SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 20-F

Commission file number 001-36176

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

At March 31, 2020, 127,116,702 ‘A’ ordinary shares and 19,899,085 ‘B’ ordinary shares, each at par value GBP 0.30 per share, were issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.☐ Yes   ☑ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.☐ Yes   ☑ No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.☑ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).☑ Yes   ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: ☐ Item 17   ☐ Item 18

If this report is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).☐ Yes   ☑ No

TABLE OF CONTENTS

EROS INTERNATIONAL PLC

Unless otherwise indicated or required by the context, as used in this annual report, the terms “Eros,” “we,” “us,”, “the Group”, “our” and the “Company” refer to Eros International Plc and all its subsidiaries that are consolidated under International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board (IASB). Our fiscal year ends on March 31 of each year. When we refer to a fiscal year, such as fiscal year 2020, fiscal 2020 or FY 2020, we are referring to the fiscal year ended on March 31 of that year. The “Founders Group” refers to Beech Investments Limited and Kishore Lulla. “$” and “dollar” refer to U.S. dollars.

“High budget” films refer to Hindi films with direct production costs in excess of $8.5 million and regional films with direct production costs in excess of $7.0 million, in each case translated at the historical average exchange rate for the applicable fiscal year. “Low budget” films refer to Hindi and regional films with less than $1.0 million in direct production costs, in each case translated at the historical average exchange rate for the applicable fiscal year. “Medium budget” films refer to Hindi, Tamil, Telugu and other regional language films within the remaining range of direct production costs. With respect to low budget films, references to “film releases” refer to theatrical releases or, for films that we did not theatrically release, to our initial DVD, digital or other non- theatrical exhibition.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act, and such statements are subject to the safe harbors created thereby. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “approximately,” “anticipate,” “believe,” “estimate,” “continue,” “could,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will” and similar expressions. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources, tax assessment orders and future capital expenditures. All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including, without limitation:

These and other factors are more fully discussed in “Part I — Item 3. Key Information — D. Risk Factors,” “Part I — Item 5. Operating and Financial Review and Prospects” and elsewhere in this annual report. The forward-looking statements contained in this annual report are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. Should one or more of these risks or uncertainties materialize or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this annual report speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The table set forth below presents our selected historical consolidated financial data for the periods and at the dates indicated. The selected historical consolidated statements of income data for each of the three years ended March 31, 2020, 2019, and 2018 and the selected statements of financial position data as of March 31, 2020 and 2019 have been derived from and should be read in conjunction with “Part I — Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this Annual Report on Form 20-F. The selected historical consolidated statements of income data for each of the two years ended March 31, 2017 and 2016 and the selected historical statements of financial position data as of March 31, 2018, 2017, and 2016 have been derived from audited consolidated financial statements not included in this Annual Report on Form 20-F.

 _______________

The following table sets forth the reconciliation of our net income to EBITDA, Adjusted EBITDA and Gross Adjusted EBITDA:

_______________

Our management team believes that EBITDA, Adjusted EBITDA and Gross Adjusted EBITDA are useful to an investor in evaluating our results of operations because these measures:

However, there are significant limitations to using EBITDA, Adjusted EBITDA and Gross Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss, the lack of comparability of results of operations of different companies and the different methods of calculating EBITDA. Adjusted EBITDA and Gross Adjusted EBITDA reported by different companies.

Exchange Rate Information

Our functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated into U.S. dollars at the exchange rates at ruling on the date of the applicable statement of financial position. For the purposes of consolidation, all income and expenses are translated at the average rate of exchange during the period covered by the applicable statement of income and assets and liabilities are translated at the exchange rate ruling on the date of the applicable statement of financial position.

The following table sets forth, for the periods indicated, information concerning the exchange rates between Indian rupees and U.S. dollars based on the noon buying rate in the City of New York for cable transfers of Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York. These rates are provided solely for your convenience and are not necessarily the exchange rates that were used in this Offering Memorandum or will be used in the preparation of periodic reports or any other information to be provided to you.

B. Capitalization and Indebtedness

Not Applicable.

C. Reason for the Offer and the Use of Proceeds

Not Applicable.

D. Risk Factors

This annual report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those described in the following risk factors and elsewhere in this annual report. If any of the following risks were to occur, our business affairs, prospects, assets, financial condition, results of operations and cash flows could be materially and adversely affected, and the market price of our A ordinary shares could decline. Additionally, the pandemic caused by a novel strain of coronavirus (“COVID-19”) has had, and is expected to continue to have, a material adverse impact on our business, financial condition and results of operations, as well as those of many of our business partners, and local, national, and global economies. The COVID-19 pandemic has also amplified many of the other risks discussed below to which we are subject. We are unable to predict the extent to which the pandemic and its related impacts will adversely affect us. However, given the unpredictable, unprecedented, and fluid nature of the pandemic, it may also materially and adversely affect our business, financial condition, and results of operations in ways that are not currently anticipated by or known to us or that we do not currently consider to present significant risk.

Risks Relating to the STX Transaction and the Combined Company Upon Completion of the STX Transaction

We cannot assure you that the STX Transaction will occur on the timeframe that is currently contemplated or at all.

On April 17, 2020, Eros entered into an Agreement and Plan of Merger (the “Merger Agreement”) with STX Filmworks, Inc., a Delaware corporation (“STX”), England Holdings 2, Inc., a Delaware corporation and indirect wholly owned subsidiary of Eros (“England Holdings 2”), and England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly owned subsidiary of England Holdings 2 (“Merger Sub”), which provides for, among other things, the merger of Merger Sub with and into STX (the “Merger”), with STX surviving as the surviving corporation and a direct wholly owned subsidiary of England Holdings 2. Eros, as the combined company following the Merger, is referred to hereafter as the “combined company.” The Merger and the related transactions contemplated by the Merger Agreement are collectively referred to hereafter as the “STX Transaction.” The Merger Agreement and the STX Transaction are described in greater detail below under “Part I –Item 10. Additional Information – C. Material Contracts.” While the parties currently expect that the STX transaction will be consummated on or shortly after the date of this Report, there is still a risk that the STX Transaction may not be consummated, including if one or more parties fails to perform under or breaches the PIPE Subscription Agreement. If the STX Transaction does not occur, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, and such failure could have a material adverse impact on our stock price, business and our results of operation and financial condition.

Uncertainties associated with the STX Transaction may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company following completion of the STX Transaction.

Both Eros and STX are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans and the business plan of the combined company. The combined company’s success after the completion of the STX Transaction will depend in part upon the ability of the combined company to retain certain key management personnel and employees of Eros and STX. No assurance can be given that the combined company, after the completion of the STX Transaction, will be able to attract or retain key management personnel and other key employees to the same extent that Eros and STX have previously been able to attract or retain their own employees.

Following the STX Transaction, the composition of the combined company board of directors will be different than the composition of the current Eros board of directors.

The Eros board of directors currently consists of seven directors. Upon completion of the STX Transaction, the board of directors of the combined company will consist of nine directors, including four directors who were selected by the Founders Group (one of whom must be an independent director), four directors who were selected by STX (one of whom must be an independent director), and an independent director jointly selected by the Founders Group and STX. This new composition of the board of directors of the combined company may affect the future decisions of the combined company.

The combined company may be unable to successfully integrate Eros and STX and realize the anticipated benefits of the STX Transaction.

The success of the STX Transaction will depend, in part, on the combined company’s ability to successfully combine and integrate Eros and STX, and realize the anticipated benefits, including synergies, cost savings, innovation and strategic growth opportunities and operational efficiencies from the STX Transaction in a manner that does not materially disrupt existing customer, supplier, talent, producer, distributor, employee and other industry relations and does not result in decreased revenues due to losses of, or decreases in purchase and/or viewership of its content and service offerings by, subscribers and other counterparties. If the combined company is unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of the combined company’s A ordinary shares may decline. The combined company may fail to realize some or all of the anticipated benefits of the STX Transaction if the integration process takes longer than expected or is more costly than expected.

The integration of the two companies may result in material challenges, including, without limitation:

Many of these factors will be outside of the combined company’s control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and other adverse impacts, which could materially affect the combined company’s financial position, results of operations and cash flows.

Due to legal restrictions, Eros and STX have been and are currently permitted to conduct only limited planning for the integration of the two companies following the STX Transaction. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized on a timely basis, if at all.

In addition, the combined company’s ability to successfully integrate and manage its expanded business and achieve the anticipated benefits of the STX Transaction may be materially and adversely effected by the ongoing COVID-19 pandemic, which is discussed in greater detail below. The ability of both Eros and STX to generate revenues from the monetization of film content in various distribution channels, including through agreements with commercial theatre operators, has been and may continue to be adversely effected by the COVID-19 pandemic. The full extent and scope of the impact of the pandemic on national, regional and global markets and economies, and therefore the combined company’s business and industry and efforts to integrate its expanded business and organization and realize anticipated benefits of the STX Transaction, is highly uncertain and cannot be predicted.

The future results of the combined company may be adversely impacted if the combined company does not effectively manage its complex operations following the completion of the STX Transaction.

Following the completion of the STX Transaction, the size of the combined company’s business will be significantly larger than the current size of either Eros’ business or STX’s business. The combined company’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of Eros and STX, but also the increased scale and scope of the combined business with its associated increased costs and complexity. There can be no assurances that the combined company will be successful in integrating the businesses or that it will realize the expected operating efficiencies, cost savings, strategic growth opportunities and other benefits currently anticipated from the STX Transaction.

Current Eros shareholders will generally have a reduced ownership and voting interest in the combined company after the STX Transaction.

Immediately after the completion of the STX Transaction, each Eros shareholder will remain a shareholder of Eros, as the combined company, but with a percentage ownership that will be less than half of such shareholder’s percentage of Eros as of immediately prior to the STX Transaction. As a result of this reduced ownership percentage, existing Eros shareholders will generally have less voting power in the combined company after the STX Transaction than they did prior to the STX Transaction.

Pursuant to an Investors’ Rights Agreement and the Amended Articles of Association, the Founders Group and certain significant stockholders of STX will have rights relating to governance of the combined company that are different from shareholders generally.

As described below under “Part I –Item 10. Additional Information – C. Material Contracts,” the Founders Group and certain significant stockholders of STX (the “STX Parties”) will enter into an Investors’ Rights Agreement at the effective time of the Merger. In addition, as required by the Merger Agreement, we convened an extraordinary general meeting of our shareholders on June 29, 2020 at which the requisite percentage of our shareholders approved the Amended Articles of Association, key provisions of which are also described in “Part I –Item 10. Additional Information – C. Material Contracts.” By virtue of the Investors’ Rights Agreement and the Amended Articles of Association, for a period lasting up to three years following the consummation of the STX Transaction, the Founders Group will have the right to nominate four out of nine directors on the combined company’s board of directors and certain of the STX Parties affiliated with Hony Capital (“Hony”) will have the right to nominate four out of nine directors on the combined company’s board of directors. In addition, during this period, the board of directors of the combined company will not be permitted to take certain significant corporate actions, including adopting the combined company’s annual business plan and budget, without the approval of at least one non-independent member of the board of directors that was nominated by the Founders Group. During this period, the board of directors of the combined company also will not be permitted to hire or terminate any of the chief executive officer, chief financial officer or president (or co-presidents) of the combined company without the approval of at least one non-independent member of the board of directors that was nominated by the Founders Group and at least one member of the board of directors that was nominated by Hony. In exercising their rights under the Investors’ Rights Agreement and the Amended Articles of Association, the Founders Group and STX Parties may have interests that are different from or in addition to the interests of the combined company’s other shareholders.

Each of Eros and STX has incurred substantial expenses related to the completion of the STX Transaction and expects to incur substantial expenses related to the integration of Eros and STX.

Each of Eros and STX has incurred substantial expenses in connection with the completion of the STX Transaction and expects to incur substantial expenses to integrate a large number of processes, policies, procedures, operations, technologies and systems of Eros and STX in connection with the STX Transaction. The substantial majority of these costs will be non-recurring expenses related to the transactions and facilities and systems consolidation costs. The combined company may incur additional costs or suffer loss of business under third-party contracts that are terminated or that contain change in control or other provisions that may be triggered by the completion of the transactions, and/or losses of, or decreases in transactions by, customers and business partners of Eros and STX, and may also incur costs to retain certain key management personnel and employees. Eros and STX will also incur transaction fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs and time delays. These incremental transaction-related costs may exceed the savings the combined company expects to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs. Factors beyond the parties’ control could affect the total amount or timing of these expenses, many of which, by their nature, are difficult to estimate accurately.

The market price of the combined company’s A ordinary shares after the STX Transaction is completed may be affected by factors different from those affecting the price of Eros A ordinary shares before the STX Transaction is completed.

Upon completion of the STX Transaction, holders of Eros A ordinary shares will be holders of A ordinary shares of the combined company. As the businesses of Eros and STX are different, the results of operations as well as the price of the combined company’s A ordinary shares may, in the future, be affected by factors different from, or may be affected differently by, those factors affecting Eros an independent stand-alone company. The combined company will face additional risks and uncertainties to which each of Eros and STX may currently not be exposed. As a result, the market price of the combined company’s shares may fluctuate significantly following completion of the STX Transaction.

The market price of the combined company’s A ordinary shares may decline as a result of the STX Transaction.

The market price of the combined company’s A ordinary shares may decline as a result of the STX Transaction if, among other things, the operational cost savings estimates in connection with the integration of Eros’s business and STX’s business are not realized, there are unanticipated negative impacts on Eros’s financial position, or if the transaction costs related to the STX Transaction are greater than expected. The market price also may decline if the combined company does not achieve the perceived benefits of the STX Transaction as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the transactions on the combined company’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.

In addition, sales of combined company’s A ordinary shares after the completion of the STX Transaction may cause the market price of such shares to decrease. It is estimated that Eros will issue approximately 236,262,932 A ordinary shares, including up to 40 million share equity awards, in connection with the STX Transaction, based on the number of outstanding shares, including share equity awards, and the 10-day volume weighted average price of Eros A ordinary shares as of July 29, 2020. While STX stockholders who did not purchase shares pursuant to the PIPE Subscription Agreement described below under “Part I –Item 10. Additional Information – C. Material Contracts” will be subject to a contractual 18-month lockup period during which they may not sell the combined company’s A ordinary shares they receive in the Merger, those STX stockholders who purchase shares pursuant to the PIPE Subscription Agreement are subject only to a 75-day lockup period (with respect to both the shares they receive in the Merger and the shares they purchase in the PIPE Subscription Agreement). Such STX stockholders may decide not to hold the shares of combined company common stock they will receive in STX Transaction beyond the 75-day lockup period. In addition, existing Eros shareholders may decide not to continue to hold their A ordinary shares following completion of the STX Transaction. Such sales of combined company A ordinary shares could have the effect of depressing the market price for the combined company’s A ordinary shares.

Any of these events may make it more difficult for the combined company to sell equity or equity-related securities, dilute your ownership interest in the combined company and have an adverse impact on the price of the combined company’s A ordinary shares.

If certain U.S. federal income tax rules regarding ‘‘inversion transactions’’ apply to us as a result of the STX Transaction, such rules could result in adverse U.S. federal income tax consequences.

Under section 7874 of the U.S. Internal Revenue Code of 1986, as amended (‘‘Code’’), a foreign corporation is treated as a “surrogate foreign corporation” if, pursuant to a plan (or a series of related transactions) (1) the foreign corporation completes the direct or indirect acquisition of substantially all of the properties held, directly or indirectly, by a U.S. corporation, (2) after the acquisition at least 60% of the stock (by vote or value) of the foreign corporation is held by former shareholders and certain creditors of the U.S. corporation by reason of their holding stock or debt obligations of the U.S. corporation (such percentage held by such persons being the ‘‘Section 7874 Percentage’’), and (3) after the acquisition, the “expanded affiliated group” (within the meaning of section 7874 of the Code) that includes the foreign corporation does not have substantial business activities in the foreign country in which, or under the law of which, the foreign corporation is created or organized, relative to the total business activities of such expanded affiliated group.

If the Section 7874 Percentage is at least 60% but less than 80% and a foreign corporation is a surrogate foreign corporation with respect to a U.S. corporation, several limitations apply to the U.S. corporation, including, but not limited to, the prohibition, for a period of ten years, of the use of net operating losses, foreign tax credits and other tax attributes to offset the income or gain recognized by reason of transfer of any property to a foreign related person or to offset any income received or accrued during such period by reason of a license of any property to a foreign related person and an additional minimum tax under Section 59A of the Code on certain ‘‘base eroding’’ payments to members of the expanded affiliated group that are foreign corporations. In addition, under section 4985 of the Code and the rules related thereto, an excise tax at a rate of currently 20% is imposed on the value of certain share compensation held directly or indirectly by certain ‘‘disqualified individuals’’ (including certain of officers and directors). Further, shareholders of the foreign corporation that are United States persons for U.S. federal income tax purposes may not be eligible for reduced rates on dividends paid by the foreign corporation.

If the Section 7874 Percentage is at least 80% and a foreign corporation is a surrogate foreign corporation with respect to a U.S. corporation, the foreign corporation will be treated as a U.S. corporation, regardless of the fact that such corporation is also incorporated in a foreign country. If the foreign corporation were treated as a U.S. corporation, the entire net income of the foreign corporation would be subject to U.S. federal income tax on a net income basis and would be determined under U.S. federal income tax principles.

[Based on the facts as of the date hereof, we expect that, after the consummation of the STX Transaction, the Section 7874 Percentage with respect to former STX shareholders and creditors will be less than 60% and therefore we do not expect to be treated as a “surrogate foreign corporation” within the meaning of section 7874 of the Code.] Determining the Section 7874 Percentage, however, is complex and cannot be made until after the consummation of the STX Transaction, and is subject to legal uncertainties and factual uncertainties. As a result, there can be no assurance that the Section 7874 Percentage will be less than 60%. Holders are urged to consult their own tax advisors regarding the potential application of section 7874 of the Code to the STX Transaction and its potential tax consequences. A determination that we are a surrogate foreign corporation for the purposes of section 7874 of the Code may have material adverse effects on the business, financial condition, results of operations and prospects of the combined company following the STX Transaction.

Risks Related to Our Business

The COVID-19 pandemic and other adverse public health developments has adversely affected our business and results of operations.

In December 2019, COVID-19 emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread globally to many countries where we distribute films theatrically, including India, United Kingdom, United States, Dubai, Singapore and Australia. On March 11, 2020, the World Health Organization designated the outbreak a pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including imposing restrictions on movement and travel such as quarantines and shelter-in-place requirements, or nationwide lockdowns, as well as restricting or prohibiting outright some or all commercial and business activity, including the closure of some or all theatres and disrupting the production and availability of content, including delayed, or in some cases, shortened or cancelled theatrical releases. These measures, though currently temporary in nature, may become more severe and continue indefinitely depending on the evolution of the pandemic. To date, no fully effective vaccines or treatments have been developed and effective vaccines or treatments may not be discovered soon enough to protect against a further worsening of the pandemic.

The pandemic has materially and adversely affected our ability to generate revenues from the monetization of Indian film content in various distribution channels through agreements with commercial theatre operators, and may continue to do so unless and until the pandemic subsides or an effective treatment or vaccine is discovered. The extent of the adverse impact on our financial and operational results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration of COVID-19 and among other things, the impact of governmental actions imposed in response to the pandemic and individuals’ and companies’ risk tolerance regarding health matters going forward. Our business also could be significantly affected even after reopening of certain operations, should the disruptions caused by the COVID-19 lead to changes in consumer behavior (such as social distancing becoming the norm independent of any pandemic conditions) and also delayed in production schedule. For example, some areas may not re-open movie theatres or, if they do, some individuals may not feel comfortable gathering in public places such as movie theatres.

The continued spread of COVID-19 has adversely affected many industries as well as the economies and financial markets of many countries, including in many of the countries in which we distribute content, resulting in a significant deceleration of economic activity. This slowdown has reduced production, decreased the level of trade, and led to widespread corporate downsizing, causing a sharp increase in unemployment. We have also seen significant disruption of and extreme volatility in the global capital markets, which could increase the cost of, or entirely restrict access to, capital. This volatility and uncertainty have adversely affected our stock price and may continue to do so. As a result, to the extent we determine it is in our best interests to access the capital markets or refinance some or all of our indebtedness, we may not be able to do so on terms that are acceptable to us or at all. The impact of this outbreak on global, national and local economies is still uncertain and, unless the outbreak is contained, these adverse impacts could worsen, impacting all segments of the global economy, and result in a significant recession or worse.

Considerable uncertainty still surrounds COVID-19 and its potential effects, and the extent of and effectiveness of any responses taken on a local, national and global level. Infections may become more widespread and that could accelerate or magnify one or more of the risks described above. While we expect the pandemic and related events will have a negative effect on our business, the full extent and scope of the impact on national, regional and global markets and economies, and therefore our business and industry, is highly uncertain and cannot be predicted. Accordingly, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, any of which could have a material adverse impact on our business and our results of operation and financial condition.

We are monitoring the rapidly evolving situation and its potential impacts on our financial position, results of operations, liquidity, and cash flows.

We may fail to source adequate film content on favorable terms or at all through acquisitions or co-productions, which could have a material and adverse impact on our business.

We generate revenues by monetizing Indian film content that we primarily co-produce or acquire from third parties, and then distribute through various channels. Our ability to successfully enter into co-productions and to acquire content depends on, among other things, our ability to maintain existing relationships, and form new ones, with talent and other industry participants.

The pool of quality talent in India is limited and, as a result, there is significant competition to secure the services of certain actors, directors, composers and producers, among others. Competition can increase the cost of such talent, and hence the cost of film content. These costs may continue to increase, making it more difficult for us to access content cost-effectively and reducing our ability to sustain our margins and maximize revenues from distribution and monetization. Further, we may be unable to successfully maintain our long-standing relationships with certain industry participants and continue to have access to content and/or creative talent and may be unable to establish similar relationships with new leading creative talent. This is also dependent on relationships with various writers and talent and has execution risks associated with it. If any such relationships are adversely affected, or we are unable to form new relationships, or if any party fails to perform under its agreements or arrangements with us, our business, prospects, financial condition, liquidity and results of operations could be materially adversely affected.

Our business involves substantial capital requirements, and our inability to maintain or raise sufficient capital could materially adversely affect our business.

Our business requires a substantial investment of capital for the production, acquisition and distribution of films and a significant amount of time may elapse between our expenditure of funds and the receipt of revenues from our films. This may require us to fund a significant portion of our capital requirements from our credit facilities or other financing sources. Any capital shortfall could have a material adverse effect on our business, prospects, financial condition, results of operations and liquidity. For additional information, please see “Part 1—Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources” and Note [2(a)] and Note [31] to our audited Consolidated Financial Statements appearing elsewhere in this annual report.

Delays, cost overruns, cancellation or abandonment of the completion or release of films may have a material adverse effect on our business.

There are substantial financial risks relating to film production, completion and release. Actual film costs may exceed their budgets, and factors such as labour disputes, unavailability of a star performer, equipment shortages, disputes with production teams or adverse weather conditions may cause cost overruns and delay or hamper film completion. When a film we have contracted to acquire from a third-party experiences delays or fails to be completed, we may not recover advance monies paid for the proposed acquisition. When we enter into co-productions, we are typically responsible for paying all production costs in accordance with an agreed upon budget and while we typically cap budgets in our contracts with our co-producer, given the importance of ongoing relationships in our industry, longer-term commercial considerations may in certain circumstances override strict contractual rights and we may feel obliged to fund cost over-runs where there is no contractual obligation requiring us to do so.

Production delays, failure to complete projects or cost overruns could result in us not recovering our costs and could have a material adverse effect on our business, prospects, financial condition and results of operations.

The popularity and commercial success of our films are subject to numerous factors, over which we may have limited or no control.

The popularity and commercial success of our films depends on many factors including, but not limited to, the key talent involved, the timing of release, the promotion and marketing of the film, the quality and acceptance of other competing programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment, general economic conditions, the genre and specific subject matter of the film, its critical acclaim and the breadth, timing and format of its initial release. We cannot predict the impact of such factors on any film, and many are factors that are beyond our control. As a result of these factors and many others, our films may not be as successful as we anticipate, and as a result, our results of operations may suffer.

The success of our business depends on our ability to consistently create and distribute filmed entertainment that meets the changing preferences of the broad consumer market both within India and internationally.

Changing consumer tastes affect our ability to predict which films will be popular with audiences in India and internationally. As we invest in a portfolio of films across a wide variety of genres, stars and directors, it is highly likely that at least some of the films in which we invest will not appeal to Indian or international audiences. Further, where we sell rights prior to release of a film, any failure to accurately predict the likely commercial success of a film may cause us to underestimate the value of such rights. If we are unable to co-produce and acquire rights to films that appeal to Indian and international film audiences or to accurately judge audience acceptance of our film content, the costs of such films could exceed revenues generated and anticipated profits may not be realized. Our failure to realize anticipated profits could have a material adverse effect on our business, prospects, financial condition and results of operations.

Our ability to monetize our content is limited to the rights that we acquire from third parties or otherwise own.

We have acquired our film content through contracts with third parties, which are primarily fixed-term contracts that may be subject to expiration or early termination. Upon expiration or termination of these arrangements, content may be unavailable to us on acceptable terms or at all, including with respect to technical matters such as encryption, territorial limitation and copy protection. In addition, if any of our competitors offer better terms, we will be required to spend more money or grant better terms, or both, to acquire or extend the rights we previously held. If we are unable to renew the rights to our film library on commercially favorable terms and to continue monetizing the existing films in our library or other content, it could have a material adverse effect on our business, prospects, financial condition and results of operations.

In addition, we typically only own certain rights for the monetization of content, which limits our ability to monetize content in certain media formats. In particular, we do not own the audio music rights to the majority of the films in our library and to certain new releases. To the extent we do not own the music or other media rights in respect of a particular film, we may only monetize content through those channels to which we do own rights, which could have an adverse effect on our ability to generate revenue from a film and recover our costs from acquiring or producing content.

We may face claims from third parties that our films may be infringing on their intellectual property.

Third parties may claim that certain of our films misappropriate or infringe such third parties’ intellectual property rights with respect to previously developed films, stories, characters, other entertainment or intellectual property. Any such assertions or claims may impact our rights to monetize the related films. Irrespective of the validity or the successful assertion of such claims, we could incur significant costs and diversion of resources in defending against them. If any claims or actions are asserted against us, we may seek to settle such claim by obtaining a license from the plaintiff covering the disputed intellectual property rights. We cannot provide any assurances, however, that under such circumstances a license, or any other form of settlement, would be available on reasonable terms or at all. Any of these occurrences could have a material adverse effect on our business, prospects, financial condition and results of operations.

We were historically and are currently, party to class action lawsuits in the U.S. and may be subject to similar or additional claims in the future, and an adverse ruling on any such future claims could have a material adverse effect on our business, financial condition and results of operations and could negatively impact the market price of our A Ordinary Shares.

Beginning on November 13, 2015, the Company was named a defendant in five substantially similar putative class action lawsuits filed in federal court in New Jersey and New York by purported shareholders of the Company. On May 17, 2016, the putative class actions filed in New Jersey were transferred to the United States District Court for the Southern District of New York where they were subsequently consolidated with the other two actions. The Court-appointed lead plaintiffs filed a single consolidated complaint on July 14, 2016 and amended on October 10, 2016. The amended consolidated complaint alleged that the Company and certain individual defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), but did not assert certain claims that had been asserted in prior complaints. The remaining claims were primarily focused on whether the Company and individual defendants made material misrepresentations concerning the Company’s film library and materially misstated the usage and functionality of Eros Now, our digital OTT entertainment service. On September 25, 2017, the United States District Court for the Southern District of New York entered a Memorandum and Order dismissing the putative class action with prejudice. On August 24, 2018, the United States Court of Appeals for the Second Circuit issued a summary order affirming the district court’s earlier dismissal, with prejudice.

Beginning on June 21, 2019, the Company was named a defendant in three substantially similar putative class action lawsuits filed in federal court in California and New Jersey by purported shareholders of the Company. The lawsuits allege that the Company and certain individual defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and/or misleading statements regarding the Company’s accounting for trade receivables. On September 27, 2019, the putative class action filed in California was transferred to the United States District Court for the District of New Jersey. On April 14, 2020, the three putative class actions were consolidated, and a lead plaintiff was appointed. On July 1, 2020, the court-appointed lead plaintiff filed a consolidated complaint. The consolidated complaint expands the scope of the allegations. The company expects to file a motion to dismiss, which is due August 28, 2020.

