The merger of Naresh Malhotra’s Video Works and Namit Malhotra’s Video Workshop in 1997 gave birth to Prime Focus. The company started in a moderate one room editing studio. A decade later, Prime Focus is India‘s largest integrated end-to-end post-production and visual effects services house.

 

The company posted a 52 per cent increase in net profit for the year ended March 2007 at Rs 213.7 million (Rs 21.37 crore) as against Rs 140.6 million (Rs 14.60 crore) in the previous fiscal. Prime Focus is planning to raise close to $85 million (approximately Rs 380 crores) to expand nationally and internationally, with a set up in the US topping the agenda.

 

After acquiring the AIM listed European company VTR plc last year, Prime Focus is not prowling other markets like the US and Dubai to expand its footprints.

 

In an exclusive interview with Businessofcinema.com, Prime Focus managing director Namit Malhotra gives an insight into the company’s operations, future developments and more.

 

Excerpts:

 

How has the current financial year been for Prime Focus?

We are almost on target. The first quarter results clearly show that there has been a jump. Although there is reasonable growth, we are still trying to get our new facilities to contribute fully. All new diversifications like the Hyderabad facilities and camera equipment rental services that we made last year, have still not become fully visible. I think we definitely have progressive opportunity to maintain the momentum.

Considering that this is the tenth year of the company’s operations, are there any special plans?

We have always tried to push ourselves to the next level. Likewise there are a lot of things that are meant to happen. In the current fiscal year if all our plans materialise we will yet again have an interesting proposition to present to the entire global market. Our global proposition is being able to setup and operate our business of post-production and VFX across various geographies of the world. London being the first, we are hopeful that in the near term we would add additional facilities.

What about your plans to set shop in Dubai and the US?

Setting up in the US is definitely on the agenda right now. However, Dubai will fall in line after our US consolidation. There is no great advantage to set up something fresh because the markets are already so matured and there are a 100 companies already doing business. Our job is to find an ideal company that can work with us and facilitate the knowledge and skill set so that we can evolve. We are eyeing this move so anything can happen in the near future.

 

However, at present we have not yet zeroed in on any company as such to acquire.

 

Since you are opening a facility in New York, are there any plans to list on Dow Jones or Nasdaq too?

There is nothing finalised yet so cannot comment.
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Prime Focus Limited is planning to raise close to $ 85 million. How will these funds be utilized?

A lot of it has to do with international acquisitions. We want to consolidate our position in the American market. The funds will also be utilized to set up our complete back end facilities in India.

 

What are the other future investments and across which area of operations will they be segregated?

Right now we have our facilities set up across various strategic markets. We have multiple facilities operating in Mumbai. We also have facilities in Hyderabad, Chennai and London.

 

While we clearly create diversification in each area of our operations we are also looking at increasing capacity, so that the business starts to grow. So we try to expand vertically and horizontally in terms of capacity and new areas of services that keep adding constantly to our business.

 

So what are these new areas of services? 

We have just set up a fairly large equipment rental facility, which is providing the latest high definition cameras to the film and television industry. So that is a new addition to the entire business plan. There are aspects of adding other dimensions to the television side where we are looking at increasing our infrastructure and presence. On the visual effects and animation side too, we are looking at furthering our presence.

 

Today we do visual effects for films but we are also looking at focusing on advertising. In theory, we say we do visual effects, but now we have two parallel tracks of feature films and advertising. We are also increasing our infrastructure and increasing the number of people.

 

What has been the reason behind expanding so extensively in the overseas market?

There is a great value proposition that we as an Indian film making company can offer to the world. We need to find a mechanism for reaching out our capabilities and skill sets beyond Bollywood to the rest of the world. The number of technicians and creative people in this country that are making huge number of films have the potential of going beyond what we are currently doing.

 

Prime Focus wants to pursue taking our country’s films to a bigger market and create a better value for it and try to find the right outlet to showcase our overall strength and capabilities to the rest of the world. 

 

Does setting shop in Hollywood imply that you are gearing to work on Hollywood flicks as well? 

That is definitely the key motivating factor. We don’t believe that we can add great value to Hollywood films. But they can benefit tremendously because the scale at which they are trying to peg film after film and are constantly fighting the battle of quality versus cost, I think somewhere we can play a role of bringing a greater value to the table.
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Going further, what do the expansion plans in India include?

There is going to be expansion for our visual effects and animation foray. As we grow internationally we also need to grow in India at the same time. However, it is a little early in the day to say what we will do and how big it will be. It is a little premature to talk about it right now. We are trying to get out overall strategy in place now.

 

Will your core focus area be post production only or are you planning to have an active presence in production of feature films as well?

