MUMBAI: The Indian media and entertainment sector has never had it so good. The sector has recently drawn a whole lot of local and global attention with various companies investing in the space. However, private equity investors are looking for companies that have consistent and stable growth, which is where the media and entertainment sector needs to pull its socks up.
In the session titled ‘Financing Option and Valuation of the Entertainment Industry’ at FICCI FRAMES, Blackstone Advisors India chairman and managing director Akhil Gupta said that the media and entertainment industry has been very buoyant recently and has managed to attract equity financing.
Ernst & Young traction advisory services associate director Mukesh Jain said, “Major media groups are expanding beyond their core areas in terms of segments and geographies. Companies are now keenly eyeing or already investing in digital and new media space. On the movies’ front, people are now moving away from family run businesses to the institutional space.”
The film production arena has seen a re-emergence of the studio system, dependence on box office has become decreased with additional revenue streams like overseas, home video, digital rights coming in the picture. “Moreover, corporateization has led to film space getting an industry status,” added Jain.
As far as the film distribution segment is concerned, with the coming in of digital cinema, movies are now ensured a wider release. Additionally multiplexes have also started penetrating the Tier II towns and the windows of revenues are also multiplying with theatrical, home video, satellite TV etc coming in the picture, said Jain.
The various equity financing options available for companies in the media and entertainment sector are: private equity, domestic listing and global listing. Companies like UTV and NDTV have been planning overseas listings.
However, drawbacks that one faces in financing film production is that it is fragmented, governed by ‘hits and misses’ and is largely dependent on star power. On the other hand, the film exhibition business has a dearth of quality content, is marred by piracy and has high taxation. “This is not something that goes down well with private equity investors. They are looking for consistent and stable growth and that is where the media and entertainment sector needs to buck up,” added Jain.
Ambit Corporate Finance partner and CEO Ashok Wadhwa said, “The India story has re-emerged. We need to learn from the mistakes we made in 2000 – 2001. If an investor does not see an opportunity to get returns on his investment, then he will never be interested. There is no dearth of money here today and the marriage of creative talent and those who fund this creative talent is very essential.”
Speaking on film financing, Wadhwa said that significant amount of money will be invested here since the industry is formalised and hence attractive. “Business houses will invest and so will funds – domestically or globally… there is tremendous scope. At least $ 100 – 200 million will be raised by media and entertainment companies before the second quarter ends,” he informed.
However, Wadhwa warned that media and entertainment companies should tap the market at the right time and not too early in the day.
Bank of Montreal USA communications and technology group director media Neetu Bhatia said that companies like Time Warner are keen to have a presence in India. “Investors are looking at Indian media assets. Consumer demand for filmed entertainment is going to outpace the general economy. The consumer is becoming increasingly fickle. The key lies in how to push the content to the consumer rather than having the consumer pull content.”