A RESEARCH PROJECT ON

ROLE OF FINANCIAL INSTITUTIONS IN

FILM INDUSTRY

(with special reference to IDBI)

SUBMITTED IN THE PARTIAL FULFILLMENT FOR THE AWARD OF

MASTERS DEGREE IN BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF: SUBMITTED BY:

Mr. Ranjeet Verma NIPUN WADHAWAN

Lecturer, MBA department MBA/05/05

Mr. S.K. NARANG 4th semester

Professor, MBA department

N.C. COOLEGE OF ENGINEERING, ISRANA, PANIPAT

(KURUKSHETRA UNIVERSITY, KURUKSHETRA)

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2
 INDEX

S NO. TOPIC PAGE NO.

1 EXECUTIVE SUMMARY 5

2 INTRODUCTION OF COMPANY 7

3 INTRODUCTION OF STUDY 10

4 OBJECTIVE OF STUDY 32

5 RESEARCH METHODOLOGY 33

6 ANALYSIS & INTERPRETATION 37

7 ADVANTAGES 38

8 LIMITATIONS 39

9 SUGGESTIONS 40

10 CONCLUSION & FINDING 41

11 BIBLIOGRAPHY 42

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 ACKNOWLEDGEMENT

It was great experience of undergoing winter project on ROLE OF FINANCIAL INSTITUTION IN

FILM INDUSTRY, WITH SPECIAL REFRENCE TO IDBI.

I wish to express my deep sense of gratitude to my reverend guide Mr. RANJEET VERMA

who through his benevolent guidance has enabled me to accomplish my project. He has been great

source of inspiration to me, all the way. Without his keen interest, incessant encouragement and

invaluable suggestions this report could not have attained its present shape with zeal and enthusiasm.

I convey my heartful affection to all those people who helped and supported me during the

course, for completion of my Project Report.

Special thanks to:

Mr. S.K. Narang

Professor, MBA Dept.

Ms Puja Walia Mann

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 EXECUTIVE SUMMARY

The study was undertaken to know the role of Financial Institutions in film industry,

requirement and procedure for sanction of loan and comparative analysis of IDBI with

various banks.

The Indian film industry is said to be one of the largest in the world with 934 films

produced in 2004 and more than 3.1 billion admissions. It is currently worth about US$

1,256 million and is expected to grow at a compounded annual growth rate of 18 per cent

for the next 5 years.

The Indian film industry is largest in the world in terms of number of movies produced.

India produces 800-900 movies every year in 52 languages and provides direct and

indirect employment to 5 million people.

The research design is Descriptive in nature. The data used is secondary data. The

Judgment sampling is used to conduct the research.

IDBI size of the loan can't be less than Rs 40 million and anything above Rs 200

million will have to be backed by a completion guarantee. IDBI Bank is the leader in

the pack, having late last year decided to double its exposure limit to Rs 2 billion. It has

sanctioned Rs 1.8 billion while disbursals stand at Rs 850-900 million towards movie

projects.

IDBI, funds only corporate who have a track record of three years and insist on a 1:1

debt equity ratio.

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BANK OF INDIA has financed Rs 250 million for five movies over a four year period.

While two movies under its portfolio have been successful, one has just about managed

to recover costs.

An early lender into the film business, BANK OF BARODA is extremely cautious

about providing debt to the film sector.

EXPORT-IMPORT BANK OF INDIA (EXIM) has recently agreed to lend $7

million to Crest Animation Studios in what would be its first funding for an animation

film project. Starting to lend to the film sector since April 2004, the bank has financed

Rs 580 million for nine movies so far.

This study has been conducted with the help of material and information provided

from companys website.

Some limitation may be there in a study of this nature because some

confidential data may create problem.

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 OBJECTIVE OF STUDY

To study the role of financial institutions in film industry

To study the role of IDBI in film Industry.

To study requirement and procedure for sanction of loan of IDBI.

Comparative analysis of IDBI with various other banks.

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 INTRODUCTION OF THE COMPANY

Todays IDBI is one of the Indias largest banks. It has essayed a significant role in the

countrys Industrial and economic progress for over 40 years- first as a development

financial institution and now as full service commercial bank and now as full service

commercial bank.

