Cf Project Final

8/6/2019 Cf Project Final

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IMT NAGPUR

CORPORATE FINANCE-I

IPO 0F EROS INTERNATIONALIPO of Eros International opened on 17th September 2010.

The following document is a report on its prospectus covering

business of the company and the nature of industry, roles &

responsibilities of book running and lead managers, registrar

of the issue and bankers of the issues, book building process

and Qualified Institutional Placements.

SUBMITTED TO: PROFESSOR HANISH RAJPALSUBMITTED BY: GROUP 10

SANKHA DIP DATTA, 2010207

SHRAVAN KUMAR, 2010222

HARDIK SUTARIYA,2010272

SHILP JAIN, 2010214

SHRADHA SINGHANIA, 2010221

DATE: 7TH OCTOBER 2010


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THE ECONOMIC TIMES

MUMBAI, 21

ST

SEPTEMBER: Indian movie distributor Eros International Media Ltd's initialpublic offering to raise up to Rs 3.50 billion has been oversubscribed 26 times, stock

exchange data late on the last day of the offering showed on Tuesday.

Eros International, a unit of Eros International Plc , has set a price band of Rs 158 to 175 a

share for the offering. Enam Securities Private Ltd , Kotak Mahindra Capital Co Ltd,

Morgan Stanley India Co Private Ltd and RBS Equities (India) Ltd are lead book running

managers of the offering, which opened on Sept. 17.


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THE MEDIA AND ENTERTAINMENT INDUSTRY

The media and entertainment sector consists of the creation, aggregation and distribution of

content, products and services, news and information, advertising and entertainment through

various channels and platforms. The media and entertainment industry is one of the fastest growing

industries in the world. Ever evolving technologies, extensive use of media by corporate provide

both opportunities and challenges to the media and entertainment industry.

The Media And Entertainment industry is one of the most booming sectors in India. The global

entertainment industry is projected to reach US$ 1.8 trillion by 2015. Asian region expected to play a

central role in it, with India poised to contribute about US$ 200 billion i.e. a sizeable chunk of the

global industry................................................ ................................................................................

According to the annual edition of the FICCI, the size of the Indian Media And Entertainment

industry in the year 2006 was Rs 43,700 crore. The Indian Media And Entertainment industry grew

from Rs 35,300 crores to Rs 43,700 crores during the year 2005-06. The sector has immense

potential stored in it. The Indian Media And Entertainment industry is expected to grow at an annual

growth rate of 19% to reach Rs 83,740 crore by 2010.

Technology has changed the face of entertainment today. The ongoing change in technology,

products and distribution channels has created significant opportunities in the industry for growth

and development. The revolution in the information technology has resulted in the emergence of

cable wires, networks and most importantly the "Internet" which has revolutionized the Media and

Entertainment industry............................................................................ .......................................

The emergence of multiplexes and entertainment malls has redefined the entertainment industry.

This booming sector in India has also encouraged and many foreign investors who are making efforts

to tap the Indian market.

Growth Potential

The Indian entertainment and media sector is one of the fastest growing sectors in the economy,and its segments have all witnessed tremendous double digit growth in the last few years. The past 2

years were tumultuous, especially due to poor liquidity in the system for financing big projects for

the big and small screen.

According to a 2009 report jointly published by the Federation of Indian Chambers of Commerce and

Industry (FICCI) and KPMG, the media and entertainment industry in India is likely to grow at ~13 %

CAGR over 2009-13, touching US$ 20 billion by 2013.

The key reasons favouring the rapid growth of the Indian entertainment and media sector are the

demographic and economic factors buoying Indias development; with a majority of the population

below the age of 35, and increasing disposable income in Indian households, the average spend on

media and entertainment is likely to grow, according to the 2009 edition of PricewaterhouseCoopersreport. In addition, advances in technology, increasing penetration of communication mediums,

policy initiatives of the Indian government to increase FDI and the increased participation of private

media companies have been the other key drivers of the industry.


