Financing Options for Indian Entertainment: It's boom time, folks!

The entertainment industry is one of the fastest growing sectors in India, recording a growth rate of 18-20 per cent per annum. Ashok Wadhwa, Managing Director, Ambit Corporate Finance Pte Ltd, played the role of moderator for the session on financing options for the entertainment industry. The attempt was to analyse how investors and the financial community viewed this burgeoning sector, and the various financing options that could be made available. .

Rajeev Gupta, Managing Director, Carlyle Asia Investment Advisors Ltd, started the session by bringing out three global trends in the media sector. The first of which was desegregation in media conglomerates, which he said was a trend that was likely to take some shape in the coming days. Several observers saw this as a key to value creation, he contended. Further, media conglomerates both on the TV and Film side preferred to go in for 'the full chain', and the huge presence of full chain conglomerates was testimony to this, he explained. .

Secondly, the Internet was seriously fragmenting the ad pie, particularly for the print media, and this had begun to show. The third trend he cited was that cable companies were trying to vigorously roll out high speed data, trying to work on the path almost like telecom companies. .

"But when you look at the Indian cable industry and cable companies, there doesn't seem to be any step taken towards this opportunity. So, these are three differences and trends between what is happening globally and what is happening in India. Cable is the easiest one to be dealt with. There is a lot of opportunity in this industry as there is yet no competitive response to DTH and maybe CAS is an answer but structural issues have got to be addressed. This industry has to get the structure right before it thinks of attracting serious capital," he said. .

Gupta added, "With print media the key issue is not just multiples, as multiples at some level can be justified if strategy is right and if the industry is moving in the direction that justifies of multiples, and you can see fundamental value creation. Unfortunately such is not the case here. The same is the case with Filmed entertainment and it requires significant structural conformation and till then it is just not ready to absorb capital. There is a serious need for consolidation to happen in this sector." .

There were others like Partner at GW Capital Pvt Ltd, Vikram Narula, who pointed out that there was a growing trend towards investment money going towards companies, which were listed or needed stage-growth capital. So, there is a skew clearly in the private equity side towards well established or already established players, who need growth capital. This was also the area where most of the capital was headed, said Narula. .

Colin Hannaway, Director Media Investment Banking, HSBC (USA) added his perspective, and said, "Europe is five years behind the US in terms of the business model and the lesson to be learnt and looked at is that both in Europe and North America, media companies have deployments of cash, and they are looking to deploy in markets such as India that are growing 18-20 per cent, in the next five to seven years. These two markets are thus driving the trends. With major industry trends in US potentially going to be affecting India at some stage, the most important is that companies, which are looking at deploying cash have cash that they can either return to the share holders or invest in high growth markets. And most of the US companies are opting for the latter to benefit long term." .

Rajesh Jog spoke on the new media, which have invested in India, and listed three companies - Contest2Win, Media Turf and MakeMyTrip. "We have put some money into gaming companies, animation companies and we are looking very seriously at putting together a content fund, which will work all the industry majors. On the animation side, I feel the outsourcing model is not right for India and we are in fact 20 years behind other markets in Asia, which have been doing animation. We need to take a different look at IP driven approach. Whereas, I would say that on the gaming front we are ahead of the curve. India has the competitive advantage mainly because of the technical skills, and we have fairly good chance of becoming world leaders. In terms of console gaming, the price points need to come down." .

In some senses, media and entertainment companies are competing against healthcare and IT. Pure last mile businesses, like exhibition, are other segments where one sees capital infusion. New sectors like radio are seeing good investor confidence too.