Poonawalla's bold script: 50% stake buy in Dharma for Rs 1,000 crore

Karan Johar to retain remaining 50% ownership

Serum Institute of India’s Chief Executive Officer (CEO) Adar Poonawalla announced on Monday that his company, Serene Productions, will acquire a 50 per cent stake in Karan Johar’s Dharma Productions and Dharmatic Entertainment, collectively known as Dharma, for Rs 1,000 crore.

According to the binding agreement, Johar will retain the remaining 50 per cent ownership, Dharma Productions said in a statement.

This announcement follows several media reports suggesting that Johar wanted to monetise his stakes in Dharma. He had also held talks with several large firms, including Saregama and Reliance Industries.

Dharma Productions reported its lowest consolidated net profit in 10 years for 2023-24 (FY24), according to documents submitted to the Registrar of Companies on October 17 and reviewed by Business Standard.

 

The company’s profit plunged by 94.5 per cent year-on-year (Y-o-Y) to Rs 59 lakh in FY24. Consolidated revenue also declined by 50.2 per cent Y-o-Y to Rs 520.2 crore. The company reported a decrease in its core revenue from the distribution and exhibition of films and other distribution rights by 83 per cent to Rs 111.38 crore in FY24.

Poonawalla was quoted in the statement: “I am delighted to have the opportunity to partner with one of the most iconic production houses in our nation, along with my friend Karan. We hope to build and grow Dharma and scale even greater heights in the years to come.”

Johar, as executive chairman, will spearhead the company’s creative vision, while Apoorva Mehta, in his role as CEO, will collaborate with Johar on overseeing the operational aspects of the company.

Johar said in the release: “…as we join forces with Adar, a close friend and an exceptional visionary and innovator, we’re poised to elevate Dharma’s legacy to new heights. This partnership represents a perfect blend of our emotional storytelling prowess and forward-thinking business strategies.”

Mehta noted that this investment “enables us to explore new avenues in content creation and distribution, elevating the Indian entertainment ecosystem. More importantly, this investment allows us to take bigger creative steps”.

The statement indicated that the collaboration aims to further transform content creation, distribution, and audience engagement by integrating advanced technologies and pioneering production methods. It also aims to expand large-scale, multilingual productions, build franchises, and elevate traditional entertainment formats.

An industry insider familiar with Dharma Productions said that, in recent years, the company has made mainstream films with directors not well-versed in the nuances of mainstream filmmaking, which has impacted their box office (BO) performance and, consequently, the company’s revenue. The production house’s latest release, Jigra, starring Alia Bhatt, has massively underperformed. Other recent films like Mr. and Mrs. Mahi and Yodha also failed at the box office, the insider added.

However, industry experts believe that this deal will positively impact the Indian film industry, which is struggling with fewer movie releases.

“The industry is moving through a phase where it’s a winner-takes-all market, as large-scale budget films account for 85-90 per cent of the Hindi BO in the post-pandemic era,” said Karan Taurani, senior vice-president-research analyst at Elara Capital. “We believe this deal is a longer-term, equity-led partnership, wherein Dharma will continue to invest in large-budget films given the capital raise.”

He added that Dharma has previously partnered studios like Disney and Zee Entertainment Enterprises (ZEEL) for making Hindi films and that Poonawalla may not add any strategic value for Dharma, which may continue to operate independently under the expertise of its founder.

Nuvama noted that this deal could potentially be slightly negative for other movie producers and music companies like Saregama (which was also one of the initial bidders apart from being a content player) and, to some extent, ZEEL.

According to Tofler, the company had three directors, one of whom is Johar’s mother, Hiroo Yash Johar, and no reported key management personnel. Mehta is the most recently appointed director, having been appointed on August 20.

Dharma Productions is one of India’s leading film production and distribution companies, founded by Yash Johar in 1976 and now run by his son, Karan Johar. Dharmatic Entertainment, launched in 2018, is the digital content arm of Dharma Productions.

Another industry insider said that this represents a type of fund infusion happening at Dharma Productions. It will largely involve a mix of intellectual property rights between Dharma Productions and the new ventures or projects in the pipeline.

The Raine Group served as the exclusive financial advisor to Dharma, while AZB & Partners acted as the legal counsel to Dharma Productions. JSA served as the legal counsel to Serene Productions.