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FILM INDUSTRY
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INDEX
1 EXECUTIVE SUMMARY 5
2 INTRODUCTION OF COMPANY 7
3 INTRODUCTION OF STUDY 10
4 OBJECTIVE OF STUDY 32
5 RESEARCH METHODOLOGY 33
7 ADVANTAGES 38
8 LIMITATIONS 39
9 SUGGESTIONS 40
11 BIBLIOGRAPHY 42
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ACKNOWLEDGEMENT
I wish to express my deep sense of gratitude to my reverend guide Mr. RANJEET VERMA
who through his benevolent guidance has enabled me to accomplish my project. He has been great
source of inspiration to me, all the way. Without his keen interest, incessant encouragement and
invaluable suggestions this report could not have attained its present shape with zeal and enthusiasm.
I convey my heartful affection to all those people who helped and supported me during the
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EXECUTIVE SUMMARY
The study was undertaken to know the role of Financial Institutions in film industry,
requirement and procedure for sanction of loan and comparative analysis of IDBI with
various banks.
The Indian film industry is said to be one of the largest in the world with 934 films
produced in 2004 and more than 3.1 billion admissions. It is currently worth about US$
1,256 million and is expected to grow at a compounded annual growth rate of 18 per cent
The Indian film industry is largest in the world in terms of number of movies produced.
India produces 800-900 movies every year in 52 languages and provides direct and
The research design is Descriptive in nature. The data used is secondary data. The
IDBI size of the loan can't be less than Rs 40 million and anything above Rs 200
million will have to be backed by a completion guarantee. IDBI Bank is the leader in
the pack, having late last year decided to double its exposure limit to Rs 2 billion. It has
sanctioned Rs 1.8 billion while disbursals stand at Rs 850-900 million towards movie
projects.
IDBI, funds only corporate who have a track record of three years and insist on a 1:1
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BANK OF INDIA has financed Rs 250 million for five movies over a four year period.
While two movies under its portfolio have been successful, one has just about managed
to recover costs.
An early lender into the film business, BANK OF BARODA is extremely cautious
million to Crest Animation Studios in what would be its first funding for an animation
film project. Starting to lend to the film sector since April 2004, the bank has financed
This study has been conducted with the help of material and information provided
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OBJECTIVE OF STUDY
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INTRODUCTION OF THE COMPANY
Todays IDBI is one of the Indias largest banks. It has essayed a significant role in the
countrys Industrial and economic progress for over 40 years- first as a development
financial institution and now as full service commercial bank and now as full service
commercial bank.
Headquarters in Mumbai, the commercial capital of the country. IDBI has been
consistently delivering superior products across convenient delivery channels and always
VISION
PHASES OF IDBI
bank of India, which was a wholly owned corporation of Government of India under
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IDBI set up the Small Industries development Bank of India (SIDBI) as a
wholly owned subsidiary to cater to small industries. In 2001 IDBI reduced its
setting up of the securities Exchange Board of India (SEBI), National Stock Exchange
(NSE), credit Analysis and Research analysis, Investor Services of India etc.
In 1992 IDBI accessed the domestic retail market for the first time by issuing
innovative bonds known as Deep discount Bonds. These bonds were highly popular
In 1994, the IDBI act was amended to permit public ownership upto 49 percent.
In July 1995, it raised over Rs 20 billion in its first initial offering (IPO) of equity, there
shareholding was converted into preference capital. This capital was redeemed in March
2001, which led to a reduction in government stake. The government stake currently is 58
percent.
In august 2000, IDBI became the first All India Financial institution to obtain
In April 2001, IDBI appointed Boston consulting group India private limited as
Retail banking
Corporate banking
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IDBI provides funds for FILM FINANCING. It has certain requirement and
procedure for sanction of loan. IDBI provides finance for production of feature films as
defined under the Cinematograph (Certification) Rules, 1983. Advertisement films, short
films, documentaries etc. are not eligible for financing. A corporate entity, promoted by
reputed producers, backed by established directors & other technicians and possessing
satisfactory track record are eligible to avail assistance under the scheme. In case the
Assistance would be not less than Rs.2 cr and not exceeding 50% of the estimated cost of
the film. Interest rate would be cap rate in the prevailing interest rate band.