Production of films has always been connected to our work. We believe that our core skill is technology and we would like to take that further in production, by virtue of participating in films futuristically that have a greater use of the value, which we bring in. So we don’t have a generic production foray plan but we are looking at it as a very specific focus area. If there are films made with very high degree of visual effects we should be looking at those kinds of prospects as a part of our expansion.

 

Our core capabilities are not specific to production as such. We want to be a focused company that utilizes its core capabilities and finds new ways of exploiting it. So we are constantly pushing the line in terms of what we can do, but we are not really changing the core approach. That is because we know our value proposition is in what we have been doing. So that should be the driver for the change rather than us looking at it in a different way.

 

Recently, numerous animation films have been announced, also the number of films that use visual effects intelligently has also gone up. How has this affected your business?

That is obviously an expanding market and people are seeing that great opportunity now. Looking at the change in approach towards creative content, which relies on technology, it is a definite boost for the future of our business.

 

Now we don’t have to educate people for the use of technology in films, they are coming to us and telling we need to make a VFX /animation films, so how can you facilitate that? So we are ensuring that while the market expands, we expand with it or faster than that.

 

Prime Focus share prices fluctuated from Rs 280 around mid-December 2006 to Rs 945 in July 2007. What according to you has been the trigger point for this?

One of the factors that we can clearly present is that the week in which our IPO closed was a very turbulent time last year, when the markets were very volatile. Post that, various communication presentations have been made to all the investor communities and research reports have also been worked out on Prime Focus. The fact that we had delivered exactly to the point that we had presented to investors has built that comfort and confidence in the mindset of the investing community.

 

Post-production being a very new sector, the stock market and people have also taken their time to understand the strengths and weaknesses of what that sector brings.
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After going public, Prime Focus had announced plans like worldwide distribution network with various tie-ups and to set up India video section. What happened on that front? Is it true that that the deals went sour?

No. That was not the focus for the company. In this business you are always talking to people but I don’t think anything fundamentally strong came out of it. Various opportunities come by; you look at them… while some pass, you dabble into some. However, none are a part of our core focus area. India video is not on the radar.

 

As far as distribution is concerned we have tried testing the market through various films but that again is not really a focus area for us. It is just something that we tried to understand a bit more intrinsically and get into the practicalities of how trade operates but it’s not the core operational diversification that we are looking at.

 

You are already present in the business of supplying equipments like cameras and you also have well established post production facility. Then you even ventured into distribution of films and dabbled with home video. Basically, you were very close to becoming a complete hub, but what exactly happened?

Through my father Naresh Malhotra, production experience has always been part of our history, which has been there and is going to remain. Our objective was not to try and become a completely integrated hub and be present in every business.

 

The thought has always been on focusing on our core strength and try to use that as part of our diversifications strategy.    

 

Does lack of talent affect this business? With respect to that haven’t you thought of venturing into schooling business?

The thought has obviously crossed our mind a few times. The thought of starting a school may be easy but to give the right education is more important than just starting a school. It needs more thought and analyzation. Till you don’t have the right teachers imparting the right education, you won’t be able to address that gap.

 

We are trying to see if we can provide our experience and capabilities to other companies that want to improve their training programmes. We are analyzing those who are present in the space and the kind of work they are doing to see if there are specific inputs and improvements that we can recommend as a result of which we could address that gap.

With respect to outsourcing of work from other countries, is the market growth satisfactory or is it still under utilized?

I think we are not even at the tip of the iceberg; we are far from unlocking anything on that side. The bigger challenge right now in front of us is to get to a point where we can say we are ready to be outsourced to. As soon as we have that going, then we have got the capability to see how much we can exploit.

 

That is really where our focus and direction is moving towards. I believe that given the right positioning, talent and environment, it is a matter of time before that becomes a reality.

 

Oftentimes post production studios are accused of leaking copies of a movie in the pirated market. So is there some sort of security that you ensure for your clients? 

Although we are in the post production business, we rarely have an entire film together. We are always working on parts of a film. If we work on the visual somebody somewhere else is working on the sound, so you will never get a finished output from a post production company till almost a week before the release of the film.

 

The quality of the pirated product is of a very high standard, which comes in through some international locations. For the overseas release of a film, the prints start getting dispatched by Monday or Tuesday and I think that is the time when the window is open for piracy to happen take place. This is the crucial period when the film has reached its destination but has not yet released.

 

What is the holding of the partners in Prime Focus? Recently there was a bulk selling deal under Mr Manmohan Shetty’s name. Comment.

The public holds about 20 per cent in our company and about 25 per cent is held by our key investors. The balance 55 per cent is with the family.

 

Manmohan Shetty’s holdings were not sold in the open market but bought by an institutional investor.