Non-Hindi cinema or regional films are attracting some serious investor attention.
Early trends indicate that non–Hindi language films--thanks to their digestible size, hedge against big banner multi-starrer Bollywood films and predictability in returns—are now sought-after from a portfolio risk mitigation perspective.
Sample some recent regional cinema deals: Mahesh Manjrekar’s bilingual film Lalbaug Parel (Marathi) raised money from DAR Capital; The Japanese Wife (Bengali) got funding from Saregama India. Reliance Big Pictures, Indigo Movies, Moser Baer, Amitabh Bachchan Corporation and Aamir Khan’s production house are others eyeing this space with interest.
“The time for regional films has come,” says Arun Rangachari, Chairman, DAR Capital, with a fund size of about Rs 250 crore, which recently invested in Mahesh Manjarekar’s Lal Baug Parel.
Rangachari adds, regional films make for a good investment opportunity because of their low entry and easy maintenance costs and greater predictability in terms of profits. “The production and talent costs are curtailable,” says Rangachari, who is investing in 4-5 regional films this year and investing about 40% of his total corpus into these films.
From an economics point too, the returns generated by regional cinema can sometimes better even the high-star quotient Bollywood films. For instance, Tamil flick Ghajini, which was later remade into a Hindi blockbuster starring Aamir Khan, did more business than Rab Ne bana Di Jodi (Hindi) in the whole country.
Also, tried and tested formulas in these markets provide more predictable returns. “Production value, technical focus and a highly-focussed distribution mechanism provide for quick recovery of capital,” says Sheetal Talwar, MD, Vistaar Religare Capital Advisors, the SEBI registered VC fund which has invested in films like Rann and Stoneman Murders.
With all these pluses riding in favour of regional cinema, private equity investors are diversifying their portfolio and not putting all their eggs in one basket (read Hindi cinema).
“Films are as risky an investment for private equity as any other asset class. The Hindi film industry lost the plot somewhere with its heavy star cast. With regional films, whose budgets are in the Rs 50-60 lakh range, I can put money into various small films and diversify my risk-returns,” added Rangachari who is investing into three “key high growth cinematic markets” of Bengali, Marathi and Bhojpuri cinema.
“Content is the key driver in these films and great marketing is one of the keys to achieve this”, said Rangachari, who is disbursing 40% of the total fund size towards regional films, and pitching it as an equal opportunity against the mainline Hindi cinema. Also, content consumption globally is getting niche, he adds.
According to a recent FICCI-KPMG report, over the years, the share of Hindi films to overall films certified has declined. In 2009, 81% films made were non-Hindi language films out of which, Telugu accounted for 25%, Tamil 15%, Kannada 18%, Marathi 10%, Malayalam 8%, Bengali 7%, Bhojpuri 6% and Gujarati 5%.
Balu Nayar of Morpheus Media Fund says, “the opportunities are quite large with a large audience, both in India & overseas, for all three languages, Tamil, Telugu and Malayalam. While revenues are likely to be significantly lower with lower total population as well as lower incidence of multiplexes (thus lower ticket costs), the cost structure seems to be quite attractive. There is apparently a greater degree of predictability in these markets, at least in ensuring break-even.”
With multiplex owners having announced aggressive growth plans in the regional market, it is could translate into higher revenues and improved occupancy for regional films. It is then not surprising that Sun TV has idfentified film production as growth area and Moser Baer has stepped into movie production down south with Vellithirai and Raman Thediya Seethai in Tamil and Kaana kanmani and Loudspeaker in Malayalam.
Though the industry is slated for high growth but owing to the size of the market, it is still a low-risk-low-return game. Sheetal Talwar says, “the maximum upside that these sub one crore markets offer is 20%-30%, and even the management fee also does not get justified. Often you have to spend more time and resources with these small companies”.
And, that brings the “strategy of doing bigger and fewer” back to the forefront. But the overheating in mainline Hindi cinema and unviable costs are pushing players to seek smaller and predictable opportunities.
Samir Gupta, Partner, Cinema Venture Capital Fund, says, “the Bollywood bubble saw a lot of people burning their fingers. The market has however corrected now and we are seeing valuations at a reasonable level. Tamil cinema got a fair share of interest from investors”.
Corporate investors too are taking similar cues and looking at this direction. “I think each language has its own ecosystem. We’ve produced Bengali films, the latest is The Japanese Wife. One of the interesting trends across languages is of high content films which are not reliant on big name stars,” said Apurv Nagpal, CEO, Saregama India. “We are looking at Tamil film but no firm decision has been made so far in terms of our getting into it or not. We have an advantage in the South and East in terms of the processes we are setting up”.
Another big advantage of regional cinema is its growing appreciation at global and Indian platforms. Take, for instance, Harischandrachi Factory (Marathi) was nominated as India’s official entry to the 2009 Oscars; The Man Beyond The Bridge (Konkani) won an award at the Toronto Film Festival last year and Mee Shivajiraje Bhosale Boltoy (Marathi) was one of the few Indian films last year that celebrated its silver jubilee.
Regional cinema seems to have got its ‘hit’ formula right.