Eros International’s IPO pricing appears steep

The company collects a percentage of the box office collections of its movies from multiplexes and single-screen theatres. However, there is no reliable and independent monitoring of such data

Movie distributor Eros International Media Ltd is set to enter the primary market to raise Rs350 crore through a 100% book building issue. Rating agency CARE has assigned 'IPO Grade 4' to the initial public offer (IPO) indicating 'Above Average Fundamentals'. The issue opens for subscription on 17th September and closes on 21st September. The price band has been set at Rs158-Rs175 per share. The issue has allocated 60% to Qualified Institutional Buyers (QIBs), including 5% to mutual funds. Retail investors will be allocated 30% while non-institutional bidders will be eligible for 10% of the issue. The company is issuing around 2.21 crore shares.

Eros sources Indian and global films and distributes them worldwide through its offices in India, the UK, USA, UAE, Singapore, Australia, the Isle of Man and Fiji across formats such as theatres, home entertainment, television and digital new media. It is a wholly-owned subsidiary of Eros International Plc. 

The company is promoted by Eros Worldwide FZ LLC (Eros Worldwide) and Eros Plc. Beech, the promoter of Eros Plc, holds 68.80% stake in Eros Worldwide.

Eros International has extensive rights to over 1,000 films in languages that include Hindi, Tamil and other regional language films. Eros Plc is engaged in producing, commissioning and distributing films in all formats globally. It will use the IPO money to acquire and co-produce films in various Indian languages. On the anvil are 11 movies at a cost of Rs280 crore.

Eros collects a percentage of the box office collections from multiplexes and
single-screen theatres. However, there is no reliable and independent monitoring of such data. There are also possibilities of misreporting or underreporting of box-office collections.

The company's EPS for the year ended 31 March 2010 was Rs11.52. EPS for the June quarter stands at Rs1.94. Based on the estimated FY11 EPS of Rs6.22, the PE works out to 25.40 at the lower end and 28 at the upper end of the price band. The stock is not cheap. UTV Software had an EPS of Rs5.1 in the first quarter of FY11 and its PE is 20.

According to the FICCI-KPMG Report 2010, the Indian film industry is projected to grow at a compounded annual growth rate (CAGR) of 8.9% between 2009 and 2014, to reach a total market size of Rs136.7 billion by 2014.
Domestic and overseas box office collections are each expected to grow at 8% CAGR between 2009 and 2013, primarily due to the increase in the number of multiplex screens, which have higher average ticket prices than smaller cinemas, and increased marketing and selling efforts internationally. The home video market is estimated to grow by 11.8% CAGR over the same period, with the physical sales market expected to outperform the rental market. Revenues for the Indian film industry are expected to continue to be dominated by box office revenues (domestic and overseas), accounting for approximately 81.1% of total revenues in 2014.


RBI's rate hike unlikely to dampen demand: Auto industry

New Delhi: The Indian automobile industry, which has been on a record breaking sales spree this fiscal, today said an imminent increase in interest rates by banks following the Reserve Bank of India's (RBI) decision to hike key short-term lending and borrowing rates, is unlikely to dampen demand, reports PTI.

The RBI raised its key short-term lending rate by 25 basis points and borrowing rate by 50 basis points with immediate effect, which is expected to spike cost of funds for the banks and eventually makes loans expensive.

"We believe there is enough power in the economy and these rate hikes will not impact demand. Even in the short term, as the festive season is round the corner, we expect demand to continue," Society of Indian Automobile Manufacturers (SIAM) president Pawan Goenka told PTI.

He, however, said the auto industry was surprised by the central bank's move to hike borrowing rates (reverse repo) rate by 50 basis points.

"For us the increase of 50 basis points (bps) on reverse repo was something unexpected as inflation had started coming down. We were expecting in the region of 25 bps," Mr Goenka said.

Expressing similar sentiments, Maruti Suzuki India chief financial officer Ajay Seth said although interest rate hikes always had some impact on the demand side but since the rate hike is not much, there could not be any significant impact.

"What is more important for us is liquidity and the RBI has not touched the cash reserve ratio (CRR), which is good although we were not expecting a rate hike as inflation has started to come down," he added.

Hyundai Motor India director (marketing and sales) Arvind Saxena, however, said the rate hikes could act as a dampener to the festive season sales.

"The auto industry is looking forward to a good festive season but this interest rate hike may act as a dampener.

Frequently rising interest rates might slow down the market, especially in the festive season," Mr Saxena said.

Domestic automobile sales have been on a record breaking spree this fiscal with the industry clocking 12,63,293 units in August, the highest ever achieved in a month, bettering the previous best of sales of 12,37,461 units in July this year.

Domestic passenger car sales, which stood at 1,60,794 units in August, were the best ever monthly sales, bettering the previous best of 1,58,764 units in July this year. Total two-wheeler sales of 9,57,304 units in August, also broke the previous record of 9,38,514 units set in July this year.


Cairn asserts it has no differences with the govt or ONGC

New Delhi: Cairn Energy Plc today said it has no differences with the oil ministry or with partner Oil and Natural Gas Corporation (ONGC) on sale of a majority stake in its Indian arm, for which it is seeking all necessary approvals and expects to close the deal by year-end or early 2011, reports PTI.

"It makes good copy (to highlight differences between Cairn Energy and the government or ONGC). But believe me there are no differences," Cairn Energy Plc chief executive Bill Gammell said here today.

He said he expects Cairn to sell the majority stake in Cairn India to London-listed Vedanta Resources and close the deal by year-end or early next year.

"We are seeking all necessary approvals... and are working with the government and our partner ONGC (on the issue)," he added.

ONGC has a 30% interest in the 6.5 billion barrel Rajasthan fields, the centrepiece of the Cairn-Vedanta deal

Vedanta Resources Group is yet to get the Securities and Exchange Board of India's (SEBI) approval for an open offer to acquire up to a 20% stake from minority shareholders at a price of Rs355 a share, Rs50 less than what it is paying Cairn Energy for a majority stake.

The open offer, as per the schedule announced by Vedanta last month, is to open on 11th October.


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