Now release date had postponed so suppose now loan was taken for 6 months, now loan
has become for 8months, 9 months,12 months kind of this thing so that 6-month
additional cost has increased for the producer.
Whenever a money is borrowed from bank what is the repayment cycle like?
See the repayment cycle is always fixed with the tentative release date.
If I go to new bank, first of all they will say no it’s a very risky business
But why do they
It’s a perception. Basically its perception and I would say the industry has not worked towards
that to change the perception.
Industry produces to pay 3-4% per month
Okay
I crack the deal at 3% around 3.5% per annum.
Hi guys this is Himesh and welcome to Pinkvilla. Over the last one year multiple films have
been postponed and we have often heard how the delay in release had resulted to spike in
budget due to the rising interest cost. But never did we know what exactly does the interest
mean. So today we have with us a very special guest, Mr. Sanjay Bhandari who has financed
multiple films from Aankhen, Dhoom to Simmba more recently so lets speak to him and
know what exactly does the interest cost mean.
Welcome to Pinkvilla sir. It’s a pleasure having you here
Same here
Sir to start with, like I said in the introduction over the last one year interest factor has been a
constant conversation all through the industry in the pandemic. Could you explain us as to how exactly does this
interest factor work in you know increasing the budget of the film?
Because of that Covid delay right?
Yeah
Because of Covid the movie just got delayed that release and what happened when you
borrow money for the production and the limited period and by so-so date I will release the
movie and loan can be repaid out of that revenue. But because of pandemic film releases
have postponed. So your loan remains in the system. Once the loan remain in the system,
the interest keeps increasing everyday basis even 24/7.
Correct.
Okay now release date had postponed so suppose now loan was taken for 6 months now
loan has become for 8 months, 9 months, 12 months kind of this thing so that 6-
month additional cost has increased for the producer.
Okay.
So that’s why of you see many of the producers have sold their movie on OTT rights, digital
rights so they could recover their money upfront and use that cashflow to repay the loan or
start the new business. Some of the big budget movies which are made for the big screen
that’s why waited so that the pandemic get over and they get a window to release it. Now you
see that many announcements are happening that coming on the theatre kind of this thing
so for them interest rate was also a burden but the project size is so big, revenue
expectation, audience expectation is so they say that will be recovered. Okay the
profit will reduce some portion but they will recover it. But by that time also what happens
because of this pandemic the digital revenue of this industry has grown tremendously if you
see the numbers. The kind of deals that are happening with the prices which never
heard. Digital rights are even more than the satellite rights, TV rights. So that increased
revenue because of this pandemic also somewhere minus but somewhere plus also.
But what exactly is the percentage of interest that is been charged on a yearly basis for a
Bollywood film in today’s time?
Today I would say there are at par with the big corporates. Now they are getting interest in
single digits. Oh. Yeah that is surprise for the people because earlier the private financial
institutes used to charge 30% per annum. Still they are charging 34% is a minimum but if
you go the bank they pay in single digit. 9%,10% maximum 11 percent so its not big
interest cost per annum. I mean 9% is what not even 1% per month. So Bollywood has grown
tremendously, revenue patterns has grown tremendously so they are also at par worth the
big corporates so they are getting a good rate of interest.
But what is the repayment cycle like for whenever a money is borrowed from bank what is
the repayment cycle like?
See the repayment cycle is always fixed with the tentative release date. In old days when
we started film financing it was to be all loan to be paid before Friday.
Like the Friday of release?
Yeah Friday of release so Thursday all loan would have been repaid this kind of but now in
later part we see that film industry is grown and TV rights was not in 2000. Much was there
but not percentage of over revenue. Digital rights were not there at all. Now if you see
currently non theatrical rights around 60%-70%, 80% is the cost of production so my
revenue is more also I got additional revenue from this rights and this
revenue comes post theatrical release. So now onwards we have destructured the
repayment schedule with the bank. We convinced the bank so part money I pay before
theatrical release and part money we pay post theatrical release that money whatever we
are going to get from digital pay like OTT like Netflix, Amazon and TV like Zee, Sony, Star
whatever so that portion whatever money to come that goes post release. So now producer
doesn’t have much burden to make the payment before Friday.
