Major film studios like Eros International, UTV Motion Pictures and Reliance Big Pictures are witnessing a rekindled interest from banks for co-production of films. Film-financing by banks, which was pioneered by IDBI Bank in 2005-06, slowed down during the last two years following the economic downturn but has picked up again, indicate film trade sources.
The corporatisation of production houses into the film studio model, the shortening of the theatrical-to-TV window and the increasing share of satellite, home video and ancillary streams in the overall revenue pie, from 16% in 2008 to 21% in 2011, has fuelled the interest of banks. In addition, high credit ratings for listed entities like Eros and UTV has made investors keen. For studios, bank funding means better interest rates of 12-15% as compared to more than 30% demanded by private lenders. It also means a steady flow of working capital.
Sources indicate that Yes Bank, IDBI Bank, ICICI Bank, Dena Bank, Canara Bank and Exim Bank are the forerunners in the ?slate-funding? of films, where they are collaborating with studios on a slate of films during a period of time. Yes Bank confirmed its co-production partnership with Eros, UTV and Big Pictures. Karan Ahluwalia, VP and country head, media & entertainment, Yes Bank told FE, ?We’re working with some big studios. It gives us better transparency, economies of scale and security.?
With the rising share of ancillary revenue streams, there’s lesser dependence on box office revenues. Most of the money is recovered before the film’s release, thus guaranting return on investment. The R8,330-crore Indian film industry, which produces more than 1,000 films every year, also gives ?plenty of opportunities to banks.?
A slate of 18 to 20 films by Eros, which posted revenues of R707 crore in the financial year 2010-11, is being funded by IDBI Bank, Exim Bank and Yes Bank. Kamal Jain, Group CFO, Eros India said, ?For banks, the blanket limit of investment is R300-400 crore. According to the Reserve Bank of India (RBI) guidelines, they can fund up to 50% of the total production cost, while the rest has to be borne by the producer.? He also expects the RBI to relax film-financing norms and ?allow about 70-75% funding from banks.?
Meanwhile, UTV Motion Pictures, which grossed revenues of R454 crore in FY11, has tied up with a consortium of nationalised, private sector and foreign banks. Rajeev Waghle, CFO, UTV Group said, ?UTV is working with SBI, Allahabad Bank, Oriental Bank of Commerce, Axis Bank, Yes Bank, HDFC Bank, Standard Chartered Bank and DBS. All banks are keen to finance our film slate.?
However, neither Eros nor UTV shared names of films that are being worked upon. Big Pictures and Viacom 18 were unavailable for comment.
Waghle added, ?Earlier, the producer repaid the entire loan before the movie released. This model suited producers who would sell their films outright to distributors. However, for studios like UTV who distributed their own films, it was better to rely on banks who would finance the timing gaps that arose in movie production and its monetisation over time.?