CINEMA CAPITAL VENTURE FUND SCHEME 1
Your ticket to blockbuster returns CINEMA CAPITAL VENTURE FUND 1 CONTENTS
The Indian Media and Entertainment Industry 4 Film Entertainment Industry 7 A Unique Investment Opportunity 7 World’s Fastest Growing Film & Entertainment Industry 9 Explosive Domestic Growth 11 Multiplex Growth 12 Global Market for Bollywood 14 Multiple Revenue Streams 15 Revenue Streams : Then and Now 15 Pre-selling of film rights 15 Risk Minimization 16 Block Buster Returns in the Last 2 Years 17 Film Industry Returns 19 Transparency and Corporatisation 22 Preferred Investment Destination 23 The Film Entertainment Industry Opportunity 25 Investment Strategy 26 Exit Options 27 Fund Summary 28 Why Cinema Capital Venture Fund? 29 Taxation 30 Fund Structure 31 Professional Advisors 32 CCVF Advisory Council 32 Key Management Team 32 Film Entertainment Industry – FAQs 33
CINEMA CAPITAL VENTURE FUND 2 "The Indian Media and Entertainment (M&E) industry is poised to enter a golden era. One of the largest markets in the world, the industry is seeing strong growth and has the potential to garner US$ 25 billion by 2012." PricewaterhouseCoopers - FICCI Industry Report
CINEMA CAPITAL VENTURE FUND 3 The Indian Media and Entertainment Industry
The Indian Media and Entertainment industry is one of the fastest growing in the world having doubled its size in the last 4 years. In 2007 alone it grew by 20% reaching an estimated size of INR 51,000 Crores. Film and television segments constitute almost 70% of the entire industry and are its key drivers.
The Indian government accorded industry status to the film entertainment business in 2001. Film entertainment companies are now listed on Indian and International stock markets and have attracted significant private equity and venture capital from across the world. India’s leading corporate houses like Reliance, Birla and Mahindra have also entered this sector. Reputable banks and financial institutions now provide funding and insurance services to the industry.
This transformation has contributed to the film industry segments rapid growth from approx. Rs 600 crores in 1999 to 9600 crores in 2007, an increase of 15 times in just 9 years.
"From a global perspective, India has been ranked as the fastest growing market in the world for spend in M&E over the next five years." Eighth PricewaterhouseCoo- pers Global Entertainment and Media Outlook
CINEMA CAPITAL VENTURE FUND 4 CINEMA CAPITAL VENTURE FUND Scheme 1
•• Launches India’s first SEBI approved Venture Capital Fund focused on the Film and Entertainment Industry
•• Captures the immense growth opportunity of investing in the fastest growing entertainment economy in the world
•• Offers investors a first time opportunity of ‘ownership’ in film and entertainment ventures
•• Enjoys low correlation with other traditional asset classes, thereby providing investment diversification
•• Employs a “best of breed” strategy to deliver returns in a highly transparent and professional manner supported by industry experts in areas of media, film, legal, tax and finance
•• Seeks to deliver superior investment returns for its investors by building a diverse portfolio of richly valued companies in this fast growing industry
"India has a relatively conducive and open regulatory environment for the M&E industry, unlike many other developed and emerging countries. This has been a significant factor for global M&E conglomerates to set up shop in India." Farokh Balsara, National Sector Leader, Media & Entertainment, Ernst & Young
CINEMA CAPITAL VENTURE FUND 5 India is one of the four countries along with Brazil, Russia and China where there is significant opportunity for global media and entertainment companies to make money in the medium and long term. Favourable regulatory environment is one of the reasons that foreign companies find India more attractive than China.
