The entertainment industry, though dependent on the economic environment, has select players that are able to thrive. Eros International Media (Eros) is one such film distributor and co-producer of Hindi and select regional movies. The company has managed to derive significant revenues from mega and large budget movies, while reducing business risks by monetising the cable and satellite rights for such films.
At Rs 169, the share trades at eight times its likely per share earnings for FY13. This is lower than the valuation enjoyed by multiplex players as well as the historical multiples that it enjoys.
A slew of top movie releases that have been successful in the current fiscal, a strong pipeline of star-studded films and the ability to monetise movie rights by selling them to satellite channels are key positives for the company.
In the present slowing economic environment, the company is not going big on mega budget movies of Rs 100-150 crore, like it did in the last fiscal.
The company recovers 35-40 per cent of its costs by selling movie rights to channels such as Colors, Zee TV and Star Plus. In co-production, Eros tends to enter into revenue-sharing arrangements only after it recovers a significant portion of its investment. Together, these strategies reduce the risk inherent in the film production and distribution business.
The pipeline of movies, especially in Tamil, is quite promising. Films such as Kochadaiyaan,, Maatran and Yohaan Adyayam Ondru have strong casts as well as established directors.