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Key Drivers for Entertainment Industry

y Economic growth of the country in general and rising disposable income levels in particulary Gradually liberalising attitude of the Governmenty

Greater interface with international companies

y Privatisation and growth of the radio industryy Advancement in technologyy Favourable regulatory initiativesy Liberalized foreign investment regime

In addition to domestic growth, the growing popularity of Indian content in the world market and

South Asia in particular, has encouraged Indian entertainment industry players to also venture

abroad to tap this booming segment; according to a report by CII-AT Kearney, the share ofinternational markets in total box office collections is estimated to increase from 8% in 2006 to 15%

in 2010.

Film Industry

Indian film industry stood at US$ 1.96 billion in 2009.The industry is projected to grow at a CAGR of 9

per cent and reach US$ 3 billion by 2014. Growth drivers for the sector would include expansion of

multiplex screens resulting in better realisations, an increase in the number of digital screens

facilitating wider releases, higher cable and satellite revenues, improving collections from the

overseas markets and ancillary revenue streams like DTH, digital downloads, etc, which are expected

to emerge in future.

What can be done for further advancement of media and entertainment industry?

Weak infrastructure is an area which needed to be looked at by the government. Efforts also had to

be made to improve the reportage of cable subscription in the country. Further, a clear roadmap

from the government on the digitalisation process would make a positive impact on the sector.

In order to enhance the technical aspects of the Indian film industry and to increase the trend of

animation and gaming, the ministry also had plans to set up a national centre for animation and

gaming industry at an initial investment of US$115,000.

"The infrastructure is not adequate and there is no support from the local government and from the

local police to control crowds, or any facility to obtain permissions and licenses. We need a much

longer lead time to shoot in India as a lot of time is lost in obtaining permissions and licenses," said

renowned filmmaker Yash Chopra.


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BUSINESS OF THE COMPANY:

Eros International Media Limited is a part of the Eros Group, which is a global player within the

Indian media and entertainment sector that has been in the business close to three decades. The

Eros Group has an extensive film library and is in the business of sourcing Indian and other film

content and exploiting it worldwide through its offices in India, UK, USA, UAE, Singapore, Australia,

the Isle of Man and Fiji across formats such as theatres, home entertainment, television and digital

new media. The net worth of the company as at June 30, 2010 is 17,846.74 lakhs.

Eros International Media Limited exclusively sources all Indian film content for the Eros Group and

exploits such content across formats within India, Nepal and Bhutan. It has various rights to over

1,000 films which include Hindi, Tamil and other regional language films and also own rights to

certain English language films for home entertainment distribution within India. The company

sources the content primarily through acquisitions from third parties and through co-productions

and, occasionally, through its own productions. It exploits and distributes end-to-end Indian film

content within India, Nepal and Bhutan through multiple formats such as theatres, home

entertainment, principally in the form of DVDs, VCDs and audio CDs, and television syndication,

which primarily involves licensing the broadcasting rights to major satellite television broadcastingchannels, cable television channels and terrestrial television channels and also via digital new media

such as mobile ring tones, wallpapers and downloads, Internet Protocol Television (IPTV), Direct

to Home (DTH) and other internet channels and we also license films to airlines for in-flight

viewing.

The International Rights for distribution of Indian film content for the entire world excluding India,

Nepal and Bhutan are licensed to the Eros International Group in accordance with the terms of the

Relationship Agreement with effect from October 1, 2009 between Eros International Media Limited

and its Promoters, Eros Worldwide and Eros plc. However, its Tamil language films are distributed

globally by Ayngaran and therefore arrangements for their distribution are not governed by the

Relationship Agreement.

The Company directly acquires all its Hindi and regional language films, other than Tamil language

films, while most of the Companys co-production and production activities are conducted through

its wholly-owned Subsidiary, Eros International Films, and the Company distributes all Indian Rights

of such films across formats as well as licensing the International Rights of such films to the Eros

International Group. The company occasionally also acquires films, in particular catalogue and

overseas-only rights, through its wholly-owned Subsidiary, Copsale.