Headquarters in Mumbai, the commercial capital of the country. IDBI has been

consistently delivering superior products across convenient delivery channels and always

provide efficient services to its retail and corporate customer.

VISION

To be trusted partner in progress by leveraging quality human capital and setting

global standards of excellence to build the most valued financial conglomerate"

PHASES OF IDBI

IDBI was established in 1964 by parliament as a wholly owned subsidiary of RBI. In

1976 the banks ownership was transferred to the government of India.

IDBI has provided assistance to development related projects and contributed

to building up substantial capacities in all major industries in India. It has played a

dominant role in balanced industrial development.

In 1992, IDBI transferred its International Finance Division to Export- Import

bank of India, which was a wholly owned corporation of Government of India under

Export Import Bank of India Act, 1982.

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 IDBI set up the Small Industries development Bank of India (SIDBI) as a

wholly owned subsidiary to cater to small industries. In 2001 IDBI reduced its

shareholding in SIDBI to 49 percent.

IDBI has engineered the development of Capital Market through helping in

setting up of the securities Exchange Board of India (SEBI), National Stock Exchange

(NSE), credit Analysis and Research analysis, Investor Services of India etc.

In 1992 IDBI accessed the domestic retail market for the first time by issuing

innovative bonds known as Deep discount Bonds. These bonds were highly popular

among Indian investors.

In 1994, the IDBI act was amended to permit public ownership upto 49 percent.

In July 1995, it raised over Rs 20 billion in its first initial offering (IPO) of equity, there

reducing government stock to 72 percent. In June 2000, a part of government

shareholding was converted into preference capital. This capital was redeemed in March

2001, which led to a reduction in government stake. The government stake currently is 58

percent.

In august 2000, IDBI became the first All India Financial institution to obtain

ISO 9002: 1994 Certification for its treasury operations.

IDBI has undertaken several initiatives to reposition itself as universal Bank.

In April 2001, IDBI appointed Boston consulting group India private limited as

consultant to draw up a roadmap for conversion into Universal bank.

IDBI include both type of functions:

Retail banking

Corporate banking

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 IDBI provides funds for FILM FINANCING. It has certain requirement and

procedure for sanction of loan. IDBI provides finance for production of feature films as

defined under the Cinematograph (Certification) Rules, 1983. Advertisement films, short

films, documentaries etc. are not eligible for financing. A corporate entity, promoted by

reputed producers, backed by established directors & other technicians and possessing

satisfactory track record are eligible to avail assistance under the scheme. In case the

entity is recently corporatised, track record of the main promoter(s) is considered.

Assistance would be not less than Rs.2 cr and not exceeding 50% of the estimated cost of

the film. Interest rate would be cap rate in the prevailing interest rate band.

So far IDBI financed 12 films and some of them were completed and released
successfully.

Certain observations were made:

Since the process of funding started only the few years back, IDBI had as much to

learn about funding as the industry had to learn about how to be financed through

the regulated system.

So far the experience had been good with no defaults and the films had been

completed on time.

IDBI would feel more comfortable in financing more films.

There should be a proper system of checks and balances.

There should be a proper script.

There should be a proper agreement with stars and suppliers.

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 INTRODUCTION OF STUDY

The Indian film industry is said to be one of the largest in the world with 934 films

produced in 2004 and more than 3.1 billion admissions. It is currently worth about

US$ 1,256 million and is expected to grow at a compounded annual growth rate of

18 per cent for the next 5 years.

The Indian film industry is largest in the world in terms of number of movies

produced. India produces 800-900 movies every year in 52 languages and provides

direct and indirect employment to 5 million people.

The film Sector is one of the oldest industries in India. The first commercially

successful film was made in 1913. The exports of Indian films in the last few years

have seen a dramatic upward swing with the export earning for the year 2001-02

being in the region of Rs. 9 billion.

The Government of India has accorded industry status to the film industry and FIs

are formulating funding mechanisms for financing films. Recently some major film

projects have received funding from FIs and banks.

Many large production houses are embracing a corporate structure and there is a

trend towards adopting a professional approach in producing and marketing films in

India and overseas.

In recent years, the Indian film industry has been driven by growth in multiplexes.

