Eros International Shares Plunge 20% as SEBI Bars Company from Market

Eros International Media witnessed a significant drop of 20% in its shares on the Bombay Stock Exchange (BSE) following the decision by the Securities and Exchange Board of India (SEBI) to prohibit the company, along with Eros Worldwide and Eros Digital, from participating in the securities market. Additionally, SEBI imposed a ban on Sunil Arjan Lulla, the Managing Director of Eros Group, from accessing the markets.

SEBI's interim order was issued after a thorough examination of Eros International's financial statements, which uncovered indications of inflated financial records that did not accurately reflect the company's true financial position. In response, Eros International announced that it would seek legal counsel and take appropriate actions based on the advice received.

As part of the order, SEBI imposed restrictions on Sunil Arjan Lulla and CEO Pradeep Kumar Dwivedi, preventing them from holding directorial positions in listed companies other than Eros International. To investigate the company's financial records, SEBI appointed a forensic auditor.

During the fiscal year 2019-20, Eros International Media allocated funds amounting to ₹1,553 crores for impairment on various items such as "content advances" "film rights," and specific goodwill. Additionally, the company suffered a loss of ₹519 crores by writing off trade receivables during the same period.

As per the SEBI order, Eros International seemed to have artificially boosted its financial records by incorporating revenue that was anticipated from possibly unethical entities. The company engaged in a practice where it facilitated transactions with these entities, allowing them to make payments that were falsely recognized as revenue. The order emphasized that the earnings derived from these entities formed a significant portion of Eros International's overall earnings.