So far IDBI financed 12 films and some of them were completed and released
successfully.
Since the process of funding started only the few years back, IDBI had as much to
learn about funding as the industry had to learn about how to be financed through
So far the experience had been good with no defaults and the films had been
completed on time.
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INTRODUCTION OF STUDY
The Indian film industry is said to be one of the largest in the world with 934 films
produced in 2004 and more than 3.1 billion admissions. It is currently worth about
US$ 1,256 million and is expected to grow at a compounded annual growth rate of
The Indian film industry is largest in the world in terms of number of movies
produced. India produces 800-900 movies every year in 52 languages and provides
The film Sector is one of the oldest industries in India. The first commercially
successful film was made in 1913. The exports of Indian films in the last few years
have seen a dramatic upward swing with the export earning for the year 2001-02
The Government of India has accorded industry status to the film industry and FIs
are formulating funding mechanisms for financing films. Recently some major film
Many large production houses are embracing a corporate structure and there is a
In recent years, the Indian film industry has been driven by growth in multiplexes.
estimates, Hindi language films command a 40 per cent share of the Indian film
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market today since a large portion of the films made in India are produced in the
Hollywood films are now being dubbed in local Indian languages and screened in
cinema theatres. The dubbing industry has grown at 25-30 per cent over the last
five years. In fact, almost 75 per cent of the total industry revenues of US$ 5.1
For example, the dubbing of Spiderman 2 in three local languages has played a
million in India in its first weekend, the highest ever for a Hollywood film. Films
animation films.
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EXIM BANK IN FILM INDUSTRY
Export-Import Bank of India (Exim) has recently agreed lend $7 million to Crest
Animation Studios in what would be its first funding for an animation film project. Starting
to lend to the film sector since April 2004, the bank has financed Rs 580 million for nine
movies so far. This includes Rs 400 million to noted filmmaker Yash Chopra for movies
like
Veer Zaara, Hum Tum, Bunty Aur Babli and Dum. It has also lent Rs 100 million for
Farhan Akhtar's Don and Rs 80 million for Mangal Pandey - the Rising. Organized
finance is available at much lower interest rates, but is not accessible to fresh filmmakers.
Exim Bank offering foreign exchange loans against overseas rights at cheaper rates.
Exim Bank, which has been funding Hindi movie projects that have a potential to earn
foreign currency revenues in the overseas market, offers floating interest rates
Bank of India and Industrial Development Bank of India promise funds for corporate
filmmakers
Nearly two years after the Union government categorized film production in the country as
an industry, financial institutions and allied service providers are taking a good look at the
business.
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The Bank of India, a government-owned organization, is the latest financial institution to
At Frames 2002' it has announced that institution has earmarked a sum of Rs. 500 million
However, the bank is yet to finalize the modalities of funding film production.
institution that took the lead in entering the film financing business. According to officials
of IDBI:
A total of Rs. 600 million ($12.5 million) has thus far been disbursed for 11 films, and an
additional provision of Rs. 1 billion ($20.83 million) has been made for the future.
IDBI has tied up with the film processing laboratories to ensure that the release of the
films would take place only on debt repayment.
IDBI Ltd, bolstered by the success of its film-financing portfolio, has doubled its exposure
Having entered film financing with much trepidation, IDBI has been `pleasantly surprised'
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For the year ended March 2006, IDBI has offered Rs 177 crore as loans for various film
projects. "Of this, Rs 80 crore has been advanced for projects that are on the floor.
Unlike the financing pattern used for lending money to sectors such as steel, infrastructure,
Loans are given to individual producers on the basis of how their films have fared in the
past, the project's strength, the producer's financial capability and his track record of
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RISKY BUSINESS .
The biggest risk in film-financing is the completion of the project. IDBI has tied up with
the film processing laboratories to ensure that the release of the films would take place
IDBI has set up a cell comprising two to three persons from within the bank to work on
each of the film projects that seek funds. Additionally, an advisory team of people drawn
from the industry - producers, distributors, actors and film critics - make an assessment of
Institutional debt is slowly becoming part of the financing of the country's film industry.