There has been an increased importance of regional cinema. According to industry

estimates, Hindi language films command a 40 per cent share of the Indian film

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 market today since a large portion of the films made in India are produced in the

south and east regions of India in regional languages.

In addition, dubbed international films are also finding a market in India.

Hollywood films are now being dubbed in local Indian languages and screened in

cinema theatres. The dubbing industry has grown at 25-30 per cent over the last

five years. In fact, almost 75 per cent of the total industry revenues of US$ 5.1

million are contributed by international content released in local languages.

For example, the dubbing of Spiderman 2 in three local languages has played a

large role in the stupendous success of film in India.

Sale of merchandise products/promotional items with a film is a new trend picking

up in India. For example, merchandising for Spiderman 2 collected over US$ 2

million in India in its first weekend, the highest ever for a Hollywood film. Films

such as Spiderman created a niche segment in the entertainment market of

animation films.

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EXIM BANK IN FILM INDUSTRY

Export-Import Bank of India (Exim) has recently agreed lend $7 million to Crest

Animation Studios in what would be its first funding for an animation film project. Starting

to lend to the film sector since April 2004, the bank has financed Rs 580 million for nine

movies so far. This includes Rs 400 million to noted filmmaker Yash Chopra for movies

like

Veer Zaara, Hum Tum, Bunty Aur Babli and Dum. It has also lent Rs 100 million for

Farhan Akhtar's Don and Rs 80 million for Mangal Pandey - the Rising. Organized

finance is available at much lower interest rates, but is not accessible to fresh filmmakers.

Exim Bank offering foreign exchange loans against overseas rights at cheaper rates.

Exim Bank, which has been funding Hindi movie projects that have a potential to earn

foreign currency revenues in the overseas market, offers floating interest rates

IDBI AND BANK OF INDIA

Bank of India and Industrial Development Bank of India promise funds for corporate

filmmakers

Nearly two years after the Union government categorized film production in the country as

an industry, financial institutions and allied service providers are taking a good look at the

business.

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The Bank of India, a government-owned organization, is the latest financial institution to

decide on funding the film industry.

At Frames 2002' it has announced that institution has earmarked a sum of Rs. 500 million

($10.42 million) to finance the film industry.

However, the bank is yet to finalize the modalities of funding film production.

The Industrial Development Bank of India (IDBI) is another state-owned financial

institution that took the lead in entering the film financing business. According to officials

of IDBI:

A total of Rs. 600 million ($12.5 million) has thus far been disbursed for 11 films, and an

additional provision of Rs. 1 billion ($20.83 million) has been made for the future.

IDBI DOUBLES EXPOSURE TO FILM FINANCING

Pleasantly surprised' by the success of its lending

IDBI has tied up with the film processing laboratories to ensure that the release of the
films would take place only on debt repayment.

IDBI Ltd, bolstered by the success of its film-financing portfolio, has doubled its exposure

to this sector to Rs 200 crore.

Having entered film financing with much trepidation, IDBI has been `pleasantly surprised'

by the success of its lending.

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For the year ended March 2006, IDBI has offered Rs 177 crore as loans for various film

projects. "Of this, Rs 80 crore has been advanced for projects that are on the floor.

Unlike the financing pattern used for lending money to sectors such as steel, infrastructure,

power, IDBI's film financing portfolio is project-oriented.

Loans are given to individual producers on the basis of how their films have fared in the

past, the project's strength, the producer's financial capability and his track record of

completion of film. Bank insists on complete guarantee.

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RISKY BUSINESS .

The biggest risk in film-financing is the completion of the project. IDBI has tied up with

the film processing laboratories to ensure that the release of the films would take place

only on debt repayment.

IDBI has set up a cell comprising two to three persons from within the bank to work on

each of the film projects that seek funds. Additionally, an advisory team of people drawn

from the industry - producers, distributors, actors and film critics - make an assessment of

the projects. "The ad hoc committee can only make recommendations.

Institutional debt is slowly becoming part of the financing of the country's film industry.

IDBI and Exim Bank have taken a lead in disbursing debt to this sector. Both these

banks have offered loans not just to the Hindi film industry but also other language

filmmakers, particularly Tamil, Telugu and Kannada films.

