New funding models look to brighten the silver screen as HNI money rolls in

Specialised investment funds are bringing institutional capital into Indian cinema, treating film IP and movie portfolios as a new alternative asset class

A new kind of capital is making its way into the ₹22,000 crore Indian film business. It is not private equity funds or strategic investment. Rather, it is pure financial investment from funds that have raised money from high-net-worth individuals (HNIs) or institutions keen to invest in Indian cinema, much like they would in stocks. 

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 — Filmoney Global and CineNow — have already made their opening moves. 

The first of 10 special purpose vehicles (SPVs) from Filmoney Global is about to close. The £5 million SPV will identify and invest no more than a million pounds per movie. Each of the 10 SPVs will range from 5-10 million pounds — or dollars, depending on where the money is raised. 

Each SPV will focus on specific youth-centric genres. For instance, SPV A could be focused on funding horror films, while B could be dedicated to investing in romantic movies. The idea is to create economies of scale within each SPV, and minimise risk and maximise returns, like any institutional investment. 

“We will back high-concept, theatrical-first films, which don’t have big stars and directors.” says Sidharth Jain, co-founder and partner, Filmoney Global. The fund management firm is based in Dubai, but operationally active across New York and London. (A theatrical-first film is one that debuts exclusively in cinemas and becomes available on other platforms after a certain window of time.) 

Meanwhile, CineNow, which is a $150 million (₹1,350-odd crore) fund registered in the British Virgin Islands, is positioning 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 fund more than 30 films over six years, with budgets ranging from ₹3 crore to ₹300 crore. The fund has just roped in Siddharth Roy-Kapur, the former head of Disney India and managing director of Roy Kapur Films (Yeh Ballet, Matka King, Rocket Boys) as principal advisor.

 

Production houses say they could do with the money. “We are a grossly undercapitalised industry,” says Vikram Malhotra, founder and CEO, Abundantia Entertainment, which is in the process of raising capital. “Much of the creation, production and quasi-capitalising of producers happens through buyers such as streaming and television companies or theatrical distributors. It is not their job to be in financing,” he adds. Malhotra’s 13-year-old firm, which is behind shows such as Breathe, Daldal and Subedaar and films like Maa Behen (Netflix), Airlift and Shakuntala Devi, has been making operating profits for some years now. He reckons that the whole hit-driven approach has skewed the way investors look at the business.

 

“Our approach at Abundantia is to create a consistent business that can benefit from a hit, but withstand a miss,” he says. “You could have a ₹500 crore box office film, but the cost could be high. Therefore, 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 might have cost only Rs 5 crore in production, he adds. Both fiscal discipline at the production stage and the ability to monetise at the revenue stage are critical if a portfolio of, say, 8-10 films a year has to make money. That happened till the studio system – where everyone earned a salary – existed.

 

The eternal search for capital

 

Since that system imploded in the 1950s, filmmakers have struggled for capital. Parallel cinema found its patron in institutions like the National Film Development Corporation (NFDC) or in people like Manmohan Shetty. The founder of Adlabs produced Chakra (1981), Ardh Satya (1983), among other films. Those making commercial films went to builders or businessmen. In a particularly bad phase in the ’80s, underworld money came into cinema. Things eased once films got industry status in 2000. There was a rush of initial public offerings (IPOs) from Adlabs, Mukta, and so on. In 2008, money started coming in from foreign studios such as Fox, Paramount and Disney. However, most of them withdrew in a few years.

 

Over the last two years, things have started looking up again. There have been more than half a dozen deals, which have raised over ₹3,000 crore for filmmaking. These include an IPO (Baweja Productions: ₹97 crore), and several strategic investments such as Adar Poonawalla’s ₹1,000 crore fund infusion into Dharma Productions, or Universal Music pumping ₹720 crore into Farhan Akhtar’s Excel Entertainment.

 

A slew of funds has also emerged -- largely from entities within the cinema ecosystem. 

 

There is NFDC’s film promotion fund. And there is the Humans of Cinema and Safarnaama Pictures Co-Production Fund of ₹40 lakh, which is designed to support emerging filmmakers with a distinct voice. Apart from these, there are funds for environmental documentaries, for short films, and so on.

 

The use of SPVs and pure financial investment by a fund is common in Hollywood. In India, the concept is new, say analysts. 

 

The Indian film business, while robust creatively, remains fragmented. In an inherently risky, uncertain, and subjective business, what are these new funds banking on?

 

The fine print

 

“We offer producers and studios 100 per cent investment, whether it is for a single title or a slate of films,” says Dalmia. “Until the principal investment and agreed returns are recovered, we retain a lien over the underlying intellectual property and associated rights. We do not exercise creative control,” he adds.

 

CineNow hopes to use its basket of 30-plus films to negotiate in bulk with streaming firms, theatrical chains, and anyone who offers a distribution platform. “If they (producers/studios) independently have a better deal than what we can get as a basket, we are happy for them to exploit it,” says Dalmia. “The idea is to maximise value for all stakeholders.”

 

The fund will be tokenised. The tokens can then be traded like any other asset. What this means is that the fund is broken down into digital tokens on a blockchain. The assumption is that as the films progress, the value of the tokens could rise. Based on current projections, CineNow is targeting annualised returns for token-holders in the range of 17 to 22 per cent over the six-year investment horizon.

 

Filmoney Global’s Jain already has some experience with the cinema world, having founded The Story Ink, a book-to-screen adaptation firm in India, in 2018. It has found a home for over 200 books across production houses in the country. He turned producer with Netflix’s Trial by Fire, and was part of the team that kickstarted Hotstar over a decade back. Both his partners – London-based entertainment lawyer Srijani Chatterjee and New York-based investment banker and former actor Niraj Arjan – are part of the ecosystem. 

 

Through Story Ink, he says he has a “massive” database of thousands of stories. “We have to pick and curate the right story, and set it up with the right production house,” he says. “For the last two years, the problem has been too many filmmakers pitching projects. But there was no funding since streamers have reduced their slice of financing for original films,” says adds. This is where the new moneybags come in. Only this time, they are not glamour-stuck builders or businessmen, but funds with a return on their mind.