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Even those movies that tread the untrodden path, like Rang De Basanti, are finding corporate support.

Shanthi Venkataraman

The business of Bollywood is getting so hot that almost everyone wants to play the leading role. Banks, corporate houses, internationally renowned production studios and even affluent investors are readily opening their chequebooks to fund the production of Indian movies. Scriptwriters, filmmakers and artistes never had it so good. But those unfamiliar with Indian films might be wondering: what’s all the song and dance about?

Releasing more than 1,000 movies a year, India is the largest producer of films in the world. Problems of low movie ticket prices, unorganised trade practices and rampant piracy, however, have ensured that the industry is barely one-tenth of the US filmed entertainment market, which is estimated at $35 billion. But the mushrooming of multiplexes, higher spends on entertainment, increasing collections at theatres overseas and the emergence of new revenue streams beyond the box office has helped the Indian film industry log an impressive growth rate. According to the PricewaterhouseCoopers (PWC) Report on the Indian Entertainment and Media Industry 2008, the film sector is poised to record an annual growth rate of 13 per cent to Rs 17,600 crore through 2012.

With projections like that, it is no wonder that investors have begun to smell the money that can be generated from this business. The changes in the way Indian films are now produced and marketed have not only made the business a more profitable one, but has also altered investors’ perception of the film business, which has traditionally been viewed as extremely risky.

In fact, the film industry has managed to evince interest from the most conservative of lenders. Banks, in recent years, have been extending support to the Indian film industry. RBI norms cap the extent of exposure to the sector to 5 per cent and also prescribe stringent rules for lending. Only producers with a track record of more than five years in the field typically get access to such lending. IDBI is one of the largest players in this segment. EXIM Bank, too, is a big player, although loans are available only to films that can generate an international revenue stream.

Speaking at the FICCI Frames 2008 media convention, John Matthew, Chief General Manager, EXIM Bank, said the bank had had a reasonably good experience lending to the film industry. “Finance has been extended based on the rights of the film. Repayment of finance is done prior to the release of the film. So the exposure is only towards completion of the film.” There are now fewer instances of production delays or abandoned projects, thanks to ‘corporatisation’ of films, which has brought more discipline to the industry. Besides, there are companies such as Infinity Film Completion Services, sponsored by GIC (General Insurance Corporation of India), that guarantee completion of films to financiers.

EXIM Bank has extended loans worth Rs 300 crore to the film sector. “Our NPA (non-performing assets) has been just Rs 10 lakh,” he adds. YES Bank has structured products for content acquisition, not just for filmed entertainment but also for television.

The situation is now a far cry from yesteryear when filmmakers were dependent on ‘independent financiers’ who lent at 25-30 per cent interest. As for banks, lending against films is certainly more lucrative, with interest rates at about 12-14 per cent.

But returns from lending do not compare to the potential returns that can be earned through equity funding. After all, if a film is a success, a producer can recover his costs several times over. But one does not have to be a Yash Chopra to get a piece of this business. All one has to do is invest in a ‘film fund’. These funds mobilise money to invest in movie productions. While not all films are successful, the payoffs from those that are successful can be huge.

“If films are a risky business, then returns from the business have to be as high as any other risky asset, say, equity,” says Sheetal Talwar, Chairman and Managing Director, Vistaar Religare Film Fund, a venture capital fund recently set up to fund films. The fund would set up special purpose vehicles (SPVs) to fund each film project. The revenues from the film will flow directly into the SPV and will be re-distributed according to the ownership pattern. The filmmaker too will have a stake in the SPV.

Pyramid Saimira plans to launch two such funds. One would merely finance a film and offer investors a return of 12-14 per cent. The other would be a pure risk fund, meaning that it will undertake the entire risk of film production and therefore offer investors potentially higher returns. “We are giving investors with a high risk appetite an opportunity to take exposure to a different asset class. Investing in films is like investing in a junk bond,” says P. S. Saminathan, Managing Director, Pyramid Saimira, highlighting the risk associated with film investing.

The Mahindra & Mahindra group also plans to launch a film fund with an initial corpus of $50 million to invest in the group’s film business and other media initiatives.

With emerging revenue streams making film production viable, more such corporates are entering the film industry. Listed players such as UTV, Television Eighteen (Indian Film Company), Adlabs and Pyramid Saimira are already present in the production business in a big way.

As listed entities, these companies have even easier access to funding and are now able to flex their muscle to get the maximum out of sale of distribution rights, home video, music and television satellite rights. Viewing of films on other platforms such as home entertainment and Internet is untapped in India, where the box office accounts for 75 per cent of the revenues, compared to about 40 per cent in Hollywood.

Much as the artistes and old hands in the industry hate to admit it, corporates have changed the dynamics of the business. Indian Film Company (TV Eighteen group) recently made the industry sit up and take notice when it syndicated the rights of its film Jab We Met to four channels for a reported sum of Rs 22 crore, capitalising well on the trend of entertainment channels using movies to capture eyeballs.

Corporates go beyond just funding production. “We provide support from the creative, commercial and operational perspective,” says Siddhart Roy Kapoor, CEO, UTV Motion Pictures, which has more than a dozen movies lined up for the year.

The corporatisation of the film industry has also attracted FDI into the film industry. Sony Pictures released its first Indian production Saawariya in 2007. Walt Disney has tied up with Yash Raj Films for the production of three animation movies. International co-productions with the likes of 20th Century Fox and Warner Bros are on the rise.

Between banks, film funds, international strategic partners and public money, there is no dearth of funding options for the film industry. This raises the immediate question: Is there too much money chasing too few films?

“Corporates are chasing the same star-led scripts,” says Talwar of Vistaar Religare. “Our fund will be star-agnostic,” he says, adding that the script, the strength of the film’s message and the vision of the filmmaker will be the main criteria for funding a film.

Flush with money, however, producers may now be more willing to experiment and the public may finally get to see something different from the usual Indian masala movies. Corporates, too, appear willing to give new filmmakers a chance and deny the allegation that they favour only star-led scripts. “Out of the 20 movies we have on our plate, at least 10 are ones that do not have top-bidding stars playing the lead role,” says Kapoor of UTV Motion Pictures. Kapoor says that UTV has backed films such as Khosla Ka Ghosla, which was a debut for director Dibakar Banerjee, Life in a Metro, which did not have the usual crowd-pulling stars, and Rang De Basanti, which was led by Aamir Khan but was different from the usual formula films.

“We are handling public money. We need to have a balanced approach to filmmaking. Make a portfolio of films across genres,” says Pyramid’s Saminathan. The show goes on.

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