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Market fever grips India's entertainment industry

A slew of Indian film and television entertainment companies are set to raise more than $ 2 billion from the domestic and overseas markets in the next six months.

"About 40 issues have been lined up to raise about Rs 94.5 billion in the next few months," Deepak Nanda, of US investment bank Communications Equity Associates, or CEA, said.

The biggest of these is the $ 1.5 billion American depository receipts, or ADR, issue by television network Zee Telefilms, which plans to issue 40 million equity shares to strengthen the company's present business leadership and diversify into Internet-related areas.

Analysts said the Zee issue would be the largest global share float ever by an Indian company.

In addition, domestic television companies such as UTV, Sony Entertainment Television India Ltd, NDTV, Sun TV as well as popular film directors and stars such as Subhash Ghai, Jeetendra, Boney Kapoor and Sanjay Khan have lined up public issues for their own production companies.

On Thursday leading Bollywood star Ajay Devgan and his actress wife Kajol announced a share float in June to raise Rs 25 million to fund expansion plans and to launch a dot-com venture.

India, with 75 television channels and about 900 films produced annually is passionate about film and television entertainment, and Bollywood stars are rivalled only by cricketers in the celebrity stakes.

Out of a population of around one billion people, an estimated 30 million pass through India's 13,000 cinema halls every day.

The entertainment industry largely depends for its funding on private financiers who lend at about 40 per cent a year.

"Raising money through the stock markets is a much cheaper option for the entertainment industry as bank finance is very hard to get," said analyst Vinod Mirani.

However, warned Mirani, most of those planning share floats had no clear idea of the end use of the funds.

"Most of them are taken in by the current euphoria over e-commerce and the Internet and hope to cash in on the boom, but some of them sincerely want to professionalise and spread out into the rest of the world," he said.

Film star Amitabh Bachchan was the first off the block more than three years ago when he launched his integrated entertainment firm, Amitabh Bachchan Corporation Limited.

The company has since gone bankrupt and owes several million rupees to domestic banks. But Bachchan's experience has not put others off.

Former film actor Dhiraj Kumar said his television software company planned to raise about Rs 1 billion in May from domestic investors to fund its expansion and diversification plans.

"We are today one of the largest content providers on state-owned television network Doordarshan. We want to increase this by buying new businesses and buying film rights for telecast," he said.

"We are also planning two entertainment portals. We see television and Internet as offering great business scope," he said.

Nanda of CEA warned that only between