Idbi, Crest Com Ink Profit-Sharing Agreement

In a unique arrangement, the Industrial Development Bank of India (IDBI) has decided to share the profits from Crest Communications Ltd's Rs 34-crore live action-cum-animation feature film.

The financial institution had recently sanctioned a Rs 16.5-crore loan to Crest Communications at around 100 basis points above its prime lending rate (currently pegged at 12.5 per cent).

By sharing the profits, the actual yield on the advance will go up substantially. The film is expected to be released in July-August 2003.

IDBI executive director, R S Agarwal, told Business Standard that despite a lower interest rate, yield on the investment would be higher at 19 per cent, as opposed to 16 per cent in the case of its funding other films.

 

"We have negotiated for lower interest rates with IDBI wherein we will be sharing part of the profits with the financial institution," senior officials at Crest Communications said.

Agarwal declined to reveal the profit sharing ratio of the deal. He, however, asserted confidence in the promoters of the film, stating they had given their personal guarantee on the loan and had assigned all the rights to IDBI.

Crest Communications is a listed company with a networth of Rs 91 crore. It also has a good track record in terms of successes, he added.

Crest Communications will introduce to Indian cinema the first of its kind live action-cum-animation film with a total run time of two and a half hours.

This will include a 40-50 minute animation film. This film will simultaneously be produced in Tamil and Hindi. This is the second loan sanctioned by the financial institution towards film financing in less than a month.

The first loan of Rs 4 crore was sanctioned in mid-June to the Hyderabad-based Suresh Production Pvt Ltd for financing the Hindi translation of the Telegu movie "Kalisundam Raa" ('Stay together').

Industry sources said the reduced interest cost for the second film indicated the possibility of IDBI reviewing the cap on interest rates for film financing with the passage of time, and after gaining experience.

"A few more proposals will be cleared by the month end," Agarwal said, adding that the pace has been set.