Bollywood is beginning to enjoy the benefits of corporatisation. As the world’s largest film industry organises itself into a bigger and better-managed entity, it’s being helped along by a steady infusion of funds, not the least from private equity (PE) investors, who have been pouring money into sectors like infrastructure and real estate.
Although PE activity was slack in 2007—and no one is willing to give out details—experts believe that the New Year may see a lot of development on that front. With the industry growing at a frenetic pace, everyone agrees that filmmaking in India is no more the job of an individual producer or financier. Second, the growth of the film industry has attracted PE players the most. Third, with the onset of corporatisation, foreign investors feel investment in the film industry is a safe bet. According to a study by FICCI-PricewaterhouseCoopers, the size of the entertainment industry, which was pegged at Rs 8,400 crore in 2006, is likely to double by 2011.
So, how are PE funds being routed to the industry? Experts say equity is coming into the industry through both foreign and domestic routes. According to reports, some of the big film production houses are in the race for PE funds to fuel their business growth plans. The trend began last year when PE investors like 3i, Cisco and Oman International Fund invested Rs 552 crore in the media and entertainment house Nimbus Communications—producer of films like Sarhad Paar, which flopped, and the Sanjay Dutt-starrer Yakeen. PE funds have got more aggressive plans in the movie sphere in the future.
Mahesh Chhabria, director, 3i India, which has committed to investing $70 million over two years, says his firm was on the lookout for more entertainment companies for further equity investments. “You will hear something from us within the next couple of months,” he adds. Shemaroo Entertainment (Omkara, Manorama 6ft Under, Bal Ganesha) and Venus Movies, whose recently released films include Hathiyar and Garam Masala are looking for PE funds. Next in line are the entertainment TV channels.
While Shemaroo Entertainment is in the process of raising Rs 200 crore over a period of one-and-a-half years, it has set its eyes on PE players to cater to half of its financial requirement. Says Hiren Gada, director, Shemaroo Entertainment: “We are looking for PE funds as we have got ambitious plans for growth in both production as well as film distribution.”
The company is planning to raise Rs 100 crore through PE funds, while the remaining amount will be raised in the form of debt. Gada points out that his company’s talks with three-four PE players have already reached an advanced stage. “I cannot give details because due diligence is on,” he adds, even as he hints that by the end of the fiscal year, deals may be struck.
Currently, Shemaroo Entertainment is busy with the production of the film Mere Baap Pahle Aap, starring Akshaye Khanna and newcomer Genelia D’Souza, which is likely to see a summer release.
There are several other players who have raised money through Foreign Currency Convertible Bonds (FCCBS) and may take the PE route for the next phase of expansion. Says Dhilin Mehta, CMD, Shree Ashtavinayak Cinevision and producer of the box-office hit movie Jab We Met: “We have got shareholder approval to raise $50 million through FCCBs early next year, but if any PE investor approaches us, we are ready for such an option as well.”
Nearly 12 films are already on the floors from the Ashtavinayak stable waiting for release next year. “PE funds are knocking on the doors of Bollywood,” says Venkat Devarajan, CFO, Adlabs Films, which has already raised Euro 84 million through FCCBs sometime ago. “The fast growth of the Indian film industry has been the main driving force for PE investors. PE funds come faster than bank financing and will help the industry grow at a faster rate,” he points out.
In fact, Bollywood needs all the money PE funds are offering, and more. With films like Om Shanti Om and Saawariya making a big splash on the marketing and branding front, it’s become clear that filmmaking is no more the job of an individual or company. As huge sums of money are involved, experts feel PE funds can play an important role.
Preet Bedi, CEO, Percept Picture Company, says that his company is looking for PE money at a time when it wants to produce 10-12 movies a year from next year. “Although funding is available for us through banks and international sources, equity funding is likely to provide us a cushion to support our growth plans,” he adds.
After the success of the animated film Hanuman, Percept is all set for the release of its sequel Hanuman Returns on December 27. Some of the other films that are likely to be released from the Percept stable next year include the Randeep Hooda starrer Rubaru and the actor Nandita Das’ directorial debut In Such Times.
Deals are being struck in the television industry too. For instance, the Future Capital-promoted Indian PE firm, Indivision Capital, picked up a 4.9% stake in the Essel Group-run Dish TV for Rs 250 crore. Eminent filmmaker Shekhar Kapur recently said in a media interview that he was working on the idea of developing an investment fund to finance the Asian media and entertainment companies and was all set to put in $ 1 billion to begin with, for the purpose. Also, Kapur has said that a Chinese equity firm Hina Group may join him as one of the partners in his forthcoming venture.
It’s not that PE funds have not had their share of setbacks, even as they try to set foot in a new sector. One of the world’s biggest PE funds, Blackstone, for instance, got a jolt when the government in early December deferred a decision on its proposal to pick up a 26% stake in Ushodaya Enterprises, which owns ETV television network.
Source: Economic Times