Credit Suisse Report on Global Entertainment 2007
CINEMA CAPITAL VENTURE FUND 6 Did you know? India sells 2.5 times more tickets than the US the second largest ticket sale market in the world
Film Entertainment Industry — A Unique Investment Opportunity
Market Opportunity
The world’s largest and fastest growing film entertainment industry with 1100 films released and 3.5 billion tickets sold
Industry has doubled in size in the last 4 years and is projected to double again by 2012
Multiplex and Digital Screens projected to grow 5 fold from 2350 currently to over 10,000 by 2012, coupled with higher ticket prices will lead to greater revenue growth
India has the most favourable demographics to support a growing entertainment industry with over 60% of the population under 35 years
A growing global market for the industry that is now reaching over 40 countries worldwide
Risk minimization due to growth of multiple revenue streams, pre-selling of film rights delivers profits even before the release of the film
Sources : PricewaterhouseCoopers, FICCI Report 2008, 2007 A.T. Kearney Report 2007
CINEMA CAPITAL VENTURE FUND 7 Did you know? Film production companies enjoy the highest valuation in the M & E Sector averaging 35-40 times earnings
Industry Opportunity
Low correlation with traditional asset classes, thereby providing investor portfolio diversification. Entertainment consumption relatively unaffected during times of recession
Transparency and corporatisation in film entertainment com- panies resulting in attractive valuations
Preferred destination for global and Indian corporates with over US$ 500 million Foreign Direct Investment in the last 12 months
An opportunity to invest in an industry where almost 70% of the most successful companies in the sector are still privately held
Film Main Hoon Na Om Shanti Om
Director Farah Khan Farah Khan
Year 2004 2007
Cast Shahrukh Khan, Sushmita Sen Shahrukh Khan, Deepika Padukone
Production Red Chillies Entertainment Red Chillies Entertainment
Budget 25+ crores 25+ crores
Domestic Net Revs. 35.5 crores 86.35 crores
Net box office revenue growth of 81%
Source: IBOSNETWORK.COM, MARKET ESTIMATES
CINEMA CAPITAL VENTURE FUND 8 World’s Fastest Growing Film & Entertainment Industry
Rate of Growth across key markets in the Global Film Entertainment Industry G rowth in % Rs Billion
Source: PWC/FICCI Report, 2008
Growth of the Indian Media and Entertainment Industry
Source: PWC/FICCI Report, 2008
CINEMA CAPITAL VENTURE FUND 9 Largest Film Industry
Number of films made
Number of tickets sold (In Billion)
"Our growth rates are much higher than Hollywood's, but in value terms we are way below [the U.S. movie indus- try], But that will change as ticket prices—which now average less than $1 in India—swiftly catch up with the rac- ing Indian economy" Timmy Kandhari, Head of PWC's media and entertainment practice.
CINEMA CAPITAL VENTURE FUND 10 Explosive Domestic Growth
India has the most favourable demographics to support a fast growing entertainment industry with over 60% of the population under 35 years.
Top 10 films - Domestic box-office revenues (2004) Top 10 films - Domestic box-office revenues (2007)
Net Revenue Net Revenue Rank Film Name Rank Film Name (Rs. Crore) (Rs. Crore) 1 Veer Zaara 38.47 1 Welcome 72.98 2 Main Hoon Na 33.4 2 Om Shanti Om 69.96 3 Dhoom 29.5 3 Taare Zameen Par 59.71 4 Lakshya 27.86 4 Chak De India 53.73 5 Mujhse Shaadi Karogi 27.24 5 Guru (2007) 50.34 6 Khakee 27.1 6 Partner (2007) 50.16
7 Hum Tum 21.89 7 Heyy Babyy 42.75
8 Masti 21.49 8 Bhool Bhulaiyaa 40.61
9 Hulchul 20.68 9 Tara Rum Pum 34.29
10 Swades 16.88 10 Namastey London 29.63 264.51 504.16
Source: ibosnetwork.com Increase in domestic box-office revenues (Rs Crore)
Increase of 91% in 3 years for top 10 films
CINEMA CAPITAL VENTURE FUND 11 Multiplex Growth Multiplex and digital screens are going to grow five fold in the next 5 years, hugely increasing the domestic boxoffice revenue.
Growth in the number of screens over the next 5 years
Average ticket price in India (Rs)
"India's multiplex bandwagon has gone beyond the metros to redefine entertainment in B and C class towns. "While the first phase (of the multiplex story) saw emergence of multiplexes in metros and now this growth is spreading to Tier 2 and 3 cities like Lucknow, Indore, Nasik, Aurangabad, Kanpur, Amritsar and so on," says Ajay Bijli, Managing Director, PVR Cinemas Outlook Business 2008
CINEMA CAPITAL VENTURE FUND 12 Three thousand six hundred shows per day, 1600 screens, Rs 22 crore gross earnings in the first three days, Rs13 crores net earnings internationally in the first one week. These are some of the numbers that the film, Race, has garnered since its release last week.