But it is often said that it is very difficult for to convince banks to lend, to give money to
Bollywood producers because this is a risky line of business. Has that changed or are you,
how are you planning to change that thing in the market?
I am fighting everyday for that.
But luckily the whichever the bank that whose already I am doing for the last 18 years, bank funding I had
done around 150 movies so which other banks I am regularly going they are fine, pretty
comfortable they keep lending one after one. If I go to new bank first of all they will say no,
it’s a very risky business.
But why do they?
It’s a perception. Basically its perception and I would say the industry has not worked towards
that to change the perception because industry is not totally depend on institutional funding.
If I say today institutional funding in the overall industry is very minuscule if you see that
compare of the films if you see that still people are gong to private financers who easiness
for getting money, they charge higher money but they will get money in the 7 days. Bank
don’t give you money is 7 days. They take at least 2 months to process and all so that’s we
have not been able to crack, I have not been able to crack that timing gap but still people
who have a deep pocket, who can sustain with own money and all they still go with the bank
funding. Many of the production house has their line up ready, they have a funding pattern
being a single digit. Risk is there because every bank. The media industry is on the watch
list or negative in all which I am still fighting with every bank.
Correct.
But like you said there are lot of producers who opt for private funding because of they get funding
Fast money
Yeah, fast money
What’s the interest rate that they charge like?
That must be not less than 18% so 1 and a half percent, there must 18-24%, 18% I am
talking about triple aided but that triple aided don’t borrow from private finances. No big
production house now days borrow from any private financers. If they borrow, they borrow
from the institution rather they don’t even borrow. There are many of the Indian production
house are there, they don’t even borrow. They have sufficient money, they pre-sell the rights.
See today being a new studio has come in, see I tell you when we started in 2002, I will take 10
minutes, 2 minutes. When we started we started fighting with the private financer. Private
financer charge huge money so institutional have come in and banks starts funding it, it was
little bit difficult to document, documentation taking time and all. It was good because you
were getting banking money so you don’t get many income tax and basically
White money.
So there was a black and white era was there so bank has helped them to come into white.
After the bank came in, lot of and because of bank financing the industry image has changed,
they become corporatized. When I did one funding in 2004, it was a milestone to everyone,
for me also. Industry produces to pay 3-4% per month.
Okay.
I crack the deal at 3% around 3.5% per annum.
If you could name
No, I can’t name, it’s one of the biggest production house of Bollywood I would say so that
was there. After industry has changed every body say he can borrow why not we borrow?
That way the business of the institutional funding has increased. Once institutional funding
began many of the films started producing. That production house used to produce one film in 18 months
Okay
After the bank funding started, 4-5 productions in a year.
So that point of time the size of industry is 35 billion rupees that means 3,500 crores. Today
the industry’s size is 18,000 crore minimum.
In last 20 yeas has there ever been an instance where you have done funding for a film and that film tanked?
No touch wood not.
In case like in industry there have been so many films like which have been stalled mid-way,
in such case how does film financing work? Because the film isn’t made so
See now today what happen, first of all who gives money to the film producers? Which
producer gets the money? Only that producer gets money who has goodwill, who has a track
record. So today there is no producer that has a track record and his film is boxed.
According to me, there will be 15 people in the Hindi film industry who get funding. 15, 17, 20
maybe. All are top grade, I don’t think anyone’s film is in a box. Even if for some reason the
film is shelved, then too the producer make the payment available from some other source
and make the repayment.
Which is the costliest film that you have financed for till date?
It keeps changing.
So till date, like as of today which is the costliest?
I think so many costliest movies I have done. So many. Release movie what name I told you
that are the kind of this Kabhi Avida Na Kehna was the costliest movie at that time of era.
Simmba is also one of the costliest at that time of era. Now cost is changing every week,
according to me. Every week movie cost is increasing because revenues are increasing. So that what is there.
Perfect. Thank you so much. It was lovely talking to you.
For me, also same.
Thank you so much and wish you all the best.