We have incurred, and will continue to incur, significant costs to defend our position in the above-mentioned class action lawsuits. We are unable to predict whether we will be subject to similar or additional claims in the future. If we become subject to class action lawsuits or any other related lawsuits or investigations or proceedings by regulators in the future, or if the current actions are not resolved in our favor, it could result in a diversion of management resources, time and energy, significant costs, a material decline in the market price for our A Ordinary Shares, increased share price volatility and increased directors and officers liability insurance premiums and could have a material adverse effect upon our business, prospects, financial condition, results of operations and ability to access the capital markets.

Anonymous letters to regulators or business associates or anonymous allegations on social media regarding our business practices, accounting practices and/or officers and directors could have a resultant material adverse effect on our business, financial condition and results of operations and could negatively impact the market price for our A Ordinary Shares.

We have been, are currently and in the future may be, the target of anonymous letters sent to regulators or business associates or anonymous allegations posted on social media or circulated in short selling reports regarding our accounting practices, business practices and/or officers and directors. Every time we have received such allegations, we have undertaken what we believe to be a reasonably prudent review, including extensive due diligence to investigate the allegations, and where necessary our board of directors has engaged third-party professional firms to report directly to the Company’s Audit Committee. Having conducted these investigations, in each instance we found the allegations were without merit. However, the public dissemination of these allegations has adversely affected our reputation, business and the market price of our A Ordinary Shares and required us to spend significant management time and incur substantial costs to address them.

If anonymous allegations are made in the future, or if the current allegations continue, it could result in a diversion of management resources, time and energy, significant costs, a material decline in the market price for our A Ordinary Shares, increased share price volatility and increased directors and officers liability insurance premiums and could have a material adverse effect upon our business, prospects, financial condition, results of operations and ability to access the capital markets.

Our business involves risks of liability claims for media content.

As a producer and distributor of media content, we may face potential liability for:

These types of claims have been brought, sometimes successfully, against producers and/or distributors of media content. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our business and financial condition.

We depend on the Indian box office success of our Hindi and high budget Tamil and Telugu films from which we derive a significant portion of our revenues.

In India, a relatively high percentage of a film’s overall revenues are derived from theater box office sales and, in particular, from such sales in the first week of a film’s release. Indian domestic box office receipts are also an indicator of a film’s expected success in other Indian and international distribution channels. As such, poor box office receipts in India for our films, even for those films for which we obtain only international distribution rights, could have a significant adverse impact on our results of operations in both the year of release of the relevant films and in the future for revenues expected to be earned through other distribution channels. In particular, we depend on the Indian box office success of our Hindi films and high budget Tamil and Telugu films.

We may not be paid the full amount of box office revenues to which we are entitled.

We derive revenues from theatrical exhibition of our films by collecting a specified percentage of box office receipts from multiplex and single screen theater operators. The Indian film industry continues to lack full exhibitor transparency. There is limited independent monitoring of such data in India or the Middle East, unlike the monitoring services provided by comScore in the United Kingdom and the United States. We therefore rely on theater operators and our sub-distributors to report relevant information to us in an accurate and timely manner.

While multiplex and single-screen operators have now moved to a digital distribution model that provides greater clarity on the number of screenings given to our films, many still do not have computerized tracking systems for box office receipts which can be tracked independently by a third party and we are reliant on box office reports generated internally by these multiplex and single screen operators which may not be entirely accurate or transparent.

Because we do not have a reliable system to determine if our box office receipts are underreported, box office receipts and sub-distribution revenues may be inadvertently or purposefully misreported or delayed, which could prevent us from being compensated appropriately for exhibition of our films. If we are not properly compensated, our business, prospects, financial condition and results of operations could be negatively impacted.

We depend on our relationships with theater operators and other industry participants to monetize our film content. Any disputes with multiplex operators in India could have a material adverse effect on our ability or willingness to release our films as scheduled.

We generate revenues from the monetization of Indian film content in various distribution channels through agreements with commercial theater operators, in particular multiplex operators, and with retailers, television operators, telecommunications companies and others. Our failure to maintain these relationships, or to establish and capitalize on new relationships, could harm our business or prevent our business from growing, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

We have had disputes with multiplex operators in India that required us to delay our film releases and disrupted our marketing schedule for future films. These disputes were subsequently settled pursuant to settlement agreements that expired in June 2011. We now enter into agreements on a film-by-film and exhibitor-by-exhibitor basis instead of entering into long-term agreements. To date, our film-by-film agreements have been on commercial terms that are no less favorable than the terms of the prior settlement agreements; however, we cannot guarantee such terms can always be obtained. Accordingly, without a long-term commitment from multiplex operators, we may be at risk of losing a substantial portion of our revenues derived from our theatrical business. We may also have similar future disruptions in our relationship with multiplex operators, the operators of single-screen theaters or other industry participants, which could have a material adverse effect on our business, prospects, financial condition and results of operations. Further, the theater industry in India is rapidly growing and evolving and we cannot assure you that we will be able to establish relationships with new commercial theater operators.

Eros Now, our digital OTT entertainment service accessible via internet-enabled devices, may not achieve the desired growth rate.

Eros Now was soft launched in 2012 and as of March 31, 2020, Eros Now caters to 29.3 Million paying subscribers and has garnered 196.8 million registered users across global digital distribution platforms. We must continue to grow and retain subscribers in India (one of our key markets) where consumers also use traditional Pay-TV and broadcast channels for content consumption, as well as grow our subscriber base in markets outside of India. Our ability to attract and retain subscribers will depend in part on our ability to consistently provide our subscribers a high-quality experience with respect to content and features and on the quality of data connectivity (either Wi-Fi, broadband, 3G or 4G mobile data) in India.

To achieve and sustain the desired growth rate from Eros Now, we must accomplish numerous objectives, including substantially increasing the number of paid subscribers to our service and retaining them, without which our revenues from digital stream will be adversely affected. We cannot assure you that we will be able to achieve these objectives due to any of the factors listed below, among other factors:

Eros Now faces and will continue to face competition for subscriber time.

We compete for the time and attention of our Eros Now subscribers with other content providers on the basis of a number of factors, including quality of experience, relevance, diversity of content, ease of use, price, accessibility, perception of advertising load, brand awareness, and reputation.

We compete with providers of on-demand Indian language entertainment, which is purchased or available for free and playable on mobile devices and in the home. We face increasing competition for subscribers from a growing variety of businesses, including other subscription services around the world, many of which offer services that deliver Indian entertainment content over the internet, through mobile phones, and through other wireless devices.

Many of our current or future competitors are already entrenched or may have significant brand recognition in a particular region or market in which we seek to penetrate.

We believe that companies with a combination of technical expertise, brand recognition, financial resources, and digital media experience also pose a significant threat of developing competing on-demand distribution technologies. In particular, if known incumbents in the digital media space such as Facebook choose to offer competing services, they may devote greater resources than we have available, have a more accelerated time frame for deployment, and leverage their existing user base and proprietary technologies to provide services that our subscribers and advertisers may view as superior. Furthermore, Amazon Prime, Netflix, Hotstar and others have competing services, which may negatively impact our business, operating results and financial condition. Our current and future competitors may have higher brand recognition, more established relationships with talent and other content licensors and mobile device manufacturers, greater financial, technical, and other resources, more sophisticated technologies, and/or more experience in the markets in which we compete. In addition, Apple and Google also own application store platforms and are charging in-application purchase fees, which are not being levied on their own applications, thus creating a competitive advantage for themselves against us. As the market for on-demand music on the internet and mobile and connected devices increases, new competitors, business models, and solutions are likely to emerge.

We also compete for subscribers based on our presence and visibility as compared with other businesses and platforms that deliver entertainment content through the internet and mobile devices. We face significant competition for subscribers from companies promoting their own digital content online or through application stores, including several large, well-funded and seasoned participants in the digital media market. Mobile device application stores often offer users the ability to browse applications by various criteria, such as the number of downloads in a given time period, the length of time since a mobile application was released or updated, or the category in which the application is placed. The websites and mobile applications of our competitors may rank higher than our website and our Eros Now mobile application, and our application may be difficult to locate in mobile device application stores, which could draw potential subscribers away from our platform and towards those of our competitors. If we are unable to compete successfully for subscribers against other digital media providers by maintaining and increasing our presence and visibility online, on mobile devices and in application stores, our number of subscribers and content streamed on our platform may fail to increase or may decline, and our subscription fees and advertising sales may suffer.

Our subscriber metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.

We regularly review key metrics related to the operation of our business, including, but not limited to, our subscribers, key performance indicators and monthly active users, to evaluate growth trends, measure our performance, and make strategic decisions. These metrics are calculated using internal company data as well as other sources. At times, data may not have been validated by an independent third party. While these numbers are based on what we believe to be reasonable estimates of our subscriber base for the applicable period of measurement, there are inherent challenges in measuring how our service is used across large populations globally. For example, we believe that there are individuals who have multiple Eros Now accounts, which can result in an overstatement of key performance indicators. Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of monthly active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies.

In addition, advertisers generally rely on third-party measurement services to calculate our metrics, and these third-party measurement services may not reflect our true audience. Some of our demographic data also may be incomplete or inaccurate because subscribers self-report their names and dates of birth. Consequently, the personal data we have may differ from our subscribers’ actual names and ages. If advertisers, partners, or investors do not perceive our subscriber, geographic, or other demographic metrics to be accurate representations of our subscribers base, or if we discover material inaccuracies in our subscriber, geographic, or other demographic metrics, our reputation may be seriously harmed.

Changes in how we market our service could adversely affect our marketing expenses and subscriber levels may be adversely affected.

We utilize a broad mix of marketing and public relations programs, including social media sites, to promote our service to potential new subscribers. We may limit or discontinue use or support of certain marketing sources or activities if advertising rates increase or if we become concerned that subscribers or potential subscribers deem certain marketing practices intrusive or damaging to our brand. If the available marketing channels are curtailed, our ability to attract new subscribers may be adversely affected. Companies that promote our service may decide that we negatively impact their business or may make business decisions that in turn negatively impact us. For example, if they decide that they want to compete more directly with us, enter a similar business or exclusively support our competitors, we may no longer have access to their marketing channels. If we are unable to maintain or replace our sources of subscribers with similarly effective sources, or if the cost of our existing sources increases, our subscriber levels and marketing expenses may be adversely affected.

Privacy concerns could limit our ability to collect and leverage our subscriber data and disclosure of membership data could adversely impact our business and reputation.

In the ordinary course of business and in particular in connection with content acquisition and delivering our service to our members, we collect and utilize data supplied by our subscribers. Other businesses have been criticized by privacy groups and governmental bodies for attempts to link personal identities and other information to data collected on the internet regarding users’ browsing and other habits. Increased regulation of data utilization practices, including self-regulation or findings under existing laws that limit our ability to collect, transfer and use data, could have an adverse effect on our business. In addition, if we were to disclose data about our subscribers in a manner that was objectionable to them, our business reputation could be adversely affected, and we could face potential legal claims that could impact our operating results. Outside of India, we may become subject to additional and/or more stringent legal obligations concerning our treatment of customer and other personal information, such as laws regarding data localization and/or restrictions on data export. Failure to comply with these obligations could subject us to liability, and to the extent that we need to alter our business model or practices to adapt to these obligations, we could incur additional expenses.

Any significant disruption in our computer systems or those of third - parties that we utilize in our operations could result in a loss or degradation of service and could adversely impact our business.

Our reputation and ability to attract, retain and serve our subscribers is underpinned by the reliable performance and security of our computer systems and those of third parties that we work with. These systems may be subject to damage or interruption from many external factors including, inter alia: adverse weather conditions, natural disasters, terrorist attacks, power loss, telecommunications failures, and cybersecurity risks. Interruptions in these systems, or with the internet in general, could make our service unavailable or degraded or otherwise hinder our ability to deliver streaming content. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our membership service to existing and potential members.

We rely upon a number of partners to make our service available on their devices.

We currently offer subscribers the ability to receive streaming content through a host of internet-connected screens, including TVs, digital video players, television set-top boxes and mobile devices. We have agreements with various cable, satellite and mobile telecommunications operators to make our service available to subscribers. In many instances, our agreements also include provisions by which the partner bills consumers directly or otherwise offer services or products in connection with offering our service. We intend to continue to broaden our relationships with existing partners and to increase our capability to stream content to other platforms and partners over time. If we are not successful in maintaining existing and creating new relationships, or if we encounter technological, content licensing, regulatory, business or other impediments to delivering our streaming content to our subscribers via these devices, our ability to retain subscribers and grow our business could be adversely impacted. Our agreements with our partners are typically multi-year in duration and our business could be adversely affected if, upon expiration, a number of our partners do not continue to provide access to our service or are unwilling to do so on terms acceptable to us, which terms may include the degree of accessibility and prominence of our service. Furthermore, devices are manufactured and sold by entities other than Eros Now and while these entities should be responsible for the devices’ performance, the connection between these devices and Eros Now may nonetheless result in consumer dissatisfaction towards Eros Now and such dissatisfaction could result in claims against us or otherwise adversely impact our business. In addition, technology changes to our streaming functionality may require that partners update their devices. If partners do not update or otherwise modify their devices, our service and our members’ use and enjoyment could be negatively impacted.

Changes in how network operators handle and charge for access to data that travel across their networks could adversely impact our business.

We rely upon the ability of subscribers to access our service through the internet. If network operators block, restrict or otherwise impair access to our service over their networks, our service and business could be negatively affected. To the extent that network operators implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks by data providers, we could incur greater operating expenses and our membership acquisition and retention could be negatively impacted. Furthermore, to the extent network operators create tiers of internet access service and either charge us for or prohibit us from being available through these tiers, our business could be negatively impacted.

We rely upon third-party “cloud” computing services to operate certain aspects of our service and any disruption of or interference with our use of the third-party “cloud” computing operations would impact our operations and our business would be adversely impacted.

The third-party “cloud” computing service operator provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a “cloud” computing service. We have architected our software and computer systems so as to utilize data processing, storage capabilities and other services provided by third-party “cloud” computing operator. Currently, we run a material amount of our computing on the third-party “cloud” computing services. Given this, along with the fact that we cannot easily switch our third-party “cloud” computing operations to another cloud provider, any disruption of or interference with our use of third-party “cloud” computing services would impact our operations and our business would be adversely impacted.

We incur significant costs to protect electronically stored data and if our data is compromised despite this protection, we may incur additional costs, business interruption, lost opportunities and damage to our reputation.

We collect and maintain information and data necessary for conducting our business operations, which information includes proprietary and confidential data and personal information of our customers and employees. Such information is often maintained electronically, which includes risks of intrusion, tampering, manipulation and misappropriation. We implement and maintain systems to protect our digital data and obtaining and maintaining these systems is costly and usually requires continuous monitoring and updating for technological advances and change. Additionally, we sometimes provide confidential, proprietary and personal information to third parties when required in connection with certain business and commercial transactions. For instance, we have entered into an agreement with a third-party vendor to assist in processing employee payroll, and they receive and maintain confidential personal information regarding our employees. We take precautions to try to ensure that such third parties will protect this information, but there remains a risk that the confidentiality of any data held by third parties may be compromised. If our data systems, or those of our third-party vendors and partners, are compromised, there may be negative effects on our business, including a loss of business opportunities or disclosure of trade secrets. If the personal information we maintain is tampered with or misappropriated, our reputation and relationships with our partners and customers may be adversely affected, and we may incur significant costs to remediate the problem and prevent future occurrences.

Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, could result in a loss or degradation of service, unauthorized disclosure of data, including member and corporate information, or theft of intellectual property, including digital content assets, which could adversely impact our business.

Our reputation and ability to attract, retain and serve consumers is dependent upon the reliable performance and security of our computer systems and those of third parties that we utilize in our operations. These systems may be subject to damage or interruption from earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, power loss, telecommunications failures, and cybersecurity risks. Interruptions or malfunctions (including those due to equipment damage, power outages, computer viruses and a range of other hardware, software and network problems) in these systems, or with the internet in general, could make our service unavailable or degraded or otherwise hinder our ability to deliver streaming content. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our service to existing and potential subscribers. Our computer systems and those of third parties we use in our operations are vulnerable to cybersecurity risks, including cyber-attacks, both from state-sponsored and individual activity, such as computer viruses, denial of service attacks, physical or electronic break-ins and similar disruptions. These systems periodically experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse or theft of data or intellectual property. Any attempt by hackers to obtain our data (including subscriber and corporate information) or intellectual property (including digital content assets), disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could harm our business, be expensive to remedy and damage our reputation.

We have devoted and will continue to devote significant resources to the security of our computer systems; however, we cannot guarantee that we will not experience such malfunctions, attacks or interruptions in the future. A significant or large-scale malfunction, attack or interruption of one or more of our computer or database systems could adversely affect our ability to keep our operations running efficiently. Our insurance does not cover expenses related to such disruptions or unauthorized access. Efforts to prevent hackers from disrupting our service or otherwise accessing our systems are expensive to implement and may limit the functionality of or otherwise negatively impact our service offering and systems. Any significant disruption to our service or access to our systems could result in a loss of subscribers and adversely affect our business and results of operation. We utilize our own communications and computer hardware systems located either in our facilities or in that of a third-party web hosting provider. In addition, we utilize third-party “cloud” computing services in connection with our business operations. We also utilize our own and third-party content delivery networks to help us stream content in high volume to subscribers over the internet. Problems faced by us or our third-party web hosting, “cloud” computing, or other network providers, including technological or business-related disruptions, as well as cybersecurity threats, could adversely impact the experience of our members.

A downturn in the Indian and international economies or instability in financial markets, including a decreased growth rate and increased Indian price inflation, could materially and adversely affect our results of operations and financial condition.

Global economic conditions may negatively impact consumer spending. Prolonged negative trends in the global or local economies can adversely affect consumer spending and demand for our films and may shift consumer demand away from the entertainment we offer.

According to the International Monetary Fund’s World Economic Outlook Database, published in April 2020, the GDP growth rate of India is projected to increase from 7.26% in 2019 to approximately 7.49% in 2020 and 7.43% in 2021. The Economic Survey 2019-20 has estimated that the growth rate in GDP for the year ended March 31, 2020 to grow at 4.2% with headwinds of Covid19.

A decline in attendance at theaters may reduce the revenues we generate from this channel, from which a significant proportion of our revenues are derived.

If a general economic downturn continues to affect the countries in which we distribute our films, discretionary consumer spending may be adversely affected, which would have an adverse impact on demand for our theater, television and digital distribution channels. Economic instability and a continuing weak economy in India may negatively impact the Indian box office success of our Hindi, Tamil and Telugu films, on which we depend for a significant portion of our revenues.

Further, a sustained decline in economic conditions could result in closure or downsizing by, or otherwise adversely impact, industry participants on whom we rely for content sourcing and distribution. Any decline in demand for our content could have a material adverse effect on our business, prospects, financial condition and results of operations. In addition, global financial uncertainty has negatively affected the Indian financial markets.

Continued financial disruptions may limit our ability to obtain financing for our films. For example, any adverse revisions to India’s credit ratings for domestic and international debt by domestic or international rating agencies may adversely impact our ability to raise additional financing and the interest rates and other commercial terms at which such additional financing is available. Any such event could have a material adverse effect on our business, prospects, financial condition and results of operations. [India has recently experienced fluctuating wholesale price inflation compared to historical levels. – still true] An increase in inflation in India could cause a rise in the price of wages, particularly for Indian film talent, or any other expenses that we incur. If this trend continues, we may be unable to accurately estimate or control our costs of production. Because it is unlikely we would be able to pass all of our increased costs on to our customers, this could have a material adverse effect on our business, prospects, financial condition and results of operations.

Fluctuation in the value of the Indian rupee against foreign currencies could materially and adversely affect our results of operations, financial condition and ability to service our debt.

While a significant portion of our revenues are denominated in Indian rupees, certain contracts for our film content are or may be denominated in foreign currencies. Additionally, we report our financial results in U.S. dollars and most of our debt is denominated in U.S. dollars. We expect that the continued volatility in the value of the Indian rupee against foreign currency will continue to have an impact on our business. The Indian rupee experienced an approximately 8.3% decrease in value as compared to the U.S. dollar in Fiscal 2020. The Indian rupee experienced an approximately 5.9% decrease in value as compared to the U.S. dollar in Fiscal 2019. The Indian rupee experienced an approximately 0.4% decrease in value as compared to the U.S. dollar in fiscal year 2018. Changes in the growth of the Indian economy and the continued volatility of the Indian rupee, may adversely affect our business. As of March 31, 2020, we had an aggregate outstanding indebtedness of $179.4 million. There can be no assurance, however, that currency fluctuations will not lead to an increase in the amount of this debt.

Further, as of March 31, 2020, $49.2 million, or 27.4% of our debt, was denominated in U.S. dollars. We may not generate sufficient revenue in U.S. dollars to service all of our U.S. dollar-denominated debt. Consequently, we may be required to use revenues generated in Indian rupees to service our U.S. dollar-denominated debt. Any devaluation or depreciation in the value of the Indian rupee, compared to the U.S. dollar, could adversely affect our ability to service our debt. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Exchange Rate” for further information.

Although we have not historically done so, we may, from time to time, seek to reduce the effect of exchange rate fluctuations on our operating results by purchasing derivative instruments such as foreign exchange forward contracts to cover our intercompany indebtedness or outstanding receivables. However, we may not be able to purchase contracts to insulate ourselves adequately from foreign currency exchange risks. In addition, any such contracts may not perform effectively as a hedging mechanism. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Exchange Rate” for further information.

We face increasing competition with other films for movie screens, and our inability to obtain sufficient distribution of our films could have a material adverse effect on our business.

A substantial majority of the theater screens in India are typically committed at any one time to a limited number of films, and we compete directly against other producers and distributors of Indian films in each of our distribution channels. If the number of films released in the market as a whole increases it could create excess supply in the market, in particular at peak theater release times such as school and national holidays and during festivals, which would make it more difficult for our films to succeed.

Where we are unable to ensure a wide release for our films to maximize screenings in the first week of a film’s release, it may have an adverse impact on our revenues. Further, failure to release during peak periods, or the inability to book sufficient screens, could cause us to miss potentially higher gross box-office receipts and/or affect subsequent revenue streams, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

We face increasing competition from other forms of entertainment, which could have a material adverse effect on our business.

We also compete with all other sources of entertainment and information delivery, including television, mobile devices, the internet and sporting events such as the Indian Premier League for cricket. Technological advancements such as VOD, mobile and internet streaming and downloading have increased the number of entertainment and information delivery choices available to consumers and have intensified the challenges posed by audience fragmentation. The increasing number of choices available to audiences, including crossover from our Eros Now online entertainment service, could negatively impact consumer demand for our films, and there can be no assurance that attendance rates at theaters or demand for our other distribution channels will not fall.

Competition within the Indian film industry is growing rapidly, and certain of our competitors are larger, have greater financial resources and are more diversified.

The Indian film industry’s rapid growth is changing the competitive landscape, increasing competition for content, talent and release dates. Growth in the Indian film industry has attracted foreign industry participants and competitors, such as Viacom Inc., The Walt Disney Company (“Disney”), 21st Century Fox, Sony Pictures Entertainment Inc., Amazon.com, Inc. (“Amazon”) and Netflix, Inc. (“Netflix”), many of which are substantially larger and have greater financial resources, including competitors that own theaters and/or television networks and/or OTT platforms. These larger competitors may have the ability to spend additional funds on production of new films, which may require us to increase our production budgets beyond what we originally anticipated in order to compete effectively. In addition, these competitors may use their financial resources to gain increased access to movie screens and enter into exclusive content arrangements with key talent in the Indian film industry. Unlike some of these major competitors that are part of larger diversified corporate groups, we derive substantially all of our revenue from our film entertainment business. If our films fail to perform to our expectations, we are likely to face a greater adverse impact than would a more diversified competitor. In addition, other larger entertainment distribution companies may have larger budgets to monetize growing technological trends. If we are unable to compete with these companies effectively, our business prospects, results of operations and financial condition could suffer. With generally increasing budgets of Hindi, Tamil and Telugu films, we may not have the resources to distribute the same level of films as competitors with greater financial strength.

Piracy of our content, including digital and internet piracy, may adversely impact our revenues and business.

Our business depends in part on the adequacy, enforceability and maintenance of intellectual property rights in the entertainment products and services we create. Motion picture piracy is extensive in many parts of the world and is made easier by technological advances and the conversion of motion pictures into digital formats. This trend facilitates the creation, transmission and sharing of high-quality unauthorized copies of motion pictures in theatrical release on DVDs, CDs and Blu-ray discs, from pay-per-view through set top boxes and other devices and through unlicensed broadcasts on free television and the internet.

Although DVD and CD sales represent a relatively small portion of Indian film and music industry revenues, the proliferation of unauthorized copies of these products results in lost revenue and significantly reduced pricing power, which could have a material adverse effect on our business, prospects, financial condition and results of operations. In particular, unauthorized copying and piracy are prevalent in countries outside of the United States, Canada and Western Europe, including India, whose legal systems may make it difficult for us to enforce our intellectual property rights and in which consumer awareness of the individual and industry consequences of piracy is lower. With broadband connectivity improving, 3G internet penetration increasing and with the advent of 4G in India, digital piracy of our content is an increasing risk.

In addition, the prevalence of third-party hosting sites and a large number of links to potentially pirated content make it difficult to effectively monitor and prevent digital piracy of our content. Existing copyright and trademark laws in India afford only limited practical protection and the lack of internet-specific legislation relating to trademark and copyright protection creates a further challenge for us to protect our content delivered through such media. Additionally, we may seek to implement elaborate and costly security and anti-piracy measures, which could result in significant expenses and revenue losses. Even the highest levels of security and anti-piracy measures may fail to prevent piracy.

Litigation may also be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Regardless of the legitimacy or the success of these claims, we could incur costs and diversion of resources in enforcing our intellectual property rights or in defending against such claims, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

We may be unable to adequately protect or continue to use our intellectual property. Failure to protect such intellectual property may negatively impact our business.

We rely on a combination of copyrights, trademarks, service marks and similar intellectual property rights to protect our name and branded products and to protect the entertainment products and services we create. The success of our business, in part, depends on our continued ability to use this intellectual property in order to increase awareness of the Eros name. We typically attempt to protect these intellectual property rights through available copyright and trademark laws and through a combination of employee, third-party assignments and nondisclosure agreements, other contractual restrictions, technological measures, and other methods. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain countries, and the actions taken by us may be inadequate to prevent imitation by others of the Eros name and other Eros intellectual property. Despite our efforts to protect our intellectual property rights and trade secrets, unauthorized parties may attempt to copy aspects of our song recommendation technology or other technology or obtain and use our trade secrets and other confidential information. Moreover, policing our intellectual property rights is difficult and time consuming. We cannot assure you that we would have adequate resources to protect and police our intellectual property rights, and we cannot assure you that the steps we take to do so will always be effective. In addition, if the applicable laws in these countries are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our intellectual property may decrease, or the cost of obtaining and maintaining rights may increase. We could lose both the ability to assert our intellectual property rights against, or to license our technology to, others and the ability to collect royalties or other payments.

Further, many existing laws governing property ownership, copyright and other intellectual property issues were adopted before the advent of the internet and do not address the unique issues associated with the internet, personal entertainment devices and related technologies, and new interpretations of these laws in response to emerging digital platforms may increase our digital distribution costs, require us to change business practices relating to digital distribution or otherwise harm our business. We also distribute our branded products in some countries in which there is no copyright or trademark protection. As a result, it may be possible for unauthorized third parties to copy and distribute our branded products or certain portions or applications of our branded products, which could have a material adverse effect on our business, prospects, results of operations and financial condition. If we fail to register the appropriate copyrights, patents, trademarks or our other efforts to protect relevant intellectual property prove to be inadequate, the value of the Eros name could be harmed, which could adversely affect our business and results of operations.

We may be unable to continue to use the domain names that we use in our business, or prevent third parties from acquiring and using domain names that infringe on, are similar to or otherwise decrease the value of our brand or our trademarks or service marks.

We have several domain names for websites that we use in our business, such as erosplc.com, erosentertainment.com, erosnow.com and although our Indian subsidiaries currently own over 120 registered trademarks, we have not obtained a registered trademark for any of our domain names. If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable registration or any other cause, we may be forced to market our products under a new domain name, which could cause us to lose users of our websites, or to incur significant expense in order to purchase rights to such a domain name. In addition, our competitors and others could attempt to capitalize on our brand recognition by using domain names similar to ours. Domain names similar to ours have been registered in the United States of America, India and elsewhere.

We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to or otherwise decrease the value of our brand, trademarks or service marks. Protecting and enforcing our rights in our domain names may require litigation, which could result in substantial costs and diversion of management’s attention.

Litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Regardless of the validity or the success of the assertion of any claims, we could incur significant costs and diversion of resources in enforcing our intellectual property rights or in defending against such claims, which could have a material adverse effect on our business and results of operations. Our services and products could infringe upon the intellectual property rights of third parties.

