Indian film industry absorbs market shock

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: loss of Rs 115.06 crore for the quarter ended March 31, 2008. A senior official of Zee Entertainment, who did not want to be named, says the derivatives issue cropped up in 2004 whereby the company intended to cover its interest cost from the derivative swap from dollar to euro which was valued at $50 million. But the revenue protection was broken with the dollar’s weakening against the euro last year as the company had made its commitments in rupee, he adds.

Zee suffered an actual loss of Rs 26 crore last year. “We are likely to incur an additional loss of Rs 47 crore during the current fiscal with the strengthening of the dollar as our commitments in international transactions are dollar-denominated ones. Last year was full of turmoil, but with the rupee weakening, it augurs well for us,” the official adds.

One of Zee’s concerns, E-City Ventures, which has got verticals like E-City Films and Fun Cinemas, had wanted to go in for an initial public offering, but keeping in view the volatile stock market, it has deferred its plans.

Says Maneesh Mathur, COO, P9 Integrated, which marketed Sony’s Saawariya and other films like Krissh and Spiderman-3: “These financial market problems are affecting the entertainment industry as a whole. Still, it may be a conscious call for the people in the industry to invest more as production costs too have gone up thanks to soaring inflation. The fact is that no studio model works here and a majority of films are still being produced by independent producers, who invest whatever they earn from their last released film, for the production of movies with bigger budgets.”

As for the weakening of the rupee, industry players who get revenues from international operations agree that it has affected the performance of their companies. But they are not overtly worried about it as they have found ways to tackle it.

Says Hiren Gada, director, Shemaroo Entertainment: “There may be some impact on shootings for a film abroad with the weakening of the rupee. Now, in the rupee-dollar rate, dollar realisation remains the same, but the rupee realisation has come down to almost 10% which further affects our margins.” It normally takes five-six months from the time Shemaroo acquires a movie and distributes it.