IDBI and Exim Bank have taken a lead in disbursing debt to this sector. Both these
banks have offered loans not just to the Hindi film industry but also other language
IDBI, which offers film finance at rates exceeding its PLR by 1.5 to two per cent, has also
Apart from the specific film-financing portfolio, IDBI does offer debt to the entertainment
sector for setting up malls, studios or offering small corporate loans for equipment. But
within the film financing portfolio, IDBI has only extended funds to the production side
and not to the distribution and the exhibition side of the value chain.
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The bank is in talks with the two film completion bond companies in India but as yet is not
insisting on completion bonds. "Completion bond would further add to the cost of the
film. IDBI does not extend loans below Rs 4 crore and does not fund the entire project
cost. But the bank does check the veracity of funds brought in by the producer or the film
The Industrial Development Bank of India (IDBI) is in talks with multinational film financing
companies as part of its efforts to venture into financing movies in a major way.
US-based company, Film Finances Inc, has approached financial institutions to gather adequate
risk coverage and guarantee to the films financed by IDBI. Film Finances is a well-known
name in the international film industry and has presence in the UK, Canada, Italy and France,
If the deal works out, IDBI will not bear the risk in financing films, as the international agency
The arrangement will be in line with the global practice of film financing, the official said. "We
are looking at film financing as a risk-free investment. The international agency will take the
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responsibility for the completion of the film and will also do the project appraisal in the run-up
He said the US Company has asked for the script, the shooting schedule and the budget of the
films for which IDBI has already allocated its funds. But so far, IDBI has not taken any
He said the foreign companies would provide financiers assurance that the films would be
financiers responsibility.
A European company has also approached IDBI for the same business. Talks with the firm
are in a preliminary stage and it may take at least one more month to get a vivid picture on
the deal, he said. He, however, was reluctant to divulge the name of the European film
financing company.
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REQUIREMENTS FOR FILM FINANCING IDBI
The basic objective by the banks is to provide finance for production of feature films as
Advertisement films, short films, documentaries, etc. are not eligible for financing.
corporate entity, promoted by reputed producers, backed by established directors & other
technicians and possessing satisfactory track record. In case the entity is recently
SECURITY
The following are conditions to be fulfilled by the producer in order to be financed by the
Letter from film processing laboratory-conveying rights on the negatives of the film
in favour of IDBI.
A Trust & Retention Account (TRA) will be maintained for all capital as well as
revenue inflows and outflows. The receivables on sale of all IPRs shall be credited
to TRA. The modalities of TRA will be worked out to the satisfaction of IDBI. A
No Objection Certificate (NOC) from all concerned parties for the TRA
arrangement will be required. IDBI shall have first charge on the TRA.
First hypothecation charge on all the tangible movable assets under the project.
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Personal guarantee(s) of the producer(s).
Assignment of existing rights like music, video, internet, CD, DVD rights, library
The borrower would be required to obtain completion bond guarantee from such agencies.
Till such time the guarantee is made available, the risk in this regard would need to be
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PROCEDURE FOR SANCTION OF ASSISTANCE
Wherever necessary, the bank may refer the proposal to a group of experts for
The borrower will enter into an agreement with the bank, after it has conveyed its
promoters` contribution.
The assistance from the bank will be disbursed during shooting and post-shooting
stages.
Amount of disbursement will depend on the total budget of the film, progress and
Monitoring the bank to have the right of appointment of specialized agencies for
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FORMATION OF JOINT COMITEE IN 2001
Films submitted an interim report that looked at laying down norms for film
financing. The members of this body included outfits such as the Industrial
India (IDBI) while the committee was headed by the Department of banking,
ministry of finance.
Coincidentally, this report came around the time the Chori Chori Chupke Chupke
controversy had given credence to linkages between the mafia and Bollywood.