IDBI, which offers film finance at rates exceeding its PLR by 1.5 to two per cent, has also

offered lines of credit to film producers.

Apart from the specific film-financing portfolio, IDBI does offer debt to the entertainment

sector for setting up malls, studios or offering small corporate loans for equipment. But

within the film financing portfolio, IDBI has only extended funds to the production side

and not to the distribution and the exhibition side of the value chain.

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The bank is in talks with the two film completion bond companies in India but as yet is not

insisting on completion bonds. "Completion bond would further add to the cost of the

film. IDBI does not extend loans below Rs 4 crore and does not fund the entire project

cost. But the bank does check the veracity of funds brought in by the producer or the film

THE FUTURE LIES IN FILMS

The Industrial Development Bank of India (IDBI) is in talks with multinational film financing

companies as part of its efforts to venture into financing movies in a major way.

At present, two firms, a European and an American, have expressed

willingness to make strategic alliance with IDBI in the venture.

US-based company, Film Finances Inc, has approached financial institutions to gather adequate

risk coverage and guarantee to the films financed by IDBI. Film Finances is a well-known

name in the international film industry and has presence in the UK, Canada, Italy and France,

apart from the US.

If the deal works out, IDBI will not bear the risk in financing films, as the international agency

would give guarantees of completion to the financier.

The arrangement will be in line with the global practice of film financing, the official said. "We

are looking at film financing as a risk-free investment. The international agency will take the

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responsibility for the completion of the film and will also do the project appraisal in the run-up

to the sanctioning of funds."

He said the US Company has asked for the script, the shooting schedule and the budget of the

films for which IDBI has already allocated its funds. But so far, IDBI has not taken any

decision on this regard.

He said the foreign companies would provide financiers assurance that the films would be

delivered on time and the over-budget costs would not be the

financiers responsibility.

A European company has also approached IDBI for the same business. Talks with the firm

are in a preliminary stage and it may take at least one more month to get a vivid picture on

the deal, he said. He, however, was reluctant to divulge the name of the European film

financing company.

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REQUIREMENTS FOR FILM FINANCING IDBI

The basic objective by the banks is to provide finance for production of feature films as

defined under the Cinematograph (Certification) Rules, 1983.

Advertisement films, short films, documentaries, etc. are not eligible for financing.

In order to be eligible to be financed by a bank, it is required that the former should be a

corporate entity, promoted by reputed producers, backed by established directors & other

technicians and possessing satisfactory track record. In case the entity is recently

corporatized, the track record of the main promoter(s) is considered.

SECURITY

The following are conditions to be fulfilled by the producer in order to be financed by the

bank for the film.

Letter from film processing laboratory-conveying rights on the negatives of the film

in favour of IDBI.

Assignment of all agreements and Intellectual Property Rights (IPRs) in favour of

IDBI. IDBI to have right of negotiation of valuation of all IPRs.

A Trust & Retention Account (TRA) will be maintained for all capital as well as

revenue inflows and outflows. The receivables on sale of all IPRs shall be credited

to TRA. The modalities of TRA will be worked out to the satisfaction of IDBI. A

No Objection Certificate (NOC) from all concerned parties for the TRA

arrangement will be required. IDBI shall have first charge on the TRA.

First hypothecation charge on all the tangible movable assets under the project.

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 Personal guarantee(s) of the producer(s).

Assignment of existing rights like music, video, internet, CD, DVD rights, library

of old hit films, etc.

The film to be comprehensively insured.

The borrower would be required to obtain completion bond guarantee from such agencies.

Till such time the guarantee is made available, the risk in this regard would need to be

mitigated suitably to the satisfaction of IDBI.

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PROCEDURE FOR SANCTION OF ASSISTANCE

Following is the procedure for sanction of loan:

The complete application will be submitted by the bank to an Advisory Committee

for screening the proposal for financing.

Wherever necessary, the bank may refer the proposal to a group of experts for

guidance and expert advice.

The borrower will enter into an agreement with the bank, after it has conveyed its

acceptance of the terms and conditions of sanction communicated by the bank.

Disbursement Expenses during the pre-shooting stage to be met from the

promoters` contribution.

The assistance from the bank will be disbursed during shooting and post-shooting

stages.

