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.

Another Zee group company, Dish TV India, reported a net 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.

Adds Gada: ?We have to keep an eye on cross-currency fluctuations, particularly in the pound or euro, before releasing a film. Last year, we had made a profit of Rs 13 crore and we might have lost 3%-5% due to the appreciating rupee. But this year, we have been able to liquidate it thanks to weakening of the rupee.?

After releasing films like Ghatotkachh and Mere Baap Pehle Aap and distributing Jannat overseas, Shemaroo is set to release Ugly & Pugli and Ishquia starring Arshad Warshi and Vidya Balan, which is being co-produced by Vishal Bharadwaj.

Producer Abdul Samee Siddiqui of Sunrise Pictures, which produced films like Halla Bol and is currently busy producing Horn Ok Pleassss with Nana Patekar and Rimi Sen, says revenues are ?switching from the physical side which is ticket selling in cinema halls to the digital side and that is how we are protecting our revenues.?

Commenting on soaring inflation, Nileish Malhotra, producer/director of Monopoly-The Game of money with Zeenat Aman & Nikita Anand, says that it is affecting margins because production costs have gone up.

?Once the price of diesel and petrol cost goes up, everything else rises. Even the courier cost has gone up by 25%, because they are passing off the fuel surcharge to consumer. Everybody else has hiked prices, so producers tend to lose. Our margins are definitely lower,? adds Malhotra.

A section of the industry is worried more about overpricing of products rather than financial market woes. Says Shubho Shekhar Bhattacharjee, CEO, Planman Motion Pictures: ?Many of the offerings in the entertainment industry, particularly in recent times, have been overpriced, maybe owing to the bullish market trends. Companies investing in over-priced offerings are going to get affected in the immediate term.?

According to Bhattacharjee, one of the industries which can survive comfortably during recession, is the entertainment industry. ?I do not foresee any such major crisis in the filmed entertainment business,? he says.

And yet, there is a reorganisation of resources going on in the industry, say analysts. There are companies like Compact Disc India, into animation movie-making, which have cancelled plans to get listed on London?s Alternative Investment Market (AIM). Also, the company has decided to withdraw itself from the production of live-action films, Guru of Sex and Playing with the Enemy in the near future as a large number of shareholders and investment analysts have advised the company against venturing into live-action films.