A non-strategic investor like Adar Poonawalla brings in not only capital but also creative freedom.
Indian cinema needs more investors like him, reports Vanita Kohli Khandekar.
A new story is unfolding on Indian cinema screens.
In the early 1990s, Karan Johar topped the Maharashtra state board exams for commerce.
Since he already held a diplome superieur, he decided to go to Paris and do an additional course in French. However, Johar, a South Bombay lad, was also a closet Hindi film buff. He had been helping his childhood friend, Aditya Chopra, write his first film.
Three days before he was scheduled to board his flight, Chopra called him and said, 'You are meant for the movies. You will be a film-maker one day. Why can't you see it?'
He urged Johar to assist him on the project. Much of this is captured in An Unsuitable Boy (Penguin, 2017), Johar's autobiography.
Dilwale Dulhania Le Jaayenge (1995) went on to become one of Indian cinema's biggest successes after Sholay, a cult classic that ran theatrically for over 25 years.
Together with Sooraj Barjatya's Hum Aapke Hain Koun (1994), it opened the overseas market for Indian films.
Chopra, Johar and Barjatya were among the first to tap into the changing needs of the audience that a liberalising India was creating in the early '90s.
Last month, Johar tapped into another long-pending 'business' need and set a trend.
Johar, now 52, will be selling half his stake in Dharma Productions, the company he owns and runs as executive chairperson, to Adar Poonawalla's Serene Productions for Rs 1,000 crore (Rs 10 billion).
Dharma has become the first family-owned production house to seek outside capital; expect many more to follow. One report suggests that Excel Entertainment, owned by Ritesh Sidhwani and Farhan Akhtar (Don, Dil Chahta Hai, Gully Boy), might be raising funds through a deal with Comcast's Universal Studios.
This is where the story moves to the future.
Dharma, set up in 1976 by Johar's father, had some hits like Dostana (1980) but never made it to the big league. Johar revived it with his directorial venture Kuch Kuch Hota Hai (1998).
He's gone on to become an influential figure in Indian cinema, a model and a TV host (Koffee with Karan).
Dharma has nurtured talented young directors such as Shakun Batra and Ayan Mukerji. Its repertoire of 45 films include Kal Ho Naa Ho (2003), Kapoor & Sons (2016), Two States (2014) and Shershah (2021).
However, growth has been inconsistent. Dharma recorded revenues of Rs 278 crore (Rs 2.78 billion) in FY22, surged to Rs 1,044 crore (Rs 10.44 billion) in FY23, but dropped to Rs 520 crore (Rs 5.2 billion) this year.
This is true for most of India's one-man or one-woman production houses.
While Yash Raj Films, T-Series, and Excel Entertainment produce high-quality work and deliver some of the most successful films and OTT (over-the-top) shows, sustaining steady growth is challenging.
Unless a part of a bigger company like Jio Studios, the hit and miss nature of the movie business makes it impossible to hold steady. More so in a market that is transitioning.
Films (total revenue: Rs 19,700 crore/Rs 197 billion), streaming (Rs 31,000 crore/ Rs 310 billion) and television (Rs 70,000 crore/ Rs 700 billion) continue to see growing consumption. However, consolidation has reduced the number of buyers for professionally generated shows and series.
Major buyers now include PVR-Inox, Reliance-Disney, Netflix and Amazon Prime Video. The other big players, YouTube and Meta don't need production houses; they use billions of hours of user-generated content.
This consolidation at the buying ends means a pressure on costs, creative freedom, and a lack of choice on where a show or a movie could sell. That is why scale is critical. It acts as a buffer against the vagaries of the business. It also puts a production house in a better position to negotiate.
But scaling up in a creative business is tough globally and so is getting the money to do it. A non-strategic investor like Poonawalla brings in not only capital but also creative freedom. Indian cinema needs more investors like him.
In the old days when kings and queens ruled us, performing and other arts were about patronage.
Over time, this changed.
The Indian film business once had a well-oiled studio system but it imploded in the aftermath of the Second World War. Since then, film-makers have struggled to secure funding.
Parallel cinema found its patron in institutions like the National Film Development Corporation and in people like Manmohan Shetty. The founder of Adlabs, Shetty supported parallel cinema by producing films like Chakra (1981), Ardh Satya (1983), and Hip Hip Hurray (1984), among others.
Others turned to builders and businessmen. And during a particularly bad phase in the 1980s, underworld money came into cinema.
Much of this changed after films were granted industry status in 2000. The raising of money through public listing (Adlabs, Balaji, Mukta), through private equity and venture capital, or banks, all became possible. In 2008, a wave of foreign studios such as Fox, Eros and Disney entered India.
While the retail side (multiplexes) continued to absorb capital and grow, much of the capital chasing the content side struggled due to the infancy of the business. Nevertheless, this phase helped put in systems that ensured production houses were ready when the OTT boom happened post-2016.
This round of capital raising, then, is a healthy sign of looking for growth to handle the challenges of the business. There might even be a case for a private equity-backed company aggregating, say, half a dozen production houses into one.
Candle Media, a Blackstone-backed, Los-Angeles-based firm founded and run by Disney veteran Kevin Mayer does that. An investor like Poonawalla could similarly aggregate everything from Excel and Roy-Kapur Films to Applause and Arka Media Works, bringing much-needed scale and negotiating power to smaller production firms.
