I am not a huge fan of
hindi movies for they lacked terribly in content..most of the times acting is
pathetic, direction is forgettable. The only humorous’ thing about our comedy movies is theirs
being promoted as comedy. 3 idiot was last Indian movie which i liked (although
i m not sure if it is also a remake). I remember watching a movie named “ Ek
Ruka hua Faisla “....that was just great...i couldn’t believe the acting,
direction and most the content....but only to found out later that it was a
ditto remake of Hollywood movie “twelve angry men”. I haven’t seen as cheap and
miserable comedy in my life as Golmaal 3....but i found it was a hit just like
other miserable movies like Bodyguard, Ra One.
However this shouldn’t be
the case for us for we lived in a country where in our glorious past...our
great sagas, great warriors and great intellectual people, who lived a great
life full of their valiant efforts to understand the intricacies of life, who
felt the difference between comfort (sukh) and peacefulness and then out of
their enlighten state of mind and from the learning of their great life, they produced great
masterpieces which today we regard as Purans, Granthas, Vedas. Each of these is
a great work of creativity. Like in Patanjali Yogasutras...he starts with phrase
“Atha Yoganusasanam” ( Means now ,the teaching of Yoga ), here the word “ATHA”
is simply for a person who finds living life for the sake of accumulating
pieces of metal ( Gold ) worthless and feels that life is something more than
this and mystery around the life process attracts him. Just small word but
great implication and so appropriate.
We shouldn’t have faced
the dearth of great deep and meaningful ideas for movies upon which a storey
can be built. We have a history of great warriors. Similar attempt was made in
movie “Asoka” to show the great life of King Asoka...but Shahrukh looked
pathetic in the movie...he failed miserably in exhibiting the proud, glory and
fearlessness of a warrior through his eyes...same is for peacefulness and
mystery which King Asoka felt when he renounced the worldly charms. However the
same was shown brilliantly by Brad Pitt in the movie “TROY”. However sharukh
was upto the mark in his expressions when he was seduced by Kareena Kapoor
dancing meaninglessly in bare clothes.
Movies are a great medium
to convey the message and they really can change the life of the viewers.
Movies with larger than life themes can take the viewers towards a journey
where after the end they won’t be the same old persons.
But a vacuum always
attracts the air....our media industry is also at the same stage where the void
created by nonsense movies is going to be filled. Because you can’t see the
face of your beloved in Moon if you are hungry....although chances are high
that you see a “Roti” on the face of moon. Moon ceases to be a metaphor of your
beloved if you are hungry. So now with the growth that has happened in our
country in past 20 years...i feel our people will move beyond routine life of
bread, butter and sex and more meaning full content will be created.
Eros international is
going to to be the biggest beneficiary of this paradigm shift. The company is
into movies for past 30 years. Earlier they were just into distribution but now
they have ventured into production also. Their biggest strength lies in their
model which is a combination of risk and derisked. Before the theatrical
release of the movie they presell the TV rights, DVD rights and DTH rights of
the movie recovering upto 70-80% of the cost of the movie and then their bet
will be on box office collection which if movie is a hit can skyrocket their
profits.
It may appear that they
are losing the potential revenues if they don’t presell the rights. However the
same can hold right if their movie was a flop...this step save them from those
situations also and in the end both options will be even out with low value of
sale of right in case of a flop is off setted by high price in case of a hit.
But it is better to be in a stable journey....they can focus their eyes on box
office which holds the biggest pie of the entire revenue chain.
Turnover in 2013 was 1068
cr with NP of Rs. 155 cr with EPS at 17/-. With negligible debt and great management the
company is poised for a stellar show. These days movies are shown via digital
formats in multiplexes, so movies can be released on thousands of locations
throughout the world on a single day, since it is easy to make digital prints
which costs much less as compared to old tape prints ( Rs. 10000/- as compared
to 80000/-)...also it isn’t easy to make pirated copies. As movies are released
on thousands of locations so they earn revenues very fast just in few days as
compared to months earlier. Definition of a hit is now based upon the
collection not time. So movies are shown only for few weeks and then it is the
turn for other one.
Next opportunity is the
sale of TV and DTH rights. Company is having a huge library of around 1500
movies which it sells to tv channels for a fixed period....this can be a huge
revenue earner for the company. Also with compulsory digitization announced,
the earnings of broadcasters are going to see huge jumps which make them to pay
higher price for the TV rights of a movie, which augurs well for the company.
Also company has earmarked new avenues for revenue like internet, pay tv, iptv.
It also sells the
international right of the movie to its parent eros international PLC at 30% of
cost plus 30% markup which ensures stable revenue stream for the company. Eros
is the company which is credited with the honour of taking the Indian movies on
global footprints. It has inked a deal with leading Indian channels Zee, Sony,
Colours to sell the TV rights of its movies.
Company came out with its
IPO in 2010 at a price of 175/- which was at PE ratio of 15 which was very
reasonable and it was subscribed 29 times. CARE gave it the rating of 4 out of
5. It was around 300 and it is now at 138/- i am buying it from 190/- and also bought
at 113/- and i m going to buy more. Movie houses which do not have proven
record of producing out hit movies cant trade at higher PE ratio since movies
are a risking business....but the derisked model followed by the company makes
only 30-40% of the cost of the movie vulnerable to a loss. However keeping in
view the fanfare among Indians for the movies, i am not sure if any movie has
made losses at the net level.
So it should command a
much higher PE ratio than 8 at current price. It is also having a cash of 400
cr which is more than sufficient for its future growth plans and needn’t to go
for debt.
India has the capability
to produce many Disney and warner Bros. Indian media industry is poised for a
strong growth and a complete overhaul. Hollywood is looking to india for VFX
and 3D content for its movies...our prime focus has made 200 VFX for Avatar
movie (I am holding prime focus from 25). Indian media sector is at the same
crossroads where once our IT sector was...and then IT came into life with a
bang...same is going to be the fate of our media sector and no one is better
suited to reap the benefits than Eros.
Eros is having some big
movie releases this year. Their Grand Masti has got grand opening. Two movies
are with Superstar Rajnikant, Kochadaiyaan-The Legend and Rana. Other includes
Deepika/Ranveer Starrer RAM LEELA, Tanu weds Manu Season 2. It has also entered
into partnership with HBO to launch Movie centric channels which are Ad free
with 30% interest. These channels are Subscription based and Eros can benefit
from huge library of Movies.
Movie on Demand segment on
digital cable TV/DTH platform will be a game changer for the movie industry.
With the availability of Big screen LCD/LED/plasma TV’s, one can enjoy the
movie best at his home. I don’t find the business of running multiplexes
attractive enough in india due to very high taxes (Our Govt just can’t let us relax
even after sucking our blood with high taxes everywhere). At present, i
don’t have data, but i think that multiplex chains are earning profits mainly
from other avenues of revenue like costly Food and refreshments, advertisement.
Due to high prices of land costs are very high.
TV 18 Broadcast also falls
into the category of Eros. I am holding it from 18/-.
Regards
(Views are personal and should not be taken as a recommendation for buy or sell a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)
(Views are personal and should not be taken as a recommendation for buy or sell a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)
Updates
Dated 29/01/2017: Eros International has been advised to sell pursuant to its lousy
accounting standards.
Blog Post Link: https://oscillationss.blogspot.in/2017/01/eros-international-media-avoid-this.html
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