Litigation or proceedings before governmental authorities and administrative bodies may be necessary in the future to enforce our intellectual property rights, to protect our patent rights, trademarks, trade secrets, and domain names and to determine the validity and scope of the proprietary rights of others. Our efforts to enforce or protect our proprietary rights may be ineffective and could result in substantial costs and diversion of resources and management time, each of which could substantially harm our operating results.

Other parties, including our competitors, may hold or obtain patents, trademarks, copyright protection or other proprietary rights with respect to their previously developed films, characters, stories, themes and concepts or other entertainment, technology and software or other intellectual property of which we are unaware. In addition, the creative talent that we hire or use in our productions may not own all or any of the intellectual property that they represent they do, which may instead be held by third parties. Consequently, the film content that we produce and distribute or the software and technology we use may infringe the intellectual property rights of third parties, and we frequently have infringement claims asserted against us. Any claims or litigation, justified or not, could be time-consuming and costly, harm our reputation, require us to enter into royalty or licensing arrangements that may not be available on acceptable terms or at all or require us to undertake creative changes to our film content or source alternative content, software or technology. Where it is not possible to do so, claims may prevent us from producing and/or distributing certain film content and/or using certain technology or software in our operations. Any of the foregoing could have a material adverse effect on our business, prospects, financial condition and results of operations.

Our ability to remain competitive may be adversely affected by rapid technological changes and by our inability to access such technology.

The Indian film entertainment industry continues to undergo significant technological developments, including the ongoing transition from film to digital media. We may be unsuccessful in adopting new digital distribution methods or may lose market share to our competitors if the methods that we adopt are not as technologically sound, user-friendly, widely accessible or appealing to consumers as those adopted by our competitors. For example, our on-demand entertainment portal accessible via internet-enabled devices, Eros Now, may not achieve the desired growth rate.

Further, advances in technologies or alternative methods of product delivery or storage, or changes in consumer behavior driven by these or other technologies, could have a negative effect on our home entertainment market in India. If we fail to successfully monetize digital and other emerging technologies, it could have a material adverse effect on our business, prospects, financial condition and results of operations.

Our financial condition and results of operations fluctuate from period to period due to film release schedules and other factors and may not be indicative of results for future periods.

Our financial condition and results of operations for any period fluctuate due to film release schedules in that period, none of which we can predict with reasonable certainty. Theater attendance in India has traditionally been highest during school holidays, national holidays and during festivals, and we typically aim to release big-budget films at these times. This timing of releases also takes account of competitor film releases, Indian Premier League cricket matches, and the timing dictated by the film production process. As a result, our quarterly results can vary from one year to the next, and the results of one quarter are not necessarily indicative of results for the next or any future quarter. Additionally, the distribution window for the theatrical release of films, and the window between the theatrical release and distribution in other channels, have each been compressing in recent years and may continue to change. Further shortening of these periods could adversely impact our revenues if consumers opt to view a film on one distribution platform over another, resulting in the cannibalizing of revenues across distribution platforms. Additionally, because our revenue and operating results are seasonal in nature due to the impact of the timing of new releases, our revenue and operating results may fluctuate from period to period, and which could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.

Our accounting practices and management judgments may accentuate fluctuations in our annual and quarterly operating results and may not be comparable to other film entertainment companies.

For first release film content, we use a stepped method of amortization and a first 12 months amortization rate based on management’s judgment taking into account historic and expected performance, typically amortizing 50% of the capitalized cost for high budget films released during or after the fiscal year 2014, and 40% of the capitalized cost for all other films, in the first 12 months of their initial commercial monetization, and then the balance evenly over the lesser of the term of the rights held by us and nine years. Our management has determined to adjust the first-year amortization rate for high budget films because of the high contribution of theatrical revenue. Similar management judgment taking into account historic and expected performance is used to apply a stepped method of amortization on a quarterly basis within the first 12 months, within the overall parameters of the annual amortization.

Typically, 25% of capitalized cost for high budget films released during or after the fiscal year 2014, and 20% of capitalized cost for all other films, is amortized in the initial quarter of their commercial monetization. In the fiscal year 2009 and the fiscal years prior to 2009, the balance of capitalized film content costs were amortized evenly over a maximum of four years rather than nine. Because management judgment is involved regarding amortization amounts, our amortization practices may not be comparable to other film entertainment companies. In the case of film content that we acquire after its initial monetization, commonly referred to as library, amortization is spread evenly over the lesser of 10 years after our acquisition or our license period. At least annually, we review film and content rights for indications of impairment in accordance with International Accounting Standard (IAS) 36: Impairment of Assets issued by IASB.

Ineffective system of internal control over financial reporting, can reduce our ability to accurately and timely report our financial results or prevent fraud may be adversely affected.

We ceased to qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 on March 31, 2019, and as a result, we are subject to additional requirements under the Sarbanes-Oxley Act (the “SOX Act”), including Section 404(b) of the SOX Act which requires our independent registered public accounting firm to attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting in our annual reports on Form 20-F, starting from annual report for Fiscal Year 2019. As discussed in Item 15. “Controls and Procedures,” upon an evaluation of the effectiveness of the design and operation of our internal controls, we concluded that there were material weaknesses such that our internal controls over financial reporting need to be reviewed and updated, a process that we are currently undertaking.. Although we have instituted remedial measures to address the material weakness identified and will continually review and evaluate our internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will be able to adequately remediate all the existing material weaknesses or not discover additional weaknesses in our internal controls over financial reporting need to be reviewed and updated, a process that we are currently undertaking. Further, management continually improves, simplifies and rationalizes the Company’s internal control framework where possible within the constraints of existing IT systems. However, any additional weaknesses or failure to adequately remediate the existing weakness could materially and adversely affect our financial condition or results of operations.

Our revenue is subject to significant variation based on the timing of certain licenses and contracts we enter into that may account for a large portion of our revenue in the period in which it is completed, which could adversely affect our operating results.

From time to time, we license film content rights to a group of films pursuant to a single license that constitutes a large portion of our revenue for the fiscal year in which the revenue from the license is recognised. The timing and size of such licenses subjects our revenue to uncertainties and variability from period to period, which could adversely affect our operating results. We expect that we will continue to enter into licenses with customers that may represent a significant concentration of our revenues for the applicable period and we cannot guarantee that these revenues will recur.

We have entered into certain related party transactions and may continue to rely on our founders for certain key development and support activities.

We have entered, and may continue to enter, into transactions with related parties. We also rely on the Founders Group, which consists of Beech Investments Limited and Kishore Lulla and associates and enterprises controlled by certain of our directors and key management personnel for certain key development and support activities. While we believe that the Founders Group’s interests are aligned with our own, such transactions may not have been entered into on an arm’s-length basis, and we may have achieved more favourable terms had such transactions been entered into with unrelated parties. If future transactions with related parties are not entered into on an arm’s-length basis, our business may be materially harmed.

Further, because certain members of the Founders Group are controlling shareholders of, or have significant influence on, both us and our related parties, conflicts of interest may arise in relation to dealings between us and our related parties and may not be resolved in our favor. For further information, see “Certain Relationships and Related Party Transactions.”

We may encounter operational and other problems relating to the operations of our subsidiaries, including as a result of restrictions in our current shareholder agreements.

We operate several of our businesses through subsidiaries. Our financial condition and results of operations significantly depend on the performance of our subsidiaries and the income we receive from them. Our business may be adversely affected if our ability to exercise effective control over our non-wholly owned subsidiaries is diminished in any way. Although we control these subsidiaries through direct or indirect ownership of a majority equity interest or the ability to appoint the majority of the directors on the boards of such companies, unanimous board approval is required for major decisions relating to certain of these subsidiaries. To the extent there are disagreements between us and our various minority shareholders regarding the business and operations of our non-wholly owned subsidiaries, we may be unable to resolve them in a manner that will be satisfactory to us. Our minority shareholders may:

Any of these actions could have a material adverse effect on our business, prospects, financial condition and results of operations.

Eros India has entered into shareholder agreements with third-party shareholders of its non-wholly owned subsidiaries, including Big Screen Entertainment Private Limited and a binding term sheet for a joint venture with Colour Yellow Productions Private Limited. These arrangements contain various restrictions on our rights in relation to these entities, including restrictions in relation to the transfer of shares, rights of first refusal, reserved board matters and non-solicitation of employees by us. We may also face operational limitations due to restrictive covenants in such shareholder agreements. In addition, under the terms of our shareholder agreement in relation to Big Screen Entertainment Private Limited, disputes between partners are required to be submitted to arbitration in Mumbai, India. These restrictions in our current shareholder agreements, and any restrictions of a similar or more onerous nature in any new or amended agreements into which we may enter, may limit our control of the relevant subsidiary or our ability to achieve our business objectives, as well as limiting our ability to realize value from our equity interests, any of which could have a material adverse effect on our business, prospects, financial condition and results of operations.

The interests of the other shareholders with respect to the operation of Big Screen Entertainment Private Limited, Colour Yellow Productions Private Limited and Mr. V. Vijayendra Prasad, may not be aligned with our interests. As a result, although we own a majority of the ownership interest in Big Screen Entertainment Private Limited, and 50% of the shareholding of Colour Yellow Productions Private Limited, taking actions that require approval of the minority shareholders (or their representative directors), such as entering into related party transactions, selling material assets and entering into material contracts, may be more difficult to accomplish.

We depend on the services of senior management.

We have, over time, built a strong team of experienced professionals on whom we depend to oversee the operations and growth of our businesses. We believe that our success substantially depends on the experience and expertise of, and the longstanding relationships with key talent and other industry participants built by, our senior management. Any loss of our senior management, any conflict of interest that may arise for such management or the inability to recruit further senior managers could impede our growth by impairing our day-to-day operations and hindering development of our business and our ability to develop, maintain and expand relationships, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

In recent years, we have experienced additions to our senior management team, and our success depends in part on our ability to successfully integrate these new employees into our organization. We anticipate the need to hire additional members in senior management in connection with the expansion of our digital business. While some members of our senior management have entered into employment agreements that contain non-competition and non- solicitation provisions, these agreements may not be enforceable in the Isle of Man, India or the United Kingdom, whose laws govern these agreements or where our members of senior management reside. Even if enforceable, these non-competition and non-solicitation provisions are for limited time periods.

To be successful, we need to attract and retain qualified personnel.

Our success continues to depend to a significant extent on our ability to identify, attract, hire, train and retain qualified professional, creative, technical and managerial personnel. Competition for the caliber of talent required to produce and distribute our films continues to increase. We cannot assure you that we will be successful in identifying, attracting, hiring, training and retaining such personnel in the future. If we were unable to hire, assimilate and retain qualified personnel in the future, such inability would have a material adverse effect on our business and financial condition.

We are currently completing the integration of various supporting modules to an SAP ERP operating system, which could disrupt our business, and our failure to successfully integrate our IT systems across our international operations could result in additional costs and diversion of resources and management attention.

We have completed the accounting portion of the migration in India and significant locations outside India, and are in the process of completing the rest of the migration. For instance, we have not yet integrated supporting modules into the SAP ERP system, such as a module to manage our film library across the globe. This integration and migration may lead to unforeseen complications and expenses, and our failure to efficiently integrate and migrate our IT systems could substantially disrupt our business.

Negative media coverage could adversely affect our business and some viewers or civil society organizations may find our film content objectionable.

We receive a high degree of media coverage around the world. Unfavourable publicity regarding, for example, payments to talent, third-party content providers, publishers, artists, and other copyright owners, our privacy practices, terms of service, service changes, service quality, litigation or regulatory activity, government surveillance, the actions of our advertisers, the actions of our developers, the use of our OTT platform for illicit, objectionable, or illegal ends, the actions of our subscribers, the quality and integrity of content shared on our OTT platform, or the actions of other companies that provide similar services to us, could materially adversely affect our reputation. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of our subscriber base and result in decreased revenue, which could materially adversely affect our business, operating results and financial condition.

Some viewers or civil society organizations in India or other countries may object to film content produced or distributed by us based on religious, political, ideological or any other positions held by such viewers. This applies in particular to content that is graphic in nature, including violent or romantic scenes and films that are politically oriented or targeted at a segment of the film audience. Viewers or civil society organizations, including interest groups, political parties, religious or other organizations may assert legal claims, seek to ban the exhibition of our films, protest against us or our films or object in a variety of other ways. Any of the foregoing could harm our reputation and could have a material adverse effect on our business, prospects, financial condition and results of operations. The film content that we produce and distribute could result in claims being asserted, prosecuted or threatened against us based on a variety of grounds, including defamation, offending religious sentiments, invasion of privacy, negligence, obscenity or facilitating illegal activities, any of which could have a material adverse effect on our business, prospects, financial condition or results of operations.

Our films are required to be certified in India by the Central Board of Film Certification.

Pursuant to the Indian Cinematograph Act, 1952, or the Cinematograph Act, films must be certified for adult viewing or general viewing in India by the Central Board of Film Certification (“CBFC”), which looks at factors such as the interest of sovereignty, integrity and security of the relevant country, friendly relations with foreign states, public order and morality. There may be similar requirements in the United Kingdom, Canada, China and Australia, among other jurisdictions. We may be unable to obtain the desired certification for each of our films and we may have to modify the title, content, characters, storylines, themes or concepts of a given film in order to obtain any certification or a desired certification for broadcast release that will facilitate distribution and monetization of the film. Any modification could result in substantial costs and/or receipt of an undesirable certification could reduce the appeal of any affected film to our target audience and reduce our revenues from that film, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

Litigation and negative claims about us or the Indian film entertainment industry generally could have a material adverse impact on our reputation, our relationship with distributors and co-producers and our business operations.

We and certain of our directors and officers are subject to various legal civil and criminal proceedings in India. As of March 31, 2020, we were subject to certain tax proceedings in India, including service tax claims aggregating to approximately $56 million, value added tax (“VAT”) and sales tax claims aggregating to approximately $3 million for the period between April 1, 2005 to March 31, 2015. As our success in the Indian film industry partially depends on our ability to maintain our brand image and corporate reputation, in particular in relation to our dealings with creative talent, co-producers, distributors and exhibitors, any such proceedings or allegations, public or private, whether or not routine or justified, could tarnish our reputation and cause creative talent, co-producers, distributors and exhibitors not to work with us. See “Business Overview— Litigation” for further details.

In addition, the nature of our business and our reliance on intellectual property and other proprietary rights subjects us to the risk of significant litigation. Litigation, or even the threat of litigation, can be expensive, lengthy and disruptive to normal business operations, and the results of litigation are inherently uncertain and may result in adverse rulings or decisions. We may enter into settlements or be subject to judgments that may, individually or in the aggregate, have a material adverse effect on our business, prospects, financial condition or results of operations.

Our performance in India is linked to the stability of its policies, including taxation policy, and the political situation.

The role of Indian central and state governments in the Indian economy has been and remains significant. Since 1991, India’s government has pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. The rate of economic liberalization could change, and specific laws and policies affecting companies in the media and entertainment sector, foreign investment, currency exchange rates and other matters affecting investment in our securities could change as well. A significant change in India’s economic liberalization and deregulation policies, and in particular, policies in relation to the film industry, could disrupt business and economic conditions in India and thereby affect our business.

Previously, taxes generally were levied on a state-by-state basis for the Indian film industry. However, with effect from July 1, 2017, goods and services tax (“GST”) was implemented in India, which combines taxes and levies by the Government of India and state governments into a unified rate structure, and replaces indirect taxes on goods and services such as central excise duty, service tax, central sales tax, entertainment tax, state value added tax, cess and surcharge and excise that were being collected by the Government of India and state governments. Initially, under the GST regime, movie exhibition fell under the highest tax bracket of 28% (for tickets above 100 rupee). However, with effect from January 1, 2019, the GST rate has been reduced to 12% for tickets under 100 rupee and 18% for tickets above 100 rupees. Further, under the state-by-state tax regime in India, the state governments were levying entertainment tax on the exhibition of films in cinemas, including multiplexes. With the implementation of GST, the entertainment tax levied by the state governments was subsumed under GST. However, certain local government bodies levy local body entertainment tax, in addition to GST, within their state. Any future increases or amendments may affect the overall tax efficiency of companies operating in India and may result in significant additional taxes becoming payable. If, as a result of a particular tax risk materializing, the tax costs associated with certain transactions are greater than anticipated, it could affect the profitability of such transactions.

Separately, there are certain deductions available to film producers for expenditures on production of feature films released during a given year. These tax benefits may be discontinued and impact current and deferred tax liabilities. In addition, the government of India has issued and may continue to issue tariff orders setting ceiling prices for distribution of content on cable television service charges in India.

Other changes in the Indian law and policy environment which may have an impact on our business, results of operations and prospects, to the extent that we are unable to suitably respond to and comply with any such changes in applicable law and policy include the following:

India signed the MLI to implement tax treaty related measures to prevent BEPS on June 7, 2017. On June 25, 2019, India has deposited the instrument of ratification for MLI with OECD along with a list of reservations and notifications. As a result, MLI will enter into force for India on October 1, 2019 and its provisions will have effect on India’s tax treaties from financial year 2020-21 onwards where the other country has also deposited its instrument of ratification with OECD. The interplay between GAAR (under the IT Act) and the modification of the existing tax treaties by way of the MLI remains to be seen.

if certain prescribed thresholds are breached.

Further, if SEP is constituted, attribution shall be restricted to such aforesaid transactions and/or business activities/users in India.

The threshold of payments received and number of users (mentioned in the aforesaid conditions) shall be prescribed by the Central Board of Direct Taxes in due course after which one will be able to gauge the impact of this expansion in the provision.

In addition, unless corresponding modifications to PE rules are made in tax treaties, the existing treaty rules will apply. Accordingly, the above provisions would need to be separately evaluated under the tax treaty scenario.

Further, as per Finance Act, 2020, it is pertinent to note that SEP provisions have been deferred by a year and shall be effective from April 1, 2021.

Our business and financial performance could be adversely affected by unfavourable changes in or applications or interpretations of existing, or the promulgation of new, laws, rules and regulations applicable to us and our business. Such unfavourable changes could decrease demand for our products, increase costs and/or subject us to additional liabilities.

Tax increases could place pricing pressures on cable television service providers and broadcasters, which may, among other things, restrict the ability and willingness of cable television broadcasters in India to pay for content acquisition, including for our films. Any of the foregoing could have a material adverse effect on our business, prospects, financial condition and results of operations.

Natural disasters, epidemics, terrorist attacks and other acts of violence or war could adversely affect the financial markets, result in a loss of business confidence and adversely affect our business, prospects, financial condition and results of operations.

Numerous countries, including India, have experienced community disturbances, strikes, terrorist attacks, riots, epidemics and natural disasters. These acts and occurrences may result in a loss of business confidence and could cause a temporary suspension of our operations, if, for example, local authorities close theaters and could have an adverse effect on the financial markets and economies of India and other countries. Such closures have previously, and could in the future, impact our ability to exhibit our films and have a material adverse effect on our business, prospects, financial condition and results of operations. In addition, travel restrictions as a result of such events may interrupt our marketing and distribution efforts and have an adverse impact on our ability to operate effectively.

Our insurance coverage may be inadequate to satisfy future claims against us.

While we believe that we have adequately insured our operations and property in a way that we believe is customary in the Indian film entertainment industry and in amounts that we believe to be commercially appropriate, we may become subject to liabilities against which we are not adequately insured or against which we cannot be insured, including losses suffered that are not easily quantifiable and cause severe damage to our reputation. Film bonding, which is a customary practice for U.S. film companies, is rarely used in India. Even if a claim is made under an existing insurance policy, due to exclusions and limitations on coverage, we may not be able to successfully assert our claim for any liability or loss under such insurance policy. In addition, in the future, we may not be able to maintain insurance of the types or in the amounts that we deem necessary or adequate or at premiums that we consider appropriate. The occurrence of an event for which we are not adequately or sufficiently insured including any class action litigation, the successful assertion of one or more large claims against us that exceed available insurance coverage, the successful assertion of claims against our co-producers, or changes in our insurance policies could have a material adverse effect on our business, prospects, financial condition and results of operations.

Our Indian subsidiary, Eros India, from which we derive a substantial portion of our revenues, is publicly listed and we may lose our ability to control its activities.

Our Indian subsidiary, Eros India, from which we derive a substantial portion of our revenues, is publicly listed on the Indian stock exchanges. As such, under Indian law, minority stockholders have certain rights and protections against oppression and mismanagement. Further shares of Eros India is pledged to secure indebtedness incurred by Eros India.  To the extent that Eros India is unable to service such indebtedness, or otherwise defaults on its obligations under such indebtedness, the lenders of such indebtedness may exercise certain remedies over such shares, including foreclosing on such shares and selling such shares. As of June 30, 2020, we owned approximately 62.31% of Eros India. Over time, we may lose control over its activities and, consequently, lose our ability to consolidate its revenues.

Dividend distributions by our subsidiaries are subject to certain limitations under local laws, including Indian and UAE law (including laws of Dubai) and other contractual restrictions.

As a holding company, we rely on funds from our subsidiaries to satisfy our obligations. Dividend payments by our subsidiaries, including Eros India, are subject to certain limitations under local laws and restrictive covenants of their borrowing arrangements. For example, under Indian law, dividends are only permitted to be paid out of the profits of the company for that year or out of the profits for any previous financial year after providing for depreciation. UAE law imposes similar limitations on dividend payments. As per the Finance Act 2020, Dividend Distribution Tax (‘DDT’) of 20.56 percent levied on the Indian companies declaring dividend has been abolished with effect from April 1, 2020. Consequently, dividend is taxable in the hands of recipient and there shall be withholding of taxes on such dividends.

The Relationship Agreement with our subsidiaries may not reflect market standard terms that would have resulted from arm’s-length negotiations among unaffiliated third parties and may include terms that may not be obtained from future negotiations with unaffiliated third parties.

The 2009 Relationship Agreement was last renewed with the execution of the 2016 Relationship Agreement between Eros India, Eros Worldwide and us (“Relationship Agreement”). The Relationship Agreement, exclusively assigns to Eros Worldwide, certain intellectual property rights and all distribution rights (including global digital distribution rights) for films (other than Tamil films), held by Eros India and any of its subsidiaries (the “Eros India Group”), in all territories other than India, Nepal, and Bhutan. In return, Eros Worldwide provides a lump sum minimum guaranteed fee to the Eros India Group in a fixed payment equal to 40% of the production cost of such film (including all costs incurred in connection with the acquisition, pre-production, production or post-production of such film), plus an amount equal to 20% thereon as markup. We refer to these payments collectively as the minimum guaranteed fee. Eros Worldwide is also required to reimburse the Eros India Group pre-approved distribution expenses in connection with such film, plus an amount equal to 20% thereon as markup. In addition, 15% of the gross proceeds received by Eros International Group from monetization of such films, after certain amounts are retained by the Eros International Group, are payable over to Eros India Group.

The Relationship Agreement may not reflect terms that would have resulted from arm’s-length negotiations among unaffiliated third parties, and Eros’s future operating results may be negatively affected if it does not receive terms as favourable in future negotiations with unaffiliated third parties. Further, as Eros does not have complete control of Eros India, it may lose control over its activities and, consequently, its ability to ensure its continued performance under the Relationship Agreement.

The transfer pricing arrangements in the Relationship Agreement are not binding on the applicable taxing authorities, and may be subject to scrutiny by such taxing authorities. Accordingly, there may be material and adverse tax consequences if the applicable taxing authorities challenge these arrangements, and they may adjust our income and expenses for tax purposes for both present and prior tax years, and assess interest on the adjusted but unpaid taxes.

Our indebtedness could adversely affect our operations, including our ability to perform our obligations, fund working capital and pay dividends.

As of March 31, 2020, we had $179.4 million of borrowings outstanding of which $117.1 million is repayable within one year. We may also incur substantial additional indebtedness. Our indebtedness could have important consequences, including the following:

If any of these consequences occur, our financial condition, results of operations and ability to pay dividends could be adversely affected. This, in turn, could negatively affect the market price of our A Ordinary Shares, and we may need to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital.

We cannot assure that any refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds that may be realized from those sales, or that additional financing could be obtained on acceptable terms, if at all. For additional information, please see [Note 2(b) and Note 31] to our audited Consolidated Financial Statements appearing elsewhere in this annual report.

Downgrade in our credit ratings could increase our future borrowing costs and adversely affect the availability of new financing.

There can be no assurance that any of our credit ratings will remain unchanged for any given period of time or that a rating will not be lowered if, in that rating agency’s judgment, future circumstances relating to the basis of the rating so warrant. If, among other things, we are unable to maintain our outstanding debt and financial ratios at levels acceptable to the credit rating agencies, if we default on any indebtedness or if our business prospects or financial results deteriorate, our ratings could be downgraded by the rating agencies. Our credit ratings have been subject to change over time, including a downgrade in June 2019 (See Note [2(b)] of our audited consolidated financial statements). We cannot make assurances regarding how long these ratings will remain unchanged or regarding the outcome of the rating agencies future reviews of new or existing indebtedness. Such downgrade by the rating agencies could adversely affect the value of our outstanding securities, our existing debt and our ability to obtain new financing on favorable terms, if at all, and increase our borrowing costs, any of which could have a material adverse effect on business, financial condition and our results of operations.

Our ability to incur debt and the use of our funds could be limited by the restrictive covenants in existing credit facilities as well as the notes and our GBP denominated London Stock Exchange listed bond (“UK Retail Bond”).

Our existing credit facilities as well as the notes and the UK Retail Bond contain restrictive covenants, as well as requirements to comply with certain leverage and other financial maintenance tests. These covenants and requirements could limit our ability to take various actions, including incurring additional debt, guaranteeing indebtedness and engaging in various types of transactions, including mergers, acquisitions and sales of assets. These covenants could place us at a disadvantage compared to some of our competitors, who may have fewer restrictive covenants and may not be required to operate under these restrictions. Further, these covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, mergers and acquisitions or other opportunities.

We may not be able to generate sufficient cash to service all of our Indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful.

Based on interest rates as of March 31, 2020, and assuming no additional borrowings or principal payments on our credit facilities, the UK Retail Bond and the Senior Convertible Notes (as defined below) until their maturities, we would need approximately $117.1 million over the next year, and $62.3 million over the next three years, to meet our principal under our debt agreements. Our ability to satisfy our debt obligations will depend upon, among other things:

There can be no assurance that our business will generate sufficient cash flow from operations, or that we will be able to refinance debt as it comes due or draw under our revolving credit facilities in an amount sufficient to fund our liquidity needs. If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, or seek additional capital. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements may restrict us from adopting some of these alternatives. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. If we are unable to generate sufficient cash flow, refinance our debt on favourable terms or sell additional debt or equity securities or our assets, it could have a material adverse effect on our financial condition and on our ability to make payments on our indebtedness.

Our trade accounts receivables were $101.7 million as at March 31, 2020. If the cash flow, working capital, financial condition or results of operations of our customers deteriorate, they may be unable, or they may otherwise be unwilling, to pay trade account receivables owed to us promptly or at all. In addition, from time to time, we have significant concentrations of credit risk in relation to our trade account receivables as a result of individual theatrical releases, television syndication deals or music licenses. Although we use contractual terms to stagger receipts, de-recognition of financial assets and/or the release or airing of content, as of March 31, 2020, 40.1% of our trade account receivables were represented by our top five debtors, compared to 20.4% as of March 31, 2019. Any substantial defaults or delays by our customers could materially and adversely affect our cash flows, and we could be required to terminate our relationships with customers, which could adversely affect our business, prospects, financial condition and results of operations.

We face risks relating to the international distribution of our films and related products.

We derive a significant percentage of our revenues from customers located outside of India. We derived 71.1% of our revenue in Fiscal Year 2020 from the monetization of our films in territories outside of India. We do not track revenues by geographical region other than based on our Company or customer domicile and not necessarily the country where the rights have been monetized or licensed. As a result, revenue by customer location may not be reflective of the potential of any given market. As a result of changes in the location of our customers, our revenues by customer location may vary year to year.

We are currently growing our presence in China through theatrical and distribution of our films. If we are unsuccessful in the production, distribution and monetization of films not only in India but also in the international markets including China, we may suffer losses and it may materially affect our growth prospects. Several countries around the world impose restrictions on the amount and nature of content that may be distributed in that country. For instance, China has imposed an annual limit on the number of foreign films, as selected by relevant authorities in China, that may be distributed annually on a revenue share basis as determined by box office performance. In addition, in September 2018, China’s film and television regulator, the National Administration of TV and Radio, published proposed regulations that would severely limit the streaming and broadcasting of foreign film and television content in China, further reducing foreign access to the Chinese market.