Amount of disbursement will depend on the total budget of the film, progress and

shooting/processing of the film, withdrawal schedule and timing of the equity

contribution, compliance of various terms and conditions of the letter of sanction.

Monitoring the bank to have the right of appointment of specialized agencies for

monitoring the timely shooting/processing of the film and assessing the

reasonableness of the expenditure incurred, etc

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FORMATION OF JOINT COMITEE IN 2001

The Joint Institutional Committee on Financing Entertainment Industry, Including

Films submitted an interim report that looked at laying down norms for film

financing. The members of this body included outfits such as the Industrial

Finance Corporation of India (IFCI) and Industrial Development Bank of

India (IDBI) while the committee was headed by the Department of banking,

ministry of finance.

Coincidentally, this report came around the time the Chori Chori Chupke Chupke

controversy had given credence to linkages between the mafia and Bollywood.

Presumably, the committee was hoping that uniform-lending norms would nudge

big-banner producers the way of banks.

Yet, the governments wooing of the film industry has not excited too many

producers. Recently, Ram Gopal Varma, the maker of blockbusters such as

Rangeela and Satya, said the industry was not suffering from lack of finance. All

film makers get financial support from private financiers with whom they have

mutually beneficial relationships..

At Frames 2001, the IDBI had promised the industry a sum of Rs.100 crores for

film financing at a debt equity ratio of 1:1 after the film industry was recognized

as an Industry last year. It had financed 12 films so far.

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 In October last year, the government accorded film producing industry status via

notification 2(C)(XVII) of the IDBI Act 1964. Until now, banks and financial

institutions did not recognise film production as an industry and hence shied away

from financing films. So, producers turned to private financiers whose means of

funding were truly mysterious. With funding, plenty of it illegitimate, coming from

things like hawala, drug trafficking and ransom, producers here ended up paying

astronomical rates of interest (48-60% per annum).

However, now the industry can borrow at interest rates as low as 17.5% per annum

from banks and FIs. While giving the industry status, the department of banking

also suggested that banks and FIs work together with producers to evolve standards

for financing film production.

It's an option that producers should have grabbed. So, what's preventing producers

from lining up for loans? For one, it's the issue of putting up collaterals against the

loans.

So, the interim report of The Joint Institutional Committee On Financing of Entertainment

Industry, Including Films, has suggested that since films now receive significant revenues

through music rights, satellite television rights and overseas rights, these could also be

assigned in the lenders favour. Suitable escrow mechanism for securitisation of future

revenue streams could also be considered as a form of security. However, producers believe

these demands are excessive.

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INDUSTRY GETS MORE CORPORATISED AND FOCUS IS ON

DISTRIBUTION

The rules of the filmed entertainment business are changing. The production process is

getting more corporatised, multiplexes are bringing in a breath of fresh air on the exhibition

front, and investors are watching with keen interest which way the fortunes are going to

swing.

The production cycle is getting shorter for at least the organized players. Like Mukta Arts,

for instance, took six months to produce Shaadi Se Pehle. The duration of completing a

movie, though, varies from project-to-project and also depends on the production house.

Focus on good stories; well-oiled machineries, planned executive and effective marketing

campaigns are going to be crucial in driving down costs and getting mainstream hits.

GROWTH IN FILM INDUSTRY DUE TO INCREASING NUMBER OF

MULTIPLEXES.

Fragmenting and targeting niche audiences is possible today with the number of

multiplexes, which have sprung up across the country. Multiplexes are also securing a

better revenue flow across the distribution value chain. The revenue leakage on the

distribution front is still an issue. But there is an improvement because of the multiplexes

which have brought about transparency."

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Digital delivery of movies will also drive change. But it is still at a nascent stage and is

taking place at the low-cost end. "The industry has around 250 digital exhibition theatres

across the country. Industry has to push it up to 2,000 to 3,000 theatres. Mukta Arts has a

joint venture with Adlabs for the digital delivery business.

Multiplex operators are fast ramping up. There are around 100 multiplexes in the

country. But with the players lining up major expansion plans, this is expected to

grow to 250 multiplexes within two years. We are scaling up from four properties

and 17 screens to a total of 35 multiplexes and 150 screens by early 2008."

