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The industry estimates that at least 60-65 per cent of the funds needed by Bollywood's organised mainstream film market, which spends over Rs 800 crore annually, is coming from institutions and large corporates.
This is a remarkable transformation from the 10 per cent institutional funding four years ago, according to a Yes Bank report.
"IDBI and Exim Bank together are putting over Rs 275 crore into film finance this year. And another Rs 200-250 crore will come from corporates. It is a sea change," points out Sanjay Bhandari, a chartered accountant who helps production houses get institutional money.
Exim Bank, which funds films with export potential, has already doubled its exposure in a year. "We expect to put in cumulatively over Rs 150 crore by the end of this year in films. And the risks are limited if you choose the right directors," says Mathew John, general manager of the bank.
The ABP Group has invested Rs 20 crore for a stake in Bobby Bedi's Kaleidoscope Entertainment, part of which will be used to fund films.
Adlabs, Anil Ambani's vehicle in the film world, has a corpus of around Rs 40-50 crore it rotates to finance 5-6 films a year. Says its chairman Manmohan Shetty, "We have financed 100 per cent of the film cost... even gone into long-term deals with directors like Vipul Shah to undertake 10 films together."
The advent of new money has dramatically reduced the risks of the business for producers as well as financiers. Institutional funding is available at 9-15 per cent, one-third of what moneylenders charge. And like Pritish Nandy Productions, film-makers can always tap the IPO market.
Producers now have more ways to make money. Only 40 per cent of the revenue of a typical Bollywood film today comes from the box-office; the rest from music, DVD, satellite and Internet rights, and direct-to-home TV services and mobile ringtones.
And the new financing structures are also helping in reducing risks. A case in point is the deal Bhandari just brokered between Studio 18 (part of TV 18) and Ravi Chopra's BR Films, in which the former will fund a substantial cost of Boothnath, a film for children, starring Amitabh Bachchan. The rest will come from banks and institutions.
Bhandari explains that earlier, producers financed half the film from distributors' advances. The rest had to be put in by the producers themselves. But producers had fewer bargaining chips than the distributors because the movie was still not off the ground.
"Under the new arrangement he can sell his territories just a few weeks before the movie is released and get a higher premium. Plus his risks are minimal," he says.
Exim's John points out that they always recover the loan before the movie hits cinema houses, so the only risk is if the film is delayed or has cost overruns. As a large part of its funds is with banners like Yash Raj Films, it does not need to worry. And, of course, it keeps close tabs on the progress of the film.
But even the risk of cost overruns and delays can be mitigated because companies like US-based Film Finance Inc are offering "completion bonds" to producers.
Under this system, while producers pay a steep fee of 3 per cent of the cost of the film, financiers breathe easier because the company underwrites these two key risks.