Our business is subject to risks inherent in international trade, many of which are beyond our control. These risks include:

Events or developments related to these and other risks associated with international trade could adversely affect our revenues from non-Indian sources, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

We may pursue acquisition opportunities, which could subject us to considerable business and financial risk, divert management’s attention and otherwise disrupt our operations and harm our operating results. We may fail to acquire companies whose market power or technology could be important to the future success of our business.

We evaluate potential acquisitions of complementary businesses on an ongoing basis and may from time to time pursue acquisition opportunities. We may in the future seek to acquire or invest in other companies or technologies that we believe could complement or expand our services, enhance our technical capabilities, or otherwise offer growth opportunities. Pursuit of future potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. We may not be successful in identifying acquisition opportunities, assessing the value, strengths and weaknesses of these opportunities or consummating acquisitions on acceptable terms. In addition, we have limited experience acquiring and integrating other businesses. We may be unsuccessful in integrating our recently acquired businesses or any additional business we may acquire in the future, and we may fail to acquire companies whose market power or technology could be important to the future success of our business. Future acquisitions may result in near-term dilution of earnings, including potentially dilutive issuances of equity securities or issuances of debt. Acquisitions may expose us to particular business and financial risks that include, but are not limited to:

In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process. Acquisitions also could result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial condition may suffer.

If we are unable to address the risks associated with acquisitions, or if we encounter expenses, difficulties, complications or delays frequently encountered in connection with the integration of acquired entities and the expansion of operations, we may fail to achieve acquisition synergies and may be required to focus resources on integration of operations rather than on our primary business activities. In addition, future acquisitions could result in potentially dilutive issuances of our A Ordinary Shares, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial condition.

We may require additional capital to support business growth and objectives, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our existing services, expand into additional markets around the world, improve our infrastructure, or acquire complementary businesses and technologies. Accordingly, we may need to engage, and have engaged, in equity and debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing shareholders could suffer additional significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our Ordinary Shares. Any debt financing we secure in the future, including pursuant to the unwind described above, also could contain restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favourable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth, acquire or retain consumers and subscribers, and to respond to business challenges could be significantly impaired, and our business may be harmed.

Risks Related to our A Ordinary Shares

Our A ordinary share price has been and may be highly volatile and, as a result, shareholders could lose a significant portion or all of their investment or we could become subject to securities class action litigation.

Prior to November 12, 2013, our ordinary shares had been admitted on the Alternative Investment Market of the London Stock Exchange (“AIM”) since 2006 and our ‘A’ ordinary shares have been traded on the New York Stock Exchange (“NYSE”) since our initial public offering in 2013. The trading price of our ordinary shares on the NYSE has been highly volatile. Since the listing of our A ordinary shares on the NYSE, the highest closing price of the A ordinary shares, in the period beginning November 12, 2013 and ended June 30, 2020, was $39.01 per share and the lowest price was $1.10 per share. The market price of the A ordinary shares on the NYSE may fluctuate as a result of several factors, including the following:

These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions or interest rate changes may cause the market price of ordinary shares to decline.

In addition, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. A putative securities class action filed in November 2015 has now been dismissed with prejudice, but on June 21, 2019, the Company was named a defendant in two substantially similar putative class action lawsuits filed in federal court in New Jersey by purported shareholders of the Company. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could adversely impact our business and affect the market price of our A ordinary shares.

Additional equity issuances will dilute your holdings, and sales by the Founders Group could adversely affect the market price of our A ordinary shares.

Sales of a large number of our ordinary shares by the Founders Group, as defined in “Part I — Item 4. Information on the Company — C. Organizational Structure” could adversely affect the market price of our A ordinary shares. Similarly, the perception that any such primary or secondary sale may occur; could adversely affect the market price of our A ordinary shares. Any future issuance of our A ordinary shares by us may dilute the holdings of our existing shareholders, causing the market price of our A ordinary shares to decline. In addition, any perception by potential investors that such issuances or sales might occur could also affect the trading price of our A ordinary shares.

The Founders Group, which includes our Chairman, Kishore Lulla, holds a substantial interest in and, through the voting rights afforded to our B ordinary shares and held by the Founders Group, will continue to have the ability to exercise a controlling influence over our business, which will limit your ability to influence corporate matters.

Our B ordinary shares have ten votes per share and our A ordinary shares, which are trading on the NYSE, have one vote per share. As of July 27, 2020, the Founders Group collectively owns 13.4% of our issued share capital in the form of 2,018,189 A ordinary shares, representing 1.3% of the voting power of our outstanding ordinary shares, and 21,700,418 B ordinary shares, representing all of our B ordinary shares and 60.0% of the voting power of our outstanding ordinary shares.

Due to the disparate voting powers attached to our two classes of ordinary shares, the Founders Group continues to have significant influence over management and affairs and over all matters requiring shareholder approval, including our management and policies and the election of our directors and senior management, the approval of lending and investment policies, revenue budgets, capital expenditure, dividend policy, significant corporate transactions, such as a merger or other sale of our company or its assets and strategic acquisitions, for the foreseeable future. In addition, because of this dual class structure, the Founders Group will continue to be able to control all matters submitted to our shareholders for approval.

This concentrated control could delay, defer or prevent a change in control of our Company, impede a merger, consolidation, takeover or other business combination involving our Company, or discourage a potential acquirer from making a tender offer, initiating a potential merger or takeover or otherwise attempting to obtain control of the Company even though other holders of A ordinary shares may view a change in control as beneficial. Many of our directors and senior management also serve as directors of, or are employed by, our affiliated companies, and we cannot guarantee that any conflicts of interest will be resolved in our favor. As a result of these factors, members of the Founders Group may influence our material policies in a manner that could conflict with the interests of our shareholders. As a result, the market price of our A ordinary shares could be adversely affected.

We will continue to incur substantial costs as a result of being a U.S. public company.

We became a U.S. public company in November 2013. As a U.S. public company, we incur significant legal, accounting and other expenses. Being a U.S. public company increased our legal and financial compliance costs and make some activities more time-consuming and costly. In addition it has made it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage in the future. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.

As a foreign private issuer, we are subject to different U.S. securities laws and NYSE governance standards than domestic U.S. issuers. This may afford less protection to holders of our A ordinary shares, and you may not receive corporate and Company information and disclosure that you are accustomed to receiving or in a manner in which you are accustomed to receiving it.

As a foreign private issuer, the rules governing the information that we disclose differ from those governing U.S. corporations pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act. Although we intend to report quarterly financial results and report certain material events, we are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence and our quarterly or current reports may contain less information than required under U.S. filings. In addition, we are exempt from the Section 14 proxy rules, and proxy statements that we distribute will not be subject to review by the SEC. Our exemption from Section 16 rules regarding sales of ordinary shares by insiders means that you will have less data in this regard than shareholders of U.S. companies that are subject to the Securities Exchange Act. As a result, you may not have all the data that you are accustomed to having when making investment decisions. For example, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder with respect to their purchases and sales of our A ordinary shares.

The periodic disclosure required of foreign private issuers is more limited than that required of domestic U.S. issuers and there may therefore be less publicly available information about us than is regularly published by or about U.S. public companies. See “Part I — Item 10. Additional Information — H. Documents on Display.”

As a foreign private issuer, we are exempt from complying with certain corporate governance requirements of the NYSE applicable to a U.S. issuer, including the requirement that a majority of our board of directors consist of independent directors. Although we are in compliance with the current NYSE corporate governance requirements imposed on U.S. issuers, with the exception of our Audit Committee currently having two rather than three members, our charter does not require that we meet these requirements.

As the corporate governance standards applicable to us are different than those applicable to domestic U.S. issuers, you may not have the same protections afforded under U.S. law and the NYSE rules as shareholders of companies that do not have such exemptions. It is also possible that the significant ownership interest of the Founders Group could adversely affect investor perception of our corporate governance.

You may be subject to Indian taxes on income arising through the sale of our A ordinary shares.

The Indian Income Tax Act, 1961 has been amended to provide that income arising directly or indirectly through the sale of a capital asset, including shares of a company incorporated outside of India, will be subject to tax in India, if such shares derive, directly or indirectly, their value substantially from assets located in India, whether or not the seller of such shares has a residence, place of business, business connection, or any other presence in India, if, on the specified date, the value of such assets (i) represents 50% of the value of all assets owned by the company or entity, or and (ii) exceeds the amount of 100 million rupees.

If the Indian tax authorities determine that our A ordinary shares derive their value substantially from assets located in India you may be subject to Indian income taxes on the income arising, directly or indirectly, through the sale of our A ordinary shares. However, the impact of the above indirect transfer provisions would need to be separately evaluated under the tax treaty scenario of the country of which the shareholder is a tax resident. For additional information, see “Part I—Item 10. Additional Information—E. Taxation.”

We are an Isle of Man company and, because judicial precedent regarding the rights of shareholders is more limited under Isle of Man law than under U.S. law, you may have less protection of your shareholder rights than you would under U.S. law.

Our constitution is set out in our memorandum and articles of association, and we are subject to the Isle of Man Companies Act 2006, as amended, — see “Part II — Item 4. Information on the Company — Government Regulations” and Isle of Man common law. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Isle of Man law are to an extent governed by the common law of the Isle of Man. The common law of the Isle of Man is derived in part from comparatively limited judicial precedent in the Isle of Man as well as from English common law, which has persuasive, but not binding, authority on a court in the Isle of Man. The rights of our shareholders and the fiduciary responsibilities of our directors under Isle of Man law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Isle of Man has a less developed body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Isle of Man. Furthermore, shareholders of Isle of Man companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. As a result, shareholders may have more difficulties in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as shareholders of a U.S. company.

Our board of directors may determine that a shareholder meets the criteria of a “prohibited person” and subject such shareholder’s shares to forced divestiture.

Our articles of association permit our board of directors to determine that any person owning shares (directly or beneficially) constitutes a “prohibited person” and is not qualified to own shares if such person is in breach of any law or requirement of any country and, as determined solely by our board of directors, such ownership would cause a pecuniary or tax disadvantage to us, another shareholder or holders of our other securities. If our board of directors determines that a shareholder meets the above criteria of a “prohibited person,” they may direct such shareholder to transfer all A ordinary shares such shareholder owns to another person. Under the provisions of our articles of association, such a determination by our board of directors would be conclusive and binding on such shareholder.

If our board of directors directs such shareholder to transfer all A ordinary shares such shareholder owns, such shareholder may recognize taxable gain or loss on the transfer. See “Part I — Item 10. Additional Information — E. Taxation” for a more detailed description of the tax consequences of a sale or exchange or other taxable disposition of such shareholders A ordinary shares.

Judgments obtained against us by our shareholders may not be enforceable.

We are an Isle of Man company and substantially all of our assets are located outside of the United States. A substantial part of our current operations are conducted in India. In addition, substantially all of our directors and executive officers are nationals and residents of countries other than the United States and we believe that a substantial portion of the assets of these persons may be located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors. Moreover, the courts of India would not automatically enforce judgments of U.S. courts obtained in such actions against us or our directors and officers, or entertain actions brought in India against us or such persons predicated solely upon United States federal securities laws. Further, the U.S. has not been declared by the Government of India to be a reciprocating territory for the purposes of enforcement of foreign judgments, and there are grounds upon which Indian courts may decline to enforce the judgments of United States courts. Some remedies available under the laws of United States jurisdictions, including remedies available under the United States federal securities laws, may not be allowed in Indian courts if contrary to public policy in India. Since judgments of United States courts are not automatically enforceable in India, it may be difficult for you to recover against us or our directors and officers based upon such judgments. There is uncertainty as to whether the courts of the Isle of Man would recognize or enforce judgments of United States courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, there is uncertainty as to whether such Isle of Man courts would be competent to hear original actions brought in the Isle of Man against us or such persons predicated upon the securities laws of the United States or any state.

If securities or industry analysts do not publish research or publish unfavourable or inaccurate research about our business, our share price and trading volume could decline.

The trading market for our A ordinary shares depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We may be unable to sustain coverage by well-regarded securities and industry analysts. If either none or only a limited number of securities or industry analysts maintain coverage of our company, or if these securities or industry analysts are not widely respected within the general investment community, the trading price for our A ordinary shares would be negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who cover us downgrade our A ordinary shares or publish inaccurate or unfavourable research about our business, our share price would likely decline. We have experienced such downgrade from two of our analysts in fiscal year 2016 during the period of anonymous short seller attacks on our stock. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, or fail to maintain a favourable outlook on the company, it may cause investor sentiment to be weak, demand for our A ordinary shares could decrease, which might cause our share price and trading volume to decline.

We do not currently intend to pay dividends on our ordinary shares. Our ability to pay dividends in the future will depend upon satisfaction of the Isle of Man 2006 Companies Act solvency test, future earnings, financial condition, cash flows, working capital requirements and capital expenditures.

We currently intend to retain any future earnings and do not expect to pay dividends on our ordinary shares. The amount of our future dividend payments, if any, will depend upon our satisfaction of the solvency test contained in the 2006 Companies Act, our future earnings, financial condition, cash flows, working capital requirements and capital expenditures. The 2006 Companies Act provides that a company satisfies the solvency test if: (i) it is able to pay its debts as they become due in the normal course of the company’s business: and (ii) the value of the company’s assets exceeds the value of its liabilities. There can be no assurance that we will be able to pay dividends. Additionally, we are restricted by the terms of certain of our current debt financing facilities and may be restricted by the terms of any future debt financings in relation to the payment of dividends.

We may be classified as a passive foreign investment company, or PFIC, under United States tax law, which could result in adverse United States federal income tax consequences to U.S. investors

Based upon the past and projected composition of our income and valuation of our assets, we do not believe we will be a PFIC for our taxable year ending December 31, 2020, and we do not expect to become one in the future, although there can be no assurance in this regard. The determination of whether or not we are a PFIC for any taxable year is made on an annual basis and will depend on the composition of our income and assets from time to time. Specifically, we will be classified as a PFIC for United States federal income tax purposes if either:

The calculation of the value of our assets will be based, in part, on the then market value of our A ordinary shares, which is subject to change. We cannot assure you that we were not a PFIC for the previous taxable years or that we will not be a PFIC for this or any future taxable year. Moreover, the determination of our PFIC status is based on an annual determination that cannot be made until the close of a taxable year and involves extensive factual investigation. This investigation includes ascertaining the fair market value of all of our assets on a quarterly basis and the character of each item of income we earn, which cannot be completed until the close of a taxable year, and, therefore, our U.S. counsel expresses no opinion with respect to our PFIC status.

If we were to be or become classified as a PFIC, a U.S. Holder (as defined in “Part I — Item 10. Additional Information — E. Taxation”) may be subject to burdensome reporting requirements and may incur significantly increased United States income tax on gain recognised on the sale or other disposition of the shares and on the receipt of distributions on the shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules. Further, if we were a PFIC for any year during which a U.S. Holder held our shares, we would continue to be treated as a PFIC for all succeeding years during which such U.S. Holder held our shares. Each U.S. Holder is urged to consult its tax advisors concerning the United States federal income tax consequences of acquiring, holding and disposing of shares if we are or become classified as a PFIC. See “Part I — Item 10. Additional Information — E. Taxation” for a more detailed description of the PFIC rules.

If the fair market value of our ordinary shares fluctuates unpredictably and significantly on a quarterly basis, the social costs we accrue for share-based compensation may fluctuate unpredictably and significantly, which could result in our failing to meet our expectations or investor expectations for quarterly financial performance. This could negatively impact investor sentiment for the Company, and as a result, adversely impact the price of our ordinary shares.

Social costs are payroll taxes associated with employee salaries and benefits, including share-based compensation that we are subject to in various countries in which we operate.

When the fair market value of our ordinary shares increases on a quarter to quarter basis, the accrued expense for social costs will increase, and when the fair market value of ordinary shares falls, the accrued expense will become a reduction in social costs expense, all other things being equal, including the number of vested stock options and exercise price remains constant. The trading price of our A ordinary share price can be highly volatile. See “—Risks Related to our A Ordinary Shares—Our A ordinary share price may be highly volatile and, as a result, shareholders could lose a significant portion or all of their investment or we could become subject to securities class action litigation.” As a result, the accrued expense for social costs may fluctuate unpredictably and significantly, from quarter to quarter, which could result in our failing to meet our expectations or investor expectations for quarterly financial performance. This could negatively impact investor sentiment for the company, and as a result, the price for our ordinary shares.

Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), the U.K. Bribery Act of 2010, as amended (the “U.K. Bribery Act”) and other anti-bribery, anti-corruption and anti-money laundering laws in various jurisdictions around the world. The FCPA, the U.K. Bribery Act and similar applicable laws generally prohibit companies, as well as their officers, directors, employees and third-party intermediaries, business partners and agents, from making improper payments or providing other improper things of value to government officials or other persons. We and our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state owned or affiliated entities and other third parties where we may be held liable for corrupt or other illegal activities, even if we do not explicitly authorize them. While we have policies and procedures and internal controls to address compliance with such laws, we cannot assure you that all of our employees and third-party intermediaries, business partners and agents will not take actions in violation of such policies and laws, for which we may be ultimately held responsible. To the extent that we learn that any of our employees or third-party intermediaries, business partners or agents do not adhere to our policies, procedures or internal controls, we are committed to taking appropriate remedial action. In the event that we believe or have reason to believe that our directors, officers, employees or third-party intermediaries, agents or business partners have or may have violated such laws, we may be required to investigate or to have outside counsel investigate the relevant facts and circumstances. Detecting, investigating and resolving actual or alleged violations can be extensive and require a significant diversion of time, resources and attention from senior management. Any violation of the FCPA, the U.K. Bribery Act or other applicable anti-bribery, anti-corruption and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, and criminal or civil sanctions, penalties and fines, any of which may could adversely affect our business and financial condition.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of our Company

Eros International Plc was incorporated in the Isle of Man as of March 31, 2006 under the Companies Act 1931 commonly known as the 1931 Act — see “Part II — Item 4. Information on the Company — Government Regulations,” as a public company limited by shares. Effective as of September 29, 2011, the Company was de-registered under the 1931 Act and re-registered as a company limited by shares under the Isle of Man, Companies Act 2006 (as amended) commonly referred to as the 2006 Act. We maintain our registered office at First Names House, Victoria Road, Douglas, Isle of Man IM2 4DF, British Isles, our principal executive office in the U.S.A is at 550 County Avenue, Secaucus, New Jersey 07094; and our telephone number is +1(201) 558-9001. We maintain a website at www.erosplc.com. Information contained in our website is not a part of, and is not incorporated by reference into, this annual report.

Our capital expenditures in fiscal 2020 was $265.3 million. Our principal capital expenditures were incurred for the purposes of purchasing intangible film rights and related content. We expect our capital expenditure needs in fiscal 2021 to be in the range of $150 - $160 million, a significant amount of which we expect to be used for the acquisition of further intangible film rights and related content.

B. Business Overview

We are a leading global company in the Indian film entertainment industry that co-produces, acquires and distributes Indian language films in multiple formats worldwide, and operate the largest Indian-content OTT entertainment service network, Eros Now. Founded in 1977, we are one of the oldest companies in the Indian film industry to focus on international markets. Our A Ordinary Shares are listed on the NYSE; symbol “EROS”. We believe we are pioneers in our business. Our success is built on the relationships we have cultivated over more than 40 years with leading talent, production companies, exhibitors and other key participants in our industry. We have aggregated multi-format rights to over 3,000 films in our library, including recent and classic titles that span different genres, budgets and languages.

Eros Now – the Largest Indian-Content OTT Network

We believe Eros Now has the largest Indian language movie content library worldwide with over 12,000 digital titles, out of which approximately 5,000 films are owned in perpetuity. Eros Now also has a deep library of short-form content, including music videos, trailers, original shorts exclusive interviews and marketing shorts. During fiscal year 2020 Eros Now digitally released a total of 630 films in 12 different Indian languages. Over the same period over 8,000 music audio and video files were released on Eros Now as well as over 500 units of short form and Eros Now Originals & Quickie content. Since inception, we have digitally premiered (first ever digital release) over 250 films on the Eros Now platform, and also introduced the concept of theatrical films launching on OTT prior to its satellite premiere, which is a testament to the strength of our platform and breadth and depth of our offering. As of March 31, 2020, Eros Now achieved over 196.8 million registered users across Apps, WAPs and the Eros Now website, and 29.3 million paying subscribers. Eros Now has seen a significant surge across matrices wherein engagement has risen 70%- 100% across daily viewers, time spent and repeat visits in a pre- lockdown to during lock down phase.

Having established over many partnerships and strategic collaborations globally with telecommunications operators, OEMs and streaming services providers, Eros Now is available globally through multiple distribution channels. These partnerships and strategic collaborations include our recent agreement with Apple to make Eros Now content available on all Apple devices in multiple countries outside of India, making Eros Now the first Indian OTT provider collaborating with Apple on such a scale.

Our Distribution Channels

In fiscal year 2020, we released a total of 30 films, including two medium budget films and twenty-eight low budget films. In the fiscal year 2019, we released a total of 72 films, including seven medium budget films and sixty-five low budget films.

We have a multi-platform business model and derive revenues from the following three distribution channels:

For fiscal year 2020, our aggregate revenues were $155.5 million.

Our Competitive Strengths

We believe the following competitive strengths position us as a leading global company in the Indian film entertainment industry.

Leading co-producer and acquirer of new Indian film content, with an extensive film library.

As one of the leading participants in the Indian film entertainment industry, we believe our size, scale and market position will continue contributing to our growth in India and internationally. We have established our size and scale by aggregating a film library of over 3,000 films. We have demonstrated our market position by releasing, internationally or globally, Hindi language films which were among the top grossing films in India in calendar years 2018, 2016, 2015 and 2014. We have released 36 of the top 110 highest grossing box office films in India from 2007 to 2018. We believe that we have strong relationships with the Indian creative community and a reputation for quality productions.

We believe that these factors, along with our worldwide distribution platform, will enable us to continue to attract talent and film projects of a quality that we believe is one of the best in our industry, and build what we believe will continue to be a strong film slate in the coming years with some of the leading actors and production houses with whom we have previously delivered our biggest hits. We believe that the combined strength of our new releases and our extensive film library positions us well to build new strategic relationships.

Largest Indian-content OTT Service Provider Globally

We are the largest Indian-content SVOD OTT service provider globally. Our OTT platform Eros Now has digital rights to over 12,000 films and we are collaborating with leading talents and strategic partners to create new content and expand Eros Now’s digital library. To maximize the reach of Eros Now, we currently have collaborations and partnerships in India and globally with market-leading telecommunications operators, OEMs and digital distribution entities to make available our digital service Eros Now across global audiences. Our partners include, among others, major telecommunications providers such as Airtel, Reliance Jio, Etisalat, Ooredoo, Vodafone and many more as well as streaming service providers such as Amazon Channels, Apple+ Channels, Youtube, Virgin Media, Roku, Sony TV and a plethora of connected devices. We are the first and only Indian-content OTT service provider to collaborate with Apple on a large scale. Furthermore, we have a unique and strategic relationship with Microsoft to further develop and create video technology. We believe that the scale of our digital library and the number of partnerships and collaborations with market leaders make us well positioned to take advantage of the increasing demand for digital entertainment content in India and other parts of the world.

Established, worldwide, multi-channel distribution network with access to China.

We distribute our films to the Indian population in India, the South Asian diaspora worldwide and to non-Indian consumers who view Indian films that are subtitled or dubbed in local languages. Internationally, our distribution network extends to over 50 countries, such as the United States, the United Kingdom and throughout the Middle East, where we distribute films to Indian expatriate populations, and to Germany, Poland, Russia, Romania, Indonesia, Malaysia, Taiwan, Japan, South Korea, China and Arabic and Spanish speaking countries, where we release Indian films that are subtitled or dubbed in local languages.

China is increasingly becoming an important market, and we expect to release selected successful films from our slate for wider release into China. We entered the China market in 2018 by releasing Bajrangi Bhaijaan across more than 8,000 screens, which grossed approximately $45 million at the box office in China since release. We also released Andhadhun in China in April 2019 which collected over $43 million in the Chinese box office in less than four weeks. Our partnership with iQiyi, one of China’s leading online video sites, also gives us direct access to Chinese viewers who have an interest in Indian film content. Furthermore, we are planning the release of our Indo-Chinese co-productions in fiscal 2021 in India, China and the rest of the world.

During Fiscal Year 2020 Eros Now established a digital distribution partnership in China with Wasu Media, a large state-owned culture media group. The Wasu Group is one of the largest comprehensive digital content service providers across interactive TV, 3G / 4G mobile TV and Internet TV in China. Wasu’s services cover approximately 100 cities in 29 provinces in China with cable network as well as covering the three major telecom operators and several million Internet users.

Through this global distribution network, we distribute Indian entertainment content over three primary distribution channels — theatrical, television syndication and digital and ancillary platforms. Our primarily internal distribution network allows us greater control, transparency and flexibility over the regions in which we distribute our films, which we believe results in the direct exploitation of our films without the payment of significant commissions to sub-distributors.

Diversified revenue streams and pre-sale strategies mitigate risk and promote stable cash flow generation.

Our revenue model is diversified by three major distribution channels:

We bundle library titles with new releases to maximize cash flows, and we also utilize a pre-sale strategy to mitigate new production project risks by obtaining contractual commitments to recover a portion of our capitalized film costs through the licensing of television, music and other distribution rights prior to a film’s completion.

Television pre-sales in India are an important factor in enhancing revenue predictability for our business and are part of our diversification strategy to mitigate risks of cash flow generation.

In addition, we further seek to reduce risk to our business by building a diverse film slate, with a mix of films by budget, region and genre that reduces our reliance on “hit films.” This broad-based approach also enables us to bundle old and new titles for our television and digital distribution channels to generate additional revenues long after a film’s theatrical release period is completed. We believe our multi-pronged approach to exploiting content through theatrical, television syndication and digital distribution channels, our pre-sale strategies and our portfolio approach to content sourcing and exploitation mitigates our dependence on any one revenue stream and promotes cash flow generation.

Strong brand with fast-growing international reach

We believe we are a leading brand that is a household name in India. Through our partnerships we are also able to reach the large Indian diaspora globally.

Theatrical Distribution Outside India: Outside India, we distribute our films theatrically through our offices in Dubai, Singapore, the United States, the United Kingdom, Australia and through sub-distributors in other markets. In our international markets, instead of focusing on wide releases, we select a smaller number of theaters that play films targeted at the expatriate South Asian population or the growing international audiences for Indian films. We generally theatrically release subtitled versions of our films internationally on the release date in India, and dubbed versions of films in countries outside India 12-24 weeks after their initial theatrical release in India, sometimes after a long gap.

International Broadcasting Distribution: Outside of India, we license Indian film content to content aggregator to reach cable and pay TV subscriber and for broadcasting on major channels and platforms around the world. We also license dubbed content to Europe, Arabic and Spanish speaking countries and in Southeast Asia and other parts of the world. Often such licenses include not just new releases, but films grouped around the same star, director or genre. International pre-sales of television, music and other distribution rights are an important component of our overall pre-sale strategy. We believe that our international distribution capabilities and large library of content enable us to generate a larger portion of our revenue through international distribution.

Dynamic management of our film library

We have the ability to combine our new release strategy with our library monetization efforts to maximize our revenues. We believe our extensive film library provides us with unique opportunities for content monetization, such as our dedicated Eros content channel carried by various cable companies outside India. Our extensive film library provides us with a reliable source of recurring cash flow after the theatrical release period for a film has ended. In addition, because our film library is large and diversified, we believe that we can more effectively leverage our library in many circumstances by licensing not just single films but multiple films. The existence of high margin library monetization avenues especially in television and digital platforms reduce reliance on theatrical revenues.

Strong and experienced management team with established relationships with key industry participants.

Our management team has substantial industry knowledge and expertise, with a majority of our executive officers and executive directors having been involved in the film, media and entertainment industries for 20 or more years, and has served as a key driver of our strength in content sourcing. In particular, several members of our management team have established personal relationships with leading talent, production companies, exhibitors and other key participants in the Indian film industry, which have been critical to our success. Through their relationships and expertise, our management team has also built our global distribution network, which has allowed us to effectively exploit our content globally.

Our Strategy

Our strategy is driven by the scale and variety of our content and the global exploitation of that content through diversified channels. Specifically, we intend to pursue the following strategies:

Scaling up productions and co-productions to augment our film library and focus on creating original digital content.

We will continue to leverage the longstanding relationships with creative talent, production houses and other key industry participants that we have built since our founding to source a wide variety of content. Our focus will be on investing in future slates comprised of a diverse portfolio mix ranging from high budget global theatrical releases to lower budget movies with targeted audiences. We intend to maintain our focus on films with various budgets and augment our library with quality content for exploitation through our distribution channels and explore new bundling strategies to monetize existing content.

