Eros International slumps on report US arm under scanner

Eros International Media hit a lower circuit limit of 10% to Rs 250.50 at 13:58 IST on BSE on media reports that US attorneys have started investigating the company's US arm Eros International Plc.

Meanwhile, the BSE Sensex was down 229.93 points, or 0.86%, to 26,426.90.

On BSE, so far 79,000 shares were traded in the counter, compared with an average volume of 75,771 shares in the past one quarter.

The stock hit a high of Rs 261.50 in early trade. The stock hit a record high of Rs 644.40 on 20 July 2015. The stock hit a 52-week low of Rs 240.10 on 31 October 2014.

The stock had underperformed the market over the past one month till 30 October 2015, falling 46.78% compared with 1.92% rise in the Sensex. The scrip had also underperformed the market in past one quarter, falling 53.66% as against Sensex's 3.78% decline.

The small-cap company has an equity capital of Rs 93.45 crore. Face value per share is Rs 10.

According to reports, three global investor rights law firms Steinmeyer Law, Rosen Law Firm and Bronstein, Gewirtz and Grossman issued separate statements about investigations concerning whether Eros and some of its officers and/or directors have violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

The reports alleged that the company may have issued misleading business information to the investing public. This could potentially expose Eros to class action lawsuits, the report added.

Last month, a leading international bank lowered the rating of US arm Eros International amid concerns over the revenues it is generating from UAE business. The report had also stated that the bank also raised doubts over whether Eros International will actually be free cash flow (FCF)-positive by FY 2016, as previously guided and also over the validity of the actual ErosNow user count. The bank reportedly 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 United Arab Emirates (UAE).

On consolidated basis, Eros International Media's net profit surged 48.9% to Rs 53.35 crore on 95.7% growth in net sales to Rs 472.48 crore in Q1 June 2015 over Q1 June 2014.

Eros International Media co-produces, acquires and distributes Indian language films in multiple formats around the world.

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