Eros International Media slumps as US bank raises doubts over UAE revenues, ErosNow user count

NEW DELHI: Shares of Eros International Media came under severe pressure on Monday after a leading Wall Street bank lowered the rating of parent first Eros International amid concerns over the revenues the company is generating from its UAE business. The bank also raised questions over the validation of the actual ErosNow user count.

Following the development, Eros International Media dropped 10.02 per cent to hit a low of Rs 394.20 on BSE. At 10.30 am, there were outstanding sell orders of 22,297 shares compared with buy orders of 13,184 shares.

The brokerage said it has relooked at the company fundamentals, taking into account "the continued increase in receivables, driven by a sudden spike in revenues booked in the UAE (a red flag for some investors)."

The bank also raised doubts over whether the company will actually be free cash flow (FCF)-positive by FY16E, as previously guided and also over the validaty of the actual ErosNow user count. "The management broke down the receivables in a very detailed manner, but quite frankly it was still difficult for the analysts on the call to fully grasp the collection cycle and movement of funds (particularly deals booked in the UAE)," said Wells Fargo, in a report released on Friday.

"We still don't know the largest content buyers driving this increase, and we aren't comfortable with the fact nearly half of revenue originates outside India," it said. The bank has downgraded its rating on the stock to 'market perform'.