We continue to focus on ramping up our own productions and co-productions through key partnerships. These include our partnership with the acclaimed producer-director, Aanand L Rai (Colour Yellow Production) and our joint venture partnership with screen writer and director V. Vijayendra Prasad. We have also entered into a distribution partnership agreement with Apple to make available Eros Now’s content across Apple devices in multiple countries including India. These strategic partnerships not only help us augment our in-house content production model but also expand our geographical footprint for content monetization.

Our focus is to become a global digital content company. Eros Now has rights to 12,000 films across ten different Indian languages and is rapidly expanding its content base. Eros Now enhances its consumer appeal through exploring dynamic genres to create unseen, relatable and contemporary Originals that appeal to a wide variety of audience. The launch of our Original digital series, comprising a broad mix of genres from comedy to horror and crime thriller, has enjoyed great success to date, with its original series Side Hero, Smoke, Metro Park, Modi and others winning over ten awards across different platforms. In April 2018, Eros Now successfully premiered its first worldwide direct-to-digital original film Meri Nimmo, in association with acclaimed director Aanand L Rai, to positive critical reception. Over the next 12 months, Eros Now is planning to launch an exclusive stable of feature films, made-for-digital originals films and original episodic programs, some including: Flesh by Siddharth Anand; Halahal by Zeishan Qadri; Bhumi by Pavan Kripalani; and a most awaited Season 2 of our well-known series Metro Park.

Eros Now Quickie, an IP that we launched to cater to high quality short form programming with stories that can be told within 80-100 mins and broken down into episodes of 8-10 mins has had fabulous pick up with Tier 2 audiences with IP’s like ‘The Investigation’ and Date gone wrong resonating very well with the youth. We plan to further scale this initiative across regional languages and build this culture with our viewers and subscribers.

Eros Now Prime - is our soon to be launched premium English Service is scheduled to go live in Q2 FY 21. We are excited about our plans to further penetrate the English speaking, higher ARPU market in India, and further leverage and seed this premium programming to regional audiences across the country. We also announced a strategic partnership with NBC Universal earlier this year and are looking to add other studios to our platform.

The digital music industry in India has been growing exponentially over the past few years, with over 25+ million digital audio streaming users. Film music is often marketed and monetized separately from the underlying film, both before and after a film is released. To further capture this market opportunity, we plan to expand our deep music library, which is an essential component to Eros Now’s offering, and to that end have recently established a partnership with YouTube Music in India to further capitalise on the digital music opportunity.

To promote Eros Now, our OTT digital entertainment service platform, as the preferred choice for online entertainment by consumers across digital platforms.

The adoption of 4G is gradually increasing and now 3G and 4G constitute over 75% of the overall wireless internet user base. Initiatives such as broadband rollout and public Wi-Fi as part of the government’s Digital India campaign and the promotion of 4G data packs by leading telecoms will only help boost the quality of digital infrastructure in India.

Eros Now is increasingly focused on offering quality content including Indian films, music and original shows, opening new markets, delivering consumer friendly product features such as offline viewing and subtitles and adopting a platform agnostic distribution strategy across all operating systems and platforms across mobile, tablets, cable or internet, including through deals with OEMs. As of March 31, 2020, Eros Now caters to 29.3 million paying subscribers and has garnered 196.8 million registered users across global digital distribution platforms. While a majority of users are from South Asia, followed by North America and the United Kingdom we get paid subscribers from 150 countries. Out of the 12,000 films that Eros Now has rights to, 5,000 films are owned in perpetuity, across Hindi and regional languages. Eros Now service is integrated with some of India’s major telecommunications providers such as Reliance Jio, Airtel, Vodafone, Idea and BSNL, as well as streaming service providers such as Amazon, Apple, Virgin Media and Roku, and has partnerships with connected devices such as televisions and mobile handsets with companies such as Samsung to distribute in multiple territories. We continue to believe that Eros Now will be a significant player within the OTT online Indian entertainment industry, especially given the rapidly growing internet and mobile penetration within India. We will also continue to expand Eros Now’s reach beyond audiences in India through strategic collaborations such as our partnership with Apple to distribute Eros Now content on all Apple devices in multiple countries outside of India.

Capitalize on positive industry trends driven by roll-out of high speed 4G services in the Indian market.

Driven by the economic expansion within India and the corresponding increase in consumer discretionary spending, FICCI-EY Report 2020 projects that the dynamic Indian media and entertainment industry will grow at a 10.0% CAGR, from INR 1.674 trillion in 2018 to INR 2.416 trillion by 2022, and that the Indian digital media industry will grow at a 23% CAGR over the same period. India is one of the largest and most prolific film markets in the world as measured by output and remains underpenetrated compared to other established cinema markets such as the US and UK. Ticket prices in India remain at lower levels than other cinema markets globally and have room to increase. In fiscal year 2019 the average ticket price amongst the two leading multiplex cinema chains in India, Inox Leisure Limited and PVR Limited, was $2.70, based on information publicly disclosed by them. This compares to average ticket prices in the US of $9.16 during fiscal year 2019.

The Indian television market is the second largest in the world after China, reaching an estimated 175 million television viewers in 2019. The FICCI-EY Report 2020 projects that the Indian television industry will grow from $9.9 billion in 2018 to $11.8 billion in 2022. The growing size of the television industry has led television satellite networks to provide an increasing number of channels, resulting in competition for quality feature films for home viewing in order to attract increased advertising and subscription revenues.

Broadband and mobile platforms present growing digital avenues for content distribution in India. According to a recent Cisco report, India is forecasted to have approximately 907 million internet users by 2023, a large increase from 398 million internet users in 2018. According to a recent EY FICCI report, by 2025 there are expected to be one billion “screens” in India, of which 250 million screens would be television-sized while 750 million would be smart phones. This is expected to result in a continued growth in demand for content – both long form, episodic and short form – as well as provide significant opportunities for content creators currently there are approximately 550 million television and smart phone consumers in India, We aim to take advantage of the opportunities presented by these trends within India to monetize our library and distribute new films through existing and emerging platforms, including by exploring new content options for expanding our digital strategy such as filming exclusive short form content for consumption through emerging channels such as mobile and internet streaming devices.

“Disclaimer: The exceptional circumstances brought about by coronavirus have led to the suspension of FICCI Frames. This report and the forewords were written before this development took place. We are not yet in a position to accurately quantify the deep impact which the coronavirus will have on the media ecosystem and we will come back to the investor community when we are in a better position to articulate the impact with updated future forecasts.”

Further extend the distribution of our content outside of India to new audiences.

We currently distribute our content to consumers in more than 50 countries, including in markets where there is significant demand for subtitled and dubbed Indian themed entertainment, such as Europe and South East Asia, as well as to markets where there is significant concentration of South Asian expatriates, such as the Middle East, the United States and the United Kingdom.

We intend to promote and distribute our films in additional countries, and further expand in countries where we already distribute, when we believe that demand for Indian filmed entertainment exists or the potential for such demand exists. To that end, we have entered into arrangements with local distributors in Taiwan, the Middle East, Japan, South Korea, and China to distribute dubbed or subtitled Eros films through theatrical release, television broadcast or DVD release. The MENA (“Middle East North Africa”) market represents a compelling market opportunity given the consumer trends, attractive demographics and Eros’ historic presence in the market and numerous distribution partnerships including with Etisalat and Ooredoo. Additionally, we believe that the general population growth in India experienced over recent years may eventually lead to increasing migration of Indians to other regions, resulting in increased demand for our films internationally.

Expand our regional Indian content offerings.

We continue to be committed to promoting regional content films and growing the regional movie industry. We will utilize our resources, international reputation and distribution network to continue expanding our non-Hindi content offerings to reach the substantial Indian population whose main language is not Hindi. While Hindi films retain a broad appeal across India, the diversity of languages within India allows us to treat regional language markets as distinct markets where particular regional language films have a strong following.

Our regional language films include Marathi, Malayalam, Punjabi, Kannada and Bengali films. Our Malayalam film Pathemari had won a national award for Best Malayalam Film. We intend to use our existing distribution network across India to distribute regional language films to specific territories. Where opportunities are available and where we have the rights, we also intend to exploit re-make rights to some of our popular Hindi films into non-Hindi language content targeted towards these regional audiences.

Slate Profile

The success of our film distribution business lies in our ability to acquire content. Each year, we focus on co-production, acquisition and distribution of a diverse portfolio of Indian language and themed films that we believe will have a wide audience appeal. Of the 30 films we released in fiscal 2020, eight were Hindi films, one was a Tamil film and twenty-one were regional films. Of the 72 films we released in fiscal year 2019, fifteen were Hindi films, seven was Tamil/Telugu films and fifty were regional films. Our typical annual slate of new releases consists of both Hindi language films as well as films produced specifically for audiences whose main language is not Hindi, primarily Tamil, and to a lesser extent other regional Indian language. Our most expensive films are generally the high and medium budget films (mainly Hindi and a few Tamil and Telugu films) that we release globally each year. The remainder of the films (mainly Hindi but also Tamil and/or Telugu) included in each annual release slate is built around films with various budgets to create a slate that will attract varying segments of the audience. The remainder of the slate consists of Hindi, Tamil, Telugu and other language films of a lower budget.

We focus on content driven films with appropriate budgets in order to generate an attractive rate of return and seek to mitigate the risks associated with film budgets through the use of our extensive pre-sale strategies. We have increased our focus on Tamil and Telugu films for similar reasons. Our Hindi films are typically high or medium budget films in the popular comedy and romance genres, supplemented by lower budget films, and our Tamil films are predominantly star-driven action or comedy films, which appeal to audiences distinct from audiences for more romance-focused Hindi films. We believe that a Tamil or Telugu film and a Hindi film can be released simultaneously on the same date without adversely affecting business for either film as each caters to a different audience.

We also believe that we can capitalize on the demand for regional films and replicate our success with Tamil and Telugu films for other distinct regional language films, including Marathi, Malayalam, Kannada and Punjabi. In addition, the key Indian release dates for films, during school and other holidays, vary by region and therefore our ability to release films on different holidays in various regions, in addition to being able to release films in different regional languages simultaneously, expands the likely periods in which our films can be successfully released. We intend to steadily build up our portfolio of films targeting other regional language markets.

Our Business

Content Development and Sourcing

We currently acquire films using two principal methods — by acquiring rights for films produced by others, generally through a license agreement, and by co-producing films with a production house, typically referred to as a banner, which is usually owned by a top Indian actor, director or writer, on a project-by-project basis. We regularly co-produce and acquire film content from some of the leading banners in India, and continue to focus on ramping up our own productions and co-productions through key partnerships. These partnerships include our partnership with Aanand L Rai (Colour Yellow Productions), which has released a range of films across budgets, genres and languages; and co-production partnership with screen writer and director V. Vijayendra Prasad.

Moreover, we are continuing to focus on expanding the reach of our content by further penetrating the China market, which we believe is a significant market for Indian films, and releasing more dubbed and subtitled content to new markets beyond China. To that end, in April 2019 we released Andhadhun, a dark comedy crime thriller, in China in collaboration with Tang Media Partners, a leading Chinese film distributor. In addition, these strategic partnerships not only help us augment our in-house content production capacity but also expands our geographical canvas for content monetization.

Regardless of the acquisition method, over the past five years, we have typically obtained exclusive global distribution rights in all media for a minimum period of ten to 20 years from the Indian initial theatrical release date, although the term can vary for certain films for which we may only obtain international or only Indian distribution rights, and occasionally soundtrack or other rights are excluded from the rights acquired. For co-produced films, we typically have exclusive distribution rights for at least 20 years, co-own the copyright in such film in perpetuity and, after the exclusive distribution right period, share control over the further exploitation of the film.

We believe producers bring proposed films to us not only because of established relationships, but also because they want to leverage our proven distribution and marketing capabilities. Our in-house creative team also directly develops film ideas and contracts with writers and directors for development purposes. When we originate a film concept internally, we then approach appropriate banners for co-production. Our in-house creative team also participates in the selection of our slate with other members of our management in our analysis focused on the likelihood of the financial success of each project. Our management is extensively involved in the selection of our high budget films in particular.

Regardless of whether a film will be acquired or co-produced, we determine the likely value to us of the rights to be acquired for each film based on a variety of factors, including the stars cast, director, composer, script, estimated budget, genre, track record of the production house, our relationship with the talent and historical results from comparable films. We follow a disciplined green lighting process involving extensive evaluation of films involving track records, revenue potential and costs before green lighting by a committee led by senior management and business leaders. The Company also has risk sharing contracts with talent and key stakeholders to ensure risk diversification. Our primary focus is on sourcing a diversified portfolio of films expected to generate commercial success. We generally co-produce our high budget films and acquire rights to more medium and low budget films. Our model of primarily acquiring or co-producing films rather than investing in significant in-house production capability allows us to work on more than one production with key talent simultaneously. Since the producer or co-producer takes the lead on the time intensive process of production, we are able to scale our film slate more effectively. The following table summarizes the typical terms included in our acquisition and co-production contracts.

Where we acquire film rights, we pay a negotiated fee based on our assessment of the expected value to us of the completed film. Although the timing of our payment of the negotiated fee for an acquired film to its producer varies, typically we pay the producer between 10% and 30% of a film’s negotiated acquisition cost upon signing the acquisition agreement, and the remainder upon delivery of the completed film or in instalments paid between signing and delivery. In addition to the negotiated fee, the producer usually receives a share of the film’s revenue stream after we recoup a distribution fee on all revenues, the entire negotiated fee and distribution costs, including prints and ads. After we sign an acquisition agreement, we do not exercise any control over the production process, although we do retain complete control over the distribution rights we acquire.

For films that we co-produce, in exchange for our commitment to finance typically 100% of the agreed-upon production budget for the film and agreed budget adjustments, we typically share ownership of the intellectual property rights in perpetuity and secure exclusive global distribution rights for all media for at least 20 years. After we recoup our expenses, we and the co-producers share in the proceeds of the exploitation of the intellectual property rights. Pending determination of the actual production cost of the film, we also agree to a pre-determined production fee to compensate the co-producer for his services, which typically ranges from 10%-15% of the total budget. We typically also provide a share of net revenues to our co-producers. Net revenues generally means gross revenues less our distribution fee, distribution cost and the entire amount we have paid as committed financing for production of the film. Our distribution fee varies for each of the co-produced films, but is generally either a continuing 10% to 20% fee on all revenues, or a capped amount that is calculated as a percentage of the committed financing amount for production of the film. In some cases, net revenues also deduct an overhead charge and an amount representing an interest charge on some or all of the committed financing amount. Typically, once we agree with the co-producer on the script, cast and main crew including the director, the budget and expected cash flow through a detailed shooting schedule, the co-producer takes the lead in production and execution. We normally have our executive producer on the film to oversee the project.

We reduce financing risk for both acquired and co-produced films by capping our obligation to pay or advance funds at an agreed-upon amount or budgeted amount. We also frequently reduce financial risk on a film to which we have committed funds by pre-selling rights in that film.

Pre-sales give us advance information about likely cash flows from that particular film product, and accelerate cash flow realizable from that product. Our most common pre-sale transactions are the following:

From time to time we also acquire specific rights to films that have already been released theatrically. We typically do not acquire global all-media rights to such films, but instead license limited rights to distribution channels, like digital, television, audio and home entertainment only, or rights within a certain geographic area. As additional rights to these films become available, we frequently seek to license them as well, and our package of distribution rights in a particular film may therefore vary over time. We work with producers not only to acquire or co-produce new films, but also to license from them other rights they hold that would supplement rights we hold or have previously held related to older films in our library. In certain cases, we may not hold full sequel or re-make rights or may share these rights with our co-producers.

Our Film Library

We currently own or license rights to over 3,000 films, including recent and classic titles that span different genres, budgets and languages. Eros Now has rights to over 12,000 films, out of which around 5,000 films are owned in perpetuity, across Hindi and regional languages from Eros’s internal library as well as third party aggregated content, which we believe makes it one of the largest Indian movie offering platforms around the world. Our film library has been built up over more than 40 years and includes hits from across that time period, including, among others, Pati patni aur who, Andhadhun, Boyz 2, Newton, Munna Michael, Subh Mangal Saavadhan, Ki & Ka, Housefull 3, Dishoom, Baar Baar Dekho, Bajrangi Bhaijaan, Bajirao Mastani, Tanu Weds Manu Returns, NH10, Badlapur, Devdas, Hum Dil De Chuke Sanam, Lage Raho Munna Bhai, Vicky Donor, English Vinglish, and Goliyon Ki Raasleela: Ram-Leela. We have acquired most of our film content through fixed term contracts with third parties, which may be subject to expiration or early termination. We own the rights to the rest of our film content as co-producers or sole producer of those films. Through such acquisition and co-production arrangements, we seek to acquire rights to 40 to 50 additional films each year. While we typically hold rights to exploit our content through various distribution channels, including theatrical, television and new media formats, we may not acquire rights to all distribution channels for our films. In particular, we do not own or license the music rights to a majority of the films in our library. We expect to maintain more than half of the rights we presently own through at least December 31, 2025.

In an effort to reach a wide range of audiences, we maintain rights to a diverse portfolio of films spanning various genres, generations and languages. More than 55% of the films in our Hindi library are films produced in the last 15 years. We own or license rights to films produced in several regional languages, including Tamil, Telugu, Kannada, Marathi, Bengali, Malayalam, Kannada and Punjabi.

We treat our new releases as part of our film library one year from the date of their initial theatrical release. We believe our extensive film library provides us with unique opportunities for content exploitation, such as our dedicated Eros content channel carried by various cable companies outside India. Our extensive film library provides us with a reliable source of recurring cash flow after the theatrical release period for a film has ended. In addition, because our film library is large and diversified, we believe that we can more effectively leverage our library in many circumstances by licensing not just single films but multiple films.

Award winning content/franchise

Our film releases frequently receive awards and accolades. For instance, our Hindi release Newton was selected as India’s official entry for the Best Foreign Film language category at the 2018 Academy Awards. It also received accolades at the Berlin Film Festival. We have won 218 awards in fiscal years 2015, 2016, 2017,2018 and 2019, including Studio of the Year. Some of our films and original digital series from fiscal year 2018 and fiscal 2019 that won awards include Side Hero, Smoke, Mukkabaaz, Newton, Shubh Mangal Savdhaan and Munna Michael. Side Hero won three awards including Best Web Series and Best Actor. Smoke received Best Launch of the Year at The ET Now - Stars of the Industry Awards. Mukkabaaz won three awards including Best Director and Best Actor. Newton won 13 awards including Best International Film. Shubh Mangal Savdhaan won four awards including Marketing Campaign of the Year. Munna Michael won two awards including Best Social Media Marketing Campaign. Our films over the years have won various awards in multiple categories such as Best Film, Best Director, Best Story, Best Actor, Best Music, Best Special Effects awards, and Innovative Launch Campaign of the Year and Best Child Actor awards, to name a few. Bajrangi Bhaijaan won 37 awards including National Award for Popular Film. Bajirao Mastani won over 79 award titles including National Award for Best Director. Tanu Weds Manu Returns won 19 awards including National Award for Best Female Actor in a leading role, Hero won seven awards and Badlapur won seven awards. Our Malayalam film Pathemari had also won a national award for Best Malayalam Film.

Distribution Network and Channels

We distribute film content primarily through the following distribution channels:

We generally monetize each new film we release through an initial 12-month revenue cycle commencing after the film’s theatrical release date. Thereafter, the film becomes part of our film library where we seek to continue to monetize the content through various platforms. The diagram below illustrates a typical distribution timeline through the first 12 months following theatrical release of one of our films.

Film release first cycle timeline

We currently acquire films both for global distribution, which includes the Indian domestic market as well as international markets and for international distribution only.

Certain information regarding our initial distribution rights to films initially released in the three fiscal years 2020, 2019 and 2018 is set forth below:

We distribute content in over 50 countries through our own offices located in key strategic locations across the globe. In response to Indian cinemas’ continued growth in popularity across the world, especially in non-English speaking markets, including Germany, Poland, Russia, Southeast Asia and Arabic speaking countries, we offer dubbed and/or subtitled content in over 25 different languages. In addition to our internal distribution resources, our global distribution network includes relationships with distribution partners, sub-distributors, producers, directors and prominent figures within the Indian film industry and distribution arena.

Theatrical Distribution and Marketing

India Distribution. The Indian theatrical market is comprised of both multiplex and single screen theaters which are 100% digitally equipped. In India, the cost of distributing a digital film print is lower than the cost of distributing a digital film print in the United States. Utilisation of digital film media also provides additional protection against unauthorized copying, which enables us to capture incremental revenue that we believe are at risk of loss through content piracy.

India is divided into 14 geographical regions commonly known as “Film Circuits” or “Film Territories” in the Indian film business. We distribute our content in all of the circuits either through our internal distribution offices (Mumbai, Delhi, East Punjab, Mysore and Bihar) or through sub-distributors in remaining circuits. The Film Circuits where we have direct offices comprise of a market share of up to 75% of the India theatrical revenue. Our primarily internal distribution network allows us greater control, transparency and flexibility over the core regions in which we distribute our films, and allows us to retain a greater portion of revenues per picture as a result of direct exploitation instead of using sub-distributors, which requires the payment of additional fees, sub-distributor margins or revenue shares.

We entered into agreements with certain key multiplex operators to share net box office collections for our theatrical releases with the exhibitor for a predetermined base fee of 50% of net box office collections for the first week, after which the split decreases over time.

We primarily enter into agreements on a film-by-film and exhibitor-by-exhibitor basis. To date, our agreements have been on terms that are no less favourable than the terms of the prior settlement agreements; however, we cannot guarantee such terms can always be obtained.

The largest number of screens in India that we book for a particular film are booked for the first week of theatrical release, because as a substantial portion of box office revenues are collected in the first week of a film’s theatrical exhibition. Our agreements with pan India multiplex operators is such that 100% of the entire first week of our share of revenues from all our films from such multiplexes is paid to us within 10 days of the release.

In single screens we either obtain non-refundable minimum guarantees/refundable advances and a revenue sharing arrangement above the minimum guarantee and with certain smaller multiplex chains we obtain refundable advances and a revenue sharing arrangement.

Pursuant to the Cinematograph Act, Indian films must be certified for adult viewing or general viewing by the CBFC, which looks at factors such as the interest of sovereignty, integrity and security of India, friendly relations with foreign states, public order and morality. Obtaining a desired certification may require us to modify the title, content, characters, storylines, themes or concepts of a given film.

International Distribution. Outside India, we distribute our films theatrically through our offices in Dubai, Singapore, the United States, the United Kingdom, Australia and through sub-distributors in other markets. In our international markets, instead of focusing on wide releases, we select a smaller number of theatres that play films targeted at the expatriate South Asian population or the growing international audiences for Indian films. We generally theatrically release subtitled versions of our films internationally on the release date in India, and dubbed versions of films in countries outside India 12-24 weeks after their initial theatrical release in India sometimes after a long gap.

Marketing. The marketing campaign of a film is an integral part of the overall theatrical distribution strategy. It typically starts before the film goes into production with the marketing campaign peaking closer to the release of the film. Our marketing team creates a 360 degree campaign with specific emphasis across various media platforms, including carrying out public relation campaigns and utilizing print, brand partnerships, music pre-releases, print and outdoor advertising, brand partnerships and marketing on various social media and other digital platforms. Each film campaign is unique and has a strategic, targeted approach based on the genre, talent involved, positioning of the movie, target group and overall strategy. In addition, prior to the release of a film, we introduce various film assets, including posters, teasers, trailers and songs to generate momentum for the release of a film.

Our marketing efforts are primarily managed by employees located in offices across India or in one of our international offices in Dubai, Singapore, the United States, the United Kingdom, and Australia. Occasionally, sub-distributors manage marketing efforts in regions that do not have a dedicated Eros team, using the creative aspects developed by us for our marketing campaigns. Managing marketing locally permits us to more easily identify appropriate local advertising channels and results in more effective and efficient marketing.

Television Distribution

India Distribution. We believe that the increasing television audience in India creates new opportunities for us to license our film content, and expands audience recognition of the Eros name and film products. We license Indian film content (usually a combination of new releases and existing films in our library), to satellite television broadcasters operating in India under agreements that generally allow them to telecast a film over a stated period of time in exchange for a specified license fee. We have, directly or indirectly, licensed content for major Indian television channels such as Colors, Sony, the Star Network and Zee TV.

International Distribution. Outside of India, we license Indian film content to content aggregators to reach cable and pay subscribers and for broadcasting on major channels and platforms around the world. We also license dubbed content to Europe, Arabic-speaking countries and in Southeast Asia and other parts of the world. Often such licenses include not just new releases, but films grouped around the same star, director or genre. International pre-sales of television, music and other distribution rights are an important component of our overall pre-sale strategy. We believe that our international distribution capabilities and large library of content enable us to generate a larger portion of our revenue through international distribution.

Digital Distribution

In addition to our theatrical and television distribution networks, we have a global network for the digital distribution of our content, which consists of full length films, music, music videos, clips and other video content. Through our digital distribution channel, we mainly monetize music assets and distribute movies and other content primarily in IPTV, VOD (including SVOD and DTH) and online internet channels. Our film content is distributed in original language, subtitled into local languages or dubbed, in each case as driven by consumer or regional market preferences. With our large library of content and slate of new releases, we have sought to capitalize on changes in consumer demand through early adoption of new formats and services, which we believe enables us to generate a larger portion of our revenue through digital distribution than the film entertainment industry average in India.

With a significant portion of the Indian and international population moving towards the adoption of digital technology, we are increasing our focus on providing on demand services, although the platforms and strategies differ by region. Outside of India, there is a proliferation of cable, satellite and internet services that we supply. In addition, with the proliferation of internet users, we are increasing our online distribution presence as well. These platforms enable us to continue to monetize a film in our library long after its theatrical release period has ended. In addition, the speed, ease of availability and prices of digital film distribution diminish incentives for unauthorized copying and content piracy.

In North America, we have an agreement with International Networks, a subsidiary of Comcast, to provide an SVOD service fully branded as “Eros Now.” The service is carried on most of the major cable network providers including Comcast, Cox Communications, Cablevision and Time Warner Cable. We provide all programming for this film and music channel and share revenues with the cable providers. We also provide content to Amazon Digital and participate in a revenue share deal. In Canada, we have signed a Program License Agreement for various movies with Rogers Broadcasting Limited. In Europe, we have partnered with My Digital Company (France), ESC Distribution (France) and MT Trading Ug (Germany). To maximize the reach of digital content, we currently have collaborations and partnerships in India and globally with market-leading telecommunications operators, OEMs and digital distribution entities to make available our digital service Eros Now across global audiences. Our partners include, among others, major telecommunications providers such as Airtel, Reliance Jio, Etisalat, Ooredoo, Vodafone and many more as well as streaming service providers such as Amazon Channels, Apple+ Channels, Youtube, Virgin Media, Roku, Sony TV and a plethora of connected devices.

Market opportunity

Domestic: Our distribution capabilities enable us to target a majority of the 1.3 billion people in India. Recently, as demand for regional films and other media has increased in India, our brand recognition in Hindi films has helped us to grow our non-Hindi film business by targeting regional audiences in India and overseas. With our distribution network for Hindi, Tamil and Telugu films, we believe we are well positioned to expand our offering of non-Hindi content.

Overseas: Depending on the film, the distribution rights we acquire may be global, international or India only. Indian films have a global appeal and their popularity has been increasing in many countries that consume dubbed and subtitled foreign content in local languages. These markets include Germany, Poland, Russia, France, Italy, Spain, Indonesia, Malaysia, Japan, South Korea, China, the Middle East and Latin America among others. In all these markets, it is the locals who are neither English nor Hindi speaking who view the content of the Indian film in a dubbed or subtitled version in their language, similar to the manner in which they view Hollywood content. Additionally, there is a large established Indian diaspora in North America which has a strong interest in the content of the Indian film industry. Other international markets that exhibit significant demand for subtitled or dubbed Indian-themed entertainment include Europe and Southeast Asia.

In addition, China is increasingly becoming an important market, and we expect to release select films from our slate for wider release into China. We recently released Andhadhun in China in collaboration with a leading Chinese film distributor Tang Media Partners. In March 2018, we released Bajrangi Bhaijan across more than 8,000 screens, including in China, and collected over $45 million at the box office in China, which we believe indicates a clear interest in Indian films by Chinese movie goers. As part of our strategy to penetrate further into the Chinese market, Eros Now has partnered with iQiyi, one of China’s largest online video sites, through a content licensing arrangement in September 2018, making us the first South Asian OTT platform operator to have direct access to the Chinese market.

