Speculative media reports caused Wells Fargo downgrade: Eros

BENGALURU: The Bombay Stock Exchange (BSE) listed Eros International Media lost nearly 20 per cent of its market value on Monday on the back of American multinational banking and financial services holding company Wells Fargo downgrading its parent company Eros International Plc, which is listed on the New York Stock Exchange (NYSE).

Reacting to a notice from the bourses about the downgrade by Wells Fargo, Eros International Media (Eros) held speculative media reports responsible.

Eros said that analysts downgrade or upgrade stocks regularly and ‘as such that is not a cause for much concern’. Also, the company has responded by pointing out in its reply that Wells Fargo did not revise their own earnings estimate for the quarter or the year end and their price target is $22, well above the price the stock was trading the date it was published. Eros claims in its response that another analyst from Macquire-Tim Nollen, published a very positive report and maintained outperform rating with a $25 target, on the same day as the Wells Fargo report that was published on 23 October, 2015.

Eros’ response to the bourses goes onto assure its shareholders that the company’s fundamentals are strong and there have been no material changes in the previous announced fundamentals. “We continue to be market leaders in the Indian film industry with a dominant share in the global Indian box office. Our library of over 2000 films continues to be of a unique competitive advantage, which we monetise in conjunction with our new release slate of 65-70 films comprising Hindi and regional languages each year, across theatrical, television and digital and ancillary distribution platforms which constitute our diversified revenue streams,” the company said.

The company added that its Q1 results have been strong and nothing materially has changed since then, in fact a further string of hits by the company such as Bajrangi Bhaijaan in Q2. Eros’ Q2 results, which are to be announced towards mid-November, will be strong and will be another opportunity for the company to answer further questions regarding all aspects of its operations and finances during that earnings call.

The response to the BSE and the National Stock Exchange (NSE) has been signed by Eros company secretary and compliance officer Dimple Mehta.

At the end of the day’s trade on the BSE, Eros International Media’s stock was down 19.11 per cent to close at Rs 354.40 as compared its Friday close of Rs 438.10. On Monday, the stock opened at Rs 418.80 but saw a drop as word of the Wells Fargo downgrade spread. The stock reached an intra-day low of Rs 351.

On NYSE, shares of the parent company Eros International Plc, which has a market cap of $842.9 million, too have been losing ground over the last one week. As of 23 October, the company's shares were down 45 per cent to $14.65 in one week on NYSE.

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