MUMBAI:  Leading Indian film studio Eros International Media is fighting back to save its image and reputation. The New York and Bombay stock exchange listed company has hired the US law firm Skadden, Arps, Slate, and Meagher & Flom LLP to conduct an independent internal review and also to advise it on related matters to anonymous allegations which led to a steep drop in its share price.

The Eros International share has gone into free fall over the past couple of weeks plummeting around 50 per cent to hit a low of Rs 250.50 in intra-day trading on 2 November.

The downward run in the Eros script gathered momentumon 2 November following the revelation that three  investor rights law firms in the US Steinmeyer Law, Rosen Law Firm and Bronstein, Gewirtz and Grossman were investigating whether Eros International Media’s parent Eros International plc  and certain of its officers or directors have violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

The Eros stock had anyone been shedding weight ever since reports appeared that it had allegedly resorted to financial misreporting. This was denied by Eros consistently but things got worse after Wells Fargo analysts fingered it about its rising trade receivables from UAE and others. Despite the company’s statement and explanations, the Eros stock had slimmed down to Rs 278 by end of trading on Friday last week as compared to the shares quote of Rs 438 on 23 October.

The Bombay stock exchange had earlier today asked it to clarify to reports about it being investigated by the three law firms. To this, Eros  had clarified that it was not being investigated; rather it was its parent Eros International plc.

Late in the evening, the company issued a statement in which it stated that "there has been a vicious campaign to damage the credibility of Eros International by spreading false rumors and misinformation regarding its business with an objective to create panic amongst the investor community. No new facts about the Company have come to light since the filing of the FY2015 financials or its Q1 FY2016 financials at which time the market sentiment was extremely positive.”

It further added: “We are confident in our business fundamentals and we will be announcing our Q2 FY2016 results in the first half of November. Our credibility and reputation are of paramount importance.” Hence, it had hired the law firm to do an internal review.

Further Eros addressed the principal allegations related to Increase in receivables, Amortization of content, Subsidiary financials, Capex increase, free cash flow and increasing debt,Auditors, Related party transactions and compensation packages of family members, The Eros Library, Eros Now.

Said Eros in its response:

-- The Company’s fundamentals are strong with successful track record spanning decades. The Company may be two years old on NYSE but its business is not a start-up.

--- The Company has a dominant market share of the Indian box office worldwide. 50 per cent of the top 15 grossing films in Bollywod were Eros films.Bajrangi Bhaijaan and Tanu Weds Manu Returns earned $30 million and $65 million respectively and were in the top three grossing list.

--Eros’ unique library of over 3,000 films is a key competitive advantage.

---The Company’s unparalleled global distribution network allows it  to distribute its  films in over 50 different countries in over 25 different languages.

---Eros’ entertainment platform Eros Now is an attractive consumer proposition with already 30 million registered users worldwide in the backdrop of 860 million plus mobile subscribers and growing 4G and broadband user base in India.

---The Company’s strong under-levered balance sheet ensures that it well capitalized at all times.

Eros’ statement concluded:  “We will survive this attack and emerge a winner in the long run for many keys reasons.”