In 2007, Eros International Media Limited set up a visual effects facility, EyeQube which is an almost

100.0% owned Subsidiary with Charles Darby, who has considerable expertise in visual effects as its

Creative Director. The company has entered into an agreement with Eros Music Publishing, which

has a strategic tie-up with EMI, for the administration and collection of music publishing royalties for

EMIs catalogues in India. Eros International Media Limited has also entered into a joint venture

agreement with Universal Music India in relation to a 50:50 joint venture through which it seeks todiscover and manage new acting and / or singing talent and provide them film and music platforms

to showcase their talent, leveraging on Eros International Media Limiteds and Universal Music

Indias respective strengths.


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BOOK RUNNING AND LEAD MANAGERS (BRLMs)

They are Merchant bankers appointed by the Company to undertake the Book Building

Process in respect of the Issue.

Roles & responsibilities of the BRLMs

y Enam Securities Private Limited,y Kotak Mahindra Capital Company Limited,y Morgan Stanley India Company Private Limited andy RBS Equities (India) Limited

S

No.

Activity ResponsibilityCoordinator

1

Capital Structuring with relative components and

formalities such as type of instruments., etc.

Enam, Kotak,

Morgan Stanley,

RBS

Enam

2

Due-diligence of the company including its

operations/management/business plans/legal,

etc. Drafting and design of the Draft Red Herring

Prospectus, RHP including memorandum

containing salient features of the Prospectus. The

Book Running Lead Managers shall ensure

compliance with stipulated requirements and

completion of prescribed formalities with the

Stock Exchanges, the RoC and SEBI, including

finalisation of Prospectus and the RoC filing.

Enam, Kotak,

Morgan Stanley,

RBS

Enam

3Drafting and approving all statutory

advertisements

Enam, Kotak,

Morgan Stanley,

RBS

Enam

4

Drafting and approving non-statutory

advertisements including corporate

advertisements

Enam, Kotak,

Morgan Stanley,

RBS

Morgan

Stanley

5 Appointment of Printer(s)

Enam, Kotak,

Morgan Stanley,

RBS

Enam

6

Appointment of Advertising Agency Enam, Kotak,

Morgan Stanley,

RBS

RBS

7 Appointment of Bankers to the Issue

Enam, Kotak,

Morgan Stanley,

RBS

Kotak

8 Appointment of Registrar to the Issue

Enam, Kotak,

Morgan Stanley,

RBS

Kotak


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9

Non-Institutional and Retail Marketing of the

Issue, which will cover, inter alia,

Formulating marketing strategies, preparation

of publicity budget

Finalizing Media, marketing & public relations

strategy

Finalizing centers for holding conferences for

brokers, etc.

Follow-up on distribution of publicity and Issuer

material including application form, prospectus

and deciding on the quantum of the Issue

material

Finalizing collection centres

Enam, Kotak,

Morgan Stanley,

RBS

Kotak

10

International Institutional marketing

International Institutional marketing of the Issue,

which will cover, inter alia, marketing in the

United States and includes:

Institutional marketing strategy

Finalizing the list and division of investors for

one to one meetings, and

Finalizing road show schedule and investor

meeting schedules

Preparing road show presentation

Enam, Kotak,Morgan Stanley,

RBS

Morgan

Stanley

11 Preparing frequently asked question

Enam, Kotak,

Morgan Stanley,

RBS

RBS

12

Domestic Institutional marketing

Domestic Institutional marketing of the Issue,

which will cover, inter alia, Institutional marketing

strategy

Finalizing the list and division of investors for one

to one meetings, and Finalizing road show

schedule and investor meeting schedules

Enam, Kotak,

Morgan Stanley,

RBS

Enam

13

Co-ordination with Stock Exchanges for Book

Building Process software, bidding terminals and

mock trading

Enam, Kotak,

Morgan Stanley,

RBS

RBS

14

Finalizing the list and division of investors for one

to one meetings, and Finalizing road show

schedule and investor meeting schedules

Enam, Kotak,

Morgan Stanley,

RBS

RBS


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15

Post bidding activities including management of

Escrow Accounts, co-ordinate non-institutional

allocation, coordination with Registrar and Banks,

intimation of allocation and dispatch of refund to

Bidders, etc. The post issue activities of the issue

will involve essential follow up steps, which

include finalisation of trading and dealing

instruments and dispatch of certificates and

demat delivery of shares, with the various

agencies connected with the work such as

Registrar to the Issue, Banker to the Issue and the

bank handling refund business. The Book Running

Lead Managers shall be responsible for ensuring

that these agencies fulfil their functions and

enable them to discharge the responsibility

through suitable agreements with the Issuer

Company.

Enam, Kotak,

Morgan Stanley,

RBS

Kotak

Registrar to the issue

The registrar is the keeper and retainer of the records for a period of three years from the

last date of dispatch of the letters of Allotment, or refund orders, demat credit or where

refunds are being made electronically, giving of refund instructions to the clearing system.

All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full

details such as name, address of the applicant, number of Equity Shares applied for, amount

paid on application and the bank branch or collection centre where the application was

submitted

Roles and responsibilities of the registrar

y Processing of applicationsy Data entryy Printing of Confirmation of Alloca tion Notes and refund ordersy Preparation of refund data on magnetic tapey Printing of bulk mailing register

The registrar to the issue is

Link Intime India Private Limited

C-13, Pannalal Silk Mills Compound,L.B.S Marg, Bhandup (West)

Mumbai 400 078

Tel: +91 22 2596 0320


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Bankers to the issue

Bankers to the Issue / Escrow Collection Banks , registered with the SEBI ,hold the

responsibilities of

y Clearing the bids and hosting the Escrow Accounts/RefundAccounts ie: with whom the accounts will be opened

y Public Issue Accounts are opened with the Bankers to theIssue to receive monies from the Escrow Account on the

Designated Date

Following Banks have been chosen as the Bankers to the issue

y Yes Bank Limitedy Standard Chartered Banky HDFC Bank Limitedy The HongKong and Shanghai Banking Corporation Limitedy Punjab National Banky The Royal Bank of Scotland N.V.y ICICI Bank Limitedy Kotak Mahindra Bank Limited


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BOOK BUILDING PROCEDURE:

Merchant bankers appointed by the Company to undertake the Book Building Process in respect of

the Issue, Enam Securities Private Limited, Kotak Mahindra Capital Company Limited, Morgan

Stanley India Company Private Limited and RBS Equities (India) Limited

Book Building Process

The Book Building Process refers to the process of collection of Bids, on the basis of the Red HerringProspectus, within the Price Band. The Issue Price is finalised after the Bid Closing Date.

In terms of Rule 19 (2) (b) of the SCRR (which was in existence as of the date of filing of the Draft Red

Herring Prospectus), this is an Issue for less than 25.0% of the postIssue capital, therefore, the Issue

is being made through the Book Building Process wherein at least 60.0% of the Issue will be

allocated to QIBs on a proportionate basis. If at least 60.0% of the Issue cannot be allocated to QIBs,

the entire application money will be refunded forthwith. Further, not less than 10.0% and 30.0% of

the Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and

Retail Bidders, respectively, subject to valid Bids being received at or above the Issue Price. Under-

subscription, if any, in any category, except the QIB Portion, would be allowed to be met with spill-

over from any other category or combination of categories at the discretion of our Company, in

consultation with the BRLMs and the Designated Stock Exchange. Our Company may allocate up to

30.0% of the QIB portion to Anchor Investors on a discretionary basis, provided that one-third of theAnchor Investor Portion shall be available for allocation to Mutual Funds. Further, 5.0% of the QIB

Portion (excluding Anchor investor Portion) shall be available for allocation to Mutual Funds, subject

to valid bids being received from them at or above the Issue Price.

