Financial Daily from THE HINDU group of publications
Monday, Aug 16, 2004
Money & Banking
Variety - Cinema
Exim Bank expanding presence in film financing
Mumbai , Aug. 15
THE Export-Import Bank of India (Exim Bank) is cautiously expanding its lending portfolio in the arena of film financing.
Having offered finances to Yash Chopra's Yashraj Films in the past, Exim Bank is now looking at other names in the business of filmmaking, such as Pritish Nandy and B.R. Chopra.
The finances likely on offer are for Pritish Nandy Communications's Shabd and Sahib Biwi Aur Ghulam and B.R. Chopra's Babool.
Exim Bank entered the arena of film financing in the process of developing new business opportunities.
It chose the comfort of an established name, Yash Chopra, to make a foray into this financing.
The bank has extended a loan of Rs 14 crore towards the production of three Yash Chopra films so far and is in the process of financing the fourth.
However, Exim Bank's extension of finance to films rests on the condition that the films must have export potential and thereby bring in foreign exchange earnings, said Mr Mathew John, Deputy General Manager, Exim Bank.
"We have deliberately chosen to finance projects of producers who have the wherewithal to take on such debt. We are funding the production house and not taking a call on the performance of the film,'' he said.
As for Yashraj Films, this entity has earned Rs 75 crore from exports over the last five years.
For Exim Bank, whose loan book is to the extent of Rs 12,000 crore, extension of finances to the entertainment industry is minuscule at this juncture.
"We find that the entertainment industry is growing and the movie segment is growing at the fastest pace,'' Mr John said.
Exim Bank offers finances at 500 basis points over and above Libor.
"We normally lend at around 200 basis points above Libor to other sectors.
But we would think that the rate we are offering to the film industry is better than what it is able to get.''
Within the entertainment industry, well-known television content companies with a fair amount of foreign exchange earnings have also approached Exim Bank.
Admittedly this is a new arena for Exim Bank in terms of understanding the dynamics of business.
"We go through the script and the star cast. But ultimately, we take a call on the producer before funds are disbursed,'' Mr John said.
Before the production, a tripartite agreement is entered into between the bank, the producer and the film processing laboratory.
The cash flow process is drawn up before the production commences.
Once completed, the film is not allowed to be distributed until the debt is completely repaid.
In its first project within the entertainment industry, Exim Bank extended credit and advisory support to the Pune-based PPL Entertainments for dubbing the Bollywood blockbuster, Kaho Na Pyar Hai in Spanish under the title, Reencuentro Con El Destino.
The film, slated for release across 20 South American countries, has finished its run in Peru.
In the next round it is due for release in Ecuador and Venezuela followed by Mexico, which is the biggest market for Hindi films.
Once it gains confidence, Exim Bank would not be averse to taking a call on the performance of the film it chooses to finance, Mr John said.
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