IMT NAGPUR

CORPORATE FINANCE-I

IPO 0F EROS INTERNATIONAL

IPO 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 RAJPAL SUBMITTED BY: GROUP 10 SANKHA DIP DATTA, 2010207 SHRAVAN KUMAR, 2010222 HARDIK SUTARIYA,2010272 SHILP JAIN, 2010214 SHRADHA SINGHANIA, 2010221 DATE: 7TH OCTOBER 2010

THE ECONOMIC TIMES MUMBAI, 21 ST SEPTEMBER: Indian movie distributor Eros International Media Ltd's initial public 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.

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 entertain ment 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 India s development; with a majority of the population below the age of 35, and increasing disposable income in Indian households, the average spend o n media and entertainment is likely to grow, according to the 2009 edition of PricewaterhouseCoopers report. 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.

Key Drivers for Entertainment Industry

y y y y y y y

Economic growth of the country in general and rising disposable income levels in particular Gradually liberalising attitude of the Government Greater interface with international companies Privatisation and growth of the radio industry Advancement in technology Favourable regulatory initiatives 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 CIIAT Kearney, the share of international 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 [Link] 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.

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 broadcasting channels, 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 Company s co-production and production activities are conducte through d 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 EMI s 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 to discover and manage new acting and / or singing talent and provide them film and music platforms to showcase their talent, leveraging on Eros International Media Limited s and Universal Music India s respective strengths.

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 y y y S No. 1 Enam Securities Private Limited, Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited and RBS Equities (India) Limited Activity Capital Structuring with relative components and formalities such as type of instruments., etc. Responsibility Coordinator Enam

Enam, Kotak, Morgan Stanley, RBS Due-diligence of the company including its Enam, Kotak, operations/management/business plans/legal, Morgan Stanley, etc. Drafting and design of the Draft Red Herring RBS Prospectus, RHP including memorandum containing salient features of the Prospectus. The Book Running Lead Managers shal l 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, Drafting and approving all statutory Morgan Stanley, advertisements RBS Drafting and approving non-statutory Enam, Kotak, advertisements including corporate Morgan Stanley, advertisements RBS Enam, Kotak, Appointment of Printer(s) Morgan Stanley, RBS Appointment of Advertising Agency Enam, Kotak, Morgan Stanley, RBS Enam, Kotak, Appointment of Bankers to the Issue Morgan Stanley, RBS Enam, Kotak, Morgan Stanley, Appointment of Registrar to the Issue RBS

Enam

Enam Morgan Stanley

Enam

RBS

Kotak

Kotak

10

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 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 Preparing frequently asked question 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 Co-ordination with Stock Exchanges for Book Building Process software, bidding terminals and mock trading 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, Kotak RBS

Enam, Kotak, Morgan Morgan Stanley, Stanley RBS

11

Enam, Kotak, Morgan Stanley, RBS RBS

12

Enam, Kotak, Morgan Stanley, Enam RBS

13

14

Enam, Kotak, Morgan Stanley, RBS RBS Enam, Kotak, Morgan Stanley, RBS RBS

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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 Enam, Kotak, demat delivery of shares, with the various Morgan Stanley, Kotak agencies connected with the work such as RBS 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.

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, n umber 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 y y y y Processing of applications Data entry Printing of Confirmation of Alloca tion Notes and refund orders Preparation of refund data on magnetic tape 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

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/Refund Accounts ie: with whom the accounts will be o pened Public Issue Accounts are opened with the Bankers to the Issue to receive monies from the Escrow Account on the Designated Date

Following Banks have been chosen as the Bankers to the issue y y y y y y y y Yes Bank Limited Standard Chartered Bank HDFC Bank Limited The HongKong and Shanghai Banking Corporation Limited Punjab National Bank The Royal Bank of Scotland N.V. ICICI Bank Limited Kotak Mahindra Bank Limited

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 Herring Prospectus, 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 post Issue 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. Undersubscription, if any, in any category, except the QIB Portion, would be allowed to be met with spillover 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 the Anchor 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. For instance, 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.

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 accessing international 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. It is a capital raising tool, primarily used in India, whereby a listed company can issue equity shares, 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