Eros Now Market Opportunity: Eros Now is uniquely positioned to benefit from the fast-growing internet and mobile penetration in India. A recent Cisco Annual Internet Report predicts that there will be over 907 million internet users and 966 million mobile users in India by 2023. The adoption of 4G is gradually increasing and now 3G and 4G constitute over 75% of the overall wireless internet user base. Initiatives such as broadband rollout and public Wi-Fi as part of the government’s Digital India campaign and the promotion of 4G data packs by leading telecoms help boost the quality of digital infrastructure in India. We plan to take advantage of this growth and continue to grow Eros Now’s paying user base in India and internationally.

Eros Now

With a significant portion of the Indian and international population moving towards the adoption of digital technology, we are increasing our focus on providing on-demand services via Eros Now, which leverages its extensive digital film and music libraries to stream a wide range of content. Users can access Eros Now through APPs, WAP and the internet in India and around the world. As at March 31, 2020, Eros Now had over 196.8 million registered users and 29.3 million paying users worldwide, compared to 155 million registered users and 18.8 million paying subscribers as of March 31, 2019, representing increases of 27% and 56% respectively. We define paying subscribers to mean any subscriber who has made a valid payment to subscribe to a service that includes Eros Now services as part of a bundle or on a standalone basis, either directly or indirectly through an OEM or mobile telecom provider in any given month, be it through a daily, weekly or monthly billing pack. Eros Now users have demonstrated some of the highest levels of engagement in the India OTT space. According to a published report by Counterpoint, Eros Now users are the most engaged wherein 68% access the platform daily and 59% of Tier 2 and Tier 3 users are in the age group of 24-39 in Tier 2 and Tier 3 cities of India which is the highest amongst all Indian OTT services.

We believe Eros Now has the largest Indian language movie content library worldwide with over 12,000 digital titles, out of which approximately 5,000 films are owned in perpetuity. Eros Now also has a deep library of short-form content, including music videos, trailers, original shorts exclusive interviews and marketing shorts. During fiscal year 2020 Eros Now digitally released a total of 630 films in 12 different Indian languages. Over the same period over 8,000 music audio and video files were released on Eros Now as well as over 500 units of short form and Eros Now Originals & Quickie content. Since inception, we have digitally premiered (first ever digital release) over 250 films on the Eros Now platform, and also introduced the concept of theatrical films launching on OTT prior to its satellite premiere, which is a testament to the strength of our platform and breadth and depth of our offering. As of March 31, 2020, Eros Now achieved over 196.8 million registered users across Apps, WAPs and the Eros Now website, and 29.3 million paying subscribers.

To maximize the reach of Eros Now, we currently have partnerships and strategic collaborations globally with telecommunications operators, OEMs and streaming services providers to offer Eros Now content to their users and subscribers. For instance, we recently announced our arrangement with Apple to make Eros Now available on the new Apple TV app. Eros Now is also available to customers of Reliance Jio, a major Indian mobile network operator owned by Reliance and BSNL, an Indian state-owned telecommunications company in accordance with a recent agreement that we entered into with BSNL, as well as the Malaysia-based Celcom and Maxis Berhad, Mauritius Telecom, Etisalat and Indonesia-based XL Axiata. Under these partnerships, subscribers on these networks gain access to Eros Now’s extensive content including full-length movies and thematically-created playlists along with functions such as multi-language subtitles for movies, music video playlists, regional language filters, video progression and a watch list of titles. In addition, Eros Now has entered the Sri Lankan market through a partnership with Dialog Axiata, Sri Lanka’s premier connectivity provider, and will be available on the Dialog ViU app.

Eros Now is also available in the Apple App Store and Google Play Store for download and can be streamed on any device including Amazon Fire TV stick, All IoS enabled devices and Roku, making the entertainment experience platform agnostic. Eros Now has over 60 distribution partners around the world including Apple TV+, Amazon Channels, Virgin Media, Roku, Etisalat and xfinity.

Eros Now uses advanced technologies in the creation of content, giving each Eros Now original series or episode the same treatment a film receives in terms of detailing required from cinematography to production. In addition, Eros Now uses advanced technologies to allow its users easy manoeuvrability on its platform, including categorization, search ability and stacking of content under different domains.

In September 2019, we announced a ground-breaking commercial partnership with Microsoft with the goal of transforming the content streaming experience for consumers globally. This collaboration will help Eros Now develop a new intuitive online video platform to ensure seamless delivery of content across countries and languages. It will also create a host of new interactive voice offerings for customers including video search experiences, voice search for video content across multiple Indian languages, and create personalized content. This collaboration will help our Eros Now platform enhance and strengthen its reach across globe and increase engagement with consumers.

Eros Now has been increasingly focused on delivering product features to further monetize its growing registered user base. For example, we have launched Eros Now Quickie, a platform where viewers can access quality short stories to further supplement our existing vast digital content library.

The Eros Now platform also partners with leading companies in various industries other than entertainment in an effort to create vertical synergy and attract more users for its content. These companies cover industries including banking and lifestyle. For example, Eros Now has partnerships with three major electronic payment platforms, Paytm, CashKaro and Freecharge, so Eros Now can have access and advertise its services to the users of these payment platforms and its existing viewers can more easily purchase Eros Now content. In addition, Eros Now has partnerships with other brands like Cathay Pacific, Emirates, ICICI Bank, Grofers and a host of other brands.

At Eros Now we have focused on the core of the video technology business actively and will continue to invest in development over the coming years. At. The helm of this initiative is our relationship with Microsoft to develop the next generation video technology backend to deliver language based content to audiences over the world, Our investments in remote villages in India wherein we enable Village Level Entrepreneurs to distribute Eros Now on Internet cards across the country, our relationship with Dolby and being the first partner to introduce Dolby Atmos and Vision on our applications for OTT customers, our strategic relationship with Epic Games and the work being done on Unreal Engine to revolutionize pre-visualization technology based content production.

The Indian audience’s propensity to consume content in local language has been increasing, and in recent times regional films are breaking language barriers as they cross over with dubbed versions to other markets especially the Hindi market. The regional industry also has strong releases in the next year and the market is only expected to expand further. Eros Now is well placed to capitalize on this growth given its strong regional content library and slate of compelling new regional content planned for release over the coming quarters.

Eros Now Originals

Eros Now’s various digital series, comprising a broad mix of genres from comedy to horror and crime thriller, have been well received by its viewers. Eros has a uniquely compelling slate of films and original series scheduled for release over the coming quarters, and we expect this to help drive continued growth in our Eros Now business as well as box-office revenue.

With compelling global concepts and productions in partnership with the best talent available, we believe that Eros Now’s slate of original films and series will appeal to a wide range of audience. Over the next 12 months, Eros Now is planning to launch an exclusive stable of feature films, made-for-digital originals films and original episodic programs, some including: Flesh by Siddharth Anand; Halahal by Zeishan Qadri; Bhumi by Pavan Kripalani; and a most awaited Season 2 of our well-known series Metro Park. Over the past few months, despite the COVID-19 pandemic, we have released several pieces of original content on the Eros Now platform, A Viral Wedding, Metro Park (Quarantine Edition), Date Gone Wrong (Quarantine Edition).

Music

Music is integral to our films, and when we obtain global, all-media rights in our acquired or co-produced films, music rights typically are included. Film music rights are often marketed and monetized separately from the underlying film, both before and after the release of the related films. In addition, we act as a music publisher for third party owned music rights within India. Through our internal resources and network of licensees, we are able to provide our consumers with music content directly, through third party platforms or through licensing deals.

We also exploit the music publishing and master rights we own, which involves directly licensing songs to radio and television channels in India, synchronizing of music content to film, television and advertisers globally, as well as receiving royalties from public performance of these songs when they are played at public events. Ancillary revenues from public performances in India are collected and paid over to us through Novex, which monitors, collects and distributes royalties to its members.

During fiscal year 2020 we announced a transformational alliance between Eros Now and YouTube Music Premium. This was the first time ever, in any geography, that Google/YouTube had partnered with a SVOD OTT player for a joint bundling and marketing opportunity. In addition, Eros Now developed the customer journey to provision access to both products and leveraged our new payment funnel. The campaign was supported by a robust digital marketing push from both sides.

Impact of Covid-19

The COVID-19 pandemic has had, and is likely to continue to have, a severe and unprecedented impact throughout the world. The COVID-19 outbreak and resulting measures taken by the Government of various countries to contain the virus have already significantly affected our business in the first quarter of fiscal year 2021. Measures to prevent its spread, including government-imposed restrictions on social gatherings, have had a significant effect on theatrical exhibition in India and around the world. The content production sector has also been disrupted, resulting in delays in many ongoing productions. These factors are expected to impact future release of content across distribution windows including theatrical, television and digital. The pandemic has had a negative overall impact on our business operations. The continued closure of cinemas in India and around the world for an indefinite period of time has created an unprecedented uncertainty and as a result it is difficult for us to accurately predict operating results and cash flows in near-term.

During the period from March 31st, 2020 to June 30th, 2020, we had several theatrical film releases scheduled in India and overseas, namely ‘Haathi Mere Saathi’ in three languages (Hindi, Tamil and Telugu), ‘Shokuner Lobh’ (Bengali), amongst others. However, under the present circumstances of the COVID-19 pandemic, we have taken the decision to defer the release of these films indefinitely until the situation changes, so that the revenue opportunities from these films can be maximized and improve our cashflows to better serve our commitments to our stakeholders.

The onslaught of the COVID - 19 pandemic has changed the social lives of people across regions and economic sections. While traditional and outdoor mediums of distribution of content, such as cinema theatres, continue to be unavailable; the home consumption mediums, such as television channels and OTT platforms (digital platforms) have gained in popularity and viewership. Going forward, along with our industry peers, we have started to consider changes to various operational and legal aspects of the business, such as project timelines, production costs, schedules, legal commitments etc, in order to adjust to the 'new normal' being presented to the world.

Our OTT platform Eros Now, for which the majority of the content library comprises our own existing content and acquired content, has also started considering innovative ways of updating its existing content libraries. Given the rise in demand for content and increasing online viewership, and the disruption in production of new content, existing content is likely to become more valuable in the future which will benefit us.

We believe, but cannot guarantee, that the cinematic exhibition industry will ultimately rebound and benefit from pent-up social demand for out-of-home entertainment, as government restrictions are lifted and home sheltering subsides. However, the ultimate significance of the pandemic, including the extent of the adverse impact on our financial and operational results, will be dictated by the currently unknowable duration and the effect on the overall economy and of responsive governmental regulations, including shelter-in-place orders of the pandemic and mandated suspension of operations.

Given the above, while the media and entertainment sector is currently grappling with various challenging issues as people strive to return to normalcy, eventually our sector may be amongst the first to recover and continue to provide premium entertainment to consumers around the world.

Intellectual Property

As our revenues are primarily generated from commercial exploitation of our films and other audio and/or audio-visual content, our intellectual property rights are a critical component of our business. Unauthorized use/access of intellectual property, particularly piracy of DVDs and CDs, as well as on-line piracy through unauthorized streaming/downloads, is widespread in India and other countries, and the mechanisms for protecting intellectual property rights in India and such other countries are not as effective as those of the United States and certain other countries. In order to fight against piracy, we participate directly and through industry organizations by way of actions including legal claims against persons/entities who illegally pirate our content. Furthermore, we also deal with piracy issues by promoting and marketing our films to the highest standards in order to ensure maximum viewership and revenues early in its release and shortening the period between the theatrical release of a film and its legitimate availability on DVD and VCD in the market. This is supported by the trend in the Indian market for a significant percentage of a film’s box office receipts to be generated in the first few weeks after release.

Recently, there has been a rapid transition of consumer preference from physical to digital modes of consumption of film and related content via on-line, mobile and digital platforms. This has enabled our OTT platform Eros Now to grow rapidly, which subjects us to competition from other such OTT platforms along with sites offering unauthorized pirated content. In order to tackle this issue of on-line piracy, we have adopted Digital Rights Management technology in order to ensure that our content is protected from unauthorized and illegal access and copying.

Copyright protection in India

The Copyright Act, 1957 (as amended from time to time) (“Copyright Act”), prescribes provisions inter alia relating to registration of copyrights, transfer of ownership and licensing of copyrights and infringement of copyrights and remedies available in that respect. The Copyright Act affords copyright protection to cinematographic films and sound recordings and original literary, dramatic, musical and artistic work. For cinematographic films, copyright is granted for a certain period of time, usually for a period of 60 years from the beginning of the calendar year following the year in which such film is published, subsequent to which the work falls in the public domain and any act of reproduction of such work by any person other than the author would not amount to infringement.

India is a signatory to number of international conventions and treaties that provides for universal provisions for protection and enforcement of copyrights. In addition to above, following the issuance of the International Copyright Order, 1999, subject to certain conditions and exceptions, certain provisions of the Copyright Act apply to nationals of all member states of the World Trade Organization, the Berne Convention and the Universal Copyright Convention.

The Copyright Act was amended in 2012 to allow authors of literary and musical works (which may be included as part of a cinematograph film) to retain the right to receive royalty for the utilization of such work (other than exhibition as part of the cinematograph film in a cinema hall) as mandated by the law.

Although the state governments in India serve as the enforcing authorities of the Copyright Act, the Indian government serves an advisory role in assisting with enforcement of anti-piracy measures.

It is pertinent to note that piracy continues to be one of the major issues affecting the Indian Film Industry with an annual loss of substantial revenues, to the tune of around INR 180 billion every year. In an effort to protect their Intellectual Property rights, filmmakers in India have started getting orders typically known as “John Doe” orders from court which is a pre-infringement injunction remedy provided to protect the intellectual property rights of the creator of artistic works, including movies and songs. We obtain similar protective orders from court for our films and also engage the services of a specialized anti-piracy agency to vigilantly monitor and take down on-line pirated content from our cinematograph films.

Trademark protection in India

We use a number of trademarks in our business, all of which are owned by our subsidiaries. Our Indian subsidiaries currently own over 120 Indian registered trademarks and domain names, which are used in their business, including the registered trademark “Eros,” “Eros International,” “Eros Music,” and “Eros Now.” However, certain of our trademarks used in India are still under the process of registration. The registration of any trademark in India is a time-consuming process, and there can be no assurance as to when any such registration will be granted.

The Trade Marks Act, 1999, (the “Trademarks Act”), governs the registration, acquisition, transfer and infringement of trademarks and remedies available to a registered proprietor or user of a trademark. The registration of a trademark is valid for a period of ten years but can be renewed in accordance with the specified procedure. The registration of certain types of marks is prohibited, including where the mark sought to be registered is not distinctive.

Until recently, to obtain registration of a trademark in multiple countries, an applicant was required to make separate applications in different languages and countries and disburse different fees in the respective countries. However, the Madrid Protocol enables nationals of member countries, including India, to secure protection of trademarks by filing a single application with one fee and in one language in their country of origin.

In lieu of the above, the Trademarks Act was amended by the Trade Marks (Amendment) Act 2010, or (the “Trademarks Amendment Act”). The Trademarks Amendment Act empowers the Registrar of Trade Marks to deal with international applications originating from India as well as those received from the International Bureau and to maintain a record of international registrations. This amendment also removes the discretion of the Registrar of Trademarks to extend the time for filing a notice of opposition of published applications and provides for a uniform time limit of four months in all cases. Further, it simplifies the law relating to transfer of ownership of trademarks by assignment or transmission and brings the law generally in line with international practice. Pursuant to the Madrid Protocol and the Trademarks Amendment Act, we have obtained trademarks in Egypt, the European Community, United Arab Emirates, Australia and the United States.

In order to match the international standards of trademark protection and enforcement, and to speed up the trademark registration process the Trademark Rules, 2002 were replaced by the Trademark Rules, 2017. Some notable amendments were; reduction in the number of application forms; specific concessions in filing fees to Start Ups, Individuals and Small Enterprises; expedited processing of trademark application; registration of sound marks; etc.

Remedies for Infringement in Copyright Act and Trademark Act

The remedies available in the event of infringement under the Copyright Act and the Trademarks Act include civil proceedings for damages, account of profits, injunction and the delivery of the infringing materials to the owner of the right, as well as criminal remedies including imprisonment of the accused and the imposition of fines and seizure of infringing materials.

Competition

The Indian film Industry’s has experienced robust growth over the last few years and the same is changing the competitive landscape. By opening up and relaxing the entry barriers for foreign investments in certain key areas of this industry, including the relaxation norms for the broadcasting sector (DTH, cable networks, internet & OTT Platforms etc.), the Government of India has provided the sector much needed impetus for growth. Several segments of the industry (such as broadcasting, films, sports and gaming) have especially undergone unprecedented advancements on multiple dimensions. The use of the latest technology in all phases of production, digitization and globalization of content, the availability of multiple revenue streams, financial transparency and corporatization have contributed towards the paradigm shift that the Media & Entertainment industry in India has witnessed over the last decade or so.

We believe we were one of the first companies in India to create an integrated business of sourcing new Indian film content through co-productions and acquisitions while building a valuable library of rights in existing content and also distributing Indian film content globally across formats.

Some of our direct competitors, such as Disney, 20th Century Fox Pictures and Viacom Studio 18, have moved towards similar models in addition to their other business lines within the Indian entertainment industry. We also face competition from the direct or indirect presence in India of significant global media companies, including the major Hollywood studios. Disney has acquired 100% of UTV and Viacom Inc. has ownership interests in Viacom Studio 18, while other Hollywood studios, such as News Corporation and Sony, have established local operations in India for film distribution, and have released a limited number of Indian films. Our primary competitors for Indian film content in the markets outside of India are UTV, Fox, Viacom and Yash Raj Films. We believe our experience and understanding of the Indian film market positions us well to compete with new and existing entrants to the Indian media and entertainment sector. Based on gross collections reported by comScore, our market share as an average over the preceding seven calendar years to 2018 is 24% of all theatrically released Indian language films in the United Kingdom and the U.S. Competition within the industry is based on relationships, distribution capabilities, reputation for quality and brand recognition.

Litigation

From time to time, we and our subsidiaries are involved in various lawsuits and legal proceedings that arise in the ordinary course of business. The following discussion summarizes examples of such matters. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Beginning on November 13, 2015, the Company was named a defendant in five substantially similar putative class action lawsuits filed in federal court in New Jersey and New York by purported shareholders of the Company. On May 17, 2016, the putative class actions filed in New Jersey were transferred to the United States District Court for the Southern District of New York where they were subsequently consolidated with the other two actions. The Court-appointed lead plaintiffs filed a single consolidated complaint on July 14, 2016 and amended on October 10, 2016. The amended consolidated complaint alleged that the Company and certain individual defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, but did not assert certain claims that had been asserted in prior complaints. The remaining claims were primarily focused on whether the Company and individual defendants made material misrepresentations concerning the Company’s film library and materially misstated the usage and functionality of Eros Now, our digital OTT entertainment service. On September 25, 2017, the United States District Court for the Southern District of New York entered a Memorandum & Order dismissing the putative class action with prejudice. On October 23, 2017, lead plaintiffs filed a Notice of Appeal. On August 24, 2018, the United States Court of Appeals for the Second Circuit issued a summary order affirming the district court’s earlier dismissal, with prejudice.

On September 29, 2017, the Company filed a lawsuit against Mangrove Partners, Manuel P. Asensio, GeoInvesting, LLC, and other individuals and entities alleging the defendants and other co-conspirators disseminated material false, misleading, and defamatory information about the Company and are engaging in other misconduct that has harmed the Company. On May 31, 2018, the Company filed an amended complaint that added two new defendants and expanded the scope of the Company’s initial allegations. The amended complaint alleges that Mangrove Partners and many of its co-conspirators held substantial short positions in the Company’s stock and profited when its share price declined in response to their multi-year disinformation campaign. The Company seeks damages and injunctive relief for defamation, civil conspiracy, and tortious interference, including but not limited to interference with its customers, producers, distributors, investors, and lenders. On March 12, 2019, the Supreme Court of the State of New York entered a Decision and Order granting defendants’ motions to dismiss. On March 13, 2019, the Company filed a Notice of Appeal. The matter is ongoing.

Beginning on June 21, 2019, the Company was named a defendant in two substantially similar putative class action lawsuits filed in federal court in New Jersey by purported shareholders of the Company. The lawsuits allege that the Company and certain individual defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and/or misleading statements regarding the Company’s accounting for trade receivables. On September 27, 2019, the putative class action filed in California was transferred to the United States District Court for the District of New Jersey.  On April 14, 2020, the three putative class actions were consolidated, and a lead plaintiff was appointed. On July 1, 2020, the court-appointed lead plaintiff filed a consolidated complaint.  The consolidated complaint expands the scope of the allegations.  The Company expects to file a motion to dismiss, which is due August 28, 2020.

Eros India and its subsidiaries are involved in ordinary course government tax audits and assessments, which typically include assessment orders for previous tax years including on account of disallowance of certain claimed deductions.

Eros India and its subsidiaries received show causes notices and assessment order from Service Tax Authorities in India levying amounts to be paid on account of several grounds of non-compliance with the Service Tax Laws. An amount aggregating to $56 million (net of monies paid under protest $1.8 including interest and penalty) for the periods under dispute on account of service tax arising on temporary transfer of copyright services and certain other related matters have been considered contingent. Eros has filed an appeal against the said order before the authorities. Considering the facts and nature of levies and the ad-interim protection for service tax levy for a certain period granted by the Honorable High Court of Mumbai, the Group expects that the final outcome of this matter will be favorable. There is no further update on these matters as preliminary hearing is yet to begin. Accordingly, based on the assessment made after taking appropriate legal advice, no additional liability has been recorded in Group’s consolidated financial statements.

Eros India and its subsidiaries received several assessment orders and demand notices from value added tax and sales tax authorities in India. Several revised orders have been received during the year. Eros has considered an amount equal to $3 million (net of monies paid under protest $0.1 million and including interest and penalty) for the periods under dispute as contingent. Eros has appealed against each of the orders outstanding, and such appeals are pending before relevant tax authorities. Though, uncertainties are inherent in the final outcome of these matters, the Group believes, based on assessment made after taking legal advice, that the final outcome of the matters will be favorable. Accordingly, no additional liability has been recorded in Group’s consolidated financial statements.

Eros India and its subsidiaries received several assessment orders and demand notices from Income Tax Authorities in India. The orders are on account of disallowance of certain expenditures claimed by the Company. Eros has considered an amount equal to $0.1 million for the period under dispute as contingent. Eros has contested the said cases and believes that there will not be any significant liability on the group as the misstatements were bonafide and without any wrongful intentions and do not invite penalty. However, uncertainties are inherent in the final outcome of these matters and hence, after taking appropriate legal advice, group has considered the amount as contingent liability.

Eros India is also named in various lawsuits challenging its ownership of some of its intellectual property or its ability to distribute these films in India. A number of these lawsuits seek injunctive relief restraining Eros from releasing or otherwise exploiting various films, including Bhoot Returns, Goliyon Ki Rasleela-Ram-Leela, Munna Michael, Heer Ranjha (Ishak Di Misal), Sarkar 3, Bajrangi Bhaijaan, Welcome Back, and Housefull 2.

In India, private citizens are permitted to initiate criminal complaints against companies and other individuals by filing complaints or initiating proceedings with the police. Eros and certain executives have been named in certain criminal complaints from time to time.

If, as a result of such complaints, criminal proceedings are initiated by the relevant authorities in India and the Company or any of its executives are found guilty in such criminal proceedings, our executives could be subject to imprisonment as well as monetary penalties. We believe the claims brought to date are without merit and we intend to defend them vigorously.

For instance, in relation to the film Goliyon Ki Rasleela-Ram-Leela, certain civil proceedings had been initiated in various local courts in India in and around November 2013, alleging that this film disrespected religious sensibilities and seeking to restrain its release or seeking directions for a review of its film certification. We have contested such claims in the local courts as well as by way of petitions filed by us before the Supreme Court of India. While hearings continue in some of these proceedings are pending, we have obtained stay orders in our favor from the Supreme Court of India as well as certain of the local courts where such proceedings are being heard. This film was released in November 2013.

Government Regulations

The following description is a summary of various sector-specific laws and regulations applicable to Eros.

Material Isle of Man Regulations

Companies Regime. The Isle of Man is an internally self-governing dependent territory of the British Crown. It is politically and constitutionally separate from the United Kingdom and has its own legal system and jurisprudence based on English common law principles.

Isle of Man company law is largely based on that of England and Wales. There are two separate codes of company law, embodied in the Companies Acts of 1931-2004 (commonly referred to as the 1931 Act as the principal Act is the Companies Act 1931) and the Companies Act 2006 (commonly referred to as the 2006 Act), respectively. Our Company was incorporated on March 31, 2006 under the 1931 Act. Effective September 29, 2011, it re-registered as a company incorporated under the 2006 Act.

The 2006 Act updates and modernizes Isle of Man company law by introducing a new simplified corporate vehicle into Isle of Man law. The new corporate vehicle follows the international business company model available in a number of other jurisdictions. Companies incorporated or re-registered under the 2006 Act are governed solely by its provisions and, except in relation to liquidation and receivership, are not subject to the provisions of the 1931 Act. The following are some of the key characteristics of companies incorporated under the 2006 Act:

Share Capital. Under the 2006 Act, there is no longer the concept of authorized capital. Therefore, shares may be issued with or without par value.

Dividends, Redemptions and Buy-Backs. Subject to compliance with the memorandum and articles of association, the 2006 Act allows a company to declare and pay dividends, and to purchase, redeem or otherwise acquire its own shares subject only to meeting a solvency test set out in the 2006 Act. A company satisfies the solvency test if: (i) it is able to pay its debts as they become due in the normal course of business: and (ii) the value of the company’s assets exceeds the value of its liabilities.

Capacity and Powers. Companies incorporated under the 2006 Act have separate legal personality and perpetual existence. In addition, such companies have unlimited capacity to carry on or undertake any business or activity; this is so regardless of corporate benefit and regardless of whether or not it is in the best interests of the company to do so.

The 2006 Act specifically states that no corporate act is beyond the capacity of a company incorporated under the 2006 Act by reason only of the fact that the relevant company has purported to restrict its capacity in any way in its memorandum or articles or otherwise. A person who deals in good faith with a company incorporated under the 2006 Act is entitled to assume that the directors of the company are acting without limitation.

Miscellaneous. In addition to the foregoing, the following other points should be noted in relation to companies incorporated under the 2006 Act:

Exchange Controls

No foreign exchange control regulations are in existence in the Isle of Man in relation to the exchange or remittance of sterling or any other currency from the Isle of Man and no authorizations, approvals or consents will be required from any authority in the Isle of Man in relation to the exchange and remittance of sterling and any other currency whether awarded by reason of a judgment or otherwise falling due and having been paid in the Isle of Man.

Material Indian Regulations

We are subject to other Indian and International regulations which may impact our business. In particular, the following regulations have a significant impact on our business.

Notification of Industry Status.

Prior to 1998, the lack of industry status barred legitimate financial institutions and private investors from financing films. However, on May 10, 1998, the Indian film industry was conferred industry status by a press release issued by the Minister of Information and Broadcasting (MIB).

Foreign direct investment (FDI) in indian media and entertainment industry

Through the liberalization of the foreign exchange regulations, the Government of India has allowed 100 percent FDI in the film sector. For the purposes of FDI, film sector broadly covers film production, exhibition, and distribution, including related services and products. FDI in the sector is permitted without any prior approval from Government of India.

However, according to the recent amendments made by the Government of India in the FDI Policy, any entity situated in or a citizen of any country sharing a land border with India, including but not limited to China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan, shall be required to get a prior approval from the Government of India for making any investment(s) in any entity in India (“Government Route”). This has been done to prevent any opportunistic takeover of any domestic firms amid the ongoing COVID-19 pandemic.

Film Certification. The Cinematograph Act authorizes the Central Board of Film Certification (CBFC), in accordance with the Cinematograph (Certification) Rules, 1983, or the Certification Rules, for sanctioning films for public exhibition in India. Under the Certification Rules, the producer of a film/person exhibiting the film is required to apply in the specified format for certification of such film, with the prescribed fee. The film is examined by an examining committee, which determines whether the film:

A film will not be certified for public exhibition if, in the opinion of the CBFC, the film or any part of it is against the interests of the sovereignty, integrity or security of India, friendly relations with foreign states, public order, decency or morality, or involves defamation or contempt of court or is likely to incite the commission of any offence. Any applicant, if aggrieved by any order of the CBFC either refusing to grant a certificate or granting a certificate that restricts exhibition to certain persons only, may appeal to the Film Certification Appellate Tribunal constituted by the Central Government in India under the Cinematograph Act.

A certificate granted or an order refusing to grant a certificate in respect of any film is published in the Official Gazette of India and is valid throughout India for ten years from the date of grant. Films certified for public exhibition may be re-examined by the CBFC if any complaint is received. Pursuant to grant of a certificate, film advertisements must indicate that the film has been certified for such public exhibition.

