Raising Capital: Showbiz attracts the moolah

MUMBAI: The Indian media sector has been attracting a lot of global interest lately. The latest case in point is Walt Disney Company hiking its stake in UTV Software Communications.

At a session titled Raising Capital: Showbiz attracts the moolah at FICCI FRAMES, ICICI Securities senior vice president Ravi Sardana said, "While Disney has hiked its stake in UTV, Time Warner has collaborated with Midtech. On the other hand, NBC Universal picked up an equity stake in NDTV Networks. Even Indian companies like TV18 picked up a stake in Infomedia. All these developments show the coming of age of not only the sector but also of the companies. The media and entertainment sector is expected to double in the next few years and the boom has attracted investors to the sector. Indian media companies have grown considerably in size and that has resulted in Hollywood eyeing India as a very big potential market."

Moreover, companies like UTV and TV18 (The Indian Film Company) raised funds last year on London Stock Exchange’s AIM, whereas mobile VAS company OnMobile debuted on the Indian bourses. "The significance was apparent to these fund raisings as it enabled distribution together," he said. However, on the flipside, film production continues to attract small part as top companies don’t do more than two – three movies a year. Whereas in Hollywood, the top four companies account for 90 per cent of the total movie business in a year," Sardana added.

In response to a question posed by Amarchand Mangaldas managing partner Shardul Shroff on what is unique for the media industry as compared to the other industries as far as private equity is concerned, Blackstone chairman Akhil Gupta said, "One needs to understand what the revenue model for each industry is. We need to focus our understanding on what is going to drive the revenues from advertising."

Gupta informed that 65 per cent of India’s GDP was personal consumption, whereas the same for China was 45 per cent. "That’s where the India story gets stronger as there is immense scope for growth in advertising revenues. In order to understand what is going to drive revenues, understanding per capita consumption is important," he said.

As far as funding films is concerned, bankers like EXIM Bank chief general manager John Mathew and YES Bank media and entertainment head Karan Ahluwalia pointed out that they extend their funds only for those producers who have a good track record. Mathew said, "The emphasis is more on collaterals than the face value of actors or script. We have funded close to 11 production houses a total amount of Rs 3 billion (Rs 300 crores) and have had NPAs (non-performing assets) of only Rs 10 lakhs, that too because the film did not release. So the experience has been very good for us."

The newly launched venture capital fund Religare Vistaar Film Fund’s Sheetal Talwar said, "Banks don’t extend loans to new filmmakers. They only back those who have a good track record. However, this film fund will extend its help to everyone. We want to go for regulatory approval. If we want to take our industry to $ 20 billion, then there has to be films and layers."