Adlabs plans to invest Rs 2 billion over three years towards multiplexes, adding

100 new screens by the end of FY 08 to take the total to 135 screens.

Even on the production side, it aims to produce over 10 films in a year from FY 06

onwards. Adlabs signed up Ram Gopal Varma, Ramesh Sippy, Prakash Jha and

Vipul Shah.

Such ramp ups across the top production houses like Yash Chopra, Mukta Arts and

Sahara will be a challenge and will depend upon how much the market can absorb.

Though multiplexes are growing, it remains to be seen how much additional supply

they can take in.

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STRIVING FOR VERTICAL INTEGRATION MODELS

A more varied business model is taking shape as corporate houses strive for size and

vertical integration. Adlabs, Sahara, UTV and E-City originate from different backgrounds

and are creating empires that will synergise with their other ventures.

AMBANIS ADLABS

Ambani is building an entertainment powerhouse that will sprawl over his telecom venture.

Having paid Rs 3.6 billion for a 51 per cent stake in Adlabs, he quickly raised $100 million

through an offering of foreign currency convertible bonds (FCCBs).

Flushed with funds, Adlabs will scale up movie and radio operations with a heavy presence

in exhibition, production, film processing and distribution segments. His Reliance

Infocomm will link up threatres and deliver content through its fibre optic backbone. His

foray into home video segment will help provide content for Reliance Infocomm's triple

play service, which Ambani plans to launch by the end of this year. The direct-to-home

(DTH) service will also gain content from Adlabs

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"In this type of a model, it is viable to create an integrated platform, scale up and absorb all

the risks from the vagaries of film business. Ambani is best poised to take the film industry

forward.

SAHARA

Sahara motion pictures division has churned out several hits and can play a big role in

pushing the flagging general entertainment channel forward. It has also launched a Hindi

movie channel and, along with news, is hoping to have enough firepower to migrate from

free-to-air to pay TV business.

An outsider in film production Sahara has turned out to be one of the leading producers

with a pipeline of 40 movies.

Sahara's model of tying up with production house K Sera Sera, which had a long term deal

with Ram Gopal Varma, for 10 movies proved fruitful. The company also worked out

multiple-movie deals with Boney Kapoor and Madhur Bhandarkar. "sahara is making 20

movies this year. It will be totally funding these movies and also into film distribution

business.

UTV.

UTV, which started as primarily a TV content production house, has marched into movies

and broadcast areas to boast of being an integrated media company. The company has

produced seven movies over the last 30 months and more are on various stages of

production now. "UTV do not consider film business more risky compared to other media

27
businesses. Selecting the right project after due evaluation and research, having a slate of

film projects of varying content profiles, managing cost and time schedules well and

effective and timely exploitation of revenue potential are the key to successfully managing

the film business.

UTV was commissioned by Star to produce movies for them. "Broadcasters of late are

looking at acquiring a slate of movies from producers for television exploitation compared

to film acquisition earlier. Apart from assuring future content, this also helps broadcasters

to amortize the cost over multiple films.

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BALAJI TELEFILMS.

Television content companies like Balaji Telefilms have also made cautious steps into film

production. Their aim: to drive topline growth. Movie companies like K Sera Sera are also

going the reverse way by foraying into TV content business.

Pure film companies are aiming to size up their business. Yash Raj Films has a strong

overseas distribution arm and has set up a hi-tech studio to grab outsourcing work from

Hollywood. Others like PNC have attracted equity financing, but are trying to grapple with

ways to grow the business. Mukta Arts has opened an academy to train professionals and

have a constant supply of talent to feed the industry.

Exhibition companies are getting into the distribution business. "Exhibition margins range

between 15-20 per cent. It makes business sense for us to be in distribution, which has

margins of 30 per cent, as well. They have entered Gujarat territory as we have taken 22

theatres on hire there. But one has to progress selectively into territories.

Distribution companies are also finding the climate conducive for movie production.

SONY PICTURES.

Sony Pictures Releasing of India, which had obtained FIPB (foreign investment

promotion board) approval for film production, had stayed out of it for years. But recently

the company announced a joint venture with Sanjay Leela Bhansali for production of Hindi

movie Saawariya (Beloved).

29
They are globally into film production. They think the time is also right as corporatisation

has led to a more organised production process.

