NEW DELHI: The Eros group, which includes an India-listed company with the parent Eros International plc. listed on NYSE, will soon start the process of simplifying the organisational structure to realign shareholders interest after an announcement that Reliance Industries Ltd. would be investing in the parent for a five per cent stake, according to a company executive.
In addition, Eros International will not use the money being put in by a RIL subsidiary into the joint venture with the Indian arm to set up a combined fund of $150 million for content consolidation from India but will fund the JV internally.
“At the parent level, there is a massive infusion of cash and it is fungible. So Eros International Media Ltd (the Indian arm of Eros International Plc.) will have the resources to do what it is aiming to do. It is a market leader and we are joining hands with one of the biggest players in the business, Reliance Industries. So content consolidation is here to come,” Eros group CEO and MD Jyoti Deshpande told business news channel CNBC-TV18.
Asked whether Eros International Plc will use the money being paid by Reliance to contribute its share in the $150 million [Rs 500 crore each from the two partners in the Rs 1,000 crore corpus] fund being set up by the RIL-Eros India joint venture, Deshpande clarified: “No. The money that Reliance is putting in is not to be used for this purpose. That is for a different purpose. It [Reliance] is putting money in the parent. The [Eros] group has enough resources of its own to fund this joint venture.”
She went on to add: “The current cash on parent’s books without Reliance stake is already about $140 million. The parent always gives film advances to the Indian company and the Indian company sells overseas rights, etc. to the parent company. So even without 5 per cent stake, the group already has in excess of Rs 500 crore with it already.”
According to Deshpande, who will be quitting Eros and formally joining RIL attached to chairman Mukesh Ambani’s office to look after its entertainment business in April 2018, Eros will soon take steps to align all the interests of shareholders, while refusing to comment or commit on any mergers and/or reverse merger with NYSE-listed parent.
So, if the RIL money will not be pumped into the joint venture by Eros International Plc and kept aside for other purposes, what will the company do with the cash?
Pointing out that the minority stake signals “beginning of a very long-term partnership”, Deshpande told CNBC-TV18, “At the moment there is no immediate use of the cash except that it nicely brings down the net debt of the group and capitalises our balance sheet quite nicely and gives us flexibility if we need cash during movement of structure, etc. So I think it is firepower that it gives us and it gives us alignment. More than the money it aligns us to a very powerful partner.”
Pressed further by journalists on timelines of possible restructuring and re-alignment of shareholders’ interest post a JV with RIL, Deshpande said without committing on any mergers, “There has been a lot of talk on the cards that we need to align all shareholders’ interest at one level. Right now it is a stepped kind of structure. So we are actively looking to see what we can do in that respect, where we align all shareholders at one level…All these things are governed by huge compliance, so I am not at liberty to share anything further on this topic. However, what shareholders can take away is that we are actively working towards aligning the interest of all shareholders at one level.”
Asked about RIL’s investments in another content maker and OTT platform owner Balaji Telefilms and whether the RIL-Eros JV will stop scouting for more partners, Deshpande explained, “I think the industry is quite fragmented and the vision is to try and consolidate it, grow the industry together using Eros’ expertise in the content space. So, the idea is to make all kinds of content…[and] so it is not a limiting kind of a partnership, it is a very blank canvas wide partnership.
“We want to work with every content maker that is out there--- [what] specific plans RIL has, I will be able to share post April. But wearing the Eros hat right now, I think the plan is to make as much compelling content as possible, keep content prices under control, partner and try and grow the market. We are open to all kinds of ideas, all kinds of collaborations [and] not just with content partners, but with other OTT partners. So I think the idea is to put one and one together and make it eleven.”
Dwelling on the financial performance of Eros International in FY’19, Deshpande, who’s had leadership stints at Star and Zee earlier, said, “I think scale is what you can expect. I think we can grow in the next year by another 15-20 per cent because the slate will expand, we can double the slate with half the money. So I think it is a great outlook, it is a win-win outlook for both companies.”
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