[icernet] Indian films starved of institutional funds

[Arul Selvan]

All's not well with Bollywood. The film industry grossed a turnover of 
Rs 3,900 crore (Rs 39 billion) in 2002, 12 per cent lower than the 
previous year. Mainstream Hindi cinema was the worse affected, losing 
about Rs 270 crore (Rs 2.70 billion) on gross revenues of Rs 1,650 crore 
(Rs 16.50 billion). But that's not the end of bad news. Even more 
worrying is that, despite being granted industry status in 2000, film 
production companies in the country have yet to see any significant 
institutional investment. Consider some numbers on organised investment 
in films. Institutional funding (including an initial public offering) 
for nearly 75 mainstream and crossover films was a meagre Rs 50-60 crore 
(Rs 500-600 million). This is about five per cent of the total cost of 
production of these films. Needless to say, that most of the money to 
make films is still coming from a combination of sources: the producer's 
capital and equity/debt financing from non-institutional sources. Film 
industry experts say that there are several reasons for organised 
investors to stay away from financing film companies. These include 
absence of transparency, poor management and returns, and lack of exit 
options for investors, the last being the biggest dampener. However, 
they feel financing a single film ensures relatively fixed investment 
period and quick paybacks.


Source:
http://www.rediff.com/money/2003/apr/11spec.htm