For any chance of organised funding to get better, efficiencies have to grow across the

value chain. Aligning with directors for multiple films can draw and lock in talent while co-

productions can raise the production values. On the positive side, the dependence on

domestic theatrical collections has reduced while international territories are yielding better

cash returns.

The revenue mix for good movies is more widely spread today. While domestic box office

accounts for 50-55 per cent (earlier 70 per cent) of total revenues, satellite TV rights make

up 20 per cent and overseas territories 10-15 per cent. The home video segment is also

growing, accounting for 10 per cent revenues. In the wide basket, it is only the music

rights, which have sunk over the years and seen very little rise.

New media exploitation options like mobile and Internet also offer promising revenue

potential for film content.

The best thing to happen is the emergence of a diverse range of players who are

aggressively getting into the film business for strategically different reasons. This is good

for the health of the film industry and will fuel its future growth.

Since 1931, when talkies were first introduced in India, the film industry has produced

more than 67,000 films in more than 30 different languages and dialects.

In 2001, the industry produced 1,013 films making it the world`s largest feature film

producer. The majority of films are made in the South Indian languages of Telugu, Tamil

30
and Malayalam, but Hindi-language films take the largest box office share. The industry

draws its revenues from: domestic theatrical sales (2001: 36 billion rupees); overseas rights

(2001: 5.25 billion rupees); music rights (2001: 1.5 billion rupees); television and video

rights (2001: 2 billion rupees); corporate sponsorship and merchandising (2001: 0.01

billion rupees). The total revenues of the industry from these sources are estimated at 45

billion rupees.

The development of the Indian Film Industry from its golden era was very different and

much simpler than it is today. Due to the immense growth in technology and the entrance

of Hollywood, now making a film involves a huge sum of money and depends on several

contingencies. Huge sets, highly risky stunts, sensitive equipments, a huge amount of

salary paid to the actors and a lot other factors, has made Indian Films a very risky

business.

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FILM INSURANCE

These factors demand some kind of mechanism through which a producer can be assured

that, in case of these contingencies he will be indemnified. These were the same reasons as

the concept of Film-Insurance was introduced in the foreign film industry. Thus, this

concept has been introduced even in India. Insurance companies need to negotiate the

potholes effectively because if all goes as per planned it can prove to be a fast growing

industry.

It was felt that paying a premium of 6% of the production cost, as is prevalent abroad

would be too steep for Indian film producers.

However, as time has passed premiums have dropped to as low as 1%, as more and more

producers opt for cover. For example if movies were being made at a budget of Rs. 30

million, the total insurance premium payable would be Rs. 500,000 at the rate of

approximately 1.5%. With 700-800 films being made per year totally across India, the size

of the film market in India is estimated at around Rs. 48 million or approximately 1 billion

US dollars and even if 50% of these films (Rs. 24 million) are insured at anywhere between

1.0%-5% the total premium will be anywhere between Rs. 0.24 billion to Rs. 1.24 billion -

a good start for a emerging industry if it happens.

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 RESEARCH METHODOLOGY

RESEARCH METHOODOLOGY refers to all those techniques that are used in

performing research operations. Without research every study is incomplete. It includes:

PROBLEM RECOGNITION

It is first and foremost step consisting of defining and identification of problem.

To find the role of Financial Institutions in Film Industry.

The strategies adopted by IDBI.

REVIEW THE LITERATURE

Site of IDBI

Various journals on IDBI

RESEARCH DESIGN

The research design in this case is DESCPRITIVE. The research design is Descriptive

because deep study has been done.

SAMPLE DESIGN

The sample design in this case is JUDGEMENT SAMPLING.

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COLLECTION OF DATA

The data in research is

Secondary data was collected through website of IDBI.

ANALYSIS AND INTERPRETATION

IDBI Bank is the leader in the pack, having late last year decided to double its exposure

limit to Rs 2 billion. No wonder the big daddy of film financing believes it has found the

right formula for lending to the industry. It has sanctioned Rs 1.8 billion while disbursals

stand at Rs 850-900 million towards movie projects.

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 ANALYSIS AND INTERPRETATION

1. IDBI, size of the loan can't be less than Rs 40 million and anything above Rs 200

million will have to be backed by a completion guarantee," says Balakrishnan.