The Central Government in India may issue directions to licensees of cinemas generally or to any licensee in particular for the purpose of regulating the exhibition of films, so that scientific films, films intended for educational purposes, films dealing with news and current events, documentary films or indigenous films secure an adequate opportunity of being exhibited.

The Central Government in India, acting through local authorities, may order suspension of exhibition of a film, if it is of the opinion that any film being publicly exhibited is likely to cause a breach of peace. Failure to comply with the Cinematograph Act may attract imprisonment and/or monetary fines.

Separately, the Cable Television Networks Rules, 1994 require that no film or film song, promotional material, trailer or film music video, album or their promotional materials, whether produced in India or abroad, shall be carried through cable services unless it has been certified by the CBFC as suitable for unrestricted public exhibition in India.

There are several draft bills proposing to replace and/or amend the Cinematograph Act which are awaiting approval.

Insolvency and Bankruptcy Code, 2016. An act to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India.

Financing. In October 2000, the Ministry of Finance, GOI notified the film industry as an industrial concern in terms of the Industrial Development Bank of India Act, 1964, pursuant to which loans and advances to industrial concerns became available to the film industry. The Reserve Bank of India, or the RBI, by circular dated May 14, 2001, permitted commercial banks to finance up to 50.0% of total production cost of a film. Further, by an RBI circular dated June 8, 2002, bank financing is now available even where total film production cost exceeds approximately $1.6 million. Banks which finance film productions customarily require borrowers to assign the film’s intellectual property or music audio/video/CDs/DVDs/internet, satellite, channel, export/international rights as part of the security for the loan, such that the banks would have a right in negotiation of valuation of such intellectual property rights.

Labour Laws. Depending on the nature of work and number of workers employed at any workplace, various labour related legislations may apply. Certain significant provisions of such labour related laws are provided herewith. The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, or the EPF Act, applies to factories employing 20 or more employees and such other establishments as notified by the Government from time to time. It requires all such establishments to be registered with the relevant Provident Fund Commissioner. Also, such employers are required to contribute to the employees’ provident fund the prescribed percentage of the basic wages and certain cash benefits payable to employees. Employees are also required to make equal contributions to the fund. A monthly return is required to be submitted to the relevant Provident Fund Commissioner in addition to the maintenance of registers by employers.

Competition Act. The Competition Act, 2002, or the Competition Act, prohibits practices that could have an appreciable adverse effect on competition in India. Under the Competition Act, any arrangement, understanding or action, whether formal or informal, which causes or is likely to cause an appreciable adverse effect on competition in India is void. Any agreement among competitors which directly or indirectly determines purchase or sale prices, results in bid rigging or collusive bidding, limits or controls production, supply, markets, technical development, investment or the provision of services, or shares the market or source of production or provision of services in any manner, including by way of allocation of geographical area or types of goods or services or number of customers in the market, is presumed to have an appreciable adverse effect on competition. Further, the Competition Act prohibits the abuse of a dominant position by any enterprise either directly or indirectly, including by way of unfair or discriminatory pricing or conditions in the sale of goods or services, using a dominant position in one relevant market to enter into, or protect, another relevant market, and denial of market access. Further, acquisitions, mergers and amalgamations which exceed certain revenue and asset thresholds require prior approval by the Competition Commission of India.

Under the Competition Act, the Competition Commission has powers to pass directions/impose penalties in cases of anti-competitive agreements, abuse of dominant position and combinations which are not in compliance with the Competition Act. If there is a continuing non-compliance the person may be punishable with imprisonment for a term extending up to three years or with a fine or with both as the Chief Metropolitan Magistrate, Delhi may deem fit. In case of offences committed by companies, the persons responsible to the company for the conduct of the business of the company will be liable under the Competition Act, except when the offense was committed without their knowledge or when they had exercised due diligence to prevent it. Where the contravention committed by the company took place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such person is liable to be punished.

The Competition Act also provides that the Competition Commission has the jurisdiction to inquire into and pass orders in relation to an anti-competitive agreement, abuse of dominant position or a combination, which even though entered into, arising or taking place outside India or signed between one or more non-Indian parties, but causes or is likely to cause an appreciable adverse effect in the relevant market in India. The Competition Act was amended in 2009, and cases which were pending before the Monopolies and Restrictive Trade Practice Commission were transferred to the Competition Commission of India.

Indian Takeover Regulations. The SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 came into effect on October 22, 2011, which was last amended on August 14, 2017, superseding the earlier takeover regulations. The Takeover Regulations provide the process, timing and disclosure requirements for a public announcement of an open offer in India and the applicable pricing norms.

Pursuant to the Takeover Regulations, a requirement to make a mandatory open offer by an “acquirer” (together with persons acting in concert with it) for at least 26% of the total shares of the Indian listed company, to all shareholders of such company (excluding the acquirer, persons acting in concert with it and the parties to any underlying agreement including persons deemed to be acting in concert) is triggered, subject to certain exemptions including transfers between promoters, if an acquirer acquires shares or voting rights in the Indian listed company, which together with its existing holdings and those of any persons acting in concert with him entitle the acquirer and persons acting in concert to exercise 25% or more of the voting rights in the Indian listed company; or an acquirer that holds between 25% and the maximum permissible non-public shareholding of an Indian listed company, acquires additional voting rights of more than 5% during a financial year; or an acquirer acquires, directly or indirectly, control over an Indian listed company, irrespective of acquisition of shares or voting rights in the Indian listed company.

An acquisition of shares or voting rights in, or control over, any company that would enable a person to exercise or direct the exercise of such percentage of voting rights in, or control over, an Indian listed company, the acquisition of which would otherwise attract the obligation to make an open offer under the Takeover Regulations will also trigger a mandatory open offer under the Takeover Regulations. Where the primary target of the acquisition is an overseas parent of an Indian listed company and the Indian listed company represents over 80% of a specified materiality parameter (including asset value, revenue or market capitalization) of the overseas parent company, such acquisition would be treated as a “direct acquisition” of the Indian listed company.

Indian Companies Act. A majority of the provisions of the Companies Act, 2013 read with Companies (Amendment) Act 2017, bringing into effect significant changes to the Indian company law framework, such as in the provisions related to issue of capital, disclosures, corporate governance norms, audit matters, and related party transactions. The Companies Act, 2013 has also introduced additional requirements which do not have equivalents under the Companies Act, 1956, including the introduction of a provision allowing the initiation of class action suits in India against companies by shareholders or depositors, a restriction on investment by an Indian company through more than two layers of subsidiary investment companies (subject to certain permitted exceptions), and prohibitions on advances to directors. Indian companies with net worth, turnover or net profits of INR 5,000 million or higher during any financial year are also required to spend 2% of their average net profits during the three immediately preceding financial years on activities pertaining to corporate social responsibility. Further, the Companies Act, 2013 imposes greater monetary and other liability on Indian companies, their directors and officers in default, for any non-compliance.

Differences in Corporate Law

The following chart summarizes certain material differences between the rights of holders of our A ordinary shares and the rights of holders of the common stock of a typical corporation incorporated under the laws of the State of Delaware that result from differences in governing documents and the laws of Isle of Man and Delaware.

Changes in Capital

The conditions in our articles of association governing changes in capital are not more stringent than as required under the 2006 Act. Our articles of association provide that our directors may, by resolution, alter our share capital. The 2006 Act subjects any reduction of share capital to the statutory solvency test. The 2006 Act provides that a company satisfies the solvency test if it is able to pay its debts as they become due in the normal course of the company’s business and where the value of the company’s assets exceeds the value of its liabilities.

C. Organizational Structure

We conduct our global operations through our Indian and international subsidiaries, including our majority-owned subsidiary Eros International Media Limited, or Eros India, a public company incorporated in India and listed on the BSE Limited and National Stock Exchange of India Limited, or the Indian Stock Exchanges. Our agent for service of process in the United States is Prem Parameswaran, located at 550 County Avenue, Secaucus, New Jersey.

As of July 27, 2020, the Founders Group holds approximately 13.4% of our issued share capital, which comprise all of our B ordinary shares and certain A ordinary shares. Beech Investments Limited, a company incorporated in the Isle of Man, is owned by discretionary trusts that include Eros director Kishore Lulla as a potential beneficiary.

The following diagram summarizes the corporate structure of our consolidated group of companies as of July 27, 2020:

Eros Organizational Chart (as of July 27, 2020)

D. Property and Equipment

Our properties consist primarily of studios, office facilities, warehouses and distribution offices, most of which are located in Mumbai, India. We own our corporate and registered offices in Mumbai and rent our remaining properties in India. Four of these leased properties are owned by members of the Lulla family. The leases with the Lulla family were entered into at what we believe were market rates. See “Part I. — Item 7. Major Shareholders and Related Party Transactions” and “Part I — Item 3. Key Information — D. Risk Factors. We have entered into certain related party transactions and may continue to rely on our founders for certain key development and support activities.” We also own or lease five properties in the United Kingdom, the United States and Dubai in connection with our international operations outside of India. Property and equipment with a net carrying amount of approximately $8.2 million (2019: $6.7 million) have been pledged to secure borrowings, and we currently do not have any significant plans to construct new properties or expand or improve our existing properties.

The following table provides detail regarding our properties in India and globally.

(1) Leased directly or indirectly from a member of the Lulla family.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Operating Results

You should read the information contained in the table below in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this annual report. The tables set forth below with our results of operations and period over period comparisons are not adjusted for the fluctuations in exchange rates described in “Part I — Item 3. Key Information — A. Selected Financial Data.”

OUTLOOK

Our primary revenue streams are derived from three channels: theatrical, television syndication and digital and ancillary. For the fiscal year 2020, the aggregate revenues from theatrical, television syndication and digital and ancillary were $10.6 million, $7.1 million and $137.8 million, respectively. For the fiscal year 2019, the aggregate revenues from theatrical, television syndication and digital and ancillary were $69.5 million, $77.5 million and $123.1 million, respectively.

The contribution from these three distribution channels can fluctuate year over year and period over period based on, among other things, our mix of films and budget levels, the size of our television syndication deals, the growth of the user base of our Eros Now OTT platform and other factors:

We also believe China to be a significant market opportunity and currently growing our presence in China through theatrical and distribution of our films. According to the PwC Global Entertainment & Media Outlook 2019 China was the world’s second largest box-office market with revenue of $11.0 billion in 2019. In March 2018, we released Bajrangi Bhaijan across more than 8,000 screens, including in China, and collected over $45 million at the box office in China since its release, which we believe indicates a clear interest in Indian films by Chinese movie goers. We have also entered into film co-production arrangements with several well-established Chinese film companies and we also released Andhadhun in China in April 2019 which collected over $43 million in the Chinese box office in less than four weeks.

In addition to our global expansion, we expect to increase the number of Tamil and Telugu global releases in our film mix, which will allow us to expand our audience within significant regional markets in India. As we expand into other regional languages such as Marathi, Bengali, Punjabi and Malayalam, we may see the composition of our film mix changing over time in order to allow us to successfully scale our business around Hindi as well as regional language content. At the same time, the distribution window for the theatrical release of films, and the window between the theatrical release and distribution in other channels, have each been compressing in recent years and may continue to evolve due to the growing importance of digital distribution.

Eros Now has been increasingly focused on delivering product features to further monetize its growing registered user base. For example, we recently launched Eros Now Quickie, a platform where viewers can access quality short stories to further supplement our existing vast digital content library. During fiscal year 2020 we announced a transformational alliance between Eros Now and YouTube Music Premium. This was the first time ever, in any geography, that Google/YouTube had partnered with a SVOD OTT player for a joint bundling and marketing opportunity. In addition, Eros Now developed the customer journey to provision access to both products and leveraged our new payment funnel. The campaign was supported by a robust digital marketing push from both sides.

Ancillary revenues also include all other revenues that are not theatrical or television, including licensing to airlines and cable operators, as well as provisioning of VFX (visual special effects) support to customers.

We expect that our costs associated with the co-production and acquisition of film and digital original content are likely to increase over time as we continue to focus on making content-driven films and originals with appropriate budgets in order to generate an attractive rate of return. In addition, increased competition in the Indian film entertainment industry, including from international film entertainment providers, is likely to cause the cost of film production and acquisition to increase.

In fiscal year 2020, we invested $265.3 million (of which cash outflow is $132.2 million) in film content and fiscal year 2021, we expect to invest approximately $150 to $160 million in film content.

We anticipate our administrative costs will increase as we expand our management team, especially to support the expansion of our digital businesses. Although aggregate spending will increase, we do not anticipate that this will result in a material change in aggregate administrative costs as a percentage of revenue.

Going forward, along with our industry peers, we have started to consider changes to various operational and legal aspects of the business, such as project timelines, production costs, schedules, legal commitments etc, in order to adapt to changes and disruptions caused by the COVID-19 pandemic to our industry. Our OTT platform Eros Now, for which the majority of the content library comprises our own existing content and acquired content, has also started considering innovative ways of updating its existing content libraries. Given the rise in demand for content and increasing online viewership, and the disruption in production of new content, existing content is likely to become more valuable in the future which will benefit us.

We believe, but cannot guarantee, that the cinematic exhibition industry will ultimately rebound and benefit from pent-up social demand for out-of-home entertainment, as government restrictions are lifted and home sheltering subsides. However, the ultimate significance of the pandemic, including the extent of the adverse impact on our financial and operational results, will be dictated by the currently unknowable duration and the effect on the overall economy and of responsive governmental regulations, including shelter-in-place orders of the pandemic and mandated suspension of operations.

During the period from March 31^st, 2020 to June 30^th, 2020, we had several theatrical film releases scheduled in India and overseas, namely ‘Haathi Mere Saathi’ in three languages (Hindi, Tamil and Telugu), ‘Roam Rome Mein’ (Hindi) and ‘Shokuner Lobh’ (Bengali) amongst others. However, under the present circumstances of the COVID-19 pandemic, we have taken the decision to defer the release of these films indefinitely until the situation changes, so that the revenue opportunities from these films can be maximized and improve our cashflows to better serve our commitments to our stakeholders.

SIGNIFICANT ACCOUNTING POLICIES

Overall considerations

The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarized below. Financial statements are subject to the application of significant accounting estimates and judgments. These are summarized in Note 37.

Significant new accounting pronouncements

Adoption of IFRS 16, "Leases"

On April 1, 2019, the Group adopted New accounting standard IFRS 16, "Leases". which specifies how to recognize, measure, present and disclose leases. The standard provides a single accounting model, requiring the recognition of assets and liabilities for all major leases previously classified as “operating leases”.

The Company applied the “Modified Retrospective Approach” on the date of initial application (April 1, 2019) and made cumulative adjustments to retained earnings. Accordingly, comparatives for the year ended March 31, 2019 have not been retrospectively adjusted.

As such the Company recognizes a lease liability and a corresponding right of use asset, at the lease commencement date. The right-of-use asset is initially measured at cost, based on the initial amount of the lease liability. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term includes periods covered by an option to extend if the Company is reasonably certain to exercise that option. In addition, the right-of-use asset is periodically adjusted for certain re-measurements of the lease liability. There is no impact on transition in opening balance of retained earnings as at April 1, 2019 because of the transition method applied. Further comparatives were not restated.

Basis of consolidation

The consolidated financial statements of the Group consolidates results of the Company and entities controlled by the Company and its subsidiary undertakings. The Group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Business combinations are accounted for under the acquisition method. The acquisition method involves the measurement of all identifiable assets acquired and liabilities and contingent liabilities assumed, in the business combination at their fair values at the acquisition date, regardless of whether or not they were recorded in the financial statements of the acquiree prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated statement of financial position at their fair values. Transaction costs that the company incurs in connection with a business combination such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred. The excess of consideration transferred, amount of non-controlling interest in the acquired entity and acquisition date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Changes in ownership interests

The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Company

When the group ceases to consolidate the subsidiary because of a loss of control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Segment reporting

IFRS 8 Operating Segments (“IFRS 8”) requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Group’s chief operating decision maker, which is the Group’s CEO and MD. The revenues of films are earned over various formats; all such formats are functional activities of filmed entertainment and these activities take place on an integrated basis. The management team reviews the financial information on an integrated basis for the Group as a whole. The management team also monitors performance separately for individual films for at least 12 months after the theatrical release. Certain resources such as publicity and advertising, and the cost of a film are also reviewed globally.

Eros has identified four geographic areas, consisting of its main geographic areas (India, North America and Europe), together with the rest of the world.

Revenue

Revenue from contracts are recognized only when the contract has been approved by the parties to the contract and creates enforceable rights and obligations.

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Group expects to receive in exchange for those products or services. To ensure collectability of such consideration and financial stability of the counterparty, the Group performs certain standard Know Your Client (KYC) procedures based on their geographic locations and evaluates trend of past collection from such locations.

Revenue is measured based on the transaction price, which is the consideration, adjusted for any discounts and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers. In case of variable consideration , the Group estimates, at the contract inception, the amount to be received using the “most likely amount” approach, or the “expected value” approach, as appropriate. This amount is then included in the Group’s estimate of the transaction price only if it is highly probable that a significant reversal of revenue will not occur once any uncertainty associated with the variable consideration is resolved. In making this assessment the Group considers its historical performance on similar contracts.

The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position (see Note 24). Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due

The transaction price, being the amount to which the Group expects to be entitled and has rights to under the contract is allocated to the identified performance obligations. The transaction price will also include an estimate of any variable consideration where the Group’s performance may result in additional revenues based on the achievement of agreed targets.

The following criteria apply in respect of various revenue streams within filmed entertainment:

Other income

Dividend income is recognised when the Group’s right to receive the payment is established, which is generally when shareholders approve the dividend.

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the effective interest rate applicable

Intangible assets

Intangible assets acquired by the Group are stated at cost less accumulated amortization less impairment loss, if any, except those acquired as part of a business combination, which are shown at fair value at the date of acquisition less accumulated amortization less impairment loss, if any (Film production cost and content advances are transferred to film and content rights at the point at which content is first exploited). “Eros” (the “Trade name”) is considered to have an indefinite life because of the institutional nature of the corporate brand name, its proven ability to maintain market leadership and the Group’s commitment to develop, enhance and retain its value.

Content

Investments in films and associated rights, including acquired rights and distribution advances in respect of completed films, are stated at cost less amortization less provision for impairment. Costs include production costs, overhead and capitalized interest costs net of any amounts received from third party investors. A charge is made to write down the cost of completed rights over the estimated useful lives, writing off more in year one which recognizes initial income flows and then the balance over a period of up to nine years, except where the asset is not yet available for exploitation. The average life of the assets is the lesser of 10 years or the remaining life of the content rights. The amortization charge is recognized in the consolidated statement of income within cost of sales. The determination of useful life is based upon management’s judgment and includes assumptions on the timing and future estimated revenues to be generated by these assets, which are summarized in Note 37.3.

Others

Other intangible assets, which comprise internally generated and acquired software used within the Group’s digital, home entertainment and internal accounting activities, are stated at cost less amortization less provision for impairment. A charge is made to write down the cost of completed rights over the estimated useful lives except where the asset is not yet available for exploitation. The average life of below intangible assets ranges from 3-6 years. The amortization charge is recognized in the consolidated statements of income within administrative expenses as stated below:

Subsequent expenditure

Expenditure on capitalized intangible assets subsequent to the original expenditure is included only when it increases the future economic benefits embodied in the specific asset to which it relates.

Information technology assets

An internally generated intangible asset arising from the Group’s software development activities that is expected to be completed is recognized only if all the following criteria are met:

When these criteria are met and there are appropriate resources to complete development, the expenditure is capitalized at cost. Where these criteria are not met development expenditure is recognized as an expense in the period in which it is incurred. Internally generated intangible assets are amortized over their useful economic life from the date that they start generating future economic benefits.

Impairment testing of goodwill, other intangible assets and property and Equipment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at the cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which Management monitors the related cash flows.

Goodwill and Trade names are tested for impairment at least annually. The Group has impaired Goodwill and Trade names in its entirety during the previous fiscal year. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognized for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit.

Film and content rights are stated at the lower of unamortized cost and estimated recoverable amounts. In accordance with IAS 36 Impairment of Assets, film content costs are assessed for indication of impairment on a library basis as the nature of the Group’s business, the contracts it has in place and the markets it operates in do not yet make an ongoing individual film evaluation feasible with reasonable certainty. Impairment losses on content advances are recognized when film production does not seem viable and refund of the advance is not probable.

With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist.

Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation and impairment. Land and freehold buildings are recognised at fair value based on periodic, but at least triennial, valuations by an external independent valuer, less subsequent depreciation for freehold buildings.

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount. Increases in the carrying amount arising on revaluation of freehold land and buildings are credited to other reserves in shareholders’ equity through other comprehensive income. Decreases that offset previous increases are charged against other reserves.

Depreciation is provided to write-off the cost of all property and equipment to their residual value as stated below:

Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued.

Advance paid towards the acquisition or improvement of property and equipment not ready for use before the reporting date are disclosed as capital work-in-progress.

Inventories

Inventories primarily comprise of music CDs and DVDs, are valued at the lower of cost and net realizable value. Cost in respect of goods for resale is defined as purchase price, including appropriate labor costs and other overhead costs. Costs in respect of raw materials is purchase price.

Purchase price is assigned using a weighted average basis. Net realizable value is defined as anticipated selling price or anticipated revenue less cost to completion.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturity of three months or less that are readily convertible into known amounts of cash and are subject to insignificant risk of changes in value. Bank overdrafts are shown within “Borrowings” in “Current liabilities” on the statement of financial position.

Restricted deposits held with banks

Deposits held with banks as security for overdraft facilities are included in restricted deposits held with bank.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of financial assets or financial liability, as appropriate, on initial recognition.

The transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately recognized in the Consolidated Statement of Income.

A financial asset is primarily derecognized (i.e. removed from the Group’s statement of financial position) when:

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

Debt instruments at amortized cost

A ‘debt instrument’ is measured at the amortized cost if both the following conditions are met and is not designated as at FVTPL:

After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (the “EIR”) method. The effective interest rate is the rate that exactly discounts future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income/other income in the Consolidated Statement of Income. The losses arising from impairment are recognized in the Consolidated Statement of Income.

Debt instruments at fair value through other comprehensive income

A ‘debt instrument’ is classified as at the FVTOCI if both of the following criteria are met and is not designated as at FVTPL:

Debt instruments at fair value through profit or loss

FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL. A gain or loss on a debt instruments that is subsequently measured at FVTPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instruments

All equity investments in scope of IFRS 9 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL with changes in the fair value at each reporting date recognized in the Consolidated Statement of Income.

For all other equity instruments, the Group may make an irrevocable election to present in OCI, the subsequent changes in the fair value. The Group makes such election on an instrument-by-instrument basis. If the Group decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends and impairment loss, are recognized in OCI. There is no recycling of the amounts from the OCI to the Consolidated Statement of Income, even on sale of the investment. However, the Group may transfer the cumulative gain or loss within categories of equity.

In accordance with IFRS 9, the Group applies the expected credit loss (“ECL”) model for measurement and recognition of impairment loss on financial assets and credit risk exposures.

ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the EIR of the instrument. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.

The Group follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivables. Simplified approach does not require the Group to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECL at each reporting date, right from its initial recognition.

For recognition of impairment loss on other financial assets and risk exposure, the Group determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12-month ECL.

ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Consolidated Statement of Income.

The subsequent measurement of financial liabilities depends on their classification, as described below:

A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in consolidated statement of income.. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the Consolidated Statement of Income when the liabilities are derecognized.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the Consolidated Statement of Income.

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously

Derivative financial instruments

The Group uses derivative financial instruments (“derivatives”) to reduce its exposure to interest rate movements.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in consolidated statements of income immediately.

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is more likely than not that an outflow of resources will be required to settle the obligations and the amount can be reliably measured. Provisions are measured at management’s best estimate of the expenditure required to settle the obligations at the end of each reporting period. date and are discounted to present value where the effect of the same is material.

Leases

Measurement and recognition of leases

The Company considers whether contract is,or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.

To apply this definition the Company assesses whether the contract meets three key evaluations which are whether:

Company as a lessee

At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Company and any lease payments made in advance of the lease commencement date.

The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term period. The Company also assesses the right-of-use asset for impairment when such indicators exist.

At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Company’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest expenses. It is remeasured to reflect any reassessment or modification.

The Company has elected to account for short-term leases and leases of low-value assets using the exemption given under IFRS 16. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term or on another systematic basis if that basis is more representative of the pattern of the Company’s benefit.

Company as a lessor

Lease income from operating leases where the company is lessor is recognised in income on straight line basis over the lease term. 

Taxation

Taxation on profit and loss comprises current income tax and deferred income tax. Tax is recognized in the consolidated statement of income except to the extent that it relates to items recognized directly in equity or other comprehensive income in which case it is recognized in equity or other comprehensive income.

Current income tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted at the reporting date along with any adjustment relating to tax payable in previous years.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted at the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled in the appropriate territory.

Deferred income tax in respect of undistributed earnings of subsidiaries is recognized except where the Group is able to control the timing of the reversal of the temporary difference and that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which temporary differences can be utilized.

Deferred income tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Employee benefits

Defined Contribution Plan

The Group operates defined contribution pension plans and healthcare and insurance plans on behalf of its employees. The amounts due are all expensed as they fall due.

Defined benefit plan

Gratuity: The Group’s liability towards gratuity is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. The cost for past services is recognized on a straight-line basis over the average period until the amended benefits become vested. Re-measurement gains and losses are recognized immediately in the Other Comprehensive Income as income or expense and are not reclassified to profit or loss in subsequent periods. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation.

Employee stock option plan

In accordance with IFRS 2 “Share Based Payments”, the fair value of shares or options granted is recognized as personnel costs with a corresponding increase in equity. The fair value is measured at the grant date and spread over the period during which the recipient becomes unconditionally entitled to payment unless forfeited or surrendered.

The fair value of share options granted is measured using the Black Scholes model or a Monte-Carlo simulation model, each taking into account the terms and conditions upon which the grants are made. At each statement of financial position date, the Group revises its estimate of the number of equity instruments expected to vest as a result of non-market-based vesting conditions. The amount recognized as an expense is adjusted to reflect the revised estimate of the number of equity instruments that are expected to become exercisable, with a corresponding adjustment to equity reserves. None of the Group plans feature any options for cash settlements.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares are allocated to share capital with any excess being recorded as share premium.

Foreign currencies

Transactions in foreign currencies are translated at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities in foreign currencies are translated at the prevailing rates of exchange at the reporting date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction when the fair value is determined.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognized in the income statement in the period in which they arise.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

The assets and liabilities in the financial statements of foreign subsidiaries and related goodwill are translated at the closing rate at the date of that balance sheet. Income and expenses are translated at the monthly average rate. The exchange differences arising from the retranslation of the foreign operations are recognized in other comprehensive income and taken in to the “currency translation reserve” in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to the consolidated statement of income as part of the gain or loss on disposal.

Equity shares

Ordinary shares are classified as equity. The Group defers costs in issuing or acquiring its own equity instruments to the extent they are incremental costs directly attributable to an equity transaction that otherwise would have been avoided.  Such costs are accounted for as a deduction from equity (net of any related income tax benefit) upon completion of the equity transaction. The costs of an equity transaction which is abandoned is recognized as an expense.

Earnings per share

Basic earnings per share is calculated by dividing net profit after taxes attributable to the owners of the Company for the year by weighted average number of ordinary shares outstanding during the period, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

Current/Non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.

An asset is current when it is:

All other assets are classified as non-current.

(*) The operating cycle for the business activities of the Group is considered to be twelve months except in case of catalogue sales, which have been ascertained as two years for the purpose of current / non-current classification of assets.

A liability is current when:

The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.

Year Ended March 31, 2020 Compared to Year Ended March 31, 2019

The following table sets forth, for the period indicated, the revenue by region of domicile of Group’s operation.

Revenue

In fiscal 2020, Eros film slate comprised thirty films of which two were medium budget and twenty-eight were low budget as compared to seventy-two films of which seven were medium budget and sixty-five were low budget in fiscal 2019.

In fiscal 2020, the Company’s slate of thirty films comprised eight Hindi films, one Tamil/Telugu film and twenty-one regional films as compared to the same period last year where its slate of seventy-two films comprised fifteen Hindi films, seven Tamil/Telugu film and fifty regional films ..

For the twelve months ended March 31, 2020, aggregate revenue decreased by 42.5% to $155.5 million compared to $270.1 million for the twelve months ended March 31, 2019, mainly due to a reduction in theatrical and television syndication revenue which was partially offset by increased revenue from our digital and ancillary business.

In the twelve months ended March 31, 2020, the aggregate theatrical revenue decreased by 84.8% to $10.6 million, compared to $69.5 million for the fiscal year 2019. The variation in theatrical revenue is primarily due to the mix of films and release of fewer number of films compared to fiscal 2019.

