FICCI Frames 2008: Financing celluloid dreams

There is no biz like showbiz, and given the booming entertainment industry in India, emerging trends and film finance options were discussed at length at the session on ‘Raising Capital: Showbiz attracts the moolah’. The session, which was moderated by was moderated by Shardul Shroff, Managing Partner, Amarchand Mangaldas, brought together CEOs, financers and filmmakers to discuss the current state of entertainment financing.

Domestic FIs and companies have always been apprehensive about investing in films and the media industry in India. It was only after the advent of foreign investors and institutions in the Indian media industry that we saw a rise in domestic FIs coming into the sector.

Ravi Sardana, Senior Vice-President, ICICI Securities Ltd, said that FIIs had not only invested in the Indian media industry but also forced Indian investors to rethink about their investment strategies. Elaborating further, he said, “India is the fastest growing economy in the world with a GDP of 8 per cent, and the total spend on advertising and entertainment are much ahead of the GDP growth. However, a lot is still underexplored and there is space for more players in the market. The media sector is just about $50 million, while a company like Walt Disney alone is valued at approximately $60 billion.”

Sardana added, “The growth in the Indian economy is a consumer-led growth and India consumes two times more movie tickets in the world. However, there is a talent crunch in the industry, which in turn leads to a crunch of good content, resulting in investors in India holding back.”

Mahesh Chhabria, Director, 3-i India Pvt Ltd, remarked, “Although investors in India were quite apprehensive about investing in media, I think platforms like the digital formats have paid off. The pay-for-use model is nascent in India, but people are appreciating this format and investing in this as well.”

Akhil Gupta, Chairman, Blackstone, said, “More than the GDP, per capita consumption is more important. There should be more stress on domestic consumption.”

Agreeing with Sardana, Sheetal Talwar, who has just floated a film fund, said, “There is a huge depth of talent in the industry and each film would be a separate issue for us. We have also funded newcomers in the industry on the basis of their scripts and other prospects.”

John Mathew, Chief General Manager, EXIM Bank, spoke about the RBI regulations for financing a film or a media company. “We strictly follow the RBI rules and stand by them. We evaluate a film on the basis of the track record of the production house or the producer. We also keep the rights of the film as a security and the loan is paid before the film is released,” he added.

Yes Bank’s Karan Ahluwalia, however, noted, “We also follow the same principles laid down by the RBI, however, we are also open to financing newcomers and beginners depending on their profile and other company policies. Our repayments also depend on the profile of the company, and not necessarily before the film has been released. We also finance television content.”

The session ended on a unanimous note that the Indian media industry should not haste and launch IPOs, but rather financial institutes must advice their companies to seek venture capital rather than private equity share as was the case in the US.