Friday, October 05, 2012

All Symbolism, No Substance

Soon after the Economic Liberalisation, It became almost Impossible to lose Money in the Movie Making Business due to The Rise of Multiple Revenue Streams. However, Despite Delivering Blockbusters, Dalal Street largely remains Disinterested in These Stocks.

A 2010 media and entertainment industry report jointly commissioned by FICCI-KPMG titled ‘Back in the spotlight’ states that the Indian media and entertainment industry’s turnover last year was around Rs.587 billion and the same registered a respectable CAGR of 10%. The industry is expected to grow by 13% in the next five years. In the entire pie, filmed entertainment contributed Rs.87 billion, which is projected to grow at a CAGR of 9% over the next five years. While production houses are becoming more successful in wooing Indian audiences, for a Dalal Street veteran though, the statistics doesn’t cut any deep ice. The year 2010 has, till date, witnessed a flow of $2.4 billion through the private equity route. The money was invested in 41 deals but surprisingly, only 2.5% – amounting to $61 million – went into media and entertainment companies. Also, neither of the media and entertainment companies in which the PE money went was an exclusive movie production outfit. Despite giving some of the biggest blockbusters back to back, listed movie production houses in India have failed to impress investors on Dalal Street. An analysis of the money that movies have grossed in an year (both blockbusters and flops) compared to the corresponding share price movement of their respective production houses makes it clear that the complexities of showbiz do not appeal to the imagination and remarkably shrewd commercial instincts of investors.

We take the top four prominently listed movie production houses in India as examples, namely Shree Ashtavinayak Cine Vision, PVR Pictures, UTV Motion Pictures and Mukta Arts. Since 2008, these outfits have produced movies such as Dabangg, Rajneeti, I Hate Luv Storys, Khatta Meetha, Tare Zameen Par, Jaane Tu Ya Jaane na et al. Dabangg produced by Shree Ashtavinayak Cine Vision at a budget of Rs 420 million has grossed Rs.1.4 billion since its release in September 2010 while Blue, another Shree Ashtavinayak venture costing Rs.1 billion, only managed Rs.417.8 million. Similarly, Rajneeti by UTV motion pictures was produced at a budget of Rs.600 million and till date has managed to gross Rs.929.3 million. I Hate Luv Storys (Rs.170 million), which was not well received by the audience earned a respectable Rs.426.8 million. But therein lies the intriguing anomaly worth pondering over. A trend analysis reveals a startling fact: Dalal Street does not necessarily react significantly either to the news of a big release (unlike when a manufacturing company announces a new plant or a services firm announces a new service) or to a movie bombing at the box office. In fact, stock prices of PVR Pictures, UTV Motion Pictures, Shree Ashtavinayak Cine Vision and Mukta Arts fell by 51.48%, 34.87%, 89.485% and 77.67% respectively over a span of two years since 2008. This during a time when the stock market has risen from historic lows (Sensex was around 8000 two years ago) to historic highs (now 21000 plus). All of this despite the fact that movies produced by them not just recovered the budget amount but also garnered extremely lucrative profits. Says Shubhoshekhar Bhattacharjee, CEO, Planman Motion Pictures, “Evidently, while movie house CEOs have marketed their scripts well, they’ve not marketed their ‘scrips’ well, which is an imperative in India.”


Source : IIPM Editorial, 2012.
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