These funds aim to make Indian films a new asset class, somewhat like the highly sought-after Indian Premier League (IPL) teams. Two such funds – Filmni Global and CineNow – have already launched.
The first of Filmni Global’s 10 special purpose vehicles (SPVs) is about to be shut down. The £5 million SPV will identify and invest no more than one million pounds per film. Each of the 10 SPVs will be worth between 5-10 million pounds or dollars, depending on where the money is raised.
Each SPV will focus on specific youth-focused genres. For example, SPV A may focus on financing horror films, while SPV B may be dedicated to investing in romantic films. The idea is to create economies of scale within each SPV, and like any institutional investment, minimize risk and maximize returns.
“We will support high-concept, theatrical-debut films that don’t have big stars and directors.” says Siddharth Jain, co-founder and partner, FilmMoney Global. The fund management firm is based in Dubai, but is actively active in New York and London. (Theatrical-debuting film is one that debuts exclusively in theaters and becomes available on other platforms after a certain time.)
Meanwhile, CineNow, a $150 million (₹1,350 crore) fund registered in the British Virgin Islands, is offering film intellectual property (IP) as an alternative asset class. Its chairman and managing director, Rohit Dalmia, says the list of studios and individual producers it will work with will be announced in July. CineNow intends to finance more than 30 films over six years, with budgets ranging from ₹3 crore to ₹300 crore. The fund recently inducted Siddharth Roy-Kapur, former head of Disney India and managing director of Roy Kapur Films.Yeh Ballet, Matka King, Rocket Boys) as principal advisor.
The production house says they can do this with the money. “We are a very undercapitalized industry,” says Vikram Malhotra, founder and CEO of Abundantia Entertainment, which is in the process of raising capital. He added, “Most of the creation, production and semi-capitalization of creators comes through streaming and television companies or buyers like theatrical distributors. It’s not their job to do the financing.” Malhotra’s 13-year-old company, which is behind shows like Breathe, Daldal and Subedaar and films like Maa Behen (Netflix), Airlift and Shakuntala Devi, has been making operating profits for the last few years. He believes the whole hit-driven approach has distorted the way investors view the business.
“Our approach at Abundantia is to build a consistent business that can benefit from a hit, but withstand setbacks,” he says. “You may have a ₹500 crore box office film, but the cost may be higher. So, a hit in terms of popularity is not a hit for the company.” On the other hand, a film that made Rs 20 crore at the box office would have cost only Rs 5 crore to produce, he says. If a portfolio of, say, 8-10 films in a year is to make money, both fiscal discipline at the production level and the ability to monetize at the revenue level are important. This happened as long as the studio system – where everyone earned a salary – existed.
eternal search for capital
Since that system collapsed in the 1950s, filmmakers have struggled for capital. Parallel cinema found its patrons in institutions like the National Film Development Corporation (NFDC) or people like Manmohan Shetty. The Adlabs founder produced Chakra (1981), Ardh Satya (1983), among other films. Those making commercial films went to builders or businessmen. Underworld money came into cinema during a particularly bad period in the 80s. Things became easier after films got industry status in 2000. There was a flood of initial public offerings (IPOs) from Adlabs, Mukta etc. In 2008, money started coming in from foreign studios like Fox, Paramount and Disney. However, most of them retreated within a few years.
In the last two years things have started looking better again. More than half a dozen deals have been struck, raising more than Rs 3,000 crore for film production. These include an IPO (Baweja Productions: ₹97 crore), and several strategic investments like Adar Poonawala’s ₹1,000 crore investment in Dharma Productions, or Universal Music’s ₹720 crore investment in Farhan Akhtar’s Excel Entertainment.
A large amount of money has also come forward – mainly from institutions within the cinema ecosystem.
NFDC’s film promotion fund. and the ₹40 lakh Humans of Cinema and Safarnama Pictures co-production fund, designed to support emerging filmmakers with a distinct voice. Apart from these, there are also funds for environment related documentaries, short films etc.
The use of SPVs and pure financial investment by a fund is common in Hollywood. Analysts say this concept is new in India.
The Indian film business, while creatively strong, remains fragmented. In an inherently risky, uncertain and subjective business, what do these new funds depend on?
“We offer 100 percent investment to producers and studios, whether it is for a single title or a slate of films,” says Dalmia, adding, “We retain a lien on the underlying intellectual property and related rights until the original investment and agreed returns are recouped. We do not exercise creative control.”
CineNow hopes to use its basket of more than 30 films to negotiate wholesale deals with streaming firms, theatrical chains and anyone who provides a distribution platform. “If they (producers/Studios) make a better deal than what we can get as an independent basket, we are happy for them to take advantage of it,” says Dalmia. “The idea is to maximize value for all stakeholders.”
A token will be given to the fund. The token can then be traded like any other asset. This means that the funds are broken into digital tokens on the blockchain. The assumption is that the value of the token may increase as the films progress. Based on current projections, Coinnow is targeting annual returns in the range of 17 to 22 percent for token holders over a six-year investment horizon.
Filmni Global’s Jain already has some experience in the cinema world, having founded The Story Inc., a book-to-screen adaptation firm in India, in 2018. It has found space for more than 200 books in all the production houses of the country. He became a producer with Netflix’s Trial by Fire, and was part of the team that launched Hotstar a decade ago. Both his partners – London-based entertainment lawyer Srijani Chatterjee and New York-based investment banker and former actor Neeraj Arjan – are part of the ecosystem.
Through Story Inc., he says he has a “huge” database of thousands of stories. “We have to choose the right story and prepare it, and set it up with the right production house,” he says, adding, “For the last two years, the problem is that a lot of filmmakers have been pitching projects. But there was no funding because streamers have reduced the share of financing for original films.” This is where the new moneybags come in. Only this time, they are not builders or businessmen caught up in glamour, but have funds for returns on their mind.