Home / Money / Personal-finance /  Meet Shah Rukh Khan the investor

It’s 7.30 in the evening on 7 September, the day when we reach Mannat, Shah Rukh Khan’s heritage bungalow in Bandra, a tony Mumbai suburb. We are ushered into a study in the office complex located behind the mansion, which stands as a symbol of the success—and wealth—he has achieved in a 25-year career as one of Bollywood’s most enduring stars.

Khan, now 49, paid 13.21 crore when he bought the property on a lease in 2001, according to property portal Housing.com, which, in a 2013 report, estimated its market value at 200 crore, taking into account assets, including its heritage status and the sea view it commands.

It’s also a tourist attraction where Khan’s fans stop by in the hope of getting a glimpse of the star, whose past five films (Happy New Year, Chennai Express, Jab Tak Hai Jaan, Don 2, and Ra.One) have all grossed over 100 crore—the new measure of box office success in Bollywood—and who has over 15 million followers on Twitter.

In a list of the world’s 34 highest paid actors released in August, Forbes ranked Khan 18th with yearly earnings of $26 million, and described him as “India’s Leonardo DiCaprio".

The actor walks into the study, which has wall-to-wall book cases and sofas, dressed in a blue shirt and jeans. He has just been through a story narration, and looks tired. He lights up a cigarette and sits back to talk about money.

Khan has channelled his money into three avenues—films (his film production and distribution company Red Chillies Entertainment and post-production and visual effects unit VFX); sports (the Indian Premier League, or IPL, franchise Kolkata Knight Riders); and children’s education and entertainment (he has a stake in the Indian franchisee of KidZania, a Mexican chain of family entertainment centres).

The actor says he has just one thought when he invests in something—that it should serve a purpose. “Whatever product you sell—whether it is soap, toothbrush, telephone or a dream—it should change something," explained Khan, who has endorsed a wide variety of product and service brands, including Airtel, DishTV, Hyundai cars, Nerolac paints, Pepsi, Fair and Handsome men’s fairness cream, TAG Heuer watches and Lux Cozi vests.

“For instance, the iPhone changed the way you use a phone and hence changed your life. Similarly, through the business I do—which is film-making—I would like to change lives. Just change it a little bit—one moment," he added.

Khan, known by many titles such as Badshah of Bollywood and King Khan, says he doesn’t have it in him to be a businessman. “To be honest, I really don’t understand the business part of it," he says.

As a man of the movies, he likes his films big and beautiful. “I am not a visionary; I just want cinema to look very nice and beautiful—in whichever sense," he says.

In the process, he admits, he lost money when ambitious and expensive home productions such as Phir Bhi Dil Hai Hindustani and Asoka did not do well at the box office.

But that hasn’t stopped him. “I have made two more expensive films since then, Ra.One being one. I continue to do so. And every time, after I finish a film, we say next time we will make it cheaper. There is nothing cheaper in film-making," Khan says.

“Every time I fail while making a film, I say it is okay to go wrong," he says. “I don’t learn any lessons from having gone wrong because films have a life of their own. Even if you learn all the lessons, and do everything right, a film can still go wrong. That is the lesson I have learnt in this business. It is a high-risk business and a low-paying one."

Ask him about his money and the “rich" tag and he responds with a laugh. “People talk about 300-500 crore. (But) they don’t even know the difference between gross and net and post-taxation, subsidies and a lot more."

A lot of time and effort—physical, mental, emotional and financial—goes into making a movie, and returns aren’t always commensurate, he says. “Studios... they acquire a film. They are not working on it; they just take it and lease it. To be a creative producer is a difficult job. I just realized that it has been 12 years since we have had the company. I think we are nearly debt-free. In another two-three years, we will have 25 negatives and hopefully, we will make a couple of crores a year. For me, that is a big dream for Red Chillies."

What about Kolkata Knight Riders, the IPL cricket franchise? “It is a seven-year-old company. It has got two championships. It makes a little money, which personally—I am not showing off—I could make in one day as an actor," he says. “I make that money and put it into these companies to create something."

Khan says he does not run Red Chillies any more. “But hopefully, all the people there will create cinema out of it as it grows old, which may have a little bit of my personality."

The superstar puts his own money into his productions, not borrowing even from distributors, because he doesn’t want to indulge his passion—making movies—at the risk of losing other people’s money. “You have to put your money where your mouth is. There is a huge amount of money in the market. I don’t work with that money. I work with my own money. I don’t borrow from the banks."

According to him, money should not be borrowed even for business purposes. “One of the lessons that I would teach anyone in business is: don’t borrow. Earn it yourself. Do less, but don’t borrow. And if you borrow from, say, the market or private equity, then your first allegiance, alliance and responsibility is to the person whom you borrow from."

Khan also prefers to stay away from investing in the equity markets. “I think it is a very intelligent thing that very smart people do. I know how it works, but I would not do it. I am not into quick money," he says.

“However, if my company decides to do it (go public) through the CEO (chief executive officer) and CFO (chief financial officer), and if they think it is a good thing to do, or my accountant wants to do it for my family, I will say go ahead. But I will not participate."

To be sure, he can afford to invest, and lose a bit of it, because his company has the reserves to see it through after two box office hits in Chennai Express and Happy New Year. Kolkata Knight Riders, too, has done well in terms of returns and titles.

“Now, I don’t mind making an investment, because if anything goes wrong, I can take it out and give it back," he says. “Now that I have some reserves, I know I have a fallback (option) and have the confidence to turn around, and return to people their money if it doesn’t work."

Khan says he doesn’t believe in “intelligent money". “I believe in dumb money. Just work hard...and keep your hands soiled. I don’t save any money. I have a very small businessman kind of a mind."

Earlier, when he had not tasted this kind of success, he had decided that he would do two things—build a house and provide his children with a decent education. He has done both.

Now he wants to build a studio and a stadium, and buy a plane for himself to fly around in. “I would like to invest in a world-class studio in India. For me, the making nation in the world has the shoddiest studios to make films. Right now, I can’t afford a studio, but with god’s grace, I will. The returns on studios, I have been told, take 35-45 years. It might be a stupid business, but I would like to (get into it)."

With so many business interests of his own, do start-ups look like an attractive proposition? He says there are people in his office who want to invest in start-ups, and if they want, he is willing to offer some money. But he won’t invest in one unless he is creatively involved in it.

“For instance, I understand the restaurant business since my father used to run one. Tomorrow, I could invest in one and own it. But I would not invest in, say, a chain of restaurants that someone else is starting. I don’t have that kind of money...."

So, where is the money? “I just about break even with the cinema I do. We are making four films. Cost must be 200-300 crore for making them. And all the money is ours. At this point of time, we don’t have money in the bank," he responds. When he falls short, “I attend a function or cut a ribbon and earn some money."

Khan is not the kind of person who quits midway. He explains his philosophy: If you don’t win it, then you have to keep running till you do.

“(I am a) happy accident—a good accident. I am not the most talented, good looking, sharpest, coolest or fastest. But I have been there for 25 years. I must have done something right," he says.

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