I am delighted to write to you at the end of another satisfying and exciting year atEros International. Despite a challenging external environment FY2017 has been a year inwhich Eros progressed on its business momentum and strategic initiatives.
Driven by passion
At Eros we are driven by passion. Not just for entertaining people but to makewonderful films and bring the best content to viewers in every corner of the world. Thispassion is evident in the way we run our business and the manner in which our peopleapproach it. We are proud to be a people-led organisation where the collective excitementand energy of our entire team helps bring moments of happiness joy and uniqueentertainment to more than a billion people around the world.
We are a company that enjoys a leadership position in markets that continue to be on along-term growth trajectory. Over the last year we made targeted investments in contentbrands and markets that provide attractive growth opportunities. A glance at the span ofour operations will reveal that consistent content innovation and a robust business modelunderpin our financial resilience.
Our pursuit of creative and operational excellence is our key competitive advantage.FY2017 continued that tradition and the Company reported an encouraging performancedespite the temporary impact on revenue from theatrical releases in the second half of theyear.
This year audiences have been able to choose from a variety of releases. India's filmindustry has experienced diverse growth with the exploration of high concept new genresand relatable stories. Regional content continued to make encouraging headway and engagegrowing audiences. With the gradual emergence of Tier II and Tier III cities on themultiplex map the acceptance of niche movies accelerated vis--vis traditionalcommercial cinema.
A significant development during the year was the growing importance of Bharat'i.e. the rural India due to the implementation of the new TV audience measurement systemBARC. This has created a surge in the demand for new film releases as well as our filmlibrary as film content is an effective means for satellite channels to penetrate therural markets.
As additional multiplex screens are added theatrical revenues have a potential to growsignificantly. In addition the large-scale acceptance and successful theatrical releaseof our regional movies validates our increasing focus on language diversity in ourcontent. At Eros we are poised to take advantage of opportune upcoming trends and shiftsin the market. As we expand into other regional languages such as Marathi BengaliPunjabi and Malayalam we may see the composition of our film mix changing over time toallow us to successfully scale our business with a diversified portfolio of content.
Theatrical revenues during FY2017 were driven by releases of Ki & Ka Housefull 3Nil Battey Sannata Dishoom Happy Bhaag Jayegi Baar Baar Dekho Banjo Rock On 2Kahaani 2 (overseas) and regional films include 24 (Tamil) Sardaar Gabbar Singh(Telugu) Janatha Garage (Telugu) C/O. Saira Banu (Malayalam) Baghtos Kay Mujra Kar(Marathi) Chaar Sahibzaade2 (Punjabi) and Double Feluda (Bengali) to name a few. Wereleased 44 films which included 5 high budget 10 medium budget and 29 small budgetfims. The highlight of the year was a steady growth in our profit margins. EBIT marginexpanded to 26.1% compared to 21.8% in FY2016 and our PAT margin improved to 17.8%compared to 14.7% in FY2016. This growth was majorly driven by higher contribution fromcatalogue revenues.
In FY2017 our strong regional library active pre-sales and catalogue monetisation of2000+ films' library continued to serve us well both from a performance and a riskmanagement perspective. 96% of the cost of the total film slate released in FY2017 wasrecovered through pre-sales across all revenue streams including theatrical satelliteand overseas which reflects our disciplined approach to risk management. As a part of ourlongstanding relationships with the television industry we signed television syndicationdeals with several major networks such as ZEE TV Star TV Colors and Sony TV.
Leveraging our content strength
As India increasingly becomes the market of choice for global expansion for manyInternational entertainment and digital companies content will take centre stage. As theprices for film content rise Eros' key asset a market-leading film library is a major beneficiary of this trend. Not only does our content experience theatricalrelease it crosses borders and languages engages a nation across all screens; fromtheatrical to your handset.
We had been gearing up to leverage our industry knowledge and understanding to developour own intellectual properties. Aside from further efficiency across the value chainthis will help to increase the revenue potential through Indo-China co-productions or bito tri-linguals i.e. films that are shot simultaneously in two or three India languagesbut it will also help optimise content costs. The launch of Trinity Pictures investmentsin our joint venture Colour Yellow Productions and leveraging our film library to launchsequels to successful films are concrete steps taken in this direction. We are excitedabout these developments and are looking forward to FY2018 which will see these planscome to fruition.
We have strong international distribution capabilities through our parent company ErosInternational Plc's which has a well- established worldwide and multi-channeldistribution network. The network extends over 50 countries across theatrical televisionand digital formats to cater to the global film-loving South Asian diaspora as well ascrossover audiences.
Today quality and diversified content has increasing appeal than perhaps any othertime in the past. Our parent Eros International Plcs' OTT platform Eros Now is enablingthe wider availability of content on demand and on the go. It is driving innovation incontent creation marketing and distribution through our strategic partnerships withtelecom companies OEMs and payment wallets.
Apple has featured the Eros Now App in its App Store Best of 2016' which is atestament of our achievement. We are pleased with Eros Now's progress and are excitedabout what the future unfolds. Eros Now has over 2.9 million paying subscribers and with68 million registered users we believe that this is just the tip of the iceberg.
Leading the future
We are drawing upon our core strengths as we continue to fulfil our aspiration to beThe Company people turn to for the stories that shape and enrich their lives.
In FY2018 we continue to be focused on ramping up our own productions andco-productions through Trinity Pictures and Colour Yellow Production. We will alsocontinue to expand our regional presence with 25+ releases across Tamil TeluguMalayalam Bengali Marathi Kannada and Punjabi languages.
At the heart of Eros International's consistent performance is the ability to stayagile in the face of a rapidly changing ecosystem. The face of agility at Eros is ourtalented and driven team. Our people are paving the way towards achieving our long-termobjectives.
We continue to upgrade the skills of our employees and bring on board fresh talent fromdiverse backgrounds to enhance our future readiness. It is their passion to bringclutter-breaking content to the market and distribute globally that helps us chart amarket-leading success story.
I am confident that our passion to deliver engaging content with a robust businessmodel will enable us to create value for all stakeholders in the years to come.
I seek your continued support and encouragement in this endeavour.
|Warm Regards |
|Sunil Lulla |
|Executive Vice Chairman & |
|Managing Director |