Financial Daily from THE HINDU group of publications
Monday, Feb 04, 2002
Money & Banking - Corporate Bonds
Industry & Economy - Cinema
Government - Policy
Film Finances' joint venture plan spiked
NEW DELHI, Feb. 3
THE Government has shot down the proposal of Film Finances Inc, one of the largest issuers of film completion bonds, on the ground that the company has not been able to meet the minimum capital requirement norms.
In the case of proposals falling under sectors which have been put under the automatic route by the Government, there is no need of approaching the Foreign Investment Promotion Board (FIPB). However, several companies whose proposals fall under the automatic route have, off late, been approaching the FIPB for approvals.
Though the proposed activity came under the automatic route, the company had approached the FIPB as it did not want to bring in the required minimum capital.
While the minimum capital requirement for entering the entertainment sector is $10 million, the company, along with its Indian partner, Kaleidoscope (India) Private Ltd, controlled by Mr Bobby Bedi, co-producer of the film Bandit Queen, approached the FIPB for approval to set up a joint venture company with a paid-up capital of Rs 49 lakh.
The proposed joint venture company had cited the issue of film completion bonds in India as its business activity. Completion bonds are a new concept in India though it is widely used in the developed countries for film financing. Completion bonds are issued normally in cases where films are produced through institutional finances, as is the existing practice in the US, Canada, the UK, Australia and other developed economies. Completion bonds ensure that the film is completed on time.
The US outfit has the capability to guarantee film projects up to $90 million (Rs 432 crore) from its internal resources.
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