Friday, October 05, 2012

MOVIE PRODUCTION HOUSES: INVESTOR DISINTEREST

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.
 
One of the possible reasons for investors turning blind eye is the lack in consistency of cash flows. In the notoriously fickle business of movie making, consistency in profits is what would attract investors. However, our production houses have time and again failed to explain the exact nature of profits. Mahendra Swaroop, Vice President, Indian Venture Capital Association (IVCA), says, “Although listed, Indian movie production houses are mostly non-corporatised. They have no formidable approach of tracking profits except for box office performance because they are not present in the end to end value chain.” Compare this with the case in US and the US investors share an everlasting relationship with Hollywood. The combined market cap of Walt Disney, Time Warner and Newscorp stands at a staggering $150 billion. Walt Disney alone is valued at $64 billion, around 5 times the size of the entire Indian media and entertainment industry. Even the recent MGM collapse, despite its James Bond franchise, is purely because of visible fundamental debt and loss aggregation issues.

In fact, globally, media and entertainment is a relatively lucrative sector for all kinds of investors ranging from private equity to individual ones. But back home in India, the case is quite to the contrary. The total market cap of stocks listed on the BSE is $1 trillion. Out of this, the market cap of media and entertainment companies is roughly 1.1% amounting to a mere $11 billion. And this is where the opportunity lies for Indian movie production houses, which have a great future provided they decide to be present in the entire value chain (as against the present form where the distribution rights, music rights et al are dispersed). This will help investors too in understanding and realising the true worth of the scrip and the company– a traditional happy ending for both. Till then, our production houses will continue to languish in the forgotten alleys of Dalal Street.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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