SEBI bars Eros Intl, CEO from market, Board positions for fund diversion

In a recent development, the Securities and Exchange Board of India (SEBI) has taken action against Eros International Media and its CEO, Pradeep Kumar Dwivedi, for alleged breaches of trade practice regulations. As a result, they have been barred from the securities market until further notice. Additionally, Sunil Arjan Lulla, the Vice Chairman and Managing Director of Eros International, has been prohibited from holding any directorial position in any listed company, including Eros International.

SEBI's interim order states that Dwivedi is restricted from holding any directorial position in any listed company, except Eros International. The order further prohibits the concerned parties, identified as "Noticees 1 to 5," from engaging in any buying, selling, or dealing in securities, directly or indirectly, until further directives are issued. However, if the Noticees have any open positions in exchange-traded derivative contracts, they are allowed to close out or square off such positions within three months from the date of the order or at the expiry of those contracts, whichever comes earlier.

The investigation leading to these actions began when Eros International disclosed its financial results for the fiscal year 2019-20. The company reported impairments of Rs 1,553.52 crore on "Content Advances" and "Film Rights." Additionally, trade receivables amounting to Rs 519.98 crore were written off during the same period. Upon reviewing Eros' financial statements, the National Stock Exchange (NSE) conducted a preliminary examination and forwarded a report to SEBI.

The preliminary report highlighted that a significant portion of Eros' revenue from operations, trade receivables, and loans provided were related party transactions, which notably increased during the fiscal year 2019-20. The report indicated potential financial misreporting, siphoning, or diversion of funds by the company.

SEBI's actions serve as a precautionary measure to protect the interests of investors and maintain the integrity of the securities market. By imposing restrictions on Eros International, CEO Pradeep Kumar Dwivedi, and Vice Chairman Sunil Arjan Lulla, SEBI aims to ensure compliance with trade practice regulations and prevent any further potential financial irregularities or misconduct. These restrictions will remain in effect until SEBI provides further updates on the matter.