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   Indian Film Company to list on AIM on June 18: Bahl
2007-06-07 14:09:38 Source : Moneycontrol.com   

The Indian Film Company, a TV 18 Group-promoted company, will be listing on June 18 on the Alternative Investment Market (AIM) of the London Stock Exchange. The company has already raised 55 million pounds on the AIM, Raghav Bahl, Managing Director of the TV18 Group, said. It plans to invest AIM funds in production and intellectual property rights (IPR) of Indian films, he said.
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Bahl said the company would begin with a diversified and derisked portfolio of 14 film projects.
Excerpts from CNBC-TV18's exclusive interview with Raghav Bahl:

Q: Put into perspective this money you are raising: what is the purpose behind it and where will it be deployed?

A: Well the purpose is a very easy purpose. It’s a film asset ownership company; in fact, it’s the first film asset ownership company in India. These structures are very well developed in the West. 

It's like a mutual fund of films; just as a mutual fund owns several equities, this is a mutual fund of films. Its purpose is to own films - that’s it. So it will invest in films made for an Indian audience.

Q: What is the current line up? What are the current projects the company is looking at?

A: Currently, the Indian Film Company has got about 14 films which are signed on, and it will be actively investing in others. 

As a matter of its corporate objective, it intends to either acquire or produce about 40-50 films every year. That is roughly 20% market share - to give you a sense, about 250 Hindi films are made in this country every year and so, 50 of those films will be with the Indian Film Company.

Q: The pipeline of films that will be under the Indian Film Company and under Studio 18 will be completely different at this point of time?

A: The relationship is that Studio 18, by virtue of being under the same group as the Indian Film Company, is also being sponsored by Network 18. Studio 18 has to give a right of first refusal on every production that it makes, to the Indian Film Company.

If the Indian Film Company for whatever reason doesn’t want that film, then Studio 18 can go ahead and release it of its own. However, if the Indian Film Company wants it, then Studio 18 is duty-bound to sell that film to the Indian Film Company.

Q: When do you hope to completely deploy this 55 million pounds and do you feel the need for the film business, per se, to raise any more capital over the next couple of years?

A: We expect that the entire proceeds will be deployed well before 18 months and then it goes into a cycle. In the Indian film industry, the cash moves around fairly quickly in this business; the average cycle of cash moving one time is about 7-8 months. 

So we expect that with a 55 million Sterling deployment and our ability to leverage that at least one time; that makes it 100-110 Sterling capital that is deployed in the film business.

We believe, that is quite a bit of capital and we first need to turn this capital around efficiently, generate returns for shareholders and perhaps at the later stage, see whether we want to expand the pool of capital. But we believe, as of now, this pool is sufficient.

Q: What will be the relation between the existing entities - Network 18, TV 18, GBN with the IFC; or is there going to be a relation at all? 

A: Network 18 is a shareholder of the Indian Film Company - it holds approximately 20% stake in the Indian Film Company, it’s also the sponsor shareholder.

So we have put in the seed money – that is, 10 million sterling out of 55 million sterling has come from Network 18. So network 18 is the seed - call it seed investor or anchor investor or sponsoring investor or whatever. It has put in that seed money, and then it has gone and raised 45 million sterling from other shareholders. 

The best way I can describe, is the mutual fund of films. Mutual fund is a concept that Indian market understands, where, in one fund lot of shareholders put their money and then you go out and buy a hundred companies. So this is exactly the same.

Q: What kind of returns are you targeting from this one?

A: We believe that Indian Films, if you manage the capital efficiently should be able to return at least 20% IRR.

Q: How big will the percentage of revenues be over the next 18 months; the percentage of revenues of the film part of the business - how sizeable do you intend to take it to, as a percentage of the overall group revenues?

A: We are only a 20% shareholder in the asset ownership company and so the turnover of the asset ownership company; if you just use the capital ratios - if you turn the capital around 1.5 times every year and you use 1:1 debt-equity, then you can easily look at Rs 1,000-1,200 crore turnover for the Indian Film Company.

Q: When will it start from?

A: We are in business as of now; we will have about 18 months over which the entire capital will get deployed once and then it will churn around every year.
Source : moneycontrol.com