Indian film industry absorbs market shock

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: With the Indian film industry going global in a big way—Kamal Hasan’s Dasavatharam released with 1,000 prints (with English sub-titles for all-India coverage) in overseas markets—producers are keeping an eye on not only the weakening rupee but also world currencies like the pound, euro and the dollar before releasing films.

As it turns out, it’s not the box-office alone which is throwing the Indian film into disarray—there has not been a single universal hit this year—the industry has to take a lot more into its stride.

In particular, it has had to deal with global and domestic market fluctuations, the volatility of the rupee—after appreciating up to 12% last year, the rupee has started weakening against the dollar—high interest rates due to soaring inflation and derivatives woes.

At the recent revision of the Bombay Stock Exchange index list, despite many exclusions including Spice Communications and Entertainment Network (India), no new entertainment company has been included in the new list, which comes into effect from July 28.

The good news is that a macro study now shows that the Indian entertainment industry is either immune towards these issues or has been only marginally affected for a variety of reasons, the foremost being the fact that the domestic industry is growing by leaps and bounds.

Consequently, producers are investing almost all their earnings in the production of movies.

According to experts, the industry has matured enough to absorb shocks. Yet another proof that the entertainment industry is growing faster this year is a study by Grant Thornton which says that a number of mergers and acquisitions have taken place in the sector—including Adlabs Films’ acquisition of the Lotus Five Star Cinemas in Malaysia.

While box-office collections are one way of making money, hosts of other avenues have also opened up, including food & beverages and gaming. Analysts say it is easier to get the return on investment because a large number of prints are also being released.

Says Ketan Yadav, COO, VFX, a part of Red Chillies Entertainment which has produced films like Om Shanti Om, Aashayein and Yuvraaj: “The Indian entertainment industry will not get affected by these problems in the short-term. But it may be hit if financial market problems persist over the long term.”

Zee Entertainment Ltd suffered losses in the derivatives market last year, but it has not stopped the company to aim for bigger projects this year.