With the Indian film industry running into rough weather due to the economic downturn, IDBI Bank and Exim Bank – two of the most active film financiers in the country – have decided to go slow on disbursal of loans for the movie-making business.
“The industry is facing some effects of the slowdown. Hence, we have become cautious in lending to this sector. Earlier, film budgets had moved up with contracts offering sumptuous payments to actors and the technical staff. Now with the churn, the budgets have come down too,” IDBI Bank’s Deputy Managing Director J Balakrishnan said.
While a senior official at the government-owned Export Import (Exim) Bank of India said that banks are now taking extra steps to screen proposals and monitor the payment flows.
He, however, did not disclose the extent of funding that the bank has done as it is yet to declare its audited results for 2008-09.
In the case of IDBI Bank, officials said that there were problems in the distribution of two-three films to which the bank had some financial exposure.
“But this is a temporary phenomenon. Payments will happen, but there will a change in payment schedules,” an IDBI Bank official said. For these movies, which the official did not name, producers would have to find an apt time for release.
“The timing of release is important. If this is missed, then the movie has to wait for the next opportune occasion, even if it’s sold. Overall, IDBI Bank’s exposure (to film financing) has grown from Rs 100 crore about six years ago to Rs 530 crore at the end of March 2009. In FY09, the bank sanctioned loans worth Rs 600 crore, while disbursement was close to Rs 480 crore,” the source said.
According to a FICCI-KPMG report on the Indian media and entertainment industry, the market environment has become increasingly challenging for this sector due to the economic slowdown, especially in the last quarter of 2008.
The film industry has grown from Rs 6,690 crore in 2005 to Rs 10,930 crore in 2008, showing a compounded annual growth rate (CAGR) of 17.7 per cent. This pace of growth is now expected to moderate to 9.1 per cent for the period up to 2013, with the size of the industry estimated at about Rs 16,860 crore.
For an individual player, increased complexities have emerged on account of greater fragmentation of audiences across media and distribution platforms, along with a greater need for accountability, the report said.
FICCI officials said that there has not been a single blockbuster after Ghajini, indicating a recessionary trend. Some of the producers are facing liquidity problems and there is correction underway currently.
The financing to films can take various forms. The four areas where assistance is generally provided are cash flow financing for film production, cash flow financing for film distribution/exhibition in overseas markets, term loans for fixed assets finance and term financing for export market development.
Altogether, the Indian media and entertainment industry stood at Rs 58,400 crore in 2008, a growth of 12.4 per cent over the previous year. Over the next five years, the industry is projected to grow at a CAGR of 12.5 per cent to Rs 1,05,200 crore by 2013.
