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Why this media stock lost 80% investor wealth in 2019

Why this media stock lost 80% investor wealth in 2019

Why this media stock lost 80% investor wealth in 2019
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By Pranati Deva  Jul 9, 2019 1:40:36 PM IST (Published)

Eros International Media, one of India's largest listed moviemakers and entertainment company, has emerged as one of the biggest wealth destroyers in 2019, declining over 80 percent on a year-to-date basis.

Eros International Media, one of India's largest listed moviemakers and entertainment company, has emerged as one of the biggest wealth destroyers in 2019, declining over 80 percent so far in 2019.

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The stock, which was trading around Rs 84 at the beginning of the year, has declined 82 percent to around Rs 16. To put that into perspective, an investment of Rs 1 lakh in the stock in 2009 would have depleted to Rs 18,000 today.
Eros International Media's share price fell continuously from June 4 till July 1, declining 74 percent during that period. It has lost 86 percent in the last one year and 61 percent in the last one month on BSE.
Rating downgrades, top management resignations, and alleged potential wrongdoing at parent Eros International Plc were the main reasons behind the downfall of the stock.
Earlier last month, non-executive and non-independent director Jyoti Deshpande resigned from the company followed by rating downgrades by CARE Ratings and Moody's.
On June 5, rating agency CARE cut its ratings from BBB- to default, citing delays or likely default in serving debt availed from banks. "The revision in the ratings assigned to the bank facilities of Eros International Media Ltd. (EIML) is on account of ongoing delays/default in debt servicing due to a slowdown in the collection from debtors, leading to cash flow issues in the company," the rating agency said.
Replying o the downgrade, Eros in a BSE filing said it has a strong liquidity profile and healthy balance sheet with over $135 million of cash and cash equivalents, and net debt of $145 million.
"We would like to clarify that this is on account of a delay in servicing of Bank loans for the month of April 2019 and May 2019 and will be cleared within the next seven working days. Furthermore, the company would like to clarify that our utilisation is less than Rs 550 crore as compared to Rs 750 crore facilities assessed by the rating agency as per the bank's sanctioned letters," Eros added.
Soon after Moody's downgraded ratings of its parent firm Eros International Plc to B2 from B1 and changed the outlook to negative from stable. “The rating downgrade reflects Eros Plc’s strained liquidity profile, which led to delays in servicing the bank loans of its Indian subsidiary, Eros International Media India,” the rating agency said.
"Eros has a strong liquidity profile and a healthy balance sheet with no meaningful near-term debt maturities. As of 31 March 2019, we had over $135 million of cash and cash equivalents on our balance sheet and our net debt position was $145 million," said Prem Parameswaran, group financial officer and president of North America, Eros International said in a press release.
For Q4, the company's net profit rose 14.72 percent to Rs 69.74 crore as compared to Rs 60.79 crore during the corresponding period in 2018.
However, sales fell 5.95 percent to Rs 224.56 crore in Q4 as against Rs 238.77 crore during the corresponding period in 2018. For 2018-19, net profit rose 17.33 percent to Rs 269.08 crore against Rs 229.34 crore during FY18.
Eros International Media Limited is engaged in the business of film production, exploitation, and distribution. The company's principal products/services include media and entertainment industry. The company's geographical segments include within India and outside India.
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