• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Shyam G. Menon
Latha Venkatraman

MUMBAI, March 7

THE Indian film industry may have to right-size its prolific output once corporatisation takes roots. "Close to 85 per cent of Bollywood's revenues come from less than 30 per cent of the films it makes in a year," Mr Rajesh Jain, Executive Director (Corporate Finance), KPMG India Pvt Ltd, has said.

An estimated 23 per cent of revenues in the Rs 16,000-crore entertainment industry come from films; Bollywood's is a major chunk of that. Last year, Bollywood took a beating at the box office mainly due to its failure to come off a diet of `me-too' themes. An often-cited example is 2002's multiple releases on Bhagat Singh's life.

While traditional film financing ignored the flogging of one theme, the same needn't be the case with organised financiers having exposure to several projects at the same time and thereby, a view of the many themes under production. Even weak audience interest in an existing story line or their likely interest in a new theme would be looked into. Result: as in the case of other products, in films the `me-too' genre will come to merit second-rung importance, perhaps none at all.

Fewer films may become the norm. The big grosser will be a true big grosser, overall industry revenues growing on a smaller base of films. But then, for the Indian film industry which churns out the highest number of films worldwide, that is still theory.

Mr Sunir Kheterpal, Senior Manager (Strategic Advisory/M&A), Rabo India Finance Pvt Ltd, who had earlier forecast progressive vertical integration in the industry, cites a few instances. The format of film release has altered in segments, multiplexes adding possibilities. Focused marketing has paid off. Yet the pace of overall change is poor. In reality, corporatisation of the sector is happening slowly.

This despite the dividends being attractive. In Bollywood, traditional film financing rates hover at 25-40 per cent or higher, while the Industrial Development Bank of India (IDBI) disburses funds to the sector at 16 per cent. IDBI has reportedly assigned around Rs 80-90 crore for various film projects and, according to industry circles, Bank of India has two projects and Bank of Baroda, one.

To be fair, inertia is not solely that of the industry. For the financial institutions, becoming comfortable with intangible assets as collateral is still some distance away. Their derisked model is averse to producers without track record, even if projects are riveting. (Consultants say it aligns the industry better, the big names providing a launch pad for the small ones.)

Not just that, but organised financing has been slow in funding projects in the sector with tangible collateral, like the distribution and exhibition business. (This can change once the FIs develop a funding thrust for small/medium enterprises to which category theatres belong. Besides, property value here usually exceeds upgradation costs. But as in films, out of India's 12,900 theatres not every hall will make it to the evolving future.)

Reflecting this, the hottest financing opportunity in the near term future of the domestic entertainment business, Mr Jain argues, is funding cable television's set-top boxes. Sixty per cent of entertainment revenues come from television and the funds need in consumer financing for set-top boxes is pegged at Rs 5,000 crore. Beyond that, potential in the film world for securitised ticket sales, rating of producers and creation of tangible assets (like film library) from currently intangible ones, all seem theoretical. The silver lining is last year's string of flops, which has made Bollywood's dream merchants seek better practices.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Grasim hopeful of nod to open offer for L&T stake

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line