QIBs Bidders cannot withdraw their Bids after the Bid Closing Date and Anchor Investors

cannot withdraw their Bids after the Anchor Investor Bidding Date. The Company will

comply with the ICDR Regulations and any other directions issued by SEBI for this Issue. In

this regard, we have appointed the BRLMs to manage the Issue and procure subscriptions

to the Issue.

Illustration of Book Building and Price Discovery Process (Investors are advised that this

example is solely for illustrative purposes, excludes Bidding for the Anchor Investor Portion,

and is not specific to the Issue) Bidders can bid at any price within the Price Band. Forinstance, assume a price band of Rs. 20 to Rs. 24 per equity share, issue size of 3,000 equity

shares and receipt of five bids from bidders, details of which are shown in the table below.

A graphical representation of the consolidated demand and price would be made available

at the bidding centres during the bidding period.


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QUALIFIED INSTITUTIONAL PLACEMENTS (QIP)

Prior to the innovation of the qualified institutional placement, there was concern from Indian

market regulators and authorities that Indian companies were accessinginternational funding via

issuing securities, such as American depository receipts (ADRs), in outside markets. This was seen as

an undesirable export of the domestic equity market, so the QIP guidelines were introduced to

encourage Indian companies to raise funds domestically instead of tapping overseas markets.Definitions:

y A designation of a securities issue given by the Securities and Exchange Board of India (SEBI)that allows an Indian-listed company to raise capital from its domestic markets without the

need to submit any pre-issue filings to market regulators. The SEBI instituted the guidelines

for this relatively new Indian financing avenue on May 8, 2006.

y It is a capital raising tool, primarily used in India, whereby a listed company can issue equityshares, fully and partly convertible debentures, or any securities other than warrants which

are convertible to equity shares to a Qualified Institutional Buyer (QIB).

Provision for QIP in Eros IPO

In terms of Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957, as amended (the

"SCRR"), this is an Issue for less than 25.0% of the post Issue paid-up equity capital, therefore, the

Issue is being made through the Book Building Process wherein at least 60.0% of the Issue will be

allocated to Qualified Institutional Buyers (QIBs) on a proportionate basis (such portion, the

QIB Portion), provided that our Company may allocate up to 30.0% of the QIB Portion to Anchor

Investors, on a discretionary basis (the Anchor Investor Portion). Further, 5.0% of the QIB

Portion (excluding the Anchor Investor Portion) will be available for allocation on a proportionate

basis to Mutual Funds only. The remainder will be available for allocation on a proportionate basis to

QIBs and Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. If

at least 60.0% of the Issue cannot be allocated to QIBs, the entire application money will be

refunded forthwith. Further, not less than 10.0% of the Issue will be available for allocation on a

proportionate basis to Non-Institutional Bidders and not less than 30.0% of the Issue will be

available for allocation on a proportionate basis to Retail Bidders, subject to valid Bids being

received at or above the Issue Price. Bidders (other than Anchor Investors) may participate in the

Issue through the ASBA process by providing the details of their respective bank accounts in which

the corresponding Bid amounts will be blocked by Self Certified Syndicate Banks (SCSBs).

Qualified Institutional Buyer (QIB)

(i) Mutual funds, venture capital funds, or foreign venture capital investors registered with the SEBI;

(ii) FIIs and their sub-accounts registered with the SEBI, other than a sub-account which is a foreign

corporate or foreign individual;

(iii) Public financial institutions as defined in Section 4A of the Companies Act;

(iv) Scheduled commercial banks;

(v) Multilateral and bilateral development financial institutions;

(vi) State industrial development corporations;

Anchor Investor: Qualified Institutional Buyer applying under the Anchor Investor category, with a

minimum Bid of Rs. 1,000 lakhs

Documents

Cf Project Final