SEBI to probe into Eros International Media Reported Impairment of Rs 1,553.52 Cr on Consolidated Basis

SEBI to probe into Eros International Media Reported Impairment of Rs 1,553.52 Cr on Consolidated Basis

An investigation has been launched into the financial statements of Eros International Media Ltd (Eros) for the FY 18-19 to FY 20-21 by the Securities and Exchange Board of India (SEBI). The investigation is on the basis that the financial statements are covering money transactions and agreements entered into by the company with at least 45 entities.

The market regulator has asked the company to submit details of the methodology used to determine the impairment of some of the films which were recognized as intangible assets in the company's annual report.

According to SEBI, there is reasonable ground to believe that the financial statements of Eros were prepared in a manner detrimental to investors or the securities market. It has sought details of impairment amount to as much as Rs1,278.50 crore reported by the company on a stand-alone basis and Rs1,553.52 crore reported on a consolidated basis.

SEBI has asked Eros to provide details of impairment tests done for FY16-17, FY17-18, FY18-19, FY19-20 and FY20-21.

Further, the market regulator has sought details about the impairment of Rs. 208.14 crore for rights of films like R...Rajkumar, Omkara, Lingaa, Housefull 3, Goliyon ki Rasleela- Ram-Leela, Bajirao Mastani, Dishoom and Bajrangi Bhaijaan. SEBI also wants to know how the COVID-19 pandemic has affected film rights and the methodology used for valuation at the time of recognising these movies as intangible assets.

SEBI noted that Eros had provided a report on impairment analysis as of 31 March 2020 done by Duff & Phelps to National Stock Exchange (NSE). The market regulator asked the company to provide copies of its internal discussion, memos, meeting notes and minutes of the board meeting for approving the appointment of Duff & Phelps as a valuer. SEBI also asked Eros to provide copies of the minutes of all meetings of the audit committee during FY18-19 and FY19-20.

SEBI found that there were 18 debtors of Eros whose receivables were written off by the company. It asked the company to provide details of efforts taken to recover the due amount and legal action, if any, against these 18 entities.

"It is noted that advances of Rs. 2.11 crore and Rs 5.51 crore have also been impaired. These advances were with Sanjay Leela Bhansali and Sohail Khan Productions. In this regard, you are advised to provide copies of agreements and details of efforts taken to recover the amount..," SEBI says.

Earlier this month, SEBI sent summons to all entities involved in this matter. The market regulator has asked these entities to submit before the investigation authority documents or information related with their agreement to Eros.