Having won a last-minute reprieve from creditors, Bollywood production and distribution company Eros International Plc downplays talk of a liquidity crisis. The company is also switching to a new strategy which will make “content the king” but won’t overpay for content, group chief executive officer Jyoti Deshpande said in an interview.
Eros said this week that it had executed documentation with existing lenders of its $85 million revolving credit facility (RCF) to extend the maturity of the RCF by six months from 1 April to 30 September. The RCF had matured on 31 March. The company is in advanced stages of executing multiple long-term refinancing options to replace the RCF, it said in a statement last week.
“There is absolutely no question of a liquidity crisis,” Deshpande said. “We’ve got this extension, plus we’re doing longer-term re-financing and we’ve got $115 million of cash. All our investor bases are rock-solid and they continue to stand by the company.” Last month, Standard and Poor’s (S&P) lowered its long-term corporate credit rating on Eros International to “B-” from “B+” and placed it on creditwatch with negative implications.
The New York-based credit assessor, which later withdrew its ratings on Eros on a request by the studio, had justified the downgrade by citing the weak liquidity at Eros given the impending maturity of the RCF.
Mumbai-based Eros scrapped a bond sale earlier in March that would have allowed it to repay the RCF.
Eros has been beset by trouble since 2015 when a section of investors in its US-listed unit filed a class action law suit accusing the Sunil Lulla-owned company of making misleading statements or concealing information that affected its share price. That resulted in a 45% crash in its New York Stock Exchange-listed holding company in October 2015 and a 20% fall in the Indian unit’s stock.
More recently, the studio backed out of two high-profile and expensive projects—Sanjay Leela Bhansali’s Padmavati, which is currently being shot, and Ajay Devgn-starrer Shivaay (which released in October 2016). The release of its Ram Gopal Varma-directed political thriller Sarkar 3 has been postponed to May from April—a move formally attributed to a delay in post-production work.
Padmavati, Deshpande said, was Eros’s idea, something it wanted to do as part of an Eros-Bhansali-Ranveer Singh-Deepika Padukone trilogy after Goliyon Ki Rasleela Ram-Leela and Bajirao Mastani.
“We did not do that project because we couldn’t really get over why it had to be more expensive than Bajirao Mastani when it was not to be released on an extraordinary holiday date. Besides, there is no romance between Ranveer and Deepika (in the film). In the green-lighting scheme, it didn’t justify the map for a higher budget film,” Deshpande added.
“Shivaay again had budget overruns which we did not want to fund. This goes with the new strategy we want to adopt where we think content is king, you just don’t have to overpay for content. Nor is talent shock-proof because now you can have a big star in a movie and it’s not necessarily a guaranteed success,” she said.
To be sure, Eros is not the only studio in Bollywood beset by bad news. Walt Disney Co. has decided to pull the plug on its Hindi film production unit despite the massive success of its last release, Aamir Khan’s Dangal, which collected close to Rs400 crore at the Indian box office alone. The release of its next and last Bollywood film Jagga Jasoos, starring Ranbir Kapoor, has been pushed to July from April.
An industry executive who declined to be named said the studio had also made efforts to sell the over-budget yet incomplete film in the market for Rs125 crore.
After a host of disasters like A Flying Jatt and Great Grand Masti, Balaji Motion Pictures has decided to go slow with its Hindi film slate and has only one major film on the floors—Arjun Kapoor and Shraddha Kapoor-starrer Half Girlfriend. Viacom18 Motion Pictures has also witnessed a setback of late with the debacle of its romantic saga Rangoon, which made a loss of about Rs40-45 crore, and the ongoing trouble with Padmavati, which has faced protests from Hindu activists.
Disney, Balaji and Viacom declined to comment for this story. The film exhibition business declined in 2016 with blockbusters like Dangal and Sultan standing out amid a raft of box-office duds. Domestic theatrical releases contributed Rs9,980 crore to movie revenue in 2016, down from Rs10,140 crore in 2015, according to the Indian Media and Entertainment Report 2017 released by the Federation of Indian Chambers of Commerce and Industry and KPMG in March.
The number of movies which were able to record a positive return on investment declined from 27 in 2014 to 18 in 2016.
“The scenario for any corporate is not really very rosy at the moment,” says trade analyst Komal Nahta. “It’s not like people are tired of cinemas but the films we were making were not up to the mark and nobody is going to spend Rs200-300 for a bad film.”
Between 2014-15, Eros made considerable losses on films like Dishkiyaaoon, Kochadaiiyaan, Lingaa, Lekar Hum Deewana Dil, Happy Ending, Action Jackson, Tevar and Shamitabh only partly offset by profit-makers like Bajrangi Bhaijaan, Tanu Weds Manu Returns and Bajirao Mastani. Disney had to contend with disasters like Fitoor and Mohenjo Daro alongside the smash-hit Dangal last year. Viacom barely had any releases in 2016 and placed a losing bet on Rangoon.
“Cinema is art but there is a lot of commerce involved in it so you have to understand that equation. Films like Neerja and Kapoor & Sons were lovely, differentiated content but the real blockbusters have had universal subjects. Dangal and Sultan, for example, were both rooted in Indian soil,” said film distributor and exhibitor Aditya Chowksey.
The need of the hour is to make more mass-based entertainers that have a pan-India appeal rather than just urban or multiplex appeal, he said.