IDBI Bank is the leader in the pack, having late last year decided to double its

exposure limit to Rs 2 billion. No wonder the big daddy of film financing believes

it has found the right formula for lending to the industry. It has sanctioned Rs 1.8

billion while disbursals stand at Rs 850-900 million towards movie projects.

IDBI, for instance, funds only corporate who have a track record of three years

and insist on a 1:1 debt equity ratio. "We don't deviate from these lending norms.

Other banks like UTI have entered the fray, but the lending is still extended to

select production houses and the norms are strictly observed.

2. BANK OF INDIA which has financed just Rs 250 million for five movies over a

four year period. While two movies under its portfolio have been successful, one

has just about managed to recover costs. "Another project is stuck over disputes

and the movie is yet to be released. We have also financed a fresh project which is

coming up for release. Organized finance is coming, but the pace is very slow. We

have nominated just one branch in Andheri which does film financing. Because of

its risky nature, bank have an upper ceiling of Rs 50 million per movie,"

3. An early lender into the film business, BANK OF BARODA is extremely

cautious about providing debt to the film sector. "Our experience has not been

good so far," says a senior official of the bank.

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4. EXPORT-IMPORT BANK OF INDIA (EXIM) has recently agreed to lend $7

million to Crest Animation Studios in what would be its first funding for an

animation film project. Starting to lend to the film sector since April 2004, the

bank has financed Rs 580 million for nine movies so far.

This includes Rs 400 million to noted filmmaker Yash Chopra for movies like Veer

Zaara, Hum Tum, Bunty Aur Babli and Dum. It has also lent Rs 100 million for

Farhan Akhtar's Don and Rs 80 million for Mangal Pandey - The Rising.

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 AMOUNT SANCTIONED
BANK COMMENTS

IDBI Upper limit is 2 billion and loan cant be Leader in all Banks in
less than 40 million. Film Financing
Amount sanctioned: 1.8 billion

EXIM BANK Sanctioned Rs. 580 million

BANK OF Upper ceiling is Rs. 50 million per movie Still have cautious
INDIA Amount sanctioned: Rs. 250 million on 5 approach
movies.

UTI Has just entered the fray,

but the lending is still
extended to select
production houses and
the norms are strictly
observed.

BANK OF BANK OF BARODA is

BARODA extremely cautious about
providing debt to the film
sector

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 ADVANTAGES

Indian Film Industry is expected to grow at a compounded annual growth rate of 18

per cent for the next 5 years.

Private players charge higher interest rate but financial Institution charges lower

interest rate varies from 9% to 13%.

IDBI has an upper hand in film Financing and It has doubled its exposure to 2

billion.

Bank of India has Upper ceiling of Rs. 50 million per movie.

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 LIMITATIONS

Financial Institutions doesnt provide loan for advertising and short films.

Financial Institutions doesnt fund the entire project cost, they provide the partial

finance.

IDBI provides loan only for production side not for distribution.

IDBI size of the loan can't be less than Rs 40 million

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 CONCLUSION AND FINDINGS

Indian Film Industry is expected to grow at a compounded annual growth rate of 18

per cent for the next 5 years.

There will be growth in Indian Film Industry due to increasing number of

Multiplexes.

Private players charge higher interest rate but financial Institution charges lower

interest rate varies from 9% to 13%.

The Joint Institutional Committee on Financing Entertainment Industry was formed

and it lay down norms for film financing.

IDBI has an upper hand in film Financing and the size of the loan can't be less than

Rs 40 million and anything above Rs 200 million will have to be backed by a

completion guarantee. It has doubled its exposure to 2 billion.

IDBI has tied up with the film processing laboratories to ensure that the release of

the films would take place only on debt repayment.

Bank of India has Upper ceiling is Rs. 50 million per movie and it has financed

Rs.250 million for five movies.

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 EXIM Bank has financed Rs 580 million to film industry.

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 BIBLOGRAPHY

(1) www.idbi.com

(2) www.yahoo.com

(3) www.rediffmail.com

(4) www.google.com

(5) Various journals on IDBI

(6) Various journals on EXIM BANK

(7) RESEARCH METHODOLOGY BY C R KOTHARI

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