Money News
Business Today (June 04, 2006)
Author: Krishna Gopalan; Mahesh Nayak; Vaishna Roy; Rahul Sachitanand; Shalini S. Dagar; Ahona Ghosh; Vaishna Roy
Linked as:
Summary
Bollywood Flops
Almost all the public issues launched by the movie world have had disastrous runs on the bourse so far. Now, a fresh bunch of IPOs is lining up. Should you buy?See the full content of this document
Extract
Money News
Krishna Gopalan
Remember Bollywood's B-movies of the 1980s, even the ones featuring A-list actors? Most of the breed would come to a thunderous climax in the bad man's lair, usually a cavernous underground complex replete with flashing lights, sliding panels, spinning blades of the kind that have suddenly emerged in popular computer games, crocodile pits and colour-coded buttons to set off bombs. Well, if you thought them elaborate or complex, you obviously haven't encountered the world of Bollywood finance. Behind the seeming ease with which money flows into bigger and bigger projects, there's little understanding (outside a tiny clique of insiders) of how the industry's business model is structured.What is clear, of course, is that the entertainment industry needs money, plenty of it, enough to fund big-budget motion pics that cost Rs 50-75 crore. Even today funding for the typical Bollywood pic comes from several sources (although the buzz in the industry is that the involvement of D-company in such ventures has reduced): banks and financial institutions, internal accruals, private financiers, private equity firms, even the public. That last involves raising money from the market by making an initial public offering (IPO) as several companies have done. While this gives the industry access to a new source of funding, it also involves issues related to transparency and accountability.Worryingly, though, Bollywood's listed firms have not quite made the mark in this respect. The track record of some that went public in recent times is far from impressive, with investors having lost out in almost all cases. Their performance becomes significant at a time when several of their peers are again looking to tap the market, and raise some ...See the full content of this document