Summary
- EROS International is an entertainment company which operates in India and around the Asia-Pacific region, which has seen serious growth in recent years.
- With a 138% jump in paying registered users from last year, it's gaining market share quickly and expanding its offerings.
- Not only is the company expecting sales and profits to grow meaningfully in the coming years, it has previously announced its intent to seek strategic alternatives, which may include a buyout.
- Even in a rather competitive market, EROS is well-positioned to gain from the rise of the Indian economy and the expansion of the use of internet in the region.
EROS International (EROS) is an entertainment company which offers several different services in the movie, theater and online streaming industries in India and the Asia-Pacific region.
The company has enjoyed the rising economic tide in the region and in the world's second-most populous nation as the middle class expands and as more of the younger generations and those with kids get faster internet access as more 3G and 4G infrastructure is assembled around the country. This has spurred a lot of online services, which includes online video streaming services like Netflix (NFLX) but with the unique Indian film options which are beloved in the country.
The company has managed to increase paying subscribers by 138% in 2019 and has 18.8 million paying customers beyond its 155 million registered users who can enjoy some free or limited content. As the industry is set to grow at an overall CAGR of 13.2%, the company's revenue growth rate shows it is exceeding this projection and capturing market share from TV stations and the like, similarly to what Netflix and other streaming services are doing to cable news and other TV stations in the United States.
All this being said, the company has also looked for strategic alternatives, which means it may be looking to sell itself to a larger entertainment service provider in the region or globally, which presents a speculative nature to investing in the stock beyond its solid growth in a fast-growing market.
The Indian Entertainment Industry
The overall media and entertainment industry in India is set to grow at a CAGR of 13.2% from 2018 to 2023, growing from $22 billion to $40 billion, representing a fast-paced growth environment, as most other regions are already pretty saturated, perhaps excluding China. The Indian film industry, a sub-industry which EROS participates in, is set to grow at a slightly slower 7.6% CAGR throughout the same time period.
The main driver for these high-growth industries are the changing lifestyles of the younger generations in the region and rising incomes, which allow for more discretionary spending on services rather than only necessities. This is driving products like smartphones and computers and services similar to those in the United States, like streaming from Netflix and online shopping from Amazon (AMZN) and others.
EROS as a Business
EROS offers EROS Now, which offers on-demand streaming and online video watching, which include classic films and theater offerings and its own original content. The company created 72 films in 2019, up from 24 in 2018.
The EROS Now platform, categorized under its digital and ancillary segment, accounts for 46% of the company's sales, with other segments accounting for the rest, like its theatrical and television syndicated businesses. As revenues are expected to increase 14.6% in the coming 24 months, it's apparent not only that the company is doing well when it focuses on these types of services, but that it's gaining market share, outpacing the overall market expected growth rate.