Presumably, the committee was hoping that uniform-lending norms would nudge
Yet, the governments wooing of the film industry has not excited too many
Rangeela and Satya, said the industry was not suffering from lack of finance. All
film makers get financial support from private financiers with whom they have
At Frames 2001, the IDBI had promised the industry a sum of Rs.100 crores for
film financing at a debt equity ratio of 1:1 after the film industry was recognized
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In October last year, the government accorded film producing industry status via
notification 2(C)(XVII) of the IDBI Act 1964. Until now, banks and financial
institutions did not recognise film production as an industry and hence shied away
from financing films. So, producers turned to private financiers whose means of
funding were truly mysterious. With funding, plenty of it illegitimate, coming from
things like hawala, drug trafficking and ransom, producers here ended up paying
However, now the industry can borrow at interest rates as low as 17.5% per annum
from banks and FIs. While giving the industry status, the department of banking
also suggested that banks and FIs work together with producers to evolve standards
It's an option that producers should have grabbed. So, what's preventing producers
from lining up for loans? For one, it's the issue of putting up collaterals against the
loans.
So, the interim report of The Joint Institutional Committee On Financing of Entertainment
Industry, Including Films, has suggested that since films now receive significant revenues
through music rights, satellite television rights and overseas rights, these could also be
assigned in the lenders favour. Suitable escrow mechanism for securitisation of future
revenue streams could also be considered as a form of security. However, producers believe
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INDUSTRY GETS MORE CORPORATISED AND FOCUS IS ON
DISTRIBUTION
The rules of the filmed entertainment business are changing. The production process is
getting more corporatised, multiplexes are bringing in a breath of fresh air on the exhibition
front, and investors are watching with keen interest which way the fortunes are going to
swing.
The production cycle is getting shorter for at least the organized players. Like Mukta Arts,
for instance, took six months to produce Shaadi Se Pehle. The duration of completing a
movie, though, varies from project-to-project and also depends on the production house.
Focus on good stories; well-oiled machineries, planned executive and effective marketing
campaigns are going to be crucial in driving down costs and getting mainstream hits.
MULTIPLEXES.
Fragmenting and targeting niche audiences is possible today with the number of
multiplexes, which have sprung up across the country. Multiplexes are also securing a
better revenue flow across the distribution value chain. The revenue leakage on the
distribution front is still an issue. But there is an improvement because of the multiplexes
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Digital delivery of movies will also drive change. But it is still at a nascent stage and is
taking place at the low-cost end. "The industry has around 250 digital exhibition theatres
across the country. Industry has to push it up to 2,000 to 3,000 theatres. Mukta Arts has a
Multiplex operators are fast ramping up. There are around 100 multiplexes in the
country. But with the players lining up major expansion plans, this is expected to
grow to 250 multiplexes within two years. We are scaling up from four properties
Adlabs plans to invest Rs 2 billion over three years towards multiplexes, adding
100 new screens by the end of FY 08 to take the total to 135 screens.
Even on the production side, it aims to produce over 10 films in a year from FY 06
onwards. Adlabs signed up Ram Gopal Varma, Ramesh Sippy, Prakash Jha and
Vipul Shah.
Such ramp ups across the top production houses like Yash Chopra, Mukta Arts and
Sahara will be a challenge and will depend upon how much the market can absorb.
Though multiplexes are growing, it remains to be seen how much additional supply
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STRIVING FOR VERTICAL INTEGRATION MODELS
A more varied business model is taking shape as corporate houses strive for size and
vertical integration. Adlabs, Sahara, UTV and E-City originate from different backgrounds
and are creating empires that will synergise with their other ventures.
AMBANIS ADLABS
Ambani is building an entertainment powerhouse that will sprawl over his telecom venture.
Having paid Rs 3.6 billion for a 51 per cent stake in Adlabs, he quickly raised $100 million
Flushed with funds, Adlabs will scale up movie and radio operations with a heavy presence
Infocomm will link up threatres and deliver content through its fibre optic backbone. His
foray into home video segment will help provide content for Reliance Infocomm's triple
play service, which Ambani plans to launch by the end of this year. The direct-to-home
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"In this type of a model, it is viable to create an integrated platform, scale up and absorb all
the risks from the vagaries of film business. Ambani is best poised to take the film industry
forward.