DNA India May 2008
CINEMA CAPITAL VENTURE FUND 13 Did you know? 7 of the top 10 highest grossing Indian films in the US have come in the last two years
Global Market for Bollywood Increase of US box-office revenues (US $ Mn)
The Industry caters to a worldwide market of NRIs as well as local populations in over 40 countries. US $ Mn
Increase of UK box-office revenues (£ sterling) £ Sterling Mn
Only films which grossed more than $ 500,000
Source: ibosnetwork.com, boxofficeindia.com
"The Bollywood segment of the UK market goes on growing. It is rare nowadays for the top 20 films each week not to feature at least one Bollywood title" Mark Batey, Chief Executive of the Federation of UK Distributors Association
CINEMA CAPITAL VENTURE FUND 14 Multiple Revenue Streams •• Film IPR (Intellectual Property Rights), is an asset that generates multiple revenue streams in perpetuity
•• Till the late 1980’s, 85-90% of a film’s entire revenue was dependent on domestic box-office
•• Today, a large number of rights are sold before the film release thereby guaranteeing a minimum return before it hits the box-office
Revenue Streams : Then and Now
Up till early 90s Current Scenario Domestic Theatrical Domestic Theatrical Home video Overseas Theatrical Music Home Video (DVD, VCD) Home Video (Overseas) Home Video (Rental) Music (India and Overseas) Mobile Rights Satellite Rights Overseas Satellite Rights Terrestrial Rights Doordarshan IPTV, Internet Rights Retail and Merchandizing Brands and Sponsorship rights
Pre-selling of Film Rights
Om Shanti Om Jab We Met Cost – 30 crores Welcome Cost – 15 crores (Industry Estimates) Cost – 25 crores (Industry Estimates) Eros acquisition – 70 crores UTV acquisition – 45 crores Studio 18 Acquisition – 24 crores Estimated Profit – 133% Estimated Profit – 80 % Estimated Profit – 60%
Sources: Industry Estimates, Market Sources
CINEMA CAPITAL VENTURE FUND 15 Did you know? Films like Om Shanti Om, Welcome, Singh is King and Partner have delivered an estimated 100% plus returns while still under production
Risk Minimization
The risks are getting increasingly minimized due to the emergence of alternative revenue streams. Revenues from DVD sales, mobile, gaming, internet, DTH, Video on Demand are set to increase fivefold by 2012.
Trends in Distribution of Revenue Streams Distribution of revenue streams in a mature market (Hollywood)
2006 2011 US Film Industry (Projected)
Source: Yes Bank Report, AMR's Film Entertainment Worldwide
Film Dhoom Dhoom 2 Director Sanjay Gadhvi Sanjay Gadhvi Year 2004 2006 Abhishek Bachchan, Abhishek Bachchan, Cast John Abraham Hrithik Roshan Production Yashraj Films Yashraj Films Budget 20+ crores 30+ crores Domestic 29.5 crores 83.5 crores Net Revs. Overseas 5+ crores 25+ crores Net Box office growth 214% Source: IBOSNETWORK.COM, MARKET ESTIMATES
CINEMA CAPITAL VENTURE FUND 16 Blockbuster Returns in the Last 2 Years
16 out of the top 25 domestic box-office revenue earning films have come in the last 2 years.
