How chit funds are entrenched in Tollywood

Currently, 30% movies made in Tollywood are produced by chit fund companies, this pie is likely to grow further

The 'chit fund' companies, as it is being loosely called, are well entrenched in Kolkata’s film industry, popularly known as Tollywood.

Currently, 30% of the total movies made in Tollywood are produced by chit fund companies and this pie is likely to grow further.

In the last three to four years many such money market companies have forayed into producing films on a partial or full basis. But making profit is not their agenda.

The companies are into producing films, mostly with popular stars, as it will build their brand among their target audience and reap in more trust among depositors.

Among such many companies who are in the film producing business, Rose Valley and Prayag Group are the prominent names and the former has made two national award winning films. Rose Valley, which raises money via hotel membership schemes, has produced 17 movies so far and three more are about to be released.

Prayag Group, taking it to the next level, also has a film city in the city fringes and Bollywood star Shahrukh Khan is the brand ambassador. Advertisements of the same are booming across the leading channels 24X7.  

Arijit Dutta, a renowned filmmaker, distributor and owner of a Priya cinema hall, said these companies made a silent entry into the film producing business and by the time people were aware they already had a strong presence in the market.   

While a substantial Rs 100 crore is invested each year by these firms which floated production outfits almost overnight, around 20 films produced by them are now on the floor. Around Rs 400-500 crore have been pumped in by the chit fund companies in the last four years.

“Profit making is not the primary agenda of  these chit fund companies. It is the publicity and brand building that they seek from the movie ventures. Regardless of the Saradha scam their presence is likely to grow further as directors actors and technical people of a film won't mind where the money is coming from as long as the movie is getting made,” he said.

National award winning director Kaushik Ganguly says that it would be imprudent to judge the chit fund firms that are associated with the film production.

"Not all chit fund companies are frauds and we will have to wait till the investigative agencies find out about the fraudulent  companies," he says, Ganguly adds that most of the production houses have multiple businesses ranging from fishery to real estate so it is very difficult for the director to find out the source of the invested money.

However, Ganguly agrees that due to the multiplicity of such companies, the number of films produced has shot up over the last few years.

Rose Valley Group chairman Goutam Kundu told Business Standard that it is the buyback agreement for the movies with their group channel which helps to recover costs. Budget for a Bengali film typically revolves around Rs 1crore to Rs 2.5 crore. Most of the movies, apart from the multistarrer, most movies have a budget of Rs 1 crore.

“My own group channel Ruposhi Bangla has a buyback agreement of Rs 1.5 crore. So after the movie is released and leaves the theaters I sell it to my channel for 1.5 crore. Many other reputed production houses are also operating on the same model,” said Kundu.    

Kundu's company also distributes Bollywood movies across the state. The distribution works on two models. One is the agreement is done before the movie is sold and earnings for a distributor is higher.

The second model   is commission based. After the movie is sold the distributor, using his/her network, distributes the film. This model gives a commission of five to seven% only  as risk is not involved for the distributors.