The Hindu Business Line : GIC forays into film completion bond biz

With completion guarantees in place, the possibility of a film project getting organised finance is higher, according to Mr Balsara of Ernst & Young.

Mumbai , Dec. 20

GENERAL Insurance Corporation of India (GIC) is entering film completion bond business as a reinsurer.

GIC will offer underwriting and support to film completion guarantees.

GIC has contributed to the pool of capital raised by Infinity Film Completion Services, a completion bond company promoted by producer, Mr Aanand Mahendroo, and venture capitalist, Mr Mehool Parekh.

However, Mr R.K. Joshi, Chairman, GIC, did not specify the amount GIC has contributed to this capital pool.

Infinity Film Completion Services, sponsored by GIC, has raised Rs 50 crore so far. "`This amount of money is enough to do 25 film projects,'' Mr Parekh said.

Completion bond covers completion risk, which is the risk of the film not being made within budget and as per the prescribed schedule, Mr Farokh Balsara, Senior Partner, Ernst & Young, said.

According to him, banks perceive film completion risk as the greatest risk. With completion guarantees in place, the possibility of a film project getting organised finance is higher, Mr Balsara said.

Completion guarantee acts as a creative controller to evaluate the initial script, budgets and contractual agreements with related parties. It monitors the film production to ensure that it stays on schedule and budget ensuring that there are no deviations. In case of deviations resulting in cost overruns, the completion guarantor steps in and funds the project.

Infinity, which is a part of Infinity India Advisors Pvt Ltd, a venture capital firm, would charge a fee of 5-6 per cent of the total budget of the film, including the insurance premium.

Globally, Film Finances Inc and International Film Completion Guarantors, dominate the completion guarantee business. Lloyds and the London Insurance market underwrite guarantees from these firms.

"`Infinity has set up systems and processes to bring objectivity into what has so far been a very subjective business in India,'' Mr Parekh said.