Revenue Revenue Rank Film Name Year (Rs. Crore) Rank Film Name Year (Rs. Crore)
1 Om Shanti Om 2007 86.50 Cr Kabhi Khushi Ka- 15 bhie Gham 2001 49.00 Cr 2 Dhoom 2 2006 85.48 Cr 16 Kabhi Alvida Na Kehna 2006 46.40 Cr 3 Welcome 2007 76.21 Cr 17 No Entry 2005 44.84 Cr 4 Gadar Ek Prem Katha 2001 70.00 Cr 18 Koi Mil Gaya 2003 44.00 Cr 5 Lage Raho Munnabhai 2006 69.89 Cr 19 Bhagam Bhag 2006 41.69 Cr 6 Krrish 2006 65.53 Cr 20 Guru 2007 41.65 Cr 7 Chak De India 2007 63.98 Cr 21 Veer Zaara 2004 41.00 Cr 8 Partner 2007 62.14 Cr 22 Devdas 2002 36.00 Cr 9 Taare Zameen Par 2007 61.04Cr 23 Kal Ho Na Ho 2003 35.00 Cr 10 Bhool Bhulaiyaa 2007 53.97 Cr 24 Kaho Naa Pyaar Hai 2000 34.00 Cr 11 Fanaa 2006 53.13 Cr 25 Mohabbatein 2000 30.00 Cr 12 Heyy Babyy 2007 51.64 Cr 13 Rang De Basanti 2006 51.07 Cr Blockbusters in 2006 – 2007 14 Don 2006 50.04 Cr Source: boxofficeindia.com
Film Munnabhai MBBS Lage raho Munna bhai Director Raj Kumar Hirani Raj Kumar Hirani Year 2003 2006 Sanjay Dutt, Sanjay Dutt, Cast Arshad Warsi Arshad Warsi Production Vidhu Vinod Chopra Vidhu Vinod Chopra Budget 10+ crores 15+ crores Domestic 25 crores 65.28 Crores Net Revs. Overseas 5+ crores 15+ crores Net Box office revenue growth of 167% Source: boxofficeindia.com
CINEMA CAPITAL VENTURE FUND 17 Box-office grosses rose during five of the last seven economic downturns in the U.S. — including the '70s oil crisis and the burst of the dot-com bubble in the early 2000s. The total number of movies people see in a year tends to rise in recessionary periods. Time Magazine March 2008
CINEMA CAPITAL VENTURE FUND 18 Film Industry Returns "A box-office hit movie like Rang De Basanti, which was made with a budget of Rs 30 crore recovered nearly half of its production cost through satellite rights. Similarly, Lago Raho Munnabhai garnered more money than its production costs by selling its satellite rights for Rs 15 crore." Economic Times Dec 2007
Hits - Big Budget Films
Krissh Cost – 40 crores Domestic Theatrical – 63 crores (30 crores) Rang De Basanti Satellite – 15 crores Cost – 30 crores Overseas – 15.5 crores Net Revenues – Home video and music – 4.5 crores 52 crores (20 crores) Merchandising – 4 Satellite – 16 crores Total revenues – 69 crores Overseas – 20 crores Estimated Profit – 72% Estimated Profit – 55%
Hits - Mid Budget Films
Lage Raho Munnabhai Cost – 15 crores Pyaar ke side effects Domestic theatrical – net 64 crores (28 cr shr) Cost 3.5 crores Overseas – 10 Theatrical – 8.5 crores (4 crores) Satellite – 14 Satellite 2 crores Home video – 2.5 Home video 0.75 crores Music 1.0 Music 0.75 crores Total revenue – 55.5 crores net Total 7 crores Estimated Profit – 370% Estimated Profit - 100%
Hits - International Films
Bend It Like Beckham Monsoon Wedding Cost – 22 crores Cost – 2.5 crores Worldwide revenues – 300 Crores Worldwide Revenues – 150 crores Producer share – 175+ crores Producer share – 80 crores Estimated Profit – 600% Estimated Profit – 3100%
Sources: industry estimates, trade magazines, ibosnetwork.com, MARKET SOURCES
CINEMA CAPITAL VENTURE FUND 19 "A film like Khosla Ka Ghosla, which was made on a modest budget of just above Rs 2 crore, spent another two-thirds of that amount on marketing the film raked in as much as Rs 22 crore in collections." Economic Times 2008
Hits - Content Films
Bheja Fry Khosla Ka Ghosla Cost – 1.5 crores Cost – 2 crores Total revenues – 8 crores Total revenues – 10 crores Estimated Profit – 433% Estimated Profit – 400%
Regional Films
Pokhiri (2006) Star – Mahesh Babu Sivaji Director – Puri Jagannathan Cost – 60 crores Cost – 14 crores Total Revenue – 120 crores Gross Business – 50+ crores Estimated Profit – 100% Estimated Profit – 250%
