Sebi bars Eros International, MD Sunil Lulla from securities market

The Securities and Exchange Board of India (Sebi) has barred Eros International Media and four others -- including executive vice chairman and managing director Sunil Lulla and chief executive officer Pradeep Dwivedi -- from accessing the securities market for alleged diversion of funds and financial misreporting. The two others are firms Eros Worldwide and Eros Digital Private,

In an interim ex-parte order issued on Thursday, Sebi observed that about ~1,247 crore has become untraceable, of which nearly 94 per cent has been written off by Eros. In the ongoing investigation, Sebi order further said that, potentially, ~687 crore had been diverted by Eros.

In the order, the regulator noted that Eros appeared to have siphoned off funds using paper companies with no business operations or bogus entities. Sebi also said that it had investigated these entities’ financial statements, office addresses and business and that these firms could not show utilisation of funds transferred by Eros.

“Eros continues to transfer funds to these potentially bogus entities, the same raises concerns that the company is still diverting resources to entities connected to its promoters to the detriment of the public shareholders,” noted Sebi whole-time member Ashwani Bhatia in the order, while emphasising the urgency to pass an interim order.

The markets regulator has provided a window of 21 days for submission of any response from the company and the alleged violators. While Lulla has been debarred from holding key positions in any listed company, Dwivedi cannot hold a position in any company other than Eros.

Sebi has observed that Eros’ 95 per cent of the revenue between the 2019-20 financial year (FY20) and FY22 have been from related parties.

“The transactions between the content advance entities’ and the ‘trade receivable entities’, raises the possibility that Eros was circulating funds whereby amounts transferred as content advances were subsequently recognised as revenue by routing it through trade receivables entities,” said Sebi.

The watchdog has also directed BSE to conduct forensic audits of three BSE listed companies namely, Thinkink Picturez, Mediaone Global Entertainment, and Spicy Entertainment Media. These companies have been prima-facie found to be part of the alleged fund diversion.