Bankers concerned about post-restructuring performance of Eros International

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As theatre occupancy remains low across India and the entertainment industry struggles to get back on its feet, bankers are starting to worry about Eros International Media’s ability to meet its debt obligations. The film production and distribution company are among those whose loan accounts were restructured in 2021.

According to bankers FE spoke to, the calculations made at the time of invocation of restructuring in December 2020 may not have accounted for the subsequent disruptions caused by the second wave of the pandemic. “It now looks like the industry is going to take much longer to recover as theatre occupancy remains well below 50%. I don’t think the restructuring plan for Eros had accounted for this kind of scenario,” said a senior banker.

In response to a request for comment, a spokesperson for Eros International said, “We do not comment on speculative stories. We reaffirm that we are current on all repayments of our debt obligations to our banking lenders and enjoy excellent credibility with them on our financial and operational performance.

Notwithstanding the challenges posed by the pandemic to many industries, including the media & entertainment industry, we have one of the largest film libraries in the industry and remain focused on premium content creation and global distribution through our Studio, Eros Motion Pictures, and Streaming OTT service, Eros Now.”

The company is yet to move into the special mention accounts (SMA) category, which is the name for accounts with an overdue of between one and 90 days, the banker said. As per Eros’s annual report for FY21, the company has defaulted on principal and interest worth Rs 143.19 crore between the date of invocation of restructuring on December 24, 2020, and March 31, 2021. As of March 31, 2021, the net debt of the company stood at Rs 566.37 crore. Lenders to Eros include Indian Overseas Bank, Punjab National Bank, Union Bank of India, IDBI Bank, Bank of Baroda and State Bank of India.

One-time restructuring (OTR) under the resolution framework for Covid-19 related stress was invoked by the company and the consortium bankers on December 24, 2020. The resolution plan was implemented by Eros’s bankers on June 22, 2021, with retrospective effect from January 1, 2021.

The notes to accounts accompanying Eros’s financial results for Q3FY22 stated that the economic uncertainty created by Covid-19 resulted in significant business disruptions for film distributors and broadcasting companies. “As of December 31, 2021, the current liabilities of the Company exceed current assets by `157.67 crore. Material uncertainties exist that may cast significant doubt on the Company’s ability to continue as a going concern,” the notes to accounts said. The company’s auditors, too, flagged off these uncertainties in their report on the financial results.

Analysts watching the film exhibition industry said that a recovery in operations is expected in 2023. Nitesh Jain, director, of Crisil Ratings, said that the first two waves of the pandemic had been a complete washout for the Indian cinema exhibition industry. “The impact of the third wave was milder and limited up to the first half of February. Thereafter, healthy rebound in occupancy is seen aided by an exhibition of strong content,” Jain said. Occupancy is estimated to have improved to over 20% in March and is likely to cross 25% in the current quarter, he said.

Eros said that it has taken various steps aimed at augmenting liquidity including restructuring the borrowing facilities, conserving cash, and maximising revenue through content monetisation on new partner platforms, including monetising its film/music library by way of long-term contracts.