Mukesh Ambani-led Reliance Industries Ltd. will acquire a near 5 percent equity stake in the U.S. listed film entertainment company Eros International Plc. to jointly produce and consolidate content across the country.
As per the terms of the deal announced in a press statement, Reliance Industrial Investments and Holdings Ltd., RIL’s wholly-owned subsidiary will subscribe 32.5 lakh shares at $15 apiece, an 18 percent premium to Friday’s closing price. Post the announcement, the shares of Eros International Plc closed 5.4 percent higher on the New York Stock Exchange pending announcement. The total acquisition amount would aggregate $48.75 million, said RIL.
Following the deal, RIL and Eros International Media Ltd., the Indian subsidiary of Eros, will equally invest up to Rs 1,000 crore in total to produce and buy Indian films and digital content in various languages.
Commenting on the news, RIL chairman Mukesh Ambani said, “We are pleased to join hands with Eros, as it will bring further synergies into our plans, making for a win-win partnership.”
The NYSE-listed Eros International Plc acquires, co-produces and distributes Indian films across platforms. It has a movie library of over 3,000 films in Hindi, Tamil and other Indian regional languages. In the fiscal year ended March 2017 Eros reported a net income of $11.5 million on a revenue of $253 million. India contributes 51 percent to the company’s revenue and the theatrical business 40 percent.
Its Indian subsidiary reported Rs 135 crore in net sales from operations and Rs 18 crore in net profit in the quarter ended December 2018. It has produced many successful films including, 3 Idiots, Zindagi Na Milegi Dobara, Rockstar, English Vinglish, among others.
Jyoti Deshpande, group chief executive officer of Eros, will step down from her current position to head Reliance’s media and entertainment arm as the President of the Chairman’s office, the statement added.
Deshpande will be entrusted to lead RIL’s initiatives to “organically build and grow” content in areas such as broadcasting, films, sports, animation, etc. She would also be responsible for integrating content at RIL’s existing media investments Viacom 18, in which it acquired majority control recently, and Balaji Telefilms “with a view to build, scale and consolidate the fragmented $20 billion Indian media and entertainment sector”.
The investment in Eros marks RIL’s third big effort to create a footprint in the entertainment and news content industry after the acquisition of Network 18 Media & Investment Ltd. in 2014 and last year’s purchase of a 24.9 percent stake in movie and television show producer Balaji Telefilms Ltd. RIL now has control of and or investments in three big film studios in the country.
The content play aligns with the company’s telecom services business - Jio, that it commercially launched last year. Jio turned profitable in the quarter ended December 2017 and currently has a customer market share of 13.7 percent versus industry leader Bharti Airtel Ltd.’s 24.9 percent.