SAHARA
Sahara motion pictures division has churned out several hits and can play a big role in
pushing the flagging general entertainment channel forward. It has also launched a Hindi
movie channel and, along with news, is hoping to have enough firepower to migrate from
An outsider in film production Sahara has turned out to be one of the leading producers
Sahara's model of tying up with production house K Sera Sera, which had a long term deal
with Ram Gopal Varma, for 10 movies proved fruitful. The company also worked out
multiple-movie deals with Boney Kapoor and Madhur Bhandarkar. "sahara is making 20
movies this year. It will be totally funding these movies and also into film distribution
business.
UTV.
UTV, which started as primarily a TV content production house, has marched into movies
and broadcast areas to boast of being an integrated media company. The company has
produced seven movies over the last 30 months and more are on various stages of
production now. "UTV do not consider film business more risky compared to other media
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businesses. Selecting the right project after due evaluation and research, having a slate of
film projects of varying content profiles, managing cost and time schedules well and
effective and timely exploitation of revenue potential are the key to successfully managing
UTV was commissioned by Star to produce movies for them. "Broadcasters of late are
looking at acquiring a slate of movies from producers for television exploitation compared
to film acquisition earlier. Apart from assuring future content, this also helps broadcasters
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BALAJI TELEFILMS.
Television content companies like Balaji Telefilms have also made cautious steps into film
production. Their aim: to drive topline growth. Movie companies like K Sera Sera are also
Pure film companies are aiming to size up their business. Yash Raj Films has a strong
overseas distribution arm and has set up a hi-tech studio to grab outsourcing work from
Hollywood. Others like PNC have attracted equity financing, but are trying to grapple with
ways to grow the business. Mukta Arts has opened an academy to train professionals and
Exhibition companies are getting into the distribution business. "Exhibition margins range
between 15-20 per cent. It makes business sense for us to be in distribution, which has
margins of 30 per cent, as well. They have entered Gujarat territory as we have taken 22
theatres on hire there. But one has to progress selectively into territories.
Distribution companies are also finding the climate conducive for movie production.
SONY PICTURES.
Sony Pictures Releasing of India, which had obtained FIPB (foreign investment
promotion board) approval for film production, had stayed out of it for years. But recently
the company announced a joint venture with Sanjay Leela Bhansali for production of Hindi
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They are globally into film production. They think the time is also right as corporatisation
For any chance of organised funding to get better, efficiencies have to grow across the
value chain. Aligning with directors for multiple films can draw and lock in talent while co-
productions can raise the production values. On the positive side, the dependence on
domestic theatrical collections has reduced while international territories are yielding better
cash returns.
The revenue mix for good movies is more widely spread today. While domestic box office
accounts for 50-55 per cent (earlier 70 per cent) of total revenues, satellite TV rights make
up 20 per cent and overseas territories 10-15 per cent. The home video segment is also
growing, accounting for 10 per cent revenues. In the wide basket, it is only the music
rights, which have sunk over the years and seen very little rise.
New media exploitation options like mobile and Internet also offer promising revenue
The best thing to happen is the emergence of a diverse range of players who are
aggressively getting into the film business for strategically different reasons. This is good
for the health of the film industry and will fuel its future growth.
Since 1931, when talkies were first introduced in India, the film industry has produced
more than 67,000 films in more than 30 different languages and dialects.
In 2001, the industry produced 1,013 films making it the world`s largest feature film
producer. The majority of films are made in the South Indian languages of Telugu, Tamil
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and Malayalam, but Hindi-language films take the largest box office share. The industry
draws its revenues from: domestic theatrical sales (2001: 36 billion rupees); overseas rights
(2001: 5.25 billion rupees); music rights (2001: 1.5 billion rupees); television and video
rights (2001: 2 billion rupees); corporate sponsorship and merchandising (2001: 0.01
billion rupees). The total revenues of the industry from these sources are estimated at 45
billion rupees.
The development of the Indian Film Industry from its golden era was very different and
much simpler than it is today. Due to the immense growth in technology and the entrance
of Hollywood, now making a film involves a huge sum of money and depends on several
contingencies. Huge sets, highly risky stunts, sensitive equipments, a huge amount of
salary paid to the actors and a lot other factors, has made Indian Films a very risky
business.
