The Hindu Business Line : Pritish Nandy Comm may tap institutional funding

PRITISH Nandy Communications Ltd (PNCL), a zero-debt company and Bollywood's leading production houses, may tap institutional funding this year to part-finance theeight films on its drawing table.

The Chairman, Mr Pritish Nandy, estimates the company's own investment in these films at Rs 50 crore-Rs 60 crore. Two to three of them will be big-ticket films, the remaining being smaller projects.

PNCL's last big film was Kaante in 2003, which contributed to topline but not that much to profits. The emergent busy season follows a fiscal 2004 spent nurturing the company's bottomline. Its net sales for the year slipped from the previous Rs 40.13 crore to Rs 30.95 crore while profit after tax grew from Rs 1.61 crore to Rs 2.93 crore.

Same time, PNCL's other income declined from Rs 1.11 crore to Rs 62.5 lakh. Mr Nandy attributes this to most of the company's original IPO funds now being deployed in film projects. With a project-heavy portfolio on hand for fiscal 2005, it means the need to look at additional financing, institutional funding being ideal given PNCL's zero-debt status.

If it does so, it will be a first for PNCL and from a film-funding perspective significant, in that the client is a major Bollywood corporate. On the other hand, there is talk in the industry of financial institutions yet to get their approach to funding right. In some cases, the loaned amount is sought to be recouped a week ahead of the film's release, defeating the purpose of external assistance.

PNCL's appetite for institutional debt is tied to the level of comfort it experiences in the process. Besides its in-house film production schedule for the fiscal, the company is talking to two UK-based companies to execute their projects set in India. One of these is a historical while the other is a movie in the crossover genre. Mr Nandy said fresh investment in equipment would not be needed to make these films as production facilities are available.

Typically, from the pre-production, production and post-production stages of film-making, outsourced work in the latter category entails investment. The work PNCL expects to get from the two British companies covers the full production spectrum.

His company is now wholly into film production, but Mr Nandy said PNCL still toys with the idea of working for television. It is not an easy decision as there is a plethora of channels, thereby putting pressure on earnings. There is also another angle to consider. Mr Nandy had previously indicated that he remains open to diluting his 38 per cent equity stake in the company to accommodate a financial investor. That or getting investors straight into the company is attractive only when PNCL's share price is handsome.

On Thursday (May 13), the company's stock closed trade on the BSE at Rs 68, not the right price yet for Mr Nandy. It raises the question of what is best for a good stock price: a PNCL that is fully focused on films or one that has exposure to television too?

Mr Nandy feels PNCL now has a standing in the film business and an efficient business model. The film trade, on its part, has shed much of its traditional risks. In the company's own case, the downside taken aboard is only to the extent of 15-20 per cent. The remaining portion of investment is usually recovered, including a sizable portion ahead of release.

As he puts it, PNCL's business model is one that neither concedes heavy loss nor reaps huge profit.