“Create with the heart; build with the mind,” Criss Jami, an American poet, essayist and philosopher once said. And yesterday’s announcement by filmmaker Karan Johar to sell 50% equity to Adar Poonawalla is perhaps a leaf from Jami’s philosophy. With this, Adar Poonawalla-led Serene Productions has entered into a binding agreement to invest Rs 1,000 crore into Karan Johar’s Dharma Productions and Dharmatic Entertainment (collectively, Dharma) at a valuation of Rs 2,000 crore. Through this investment, Serene Productions will hold a 50% stake in Dharma, with Karan Johar retaining the remaining 50% ownership. “The family has invested the fund, which means that this will bring in some amount of corporate governance along with a huge amount of creative freedom. The Poonawalla family has been experimental, whether it’s lifestyle or business, so this move is another logical investment. For the production company it brings huge investment to drive growth,” Meenakshi Menon, founder, Spatial Access, a Deloitte business and founder, GenSxty Tribe, told BrandWagon Online.
Moreover, as per the arrangement Karan Johar as the executive chairman will continue to lead the company’s creative vision, while Apoorva Mehta, in his role as the CEO, will work with Johar in steering the strategic direction and overseeing the operational excellence of the organisation.
The M&A and the culture!
This is not the first time that a corporate entity has invested in a film production company. A look at the past throws light on several such deals. For instance, Reliance ADA Group became a majority stakeholder in Adlabs Films Ltd, in 2005. The company was renamed Reliance MediaWorks Limited in 2009. Disney’s completion of the acquisition of UTV Software Communications, making UTV Motion Pictures a wholly-owned subsidiary in 2012, is another such example in the business of mergers and acquisitions. Yet both companies shut shop, with The Walt Disney Company which operated the movies business under UTV Motion Pictures closing the shutters post the box office disaster of movies like Fitoor and Ashutosh Gowariker’s Mohenjo Daro in 2016. “Ronnie Screwvala created several broadcast businesses and sold them when the time was right. He was in the business of buying and selling. But this is a different scene and is not comparable. Dharma Productions for a long time did not have a flagship box office hit movie. Johar co-produced many movies which went on to become a theatrical success but no stand-alone project. So he needs money to start building a creative pipeline,” Paritosh Joshi, principal, Provocateur Advisory, an independent media and communications consultancy practice.
To be sure, Dharma Productions indeed required an infusion of fresh funds to keep the business up and running. The production company’s net profit declined to Rs 59.77 lakh in FY24 from Rs 10.69 crore in FY23, as per regulatory filings accessed by business intelligence platform Tofler. It had been on a downward trajectory. Filings further revealed that the company’s net profit declined 60% to Rs 10.69 crore in FY23 from Rs 27 crore in FY22. Interestingly, the company’s total revenue from operations other than finance company rose 3x to Rs 1,040 crore in FY23 from Rs 276 crore in FY22. However, in FY24 the revenue halved to Rs 512 crore from Rs 1,040 crore in FY23. So clearly not all is well for the movie production company. “The movie-making business in India has gone through a sea of change. The Indian audiences who have now experienced watching quality international content, will not settle for anything less. Hence, one requires deep pockets to sustain if one is looking to create quality content and to remain relevant in the business,” a senior movie producer, said on, the condition of anonymity.
At a cross-road with the corporate world
In the world of creativity, corporate governance has little or no role to play and the historical data proves it. From the shutting down of companies in the past to complete takeover, there have been many instances where creators have been shown the door, as at the end of the day, profitability matters. “One of the most successful associations is that of Sameer Nair of Applause Entertainment with that of the Aditya Birla Group. With Applause, Birlas has direct access to the media and entertainment industry. The same remains true for this deal as it brings direct access to the media and entertainment. Adar Poonawalla has a huge vaccine-making business, but it is not diversified. This deal allows the group to do so,” Joshi nodded.
Interestingly, industry makers call Johar’s choice to go with Poonawalla a smart one, when compared to other large conglomerates. “At some point, there may be a plan for 100% acquisition but right now this is a desperate move to infuse funds into the system. With Poonawalla, Johar will get to retain the creative side of the business. This is not a corporate takeover but rather a player with deep pockets, who can invest in good content for years to come,” a senior media analyst said.
Meanwhile, films that were released in September 2024 grossed Rs 1,066 crore at the domestic box office, making it the third-best month at the Indian Box Office so far this year, as per the latest The India Box Office report by Ormax Media. With a combined share of nearly 60%, Devara Part – 1 and The Greatest Of All Time dominated the month, with no other film touching the Rs 100 crore mark, and only the Malayalam film A.R.M crossing Rs 50 crore. The cumulative box office for Jan-Sept releases stood at Rs 7,949 crore, which is 9.5% below the same period in 2023.
A declining box office number is also perhaps a reason why production companies are looking for a shoulder of support from their corporate brothers.