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FILM INSURANCE
These factors demand some kind of mechanism through which a producer can be assured
that, in case of these contingencies he will be indemnified. These were the same reasons as
the concept of Film-Insurance was introduced in the foreign film industry. Thus, this
concept has been introduced even in India. Insurance companies need to negotiate the
potholes effectively because if all goes as per planned it can prove to be a fast growing
industry.
It was felt that paying a premium of 6% of the production cost, as is prevalent abroad
However, as time has passed premiums have dropped to as low as 1%, as more and more
producers opt for cover. For example if movies were being made at a budget of Rs. 30
million, the total insurance premium payable would be Rs. 500,000 at the rate of
approximately 1.5%. With 700-800 films being made per year totally across India, the size
of the film market in India is estimated at around Rs. 48 million or approximately 1 billion
US dollars and even if 50% of these films (Rs. 24 million) are insured at anywhere between
1.0%-5% the total premium will be anywhere between Rs. 0.24 billion to Rs. 1.24 billion -
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RESEARCH METHODOLOGY
PROBLEM RECOGNITION
Site of IDBI
RESEARCH DESIGN
The research design in this case is DESCPRITIVE. The research design is Descriptive
SAMPLE DESIGN
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COLLECTION OF DATA
IDBI Bank is the leader in the pack, having late last year decided to double its exposure
limit to Rs 2 billion. No wonder the big daddy of film financing believes it has found the
right formula for lending to the industry. It has sanctioned Rs 1.8 billion while disbursals
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ANALYSIS AND INTERPRETATION
1. IDBI, size of the loan can't be less than Rs 40 million and anything above Rs 200
IDBI Bank is the leader in the pack, having late last year decided to double its
exposure limit to Rs 2 billion. No wonder the big daddy of film financing believes
it has found the right formula for lending to the industry. It has sanctioned Rs 1.8
IDBI, for instance, funds only corporate who have a track record of three years
and insist on a 1:1 debt equity ratio. "We don't deviate from these lending norms.
Other banks like UTI have entered the fray, but the lending is still extended to
2. BANK OF INDIA which has financed just Rs 250 million for five movies over a
four year period. While two movies under its portfolio have been successful, one
has just about managed to recover costs. "Another project is stuck over disputes
and the movie is yet to be released. We have also financed a fresh project which is
coming up for release. Organized finance is coming, but the pace is very slow. We
have nominated just one branch in Andheri which does film financing. Because of
its risky nature, bank have an upper ceiling of Rs 50 million per movie,"
cautious about providing debt to the film sector. "Our experience has not been
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4. EXPORT-IMPORT BANK OF INDIA (EXIM) has recently agreed to lend $7
million to Crest Animation Studios in what would be its first funding for an
animation film project. Starting to lend to the film sector since April 2004, the
This includes Rs 400 million to noted filmmaker Yash Chopra for movies like Veer
Zaara, Hum Tum, Bunty Aur Babli and Dum. It has also lent Rs 100 million for
Farhan Akhtar's Don and Rs 80 million for Mangal Pandey - The Rising.
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AMOUNT SANCTIONED
BANK COMMENTS
IDBI Upper limit is 2 billion and loan cant be Leader in all Banks in
less than 40 million. Film Financing
Amount sanctioned: 1.8 billion
BANK OF Upper ceiling is Rs. 50 million per movie Still have cautious
INDIA Amount sanctioned: Rs. 250 million on 5 approach
movies.
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ADVANTAGES
Private players charge higher interest rate but financial Institution charges lower
IDBI has an upper hand in film Financing and It has doubled its exposure to 2
billion.
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LIMITATIONS
Financial Institutions doesnt provide loan for advertising and short films.
Financial Institutions doesnt fund the entire project cost, they provide the partial
finance.
IDBI provides loan only for production side not for distribution.
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CONCLUSION AND FINDINGS
Multiplexes.
Private players charge higher interest rate but financial Institution charges lower
IDBI has an upper hand in film Financing and the size of the loan can't be less than
IDBI has tied up with the film processing laboratories to ensure that the release of
Bank of India has Upper ceiling is Rs. 50 million per movie and it has financed
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EXIM Bank has financed Rs 580 million to film industry.
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BIBLOGRAPHY
(1) www.idbi.com
(2) www.yahoo.com
(3) www.rediffmail.com
(4) www.google.com
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