Film financing has slowed down in the last two years with banks treading a cautious path.

Due to unpredictable revenue streams, banks and financial institutions are not financing individual film projects but taking exposure at the corporate level.

Industry analysts also say that the tiff over the revenue-sharing pattern had halted many movie releases leading to higher default on loans by distributors.

Exim Bank (Export Import Bank of India) has reduced its exposure to film financing to Rs 200 crore from a peakof Rs 350 crore in 2007-08. The financial institution has financed close to 135 Indian films since it got active in film financing in 2004.

“We are focussing on film financing due to the overseas earnings potential of Indian films. The Indian film industry brings in about half a billion dollars in foreign earnings.

“At present, we have reduced our exposure to Rs 200 crore as the distribution arrangement between multiplex and film producers has changed after 2008,” said Mr Mukul Sarkar, Chief General Manager, Exim Bank.

IDBI Bank, which was the pioneer in film financing, has turned “indifferent” to the sector. The bank has not disbursed any fresh loan in the past two years. In the last decade, the bank had extended loans aggregating about Rs 2,000 crore to the film industry.

The reason for the freeze on film financing is that the public sector bank is yet to recover dues from many films, which are still lying in cans.

“Financial institutions lend between 10 and 30 per cent of the total film production cost. This also includes advertising cost. However, the trend of bank financing of films is yet to catch up in a big way in India.

“Banks are not getting into film financing in the traditional (end to end) form. Exim Bank and IDBI Bank have slowed down their involvement in the last two years,” said Mr Jehil Thakkar, Head, Media and Entertainment, KPMG.

In other countries, production costs are largely institutionalised. Banks may lend only if they get a corporate guarantee, Mr Thakkar added.

However, banks have shown keen interest to invest in “bankable” production houses such as Yash Raj Films, UTV Motion Pictures, Excel Entertainment, Eros International, Dharma Productions among others, according to Mr Dewang Rawal, President and Regional Business Head, YES Bank.

Banks like Central Bank of India have invested in Preity Zinta’s production Ishq in Paris , while Exim Bank has made investments in upcoming movies like Ishqiya 2 , Satte pe Satta and Judwaa 2 among seven other films that are yet to be released.

Gaming industry

Exim Bank has also forayed into supporting entertainment projects in the field of gaming, animation and video games. “This segment has good potential for forex earnings,” said Mr Sarkar.

The Indian gaming sector achieved revenues of Rs 1,300 crore for the last fiscal. Bollywood embraced gaming with the release of several film-themed titles such as Ra.One Genesis , Agneepath and Don 2 across multiple platforms.

beena.parmar@thehindu.co.in

nivedita.ganguly@thehindu.co.in

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