Mumbai: Television content provider and film producer Balaji Telefilms Ltd is planning to launch a film-focused private equity (PE) firm, according to three people familiar with the development. The plan is to invest in Hindi films, television content and educational media.
Though the size of the fund is not known, Balaji Telefilms wants to tap foreign investors and rich individuals to raise money, said one of the people. “The company has applied for registration for a venture capital fund with Sebi (Securities and Exchange Board of India) and is expected to get the approval anytime now,” he said.
One of the three persons is a professional in the PE industry, another a former Balaji Telefilms executive and the third is attached to a broadcaster. All of them requested anonymity.
Puneet Kinra, chief executive of Balaji Telefilms, declined to comment.
According to the former Balaji official, the company has been planning to start this fund for a while now. “They have been planning this fund for past six months. Balaji has not been able to fund films with big stars and the fund will solve that problem,” he said.
Balaji’s intent is to follow the UTV model, where they get a cluster of big investors together, float the fund and then go after the big stars and big projects. “They’ve been waiting for this for a long time because they needed to have some releases up at the box-office before they approach people for the fund. They now have films such as Love Sex aur Dhokha, Shor in the City, Once Upon a Time in Mumbai—all decent releases,” he added.
There are a few film-focused funds in the market including Vistaar Religare Film Fund (VRFF), Cinema Capital Venture Fund, General Entertainment Partners and Dar Capital.
A film fund should have at least Rs 150-200 crore, according to Sheetal Talwar, managing director, VRFF, which has so far deployed Rs 130 crore.
“Project selection is the key challenge in this business. The other is monetization of these projects,” said Talwar. Over a five-year period, such funds target 20% return.
“Film funds help bring in a level of transparency in the film-financing business,” said Talwar. VRFF operates on a model where every film is a separate special purpose vehicle (SPV) and each film is funded separately. “You need a financial partner to help bring in the transparent structure, proper governance and processes.”
There is a scope for film funds in the market as financial institutions are cutting back in financing production houses, according to Jehil Thakkar, executive director, media and entertainment at consulting firm KPMG India Pvt. Ltd.
“As far as the returns are concerned, somebody who knows the business well is likely to be more successful in the film-financing business than a financial institution. Balaji obviously knows the business well. If done well and with transparency, it can be a good business,” said Thakkar.
A 2011 Federation of Indian Chambers of Commerce and Industry and KPMG report said the television industry is expected to grow at a compounded annual growth rate of 17% until 2015 to Rs 63,000 crore and the Indian film industry at 9.6% to Rs 13,350 crore in revenue.
Balaji Telefilms’ stock rose 0.72% to close at Rs 35 on Friday on the Bombay Stock Exchange, even as the benchmark Sensex index lost 0.64% to close at 18376.48 points.
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