When Brazilian supermodel Gisele Bundchen refused to accept payment for an assignment in dollars, insisting on the euro, she sent a clear signal that the entertainment industry was worrying about the impact of a falling currency. The Indian entertainment industry may not be as aggressive as Bundchen, but it is also waking up to the effects of a rising rupee.
The rupee has risen 12% against the dollar in one year and with overseas operations a serious business for the industry, often bringing in more than domestic box-office collections?it?s time the industry took it more seriously, say analysts. Admitting that the strengthening rupee is ?a reality of life,? Sandeep Bhargava, CEO, Studio 18, whose film Welcome is doing the rounds these days, says that his company is yet to adopt tools to protect its foreign earnings from the onslaught of the rupee.
Some have not been impacted yet because they accept payments only in rupees. Says Pritish Nandy of PNC: ?Most of our transactions are conducted in rupee terms so we are not going to lose anything due to it. Still, I?m happy to note that shooting abroad has become cheaper now, which I see as an opportunity for Indian filmmakers.?
The good news is that the prices of Indian movies abroad have seen a massive hike, fuelled by increasing demand. In certain cases, prices have shot up by more than 200%, which has become a blessing for distributors who get a chunk of their revenues from overseas distribution.
Eros International, which has exported films like Om Shanti Om and Namaste London last year prominently in countries like the UK and the US and whose film Sunday is set for a January 25 release, spends all its earnings from export of films in acquiring new films abroad. This is not all: hedging of revenues in dollars has become a buzzword among producers like Eros, Shemaroo Entertainment and Percept Picture Company (PPC).
Preet Bedi, CEO, PPC, which is planning to distribute its recently released animation Hanuman returns in the UK and the US, agrees that overseas collection will plummet when it converts its earnings in foreign currencies to the rupee. ?We may see a drop in film distribution abroad,? fears Bedi adding, ?We are looking at accepting our revenues from overseas partners in rupees only.?
For others, it is shopping time as they look to spend their earnings from overseas operations for expansion abroad in the forms like acquisition of theatres and opening subsidiaries. Venkat Devarajan, CFO, Adlabs, a part of the ADAG-promoted Reliance Entertainment that is under the process of acquiring nearly 250 screens in the US, says, ?Whatever, we earn in foreign currencies, we are spending on our theatre business there itself.?
Similarly, some others are trying to pare their losses from dollar earnings by increasing their import portfolios. The theory applies well for companies like Shemaroo Entertainment, which is involved in exports as well as import of films. Shemaroo has produced films like Bal Ganesha (animation) and Manorama 6 feet under. Also, Shemaroo?s films like Ghatotkaksh-The master of the magic (animation) directed by Srinivas of Sun Animatics and Mere Baap Pahle Aap directed by Priyadarshan, are ready for a summer release.
Hiren Gada, director, Shemaroo Entertainment, admits, ?It is a balancing act for us.? While it has distributed films like Dhamaal, Apne, Fool & Final (which flopped) and Phir Se Hera Pheri; it has also acquired foreign films like Driving Miss Baby?an Oscar winning English movie produced by French filmmaker Pache and Akira Kurosawa?s Oscar winner Japanese film Ran.
Shemaroo?s international business, which contributed 7%-8% to total revenues last year, has doubled. Similarly, turnover has increased to Rs 120 crore from Rs 94 crore a year ago. It has opened a UK subsidiary last year and may open another one in future. Says Gada: ?Yes, we have gone for forwarding contract of our foreign currencies to some extent for our earnings from overseas theatrical business as we get our returns after three months only.?
Vipul Mehta, CFO, Shree Ashtavinayak Cinevision, whose film Superstar is set for release by January-end is busy in the production of films like Golmaal Returns, Mr Fraud and Kidnap. Says Mehta: ?Interest rates are already higher in rupee terms. In fact, interest rates on foreign currency loans are comparatively low as they are charged in LIBOR (London Interbank Offered Rate) plus?this is less than the existing prime lending rate for the rupee. We have raised money in foreign currency convertible bonds to fund our subsidiary in Dubai and are looking for a Hollywood director to direct the debut film from the subsidiary, the title for which is yet to be announced.?
South Indian filmmakers, who have a good audience abroad among the Indian diaspora, are also finding out ways to fight against the weakening dollar. GV Films, a pioneer in the distribution of south Indian films in Singapore, Malaysia, West Asia and London, has also been affected. ?We had distributed 200 prints of the Rajnikanth-starrer Sivaji-The Boss overseas. Now that we are trying to get the overseas rights of another forthcoming Rajnikanth-Deepika Padukone starrer Robot, we are a bit cautious about the dollar?s devaluation,? says GV Films? CEO, Kunal Singh.
But there?s a silver lining too. Distributors acquiring Hollywood films, responsible for 7% of total box-office collections in the country, are looking at India for bigger business. Paying in weakening dollar and getting paid in the rising rupee has become a win-win situation for them.
Amit Dhanuka, vice-president, E-City Films (a Zee Group unit) which has acquired films like George Clooney starrer Michael Clayton for release on February 15 apart from other films like Bangkok Dangers starring Nicholas Cage and a 3-D movie Journey to the centre of the Earth to be released by mid-2008, says that his company, which is basically involved in the import of Hollywood films, is able to reap the benefits of the rupee rise. Dhanuka adds that the company has been able to save costs ranging somewhere between 5-8% thanks to the rising currency.
It?s also become cheaper to shoot abroad and import of processing equipment and chemicals like celluloid have become cheaper. More interestingly, Hollywood, in some sense, has started looking at Bollywood in its bid to ride on the rising rupee. Says Nikhil Mathur of Harward Entertainments, whose film Pranali-the tradition is set for release in April: ?Quite a few overseas distributors have turned into importers of Indian films to cash in on the dipping dollar.? Meanwhile, ?Hollywood filmmakers have started looking at India for outsourcing in their bid to gain from rupee?s rise,? adds Mathur.