, consumers will expect access to content anytime, anywhere and from any device at their disposal." – Ernst & Young Media 2012

Eros Entertainment

Established in 1977 Eros Entertainment has become synonymous with Bollywood. There are a handful of other major players within India, but in terms of sheer numbers, Eros has the largest single content library of Indian movies; currently this library is composed of over 2000 films and digital rights to another 700 films. In the past years, and continuing today, Eros is investing heavily in that content library and IP/distribution rights surrounding the library. In recent media and financial releases Eros is highlighting that from 2010 – 2012 they produce, on average, 3 of the top 10 Hindi films each year.

Since establishment, Eros International has been an essential force in the direction of the Indian film industry. This has been accomplished through their early adoption of new technologies and a film slate that is both successful and strategic in nature.



Looking at the current business model they are moving fast and in many important directions to harness the power of new technology at a time when the market is preparing for a shift favoring its use. Through the leveraging of platforms to grow their global audience and increase market penetration rates around the world, Eros International is developing distribution platforms that move beyond today to platforms that will be ready as the industry’s landscape within and outside of India evolves. Along the way their highly successful and growing social media is globally increasing their visibility and popularity by leaps and bounds.

Eros International is also forging partnerships and strategically increasing ownership in key areas that will contribute to expansion in the coming years.

In terms of partnerships and subsidiaries Eros International is securing or has secured deals involving HBO, a Time Warner Inc subsidiary (NYSE:TWX), UTV, MSM Satellite, Viacom18 a Viacom partnership, B4U, EMI, Ayngaran, and TechZone among many others. There are distribution agreements with many of these companies, ownership in some, co-production of movies with a number of them, and revenue sharing from endeavors and partnerships with others. There are also numerous distribution agreements with virtually all broadcast television channels throughout India and an increased foray into the digital space. For a visual overview of Eros International’s distribution and monetization methods, see slides 10-12 of this presentation.

In recent years, Eros International has moved away from an almost exclusive focus on Hindi content (Bollywood) and has started investing in films from many of the regional cinematic and theatrical industries. This move will allow them to become an integral player within the regional segments and strengthen their national presence.

In terms of financial metrics, Eros International is showing strong signs:

  • Between FY 2007 and FY 2013, the company has realized revenue increases of 21.7% CAGR and adjusted EBITDA growth of 9.4% CAGR.
  • Eros is highly diversified and less dependent on theatrical box office revenues than competitors due to digital, online, and pay TV monetization methods, each of which are important parts of the lifecycle of cinematic production and monetization.
  • Target to become FCF positive by 2015.
  • Consistent net income levels realized annually.
  • A focus on metrics that matter for a successful business and are important to investors.

ErosNow Built on a Focused Model

  • Well researched system incrementally built and executed.
  • The system is designed to bring Bollywood movies, regional titles, music, and Indian television to viewers worldwide.
  • Multiple monetization methods exist within this Netflix of Bollywood.
  • ErosNow attracts free 5,000-10,000 new global subscribers daily and has a 10-20% conversion rate to the subscription model.

Perceived Philosophy of ErosNow strategy: Distribute quality content from an unparalleled and continuously expanding library to consumers around the world on demand and using diverse devices that make sense to support.

Fun Facts (worth considering)

  • Eros International is the only company in India to design a major global CDN and system for film content.
  • Eros YouTube channels are seeing over 1,400,000 views and over 1700 new subscribers per day and 1.6 billion views since inception. ErosNow channel is in top 100 of most viewed (since YouTube inception).
  • India’s annual film production = 1000+films; Eros FY 2014 film production = 69; 69/1000(+) = less than 6.9% of annual production is from Eros
    • With less than 6.9% of total annual film production Eros International is responsible for 30% of the top 10 most successful movies per year
  • Eros is the leader of box office market share and penetration of Bollywood movies in the United Kingdom and United States.

Forward thinking

  • Eros has exhibited a history of forward thinking evident from the gathering of IP since 1977 to being the first adopters of the DVD in India and now through challenging the accepted methods of receiving and viewing entertainment content.
  • Forward thinking has allowed Eros International to create the road many other entertainment companies try to follow.

Management

  • Eros International executive management and directors bring decades of cumulative experience in the Indian film industry
  • Key management is composed of highly adaptive individuals from diverse backgrounds

Source: seekingalpha.com