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The Other Shoe Drops for EROS

Irrefutable Proof of The Company’s Financial Misconduct

Price Target: $4.00

November 12th, 2015

Author Dale Renton is noted for stating, “When what you hear and what

you see don’t match, trust your eyes.”

We at Street Watchdog Research are hearing something quite different

from EROS International PLC (NYSE: EROS) than what we are actually seeing.

Specifically:

What we hear: In its 6-K filing to the SEC just last week, Eros states, “We are confident in our business fundamentals…Our credibility and reputation are of paramount importance.”

What we see: The company’s profit for the 4 quarters of FY 2015 do not match the annual results reported to the financial community nor to the SEC! A detailed description of this irregularity is included later in this report.

What we hear: In that same 6-K filing to the SEC last week, EROS specifically states, “Grant Thornton India LLP is the auditor of Eros International Plc who performs the audit of the Company’s consolidated financial statements, which includes its subsidiaries, in accordance with the standards of Public Company Accounting Oversight Board (United States).”

What we see: Yet, in its FY 2015 20-F filing to the SEC just four months prior, on the 8th of July, EROS states in Item 3, Sec. A, “The selected historical consolidated statement of income data for each of the two years ended March 31, 2012 and 2011 and the selected historical statement of financial position data as of March 31, 2013, 2012 and 2011 have been derived from audited consolidated financial statements not included in this Annual Report on Form 20-F.” If the company has an auditor as it says it does, why have the income statements for the past 3 fiscal years and the balance sheet for the past 2 fiscal years not been audited?

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Only 7 quarters worth of financial information is publicly available on the EROS corporate website, but 4 of those 7 seem to be questionable. Specifically, the quarterly financial results for fiscal year 2015 do not match the annual results reported to the financial community. MORE IMPORTANTLY, THOSE RESULTS DO NOT MATCH THE ANNUAL RESULTS REPORTED TO THE SEC.

Additionally, the company claims to use Grant Thornton India, LLP to

audit its consolidated financial statements, yet of the 7 financial statements

provided on the company’s website, under the “Investor Relations” tab, NONE

OF THOSE 7 SETS OF FINANCIAL REPORTS HAVE BEEN AUDITED. Even

the FY 2015 results reported to the SEC indicate the company has audited

results for 2011 and 2012. Where are the audited results for FY 2013, FY

2014 and FY 2015? Before we delve into this in more detail, a bit of

background…

To make it easier for the reader to follow along, we have included below a link

to the company’s 7 sets of reported quarterly reports:

EROS Financial Statements

On October 30th, short-seller Alpha Exposure put forth a thesis entitled,

“Unlike The Name, Investors Should Not Love EROS.” In this article, Alpha

Exposure alleges that (1) the company’s earnings are overstated due to

aggressive accounting practices, (2) its subsidiaries reveal a lack of free cash

flows, (3) the company unduly enriches family management, (4) it has poor

financial controls, and (5) it is losing out to other competition, including

possibly Netflix.

The company fired back three days later, issuing the following

statement, “In the past two weeks, there has been a vicious campaign to

damage the credibility of Eros International by spreading false rumors and

misinformation regarding its business with an objective to create panic

amongst the investor community. No new facts about the Company have

come to light since the filing of the FY2015 financials or its Q1 FY2016

financials at which time the market sentiment was extremely positive.”

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Just to be clear, there are no false rumors or misinformation in this report. All

information included herein is taken directly from EROS’ filings with the SEC

as well as the limited financial data it publishes on its website.

We at Street Watchdog have, in fact, discovered an extremely important fact

that may invalidate the company’s rebuttal statement. This article intends to

give some proof of allegations number 1 and number 4 in the short-seller’s

report: aggressive accounting and poor financial controls. We have reviewed

in detail EROS’ Quarterly Reports for the four quarters of FY 2015.

Just to be clear, its fiscal year 2015 comprises the following 4 quarters:

1st Quarter FY 2015: 04/01/2014 – 06/30/2014

2nd Quarter FY 2015: 07/01/2014 – 09/30/2014

3rd Quarter FY 2015: 10/01/2014 – 12/31/2014

4th Quarter FY 2015: 01/01/2015 – 03/31/2015

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The company’s 1st quarter FY 2015 Condensed Consolidated Statement of

Income excerpted below shows a net loss for this period of -$2,588,000.

The company’s 2nd quarter FY 2015 Condensed Consolidated Statement of

Income excerpted below shows a net profit for this period of $4,324,000.

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The company’s 3rd quarter FY 2015 Condensed Consolidated Statement of

Income excerpted below shows a net profit for this period of $25,300,000.

The company’s 4th quarter FY 2015 Condensed Consolidated Statement of

Income excerpted below shows a net profit for this period of $19,356,000.

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The sum of the profit for those 4 quarters: -$2,588,000 + $4,324,000 +

$25,300,000 + $19,356,000 totals $46,392,000, yet the company is reporting

in its YTD column an inflated profit of $49,330.00! We were not able to find

any notes to the financial statements which could explain this major

discrepancy.

More importantly, this inflated net income (see SEC excerpt below) was

reported to the SEC just 4 months prior on July 8th, 2015. The full filing is

available at the link below:

EROS FY 2015 Annual Report to SEC

The same set of numbers was reported in an amended filing to the SEC about

six weeks later.

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The information above excerpted from the SEC filing indicates the 2011 and 2012 income statements were audited as well as the balance sheets for 2011, 2012, and 2013. WHY WERE THE INCOME STATEMENTS FOR THE LAST 3 FISCAL YEARS AND THE BALANCE SHEET FOR THE LAST 2 FISCAL YEARS NOT AUDITED? IF THEY WERE AUDITED, WHERE ARE THE AUDITORS’ UNQUALIFIED OPINION REPORTS? The EROS website reports annual results for FY 2014 and FY 2015. BOTH SETS ARE REPORTED AS UNAUDITED! Yet the company specifically states to the SEC that Grant Thornton India LLP is its auditor of record in its Nov 2nd Detailed Response to Recent Short-Seller Allegations.

We at Street Watchdog Research have 3 big sets of questions for EROS’ management with regard to its financial statements:

1. Which set of numbers is correct, the quarterly numbers or the annual numbers for FY 2015? Would further investigation of financial data not available to the public reveal further irregularities?

2. Were accurate numbers reported to the SEC for the FY 2015 and in previous years?

3. If you have an auditor as you claim you do, WHERE are YOUR AUDITORS’ REPORTS for the most current 3 fiscal years?

Even Hedge Fund Dalton Investments, LLC who recently disclosed a 6.2% stake in EROS indicates that there is a need for “fostering further transparency on the issuer’s management.”

Based upon the above, we at Street Watchdog have set a price target of $4.00, which is the approximate average price during FY 2012, the last year for which EROS indicated it has an audited income statement.