Bangalore: What is common between Aamir Khan-starrer Taare Zameen Par, newcomer Imran Khan’s Jaane Tu Ya Jaane Na and director Ram Gopal Verma’s forthcoming Contract? Their funding. All three movies have been co-produced by PVR Pictures, which is backed by private equity, or PE, biggies ICICI Venture and JPMorgan Partners Llc.
With an increasing slice of the some 1,000 film releases in India annually getting made by corporate production houses (as different from debt-backed and family-run production operations), venture capital (VC) and PE players want to be part of the glamour world. The potential is all there: With a population of 1.1 billion and movie ticket prices that are among the lowest in the world, India is home to the world’s largest film-going audience, according to consultancy firm PricewaterhouseCoopers. Revenues of $2.2 billion (Rs9,460 crore) in 2007 is expected to nearly double by 2012.
New territory: From production to distribution of films, VC and PE companies are taking to the movies with gusto.
The Bollywood buzz seems to be going so strong that a few film-centric funds are being floated. The country’s first Securities and Exchange Board of India (Sebi)-approved film fund, Cinema Capital Venture Fund (CCVF), will be launched early next month. With a corpus of Rs500 crore, the fund will look at investing in all elements of film-making from production to distribution. According to CCVF’s senior partner Samir Gupta, with nearly 70% of the companies being privately held in the film industry, and new filmmakers lining up regularly, there would be enough demand for investments. “The film industry enjoys high valuation and strong growth. Also, its minuscule co-relation to the (fortunes of the) stock market makes it very lucrative for investors,” says Gupta.
CCVF aims to adopt a diversified portfolio approach and invest in both start-up and growth-stage banners in the movie business. Gupta says talks are already on for a few deals and some will be disclosed immediately after the launch of the fund. He declined more details. The firm aspires to not only invest in Hindi films but also regional production houses.
Religare Enterprises Ltd, a financial services business promoted by the Singh family of Ranbaxy Laboratories Ltd, has also announced the launch of a film fund in collaboration with Vistaar Entertainment Ventures. The fund, christened Vistaar Religare Film Fund, with a corpus of Rs200 crore, is awaiting Sebi approval. The fund’s first film has tentatively been named Avasthi and stars Pankaj Kapur.
Although film-making is new territory for VC firms, PE players have been active in the distribution and exhibition end of the business. Temasek Holdings Pte Ltd, through units Aranda Investments (Mauritius) Pte Ltd and Dunearn Investments (Mauritius) Pte. Ltd, holds 13.5% in cinema chain Fame India Ltd (formerly Shringar Cinemas Ltd). PVR, which has been credited with bringing the concept of multiplexes to India, received its first share of PE equity investment in 2003 from ICICI Venture for expansion. “For us, (private equity is) the only logical way of raising capital,” says Ajay Bijli, managing director, PVR Ltd.
The advent of VC and PE investors will bring new seriousness and discipline in the film-making business, with all financial decisions being overlooked by a third party, experts say. PVR Pictures, whose debut co-production Taare Zameen Par was a hit, now has six movies in the pipeline for release. In July, both Contract and Jaane Tu Ya Jaane Na will hit the box office. On the distribution front, PVR had the distribution rights for Sarkar Raj in some areas.
In Chennai, Pyramid Saimira Group plans to launch two funds. The investment could vary from Rs1 crore to Rs50 crore, subject to the exposure not exceeding 60% on a project. Of the two funds, one would be a zero-risk option and the other a high-risk and high-return one. “The fund will back producers, creators (and) production houses purely on the strength of the project and creativity of the team. It will focus less on stars,” says P.S. Saminathan, managing director and chairman, Pyramid Saimira, which is also India’s largest distributor of films.
Experts say the entry of VC and PE investors into the business will lead to a better film-making culture in India. Unlike a few years back, when capital came from unaccounted quarters, mostly in the form of debt at exorbitant interest, reliable investors will make life easier for seasoned as well as new filmmakers.
“Not only the quality is improving and will further, investments will enable filmmakers to go for different kind of films. They (filmmakers) will be in a position to take risk and have liberty of creativity,” says Vikash Mantri, media analyst, ICICI Securities Ltd.
With the success of films such as Bheja Fry, a comedy targeted at the urban middle class and marketed with accuracy, the Indian audience seems to be opening to newer ideas. The film was made at a budget of Rs60 lakh and raked in Rs12 crore.