Sucheta Dalal :New venture will fund films with a cause
Sucheta Dalal

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New venture will fund films with a cause   

April 15, 2010

DM Capital Advisors plans to fund movies which have their themes revolving around a social cause

DM Capital Advisors, a financial advisory firm, is entering the market to support films with a cause. It will soon be launching a venture capital fund, Cause Entertainment, for this purpose. DM Capital plans to leverage equity funding for such films.

A number of movies—like Munnabhai MBBS, 3 Idiots and Rang De Basanti—have had socially relevant themes, and have also fared well at the box-office.

“We will be funding ‘cause-related’ movies which carry a message in them. We are not talking art films here, but films like Chak De! India, Munnabhai MBBS, 3 Idiots and Rang De Basanti,” said Uday Singh, corporate advisor, DM Capital.

“We are starting the venture capital (fund) to fund a niche sector. A number of corporate houses are seeing a lot of opportunity in this sector. We see a lot of potential in the market,” said Vicky Dhir, founder and director, DM Capital.
The company is currently in the process of raising funds and is looking at investing Rs200 crore in the venture. “We have raised a substantial amount through high net-worth individuals and institutional investors,” said Aditya Mehta, founder and director, DM Capital.

Compared to the funds that Hollywood manages to raise through financial institutions, the Indian entertainment industry has only a few sources of institutional revenue. Just three banks in India— IDBI Bank, EXIM Bank and Yes Bank—undertake debt funding for movies. 

As far as equity funding is concerned, a few companies like Religare Film Fund and Cinema Capital Venture Fund invest in the entertainment sector.
“In the US, there are different kinds of equity funding (for films) and multiple layers of debt funding like ‘mezzanine debt’ funding. But in India, these options are not there. Very few banks provide debt funding to the entertainment industry. Equity funding is a big challenge,” said Mr Mehta.

The company is initially planning to fund a basket of 11-15 movies and is eyeing returns of 25%-30% (post expenses, before tax).

“Our first step is to cover as many downsides as possible and then monetise,” said Manish Bhatia, head of investor relations, DM Capital.

The company has shortlisted four movies, but is not willing to name them. According to DM Capital, a film will be selected for funding under these criteria: formulation of the formal business plan; valuation of intellectual property rights, estimation of box-office collections (both domestic and global) and estimates of revenues from various rights associated with a film.
— Pallabika Ganguly

-- Sucheta Dalal