UK investors in £50m Bollywood bond crash: Action group fights for redress as thousands of savers suffer heavy losses
- Eros Media World is a major industry player based in Mumbai
- In 2014, Eros issued a bond on the stock exchange, offering 6.5% annual interest
- Interest payments increased to 8.5%, but Eros did not make the last interest payment
Red alert: Bollywood star Deepika Padukone stars in Ram-Leela, one of Eros’ releases
Thousands of British savers are facing ruinous losses after investing in a £50million bond from Indian Bollywood film group Eros Media World.
Eros, behind some of the most successful Indian films of all time, is a leading player in the Mumbai-based multi-billion pound Bollywood industry.
In 2014, the company issued a bond on the London Stock Exchange, offering 6.5% annual interest, while savings accounts yielded little or nothing.
Many investors bought the bonds hoping to secure a generous income.
After Eros restructured the bonds in 2021, extending the redemption date to April 2023, interest payments rose to an even more generous 8.5% per year.
Last October, however, Eros failed to make its final interest payment – known as the coupon in the bond market.
The group, controlled by the wealthy Lulla family, said it was “committed to remedying this late payment of the coupon as soon as possible”. But investors have yet to receive any money and there are growing fears that the bond will not be repaid at all when it matures in April.
Not only has the company not provided more information to bondholders since late last year, but Eros Media World was compulsorily delisted from the New York Stock Exchange after failing to provide accounts during of the last two years.
The bond price fell from £1 at launch to just 6.8 pence today. Now the bondholders are demanding redress.
Several have written to the Financial Conduct Authority, which admits it is considering an investigation.
A letter seen by The Mail on Sunday explains that the regulator is looking into the situation and may use its “statutory powers”. The letter states, “Not all breaches of our rules or requirements constitute gross misconduct. However, if we suspect gross misconduct, we will initiate an enforcement investigation.
Eros has been contacted numerous times but the company has so far said nothing.
There is also growing frustration with the trustee, US Bank, which is supposed to protect the interests of bondholders.
The administrator declined to comment on the MoS, but if bondholders holding 20% of the bonds form a unified group, they can ask US Bank to lobby to act on their behalf. Until then, the trustee has very few obligations.
City professionals believe the Eros saga exposes shortcomings in the stock market’s bond market, particularly when companies don’t have shares listed in London.
Eros bondholders have been left in the dark and neither the company nor the trustee has to keep them informed.
An investor, hoping to use his bonds to pay off his mortgage, invested £55,000 of his savings in the Eros deal.
Another said: “I’m originally from India and I know how popular Bollywood movies are. I really did my homework before investing in this bond and I don’t understand why we are in this situation.
Others were heartened by Eros Media World’s recent announcement of a blockbuster deal with Saudi group Arabia Pictures. And sister company Eros International Media remains listed on the Indian Stock Exchange.
An action group is meeting through Alex Dunkley of financial consultancy 365 to defend the interests of bondholders. Investors can email firstname.lastname@example.org. But 365 and others are increasingly concerned about the complex links between Eros in India and Eros outside its home market.
Eros Media World is chaired by Rishika Lulla Singh. His father, Kishore Lulla, a well-known figure in larger Indian circles, is the director of the company and other family members are involved in the business.
Eros International Media, listed on the Mumbai Stock Exchange, also names members of the Lulla family on its board. Both companies have the same managing director, Pradeep Dwivedi.
The situation caused a stir in municipal circles. Panos Simou of 365, who has been involved in the bond markets for 40 years, said of the Eros saga: “I have never seen anything like it in my entire career.”