In the twelve months ended March 31, 2020, aggregate revenues from television syndication decreased by 90.8% to $7.1 million, compared to $77.5 million for fiscal year 2019. The decrease is mainly due to the Company’s shift in business strategy to reduce the licensing of our content to third parties and increase our focus on premium digital content and drive greater value to the ErosNow platform, where the Company retains its position as the largest provider of Indian local and regional language content.

In the twelve months ended March 31, 2020, the aggregate revenues from digital and ancillary increased by 11.9% to $137.8 million, compared to $123.1 million for fiscal year 2019. The increase in revenue is primarily due to contribution from OTT (over-the-top) digital streaming revenues and ancillary business which includes revenue from providing producer support and VFX services to customers.

Cost of sales

For the twelve months ended March 31, 2020, cost of sales decreased by 47.4% to $81.7 million, compared to $155.4 million for fiscal year 2019. The decrease was mainly due to lower amortization costs, lower marketing, advertising and distribution costs.

Gross profit

In fiscal 2020 gross profit decreased by 35.7% to $73.7 million, compared to $114.7 million for fiscal 2019. The decrease was mainly due to decrease in revenue, which is partially offset by lower amortization cost and lower marketing, advertising and distribution costs.

Administrative costs

In fiscal 2020, administrative costs increased by 65.6% to $144.3 million compared to $87.1 million for fiscal year 2019, the increase in administrative cost were mainly on account of credit impairment loss amounting to $97.6 million in fiscal year 2020 compared to $ 25.7 million for fiscal 2019 due to higher expected credit loss (ECL) provision, which was partially offset by reduction in other admin cost such as reduction in legal and profession expenses, Impairment loss on advances to content vendors and other expenses.

Net finance costs

In fiscal 2020, net finance costs increased by 14.4% to $8.8 million, compared to $7.7 million for fiscal year 2019 mainly due to lower interest income on account of unwinding of credit impairment losses, lower bank interest income and higher interest on borrowings cost.

Other gains/(loss), net

In fiscal year 2020, other losses stood at $3.3 million, compared to other gains of $0.3 million in fiscal year 2019, the loss was mainly due to reduction in reversal of expected credit loss (ECL) by $10.4 million, which was partially offset by a lower loss on financial liability measured at fair value amounting to $16 million compared to $21.4 in fiscal year 2019.

Impairment loss

We recorded an impairment loss of $431.2 million for Fiscal Year 2020. The impairment charge was taken as per IAS 36 under IFRS accounting rules which require companies to re-assess the carrying book value of assets both on a regular annual basis and also in the case of irregular events. Examples of these “irregular events” include: a major change in market conditions or technology, expectations of future operating losses, material change in listed equity value or negative cash flows. As in our prior fiscal year, the significant reduction in the stock price and corresponding decline in market capitalisation was the main driver for the impairment charge. This was also compounded by exogenous factors such as the COVID pandemic and changes in business conditions, including delayed theatrical distribution of some films and disruptions to content production schedules. Accordingly, we recorded a non-cash impairment loss of $431.2 million, net of taxes, as an exceptional item within the statement of income/(loss). Management believes this is a conservative and prudent action, and does not believe this impairment materially impacts the near term or long-term business or operations of the company, as it is driven by compliance with accounting standards. In addition, to the extent that in future periods there is a material positive change in these business conditions, Management will be able to write-up the value of assets according to the same accounting standards.

Income tax expense

In fiscal 2020, income tax expenses decreased by 402.7% to $(22.2) million, compared to $7.3 million for fiscal year 2019. Effective income tax rates were 49.9% and 11.6% for March 31, 2020 and March 31, 2019, respectively, excluding non-deductible share-based payment charges, impairment loss and gain/loss on fair valuation of derivative liabilities. The change in effective rate principally reflects a change in the mix of the profits earned from taxable and non- taxable jurisdictions as well as unrecognized deductible temporary difference and carry forward losses in Indian listed subsidiary.

Net (loss)/profit

In fiscal year 2020, net loss was $491.7 million compared to $410.5 million for the fiscal year 2019, the increase was mainly on account of decrease in the group revenues and change in impairment loss in fiscal year 2020.

Adjusted EBITDA (Non-GAAP)

In fiscal 2020, adjusted EBITDA decreased by 21.0% to $54.8 million, compared to $69.4 million for fiscal year 2019. The decrease in Adjusted EBITDA is primarily due to lower syndication revenue and few theatrical releases and deferment of film releases in last quarter due to COVID-19 pandemic.

Trade receivables

As of March 31, 2020, Trade Receivables decreased to $101.7 million from $196.4 million as of March 31, 2019, primarily due to accounting of expected credit losses as per IFRS 9 standards, including the potential impact of COVID-19 on the credit risk of certain debtor’s businesses and our ability to recover contractual revenue from them.

Net debt

As of March 31, 2020, net debt increased by 21.6% to $176.4 million from $145.0 million as of March 31, 2019 because of reduction in cash and cash equivalents.

Year Ended March 31, 2019 Compared to Year Ended March 31, 2018

The following table sets forth, for the period indicated, the revenue by region of domicile of Group’s operation.

Revenue

In fiscal 2019, Eros film slate comprised seventy-two films of which seven were medium budget and sixty five were low budget as compared to twenty four films of which one were high budget, four were medium budget and nineteen were low budget in fiscal 2018.

In fiscal 2019, the Company’s slate of seventy-two films comprised fifteen Hindi films, seven Tamil/Telugu film and fifty regional films as compared to the same period last year where its slate of twenty four films comprised fourteen Hindi films, one Tamil/Telugu film and nine regional films .

For the twelve months ended March 31, 2019, revenue was adjusted by $34.5 million as significant financing component that arises on account of normal credit terms provided to licensees of our content catalogue (on account of IFRS 15 “Revenue from Contracts with Customers) and the net revenue was to $270.1 million compared to $261.3 million for the twelve months ended March 31, 2018, due to an increase in digital and ancillary revenues.

In the twelve months ended March 31, 2019, the aggregate theatrical revenue decreased by 12.1% to $69.5 million, compared to $79.1 million for the fiscal year 2018. The variation in theatrical revenue is primarily due to the mix of films and release of more low budget films.

In the twelve months ended March 31, 2019, aggregate revenues from television syndication decreased by 20.3% to $77.5 million, compared to $97.2 million for fiscal year 2018. The decrease is mainly due to mix of films and lower catalogue revenue during the year.

In the twelve months ended March 31, 2019, the aggregate revenues from digital and ancillary increased by 44.8% to $123.1 million, compared to $85.0 million for fiscal year 2018. The increase in revenue is primarily on account of contribution from catalogue revenues and digital business and an increase in revenue from OTT platform on account of an increase in subscribers by 138% when compared to the previous year.

In the twelve months ended March 31, 2019, revenue from India increased by 2.4% to $100.4 million, compared to $98.1 million for fiscal year 2018. The variation is due to the mix of films, partially offset by an increase in revenue from digital and ancillary business.

In the twelve months ended March 31, 2019, revenue from Europe increased by 133.8% to $63.2 million, compared to $27.0 million for fiscal year 2018. This was due to higher contribution from the monetization of catalogue films from one of our subsidiary in Europe, including digital and ancillary business.

In the twelve months ended March 31, 2019, revenue from North America increased by 41.4% to $1.7 million, compared to $1.2 million for fiscal year 2018. The increase was due to increase in revenue from digital and ancillary business.

In the twelve months ended March 31, 2019, revenue from the rest of the world decreased by 22.3% to $104.8 million, compared to $134.9 million for fiscal year 2018. This was due to lower catalogue sales during the year, partially offset by increase in revenue from digital and ancillary business.

Cost of sales

For the twelve months ended March 31, 2019, cost of sales increased by 15.4% to $155.4 million, compared to $134.7 million for fiscal year 2018. The increase was mainly due to higher amortization costs, higher marketing, advertising and distribution costs.

Gross profit

In fiscal 2019 gross profit decreased by 9.3% to $114.7 million, compared to $126.5 million for fiscal 2018. The decrease was mainly due to an increase in marketing, advertising and distribution costs and adjustment on account of adoption new accounting standard in fiscal year 2019.

Administrative costs

In fiscal 2019, administrative costs increased by 28.1% to $87.1 million compared to $68.0 million for fiscal year 2018, the increase in administrative cost were mainly on account of credit impairment loss amounting to $21.4 million in fiscal year 2019 and impairment of loans and advances of $7.3 million in fiscal 2019.

Net finance costs

In fiscal 2019, net finance costs decreased by 56.9% to $7.7 million, compared to $17.8 million for fiscal year 2018 mainly due to unwinding of credit impairment loss reserve by $13.2 million and which was partially offset by lower capitalization of interest.

Other gains/(loss), net

In fiscal year 2019, other gains were increased by 100.7% to $0.3 million, compared to other losses of $41.3 million in fiscal year 2018, the gain was mainly on account of reversal of expected credit loss of $20.7 million, a credit from the Government of India amounting to $2.3 million and a foreign exchange gain of $5.6 million which was partially offset by a loss on financial liability measured at fair value amounting to $21.4 million compared to $13.8 in fiscal year 2018. In addition, there were other losses in fiscal 2018 caused by a one-time loss on deconsolidation of subsidiary amounting to $14.6 million.

Impairment loss

The Company recorded an impairment loss, totaling to $423.3 million, mainly due to high discount rate and changes in the market conditions, including decrease in projected volume primarily on account of recent credit downgrade and expected investment in film content of $150 - $160 million as more fully explained in note 2(c) to audited financial statements. The impairment loss was firstly allocated to the carrying amount of goodwill and Intangibles - trademark totaling $17.8 million and the residual amount totaling $405.5 million was allocated to Intangibles – content.

Income tax expense

In fiscal 2019, income tax expenses decreased by 19.7% to $7.3 million, compared to $9.1 million for fiscal year 2018. Effective income tax rates were 11.6% and 20% for March 31, 2019 and March 31, 2018, respectively, excluding non-deductible share-based payment charges, impairment loss and gain/loss on fair valuation of derivative liabilities. The change in effective rate principally reflects a change in the mix of the profits earned from taxable and non- taxable jurisdictions.

Net (loss)/profit

In fiscal year 2019, net loss was $410.5 million compared to $9.7 million for the fiscal year 2018, the increase was mainly on account of impairment loss of $423.3 million in fiscal year 2019.

Adjusted EBITDA (Non-GAAP)

In fiscal 2019, adjusted EBITDA decrease by 8.8% to $69.4 million, compared to $76.1 million for fiscal year 2018.The decrease in Adjusted EBITDA is due to increased cost of sales, administrative cost and Profit/(loss) before impairment loss and tax.

Trade receivables

As of March 31, 2019, Trade Receivables decreased to $196.4 million from $225.0 million as of March 31, 2018 after considering expected credit loss reserve upon adoption of new accounting standards during the year.

Net debt

As of March 31, 2019, net debt decreased by 23.4% to $145.0 million from $189.2 million as of March 31, 2018 primarily on account of additional equity infusion during the year amounting $54.7 million. The equity infusion was primarily received from promoters’ group $8 million and Reliance Industries $46.7 million at $14.7 and $15 per share, respectively.

Exchange rates

Our functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated into U.S. dollars at the exchange rates ruling on the date of the applicable statement of financial position. For the purposes of consolidation, all income and expenses are translated at the average rate of exchange during the period covered by the applicable statement of income and assets and liabilities are translated at the exchange rate ruling on the date of the applicable statement of financial position.

The following table sets forth, for the periods indicated, information concerning the exchange rates between Indian rupees and U.S. dollars based on the noon buying rate in the City of New York for cable transfers of Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York.

This volatility in the Indian Rupee as compared to the U.S. dollar and the increasing exchange rate has impacted our results of operations as shown in the table below comparing the reported results against constant currency comparable based upon the average rate of exchange for the year ended March 31, 2020, of INR 70.90 to $1.00. In addition to the impact on gross profit, the volatility during the year ended March 31, 2020 also led to a non-cash foreign exchange gain of 2.7 million principally on retail bond foreign currency in the year ended March 31, 2020 compared to non-cash foreign exchange loss of 5.6 million principally on retail bond foreign currency in the year ended March 31, 2019.

The following table sets forth our constant currency revenue (a non-GAAP financial measure) for the periods indicated. Constant currency revenue is a non- GAAP financial measure. We present constant currency revenue so that revenue may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of business performance. Constant currency revenue is presented by recalculating prior period’s revenue denominated in currencies other than in US dollars using the foreign exchange rate used for the latest period. Our non-US dollar denominated revenue includes, but is not limited to, revenue denominated in Indian rupee, pound sterling and United Arab Emirates Dirham.

The percentage change for the data comparing the constant currency amounts against the reported results referenced in the table above:

The Indian Rupee experienced an approximately 8.3% decrease in value as compared to the U.S. dollar in the fiscal year 2020. In the fiscal year 2019, it decreased by 5.9%.

B. Liquidity and Capital Resources

Our operations and strategic objectives require continuing capital investment, and our resources include cash on hand and cash provided by operations, as well as access to capital from bank borrowings and access to capital markets. Management believes that cash generated by or available to us should be sufficient to fund our capital and liquidity needs for at least the next 12 months.

Our future financial and operating performance, ability to service or refinance debt and ability to comply with covenants and restrictions contained in our debt agreements will be subject to future economic conditions, the financial health of our customers and suppliers and to financial, business and other factors, many of which are beyond our control. Furthermore, management believes that working capital is sufficient for our present requirements.

(*) including trade receivables classified as current asset based on operating cycle of two years.

The decrease in working capital as at March 31, 2020 as compared to March 31, 2019 was primarily the result of reduction in trade and other receivables, Cash & Bank balance and restricted deposits by $97.9 million, $86.6 million and 51 million respectively. The short-term borrowings have also reduced by 92 million to $116.9 million as at March 31, 2020 from $208.9 million as at March 31, 2019 due to repayment of senior convertible notes and short-term borrowings secured by restricted assets.

For additional information, please see Note 2(a) and Note 31 to our audited Consolidated Financial Statements appearing elsewhere in this annual report.

Indebtedness

As of March 31, 2020, we had aggregate outstanding indebtedness of $179.4 million, cash and cash equivalents of $2.6 million and short-term liquid investments of $3.8 million. As at March 31, 2020, the total available facilities were comprised of (i) secured credit, bill discounting and overdraft, secured term loans, and vehicle loans of $71.9 million at Eros India, (ii) secured overdraft amounting to $22.1 million at Eros International Limited. In addition, Eros International plc has debt of $62.3 million in relation to a retail bond offering for £50 million in October 2014 and Senior Convertible Notes amounting to $23.1 million issued in December 2017. As at March 31, 2020, there were undrawn amounts under our facilities of $0.1 million.

Certain of our borrowings and loan agreements, including our new credit facility, contain customary covenants, including covenants that restrict our ability to incur additional indebtedness, create or permit liens on our assets or engage in mergers and acquisitions. Such agreements also contain various customary events of default with respect to the borrowings, including the failure to pay interest or principal when due and cross default provisions, and, under certain circumstances, lenders may be able to require repayment of loans to Eros India prior to their maturity. If an event of default occurs and is continuing, the principal amounts outstanding, together with all accrued unpaid interest and other amounts owed may be declared immediately due and payable by the lenders. If such an event were to occur, we would need to pursue new financing that may not be on as favourable terms as our current borrowings. We are currently in full compliance with all of our agreements governing indebtedness.

Borrowings under our term loan facilities and overdraft facility at Eros India matures between 2020 and 2023 and bear interest at fluctuating interest rates pursuant to the relevant sanction letter governing such loans.

We expect to renew, replace or extend our borrowings as they reach maturity. As at March 31, 2020, we had net undrawn amounts of $0.1 million available.

The Notes

On December 06, 2017, the Company closed a registered direct offering (the “2017 Offering”) of $122,500,000 aggregate principal amount of the Company’s Senior Convertible Notes (collectively, the “Notes”) and a Warrant (collectively, the “Warrants”) to purchase up to 2,000,000 of the Company’s A ordinary shares, for an aggregate purchase price of $100,000,000. The Notes and Warrants were issued and sold pursuant to a Securities Purchase Agreement, dated as of December 04, 2017, by and among the Company and the buyers party thereto. The 2017 Offering was effected pursuant to a prospectus supplement dated December 01, 2017 under the Company’s Registration Statement on Form F-3 (Registration No. 333-219708), as amended (the “Registration Statement”). The Registration Statement was declared effective on October 02, 2017. The Warrants expired on June 30, 2018 without being exercised.

In connection with the issuance of the Notes, the Company entered into an indenture, dated as of December 06, 2017, between the Company and Wilmington Savings Fund Society, FSB, as trustee (the “Base Indenture”), as supplemented by a first supplemental indenture thereto, dated as of December 06, 2017 (the “Supplemental Indenture” and, the Base Indenture as supplemented by the Supplemental Indenture, the “Indenture”). The terms of the Notes included those provided in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended.

The Notes would have matured on December 06, 2020 unless earlier converted or redeemed, subject to the right of the holders to extend the date under certain circumstances. The Notes were issued with an original issue discount and the terms of the Notes provided that they would not bear interest except upon the occurrence of an event of default, in which case the Notes would bear interest at a rate of 6.0% per annum. The Notes were senior obligations of the Company. 

The Company made monthly payments consisting of an amortizing portion of the principal of each Note equal to $3,500,000 and accrued and unpaid interest and late charges on the Note. Provided equity conditions referred to in the prospectus supplement were satisfied, the Company was permitted to make a monthly payment by converting such payment amount into A ordinary shares. Alternatively the Company was permitted, at its option, to make monthly payments by redeeming such payment amount in cash, or by any combination of conversion and redemption.

All amounts due under the Notes were convertible at any time, in whole or in part, at the holder’s option, into A ordinary shares at the initial conversion price of $14.6875. The conversion price was subject to adjustment for stock splits, combinations and similar events, and, in any such event, the number of A ordinary shares issuable upon the conversion of a Note would also be adjusted so that the aggregate conversion price would have been the same immediately before and immediately after any such adjustment. In addition, the conversion price was also subject to an anti-dilution adjustment if the Company issued or was deemed to have issued securities at a price lower than the then applicable conversion price. Further, if the Company sold or issued any securities with “floating” conversion prices based on the market price of the A ordinary shares, a holder of a Note would have the right thereafter to substitute the “floating” conversion price for the conversion price upon conversion of all or part the Note.

The Notes required “buy-in” payments to be made by the Company for failure to deliver any A ordinary shares issuable upon conversion.

On or after December 06, 2019, and subject to certain conditions, the Company had the right to redeem all, but not less than all, of the remaining principal amount of the Notes and all accrued and unpaid interest and late charges in cash at a price equal to 100% of the amount being redeemed, so long as the VWAP of the A ordinary shares exceeded $18.3594 (as adjusted for stock splits, stock dividends, recapitalizations and similar events) for at least 10 consecutive trading days. At any time prior to the date of the redemption, a holder had the right to convert its Note, in whole or in part, into A ordinary shares. The Company had no right to effect an optional redemption if any event of default had occurred and was continuing.

As of June 30, 2020, all amounts due under the Notes have been converted and no principal amount of the Notes remained outstanding. 

2020 Notes Offering

On September 30, 2019, the Company closed a registered direct offering (the “2019 Offering”) of $27,500,000 aggregate principal amount of the Company’s Senior Convertible Notes (collectively, the “New Notes”) for aggregate net proceeds of approximately $24,500,000. The New Notes were issued and sold pursuant to a Securities Purchase Agreement, dated as of September 26, 2019, by and among the Company and the buyers party thereto. The 2019 Offering was effected pursuant to a prospectus supplement dated September 26, 2019 under the Registration Statement.

The securities purchase agreement provided, as consideration for the securities purchase agreement and pursuant to the provisions of the Notes, for the Company to waive rights to make redemptions or repayments under the Notes in cash, and for the holder of the Notes (the “2017 Holder”) to waive certain specified rights and terms under the Notes, including certain rights to cash payment of any installment amounts then-due under the Notes, and provided for automatic election by the Company to pay each installment amount in the Company’s A ordinary shares. Additionally, with respect to an aggregate amount of $9 million of installment amounts as to which a conversion notice was delivered by the 2017 Holder but a conversion did not occur prior to September 26, 2019 as a result of the mutual agreement of the Company and the 2017 Holder, the conversion of such installment was deemed to have been voided by the 2017 Holder as of September 3, 2019, such that the installment conversion price was automatically adjusted in accordance with clause (A) of Section 8(b) of the Notes based on the VWAP of the A ordinary shares as of August 26, 2019.

The New Notes will mature on September 30, 2020, unless earlier converted or redeemed, subject to the right of the holders to extend the date under certain circumstances. The New Notes were issued with an original issue discount and do not bear interest except upon the occurrence of an event of default, in which case the New Notes shall bear interest at a rate of 6.0% per annum. The New Notes are senior obligations of the Company.

All amounts due under the New Notes are convertible at any time, in whole or in part, at the holder’s option into A ordinary shares at the initial conversion price of $3.59. The conversion price is subject to adjustment for stock splits, combinations and similar events, and, in any such event, the number of A ordinary shares issuable upon the conversion of a New Note will also be adjusted so that the aggregate conversion price shall be the same immediately before and immediately after any such adjustment. In addition, the conversion price is also subject to an anti-dilution adjustment if the Company issues or is deemed to have issued securities at a price lower than the then applicable conversion price. Further, if the Company sells or issues any securities with “floating” conversion prices based on the market price of the A ordinary shares, a holder of a New Note will have the right thereafter to substitute the “floating” conversion price for the conversion price upon conversion of all or part the New Note.

The New Notes require “buy-in” payments to be made by the Company for failure to deliver any A ordinary shares issuable upon conversion. Holders of New Notes are entitled to receive any dividends paid or distributions made to the holders of A ordinary shares on an “as if converted” basis. If the Company issues options, convertible securities, warrants, shares or similar securities to holders of A ordinary shares, each New Note holder has the right to acquire the same as if the holder had converted its New Note.

The New Notes prohibit the Company from entering into specified fundamental transactions unless the successor entity assumes all of the Company’s obligations under the New Notes under a written agreement before the transaction is completed. Upon specified corporate events, a New Note holder will thereafter have the right to receive upon a conversion such shares, securities, cash, assets or any other property which the holder would have been entitled to receive upon the happening of the applicable corporate event had the New Note been converted immediately prior to the applicable corporate event. When there is a transaction involving specified changes of control, a New Note holder will have the right to force the Company to redeem all or any portion of the holder’s New Note for a purchase price in cash equal to the equal to the greater of (i) 105% of the amount being redeemed, (ii) the product of (A) the amount being redeemed multiplied by (B) the quotient of (1) the highest closing sale price of the A ordinary shares during the period beginning on the date immediately before the earlier to occur of (x) the completion of the change of control and (y) the public announcement of the change of control and ending on the date the holder delivers the redemption notice divided by (2) the conversion price then in effect, or (iii) the product of (A) the amount being redeemed multiplied by (B) the quotient of (1) the aggregate cash consideration and the aggregate cash value of any non-cash consideration per A ordinary share to be paid to the holders of A ordinary shares upon the completion cash flow of the change of control divided by (2) the conversion price then in effect.

As of June 30, 2020, all amounts due under the New Notes have been converted and no principal amount of the New Notes remained outstanding.

Sources and uses of cash

Cash flow movement for the year ended March 31, 2020 compared to year ended March 31, 2019

Net cash generated from operating activities in fiscal year 2020 was $18.7 million compared to $75.0 million in the in fiscal year 2019, a decrease of $56.3 million, or 75.1%, primarily on account of reduction in trade and other receivables.

Net cash used in investing activities in fiscal year 2020 was $80.5 million compared to $157.7 million in fiscal year 2019, a decrease of $77.2 million, or 49.0%, primarily due to increase in the investment of intangible film and content rights in fiscal year 2020 to $132.2 million, compared to $107.7 million in fiscal year 2019 and decrease in restricted deposits to $4.8 million, compared to $ 55.9 million in fiscal year 2019.

Net cash used in financing activities in fiscal year 2020 was $24.3 million compared to net cash inflow of $84.1 million in fiscal year 2019, a decrease of $108.4 million, or 128.9%, primarily on account of reduction in the proceeds from debt/increase in repayment of debt by $64.7 million and reduction in proceeds from share capital by $49.7 million.

Cash flow movement for the year ended March 31, 2019 compared to year ended March 31, 2018

Net cash generated from operating activities in fiscal year 2019 was $75.0 million compared to $83.2 million in the in fiscal year 2018, a decrease of $8.2 million, or 9.9%, primarily due to decrease in working capital movement of $65.1 million, mainly attributable to increase in trade receivables by $88.5 million and increase in trade payables by $23.4 million and as a result of lower operating profit before exceptional item generated in fiscal year 2019 as compared to fiscal year 2018.

Net cash used in investing activities in fiscal year 2019 was $157.7 million compared to $185.4 million in fiscal year 2018, a decrease of $27.7 million, or 14.9%, primarily as a result of investment in restricted deposits amounting to $53.5 million in fiscal year 2019 and offset by the decrease in purchase of intangible film rights and content rights in fiscal year 2019 was $107.7 million, compared to $186.8 million in fiscal year 2018, decrease of $79.1 million, or 42.3%.

Net cash from financing activities in fiscal year 2019 was $84.1 million compared to $77.4 million in fiscal year 2018, an increase of $6.7 million, or 8.7%, primarily as a result of the proceeds from the issuance of share capital and an increase in short-term borrowings in fiscal year, 2019.

Capital expenditures

In fiscal year 2020, the company invested over $265.3 million (of which cash outflow is $132.2 million) in film content, and in fiscal 2021 the company expects to invest approximately $150 to $160 million in film content.

C. Research and Development

Not applicable

D. Trend Information

Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Group.

At the date of authorization of these financial statements, several new, but not yet effective, accounting standards, amendments to existing standards, and interpretations have been published by the IASB. None of these standards, amendments or interpretations have been adopted early by the Group.

Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations neither adopted nor listed below have not been disclosed as they are not expected to have a material impact on the Group’s financial statements.

IFRS 3 “Business Combinations”

In October 2018, the IASB issued amendments to IFRS 3 “Business Combinations” regarding the definition of a “Business.” The amendments:

The above amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

IAS 1 “Presentation of Financial Statements”

In October 2018, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” (“IAS 1”) and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” (“IAS 8”) which revised the definition of “Material.” Three aspects of the new definition should especially be noted, as described below:

The amendments highlight five ways in which material information can be obscured:

The new definition of material and the accompanying explanatory paragraphs are contained in IAS 1. The definition of material in IAS 8 has been replaced with a reference to IAS 1.

The amendments are effective for annual reporting periods beginning on or after January 1, 2020. Earlier application is permitted.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

In January 23, 2020, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” (“IAS 1”) to clarify the classification criteria of liabilities in the statement of financial position. The most significant changes are listed below:

The amendments are effective for annual reporting periods beginning on or after January 1, 2022. Earlier application is permitted.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

IAS 37 “Provisions, Contingent Liabilities and Contingent Asset”

On May 14, 2020, the IASB issued amendment to IAS 37 by specifying that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labour or materials) and an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

The amendments are effective for annual periods beginning on or after 1 January 2022. Early application is permitted

Interest Rate Benchmark Reform

In September 26, 2019, IASB introduced amendments, which modified specific hedge accounting requirements, so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark is not altered as a result of the interest rate benchmark reform.

The changes will mandatorily apply to all hedging relationships that are directly affected by the interest rate benchmark reform.

The Group does not expect the amendment to have any significant impact on its consolidated financial statements.

The effective date for adoption of this amendment is annual periods beginning on or after January 1, 2020, although early adoption is permitted.

IFRS 16 “Leases”

On May 15, 2020, the IASB issued amendments to IFRS 16 to make it easier for lessees to account for COVID-19-related rent concessions such as rent holidays and temporary rent reductions.

The amendment exempts lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct consequence of the covid-19 pandemic are lease modifications and allows lessees to account for such rent concessions as if they were not lease modifications. It applies to covid-19-related rent concessions that reduce lease payments due on or before 30 June 2021

These amendments are effective for periods beginning on or after June 1, 2020, with earlier application is permitted. The Company is currently evaluating the impact of amendment to IFRS 16 on its consolidated financial statements.

Quarterly Financial Information

The table below presents our selected unaudited quarterly results of operations for the four quarters in the fiscal year ended March 31, 2020. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. We have prepared the unaudited financial data for the quarters presented on the same basis as our audited consolidated financial statements. The historical quarterly results presented below are not necessarily indicative of the results that may be expected for any future quarters or periods.