Source: industry estimates, IBOSnetwork.com
Fiza Yaadein Cost – 5.5 crores Cost – 12 crores Total revenue (Industry Total revenue (Industry estimates) – 27 crores estimates) – 44 crores
CINEMA CAPITAL VENTURE FUND 20 Hollywood investors are now "reassessing their previous cool attitude" towards India and major players like Viacom, Universal, Dream Works and Warner Bros. prefer to invest in the Indian entertainment industry compared to China, says Hollywood trade magazine Variety Economic Times March 2008
CINEMA CAPITAL VENTURE FUND 21 Transparency and Corporatisation
•• Shift from traditional sources of finance to institutional sources
•• IDBI has not had a single Non Performing Asset since it started financing film companies
•• Corporatisation across the value chain of production, distribution and exhibition
•• More corporate and transparent structures have attracted increased investments and led to higher valuations averaging 30-35 times earnings
Company Share Price PE Revenue FY07 EBITDA Growth Market Cap Name as on May Multiples (Rs Million) Growth % (Rs Million) Growth % (Rs Million) (Rs)
Pyramid 1,643 3193% 199 1274% 10,706 378 54
Ashtavinayak 967 142% 167 716% 4,042 403 24
Adlabs Films 3,316 197% 2,018 314% 30,512 662 15
UTV Software 1,524 13% 300 185% 19,875 800 66
PVR 1,986 54% 338 72% 4,326 188 13
Prime Focus 551 38% 370 40% 7,887 620 21
Inox Leisure 1,530 4.30% 455 20% 6,378 104 14
TV 18 1,939 53% 579 2% 37,920 317 65
Source: www.moneycontrol.com Growth % compared to previous year "India's film industry has long been prolific and chaotic. Now, with modern business leaders, it's coming of age—and taking aim at Hollywood, U.S.A." Newsweek 2008 Cover Story
Did you know? There is almost a complete absence of cash transactions from a star salaries to the lowest light-man on sets
CINEMA CAPITAL VENTURE FUND 22 Preferred Investment Destination
•• The Indian film and entertainment sector has become a preferred investment destination for major Indian corporates and global investors. •• Major Indian corporates like Reliance ADAG, Mahindras, Birlas have entered this sector •• George Soros has invested over $100 million in this sector •• Walt Disney has partnered with Yash Raj Films to make animated movies •• Warner Group is funding Ramesh Sippy’s film projects •• Viacom has joint-ventured with the TV 18 group to form Viacom-18 •• Sony Pictures Entertainment has co-produced Saawariya with SLB Films (Sanjay Leela Bansali FIlms). •• ICICI ventures and JP Morgan have invested 120 Crores in PVR Pictures
Preferred Global Investment Destination – A snapshot FDI FDI Indian Company Foreign Investor (USD million) (Rs. million)
UTV Software Walt Disney Company 200 8050 UTV Global Broadcasting Walt Disney Company 30 1181 Times Global Broadcasting Reuters Singapore Pte Ltd. 21.91 885.64 UTV Software Various entities 7.47 295.05 K Sera Sera Various Mauritius entities 3.40 138.57 Shree Asthavinayak Various entities 3.54 144.56 Cinemeta Entertainment Ratnam Sudesh Iyer, Singapore 0.24 9.90 Reliance Big Entertainment George Soros 100 4100
Source: Market Sources, Government of India; Jan 2007- Nov 2007
Indian film entertainment companies have successfully raised funding overseas
Amount Company MARKET CATEGORY (IN Rs Crores)
Eros 220 UK AIM Film Production, Distribution
UTV 300 UK AIM Film Production, Distribution
Indian Film Co. (TV-18) 440 UK AIM Film Production, Distribution
Total 960
Did you know? 100% FDI allowed in the Film Entertainment Industry
CINEMA CAPITAL VENTURE FUND 23 In India, what is it that drives internet portals, gaming devices, and mobile phones? Intel? Wrong. Google? Wrong again. Microsoft? You are not even close. It is Bollywood.
Economic Times 2008 – ‘Bollywood : Lifeblood of various Industries’
CINEMA CAPITAL VENTURE FUND 24 The Film Entertainment Industry Opportunity
An Untapped Investment Opportunity
70% of India’s most successful films in the last 2 years were made by privately held companies Top Grossers Worldwide - 2006-08
Sr No. Name of The Film Year % Growth
1 Dhoom 2 2006 144 2 Om Shanti Om 2007 140 3 Krrish 2006 130 4 Welcome 2007 125 5 Lage Raho Munnabhai 2006 114 6 Jodha Akbar 2008 113 7 Race 2008 104 8 Guru (2007) 2007 101 9 Fanna 2006 99 10 Partner (2007) 2007 99
Films produced by privately held companies
Source: www.ibosnetwork.com
Low Correlation To Business Cycles And Traditional Asset Classes
•• A unique opportunity to invest in a lowly correlated asset class
•• In 5 out of 7 economic recessions in the US, box-office revenues grew
•• Films are still the cheapest source of mass entertainment "Box-office grosses rose during five of the last seven economic downturns in the U.S. — including the '70s oil crisis and the burst of the dot-com bubble in the early 2000s. It's not just a ticket price bump that accounts for the extra dough, either — the total number of movies people see in a year tends to rise in recessionary peri- ods." Time Magazine March 2008
CINEMA CAPITAL VENTURE FUND 25 Investment Strategy
To deliver superior investment returns by building a portfolio of richly valued companies in the Indian film and entertainment industry.
To invest in unlisted Film Entertainment Companies that
•• Have a critical role in industry development •• Have a strong catalogue of products/IPR held •• Possess an established track record •• Have a strong pipeline of products/projects signed •• Have moved to corporate governance and transparent structures. •• Possess key talent and vendor relationships •• Have sound business models
Investment mix
Film Production Ventures Film Entertainment Related Segments
•• Established production houses •• Animation and visual effects •• First generation entrepreneurs •• Studios – Shooting and Post Production •• Boutique outfits •• Television software •• Niche and regional players •• Digital content and related technologies •• Productions ventures of •• Content distribution platforms and established actors/directors technologies •• Film entertainment supported streams such as gaming, licensing and merchandising, etc "Across a slate of 20 or 30 films, just two or three hits •• New media opportunities, especially in will all but ensure a positive return for investors, online media and entertainment space based on over 30 years of historical performance data from the film industry.” Paul Kent, SVP Citibank, Euromoney, October 2006
CINEMA CAPITAL VENTURE FUND 26 Did you know? Domestic Box-office collections of top tens film total at 264 Crores in 2004 grew to 485 Crores in 2007 registering an increase of 85%
Exit Options for Fund Investments
Sale to Strategic Buyer
Large business groups seeking to enter the film and entertainment business and expansion by existing players. Examples: Turner-Miditech, Disney-UTV, Kosmic-Greycells Entertainment, Reliance Adlabs, Synergy Adlabs, Mahindra Group, Reliance Industries, Aditya Birla Group.
Sale to Financial Buyer
Global PE firms now operating in India such as Blackstone, 3i, Columbia Capital, Carlyle, TPG and Soros Funds Management have significant entertainment assets internationally and are looking at expansion into India. Examples of such transactions are deals of 3i-Nimbus and JM Financial-Ushodaya., PVR Pictures – J.P. Morgan/ICICI Ventures.
IPO Route (Domestic and International)
CCVF investee companies can successfully launch an IPO in India within 36-48 months. Examples of successful IPO’s in the last three years – Pyramid Samaira, Balaji Telefilms, UTV, Adlabs and Shree Ashtavinayak.
Film Jhankaar Beats Pyar ke side effects Director Sujoy Ghosh Saket Chaudhary Year 2003 2007 Rahul Bose Rahul Bose Cast Juhi Chawla Mallika Shehrawat Production Pritish Nandy Communications Pritish Nandy Communications Budget 2.5+ crores 4+ crores Domestic Net Revs. 2.5 crores 12 crores Net Box Office growth of 380%
Source: MARKET SOURCES
CINEMA CAPITAL VENTURE FUND 27 Fund Summary
Name of Trust Fund Hurdle Rate Cinema Capital Venture Fund Scheme 1 15% pa (Post expenses, pre-tax)
Fund Structure Performance Fee Closed ended – 5 Years 20%
Target of Trust Fund Investment Manager Rs. 500,00,00,000 (Rupees five hundred crores) Cinema Capital
Green Shoe Legal Advisor Rs. 250,00,00,000 (Rupees two hundred and fifty DSK Legal crores) Tax Advisors Minimum Investment Ernst & Young Rs. 10,00,000 (Rupees ten lakhs only) Transaction And Valuation Advisory Initial Capital Contribution Ernst & Young 25% of total commitment. Balance in 3 installments at the end of every quarter after the final closing Auditors Pricewaterhouse Management Fee 2% pa of capital commitment Liquidity Possible income distribution after 36 months as per Administrative Expenses management discretion. As per actuals (upto 2% pa of capital commitment) Target IRR Initial Setup Costs 35% (post expenses, pre tax) 5% (1% to be charged per annum)
Did you know? Monsoon Wedding delivered an estimated 3100% return to its producers due to the international box office.
CINEMA CAPITAL VENTURE FUND 28 Why Cinema Capital Venture Fund?
•• First SEBI regulated entertainment venture capital fund
•• Uniquely focused on the Film and Entertainment sector
•• First time opportunity for ‘ownership’ in film entertainment ventures
•• Independent professionals not aligned with any corporate group
•• Experienced management and advisory council
•• Team with access to key talent across all industry segments
•• Transparency and SEBI guidelines for investor reporting
•• ‘Best of Breed’ strategy – PricewaterhouseCoopers as auditors, Ernst & Young as taxation and valuation advisors
•• Entertainment sector investment experts with successful track records
"In India, what is it that drives internet portals, gaming devices, and mobile phones? Intel? Wrong. Google? Wrong again. Microsoft? You are not even close. It is Bollywood." Economic Times 2008 – ‘Bollywood: Lifeblood of various Industries’
Film No Entry Welcome Director Anees Bazmi Anees Bazmi Year 2005 2007 Anil Kapoor Anil Kapoor Cast Salman Khan Akshay Kumar Production Boney Kapoor Feroz Nadiadwala Budget 10+ crores 10+ crores Domestic Net Revs. 40 crores 73 Crores Overseas 8+ crores 20+ crores Net Box office growth of 87%
Source: IBOSNETWORK.COM, MARKET ESTIMATES
CINEMA CAPITAL VENTURE FUND 29 Did you know? 6 out of the top 10 Income Tax payers in India are from the film industry
Taxation
Cinema Capital Venture Fund is expected to generate the following three streams of income: •• Capital gains •• Interest and other income •• Dividend Income
Capital Gains Taxability of the above streams of income is given below: HOLDING Description Taxation PERIOD Long term capital gain on More than 12 NIL listed shares/ securities months Long term capital gain More than 12 22.66% on non listed shares months Long term capital gain More than 36 22.66% on other assets months Short term capital gain on Less than 12 months 16.99% listed shares/ securities Short Term capital gain Less than 12 months 33.99% on non listed shares Short Term capital gain Less than 36 months 33.99% on other assets Interest and Other Income
Interest Income 33.99%
Dividend Income
Dividend Income NIL Note: The tax rates mentioned above are as per the Financial Act, 2008
Taxability of the Investor
As the Fund will be taxed at the maximum marginal rate applicable, the distribution made by Cinema Capital Venture Fund at the end of its tenure will be exempt from tax in the hands of the investor.
CINEMA CAPITAL VENTURE FUND 30 Fund Structure
INVESTORS ADVISORY COUNCIL
Identify Invest- ment Opportunity CINEMA CAPITAL VENTURE FUND CINEMA CAPITAL
Advisory Investments based on Business Advisory Plan and Sourcing Investment Monitoring Type
E&Y Transaction / Valuation / Structure / Taxation Venture Capital Venture Capital Venture Capital Undertaking 1 Undertaking 2 Undertaking 3 PWC Audit
DSK Legal Legal Advisors
CINEMA CAPITAL VENTURE FUND 31 Professional Advisors CCVF Advisory Council Key Management Team
Legal Advisors Ketan Mehta Samir Gupta DSK Legal Director •• Over 12 years in the Entertainment and National Award Winner Media industry Tax advisors •• Film Producer Ernst & Young K N Memani •• Ex CEO, FBC Media Group, a European Ex Chairman, Ernst & Young media corporation Valuation Advisors Ernst & Young Transaction Advisory Services Asad Sultan Sanjay Bhattacharji Managing Director, Cantor Fitzgerald •• Over 15 years of management experience in the Auditors Investment Banker Film and Entertainment industry Pricewaterhouse •• Ex Chief Operating Officer, UTV Motion Pictures Anil Dharker •• Ex Head Of Strategy, INOX Group Registrars Film Critic •• Ex Consultant Film Strategy, STAR India Karvy Columnist Soumo Ganguly Sandeep Bhammer •• Over 10 years of international experience in the Managing Director, BAM Investment Media sector in business development and Advisors (Asia) marketing, finance and fund raising, organization building, and general management Sudhir Mishra •• EX CEO, Chivach Media, an Entertainment Group Director •• Ex CEO, Moving Picture Company, a listed National Award Winner entertainment company
Kabir Bedi Mohit Mehra Actor •• Over 14 years of experience across Advertising, Media Personality Television and Film Entertainment •• Ex Business Head, Home Production, Adlabs Films Komal Nahta •• Ex AVP Projects, UTV Trade Analyst •• Ex AVP Entertainment Media, Nimbus Publisher, Film Information •• Former Marketing Head, Ten Sports, Channel [V]
Madhu Mantena CEO, Saregama Films
Shankar, Ehsaan, Loy India’s leading film music directors
Vivek Singhania Ex CEO, Pantaloon Films
CINEMA CAPITAL VENTURE FUND 32 Did you know? Most films are presold and profits booked before release
Film Entertainment Industry – FAQs
Q : What is Film IPR? A : IPR = Intellectual Property Rights are the rights created when you make a film. These rights are like an asset that can be sold for revenue. This asset has perpetual value and is leased to various buyers from time to time to generate revenue for the IPR owner.
Q : How do films make money? A : Films make money from various sources – theatre tickets worldwide, television rights exploitation, sale of rights for dvd, video rental, music, internet, gaming, merchandising, remake rights.
Q : What does it mean when a film is a “HIT”? A : The word hit is often colloquially used to denote a degree of success. When a film recovers more than 2-3 times the money invested, it is termed a “HIT”.
Q : What is the maximum upside that one can see in a film? A : Films have been known to give upto 4-6 times the initial amount invested in them. In the last two years with all around growth, a number of films have delivered such returns.
Q : Is there insurance cover for film producers ? A : Yes. Comprehensive insurance cover is available to film production companies today to safeguard against any untoward incidents while a film is in production which includes accidents, fires, equipment loss, theft etc. A producer can also opt for key man insurance for his lead actors, which insures him against any loss if anything were to happen to the actor which caused delays or stoppage of his film project.
Q : What does it mean when a film is a “FLOP” A : The term ‘FLOP’ is usually given to a film which has not performed in the box-office. In the current scenario with fast growing alternative revenue streams like television rights, dvd, dth, online and gaming, most films can limit their downside to 10-15% of the production cost. This usually gets recovered over a medium term due to exploitation and re-sale of IPR rights.
Q : What kind of valuations do companies in the Film Entertainment command ? A : Film entertainment ventures command an average of 30-40 times earnings in the BSE/NSE markets. In the private equity space this can be as high as 25-30 times earnings.
CINEMA CAPITAL VENTURE FUND 33 DISCLAIMER:
This Presentation is intended only for the benefit of potential investors to whom the presentation is made or delivered for the purpose of considering a possible investment in the Cinema Capital Venture Fund Scheme 1
1. The presentation is not and should not be deemed to constitute an offer to invest or a solicitation of an offer to invest, to or from the public in general or to or from any person other than the person to whom the same is addressed.
2. Any reproduction hereof in whole or in part, or the disclosure of its contents or the distribution of the presentation, without the prior written consent of Cinema Capital, is prohibited.
3. The Contents of the presentation are provisional and may be subjected to change. The presentation is neither a prospectus nor an offer or invitation to apply for units of fund. The information contained herein is not exhaustive and must be read in conjunction with the information memorandum and the other documents.
4. While reasonable care has been taken to ensure that the information included herein is correctly and fairly represented. Cinema Capital, and other parties involved in the presentation hereof assume no liability for the relevance, accuracy or completeness of the contents herein.
5. In making an investment decision, potential investors must rely on their own examination of the fund documents and the term of the offering, including the merits and risks involved.
6. Before making an investment, each potential investors should make its independent assessment and inquiries and consult its own advisors as to legal, business, tax and related matters concerning an investment in fund.
7. The fund and its portfolio companies are subjected to several risk factors that may affect the fund performance which are detailed in the Information Memorandum.
CINEMA CAPITAL VENTURE FUND 34 THANK YOU
CINEMA CAPITAL
CINEMA CAPITAL VENTURE FUND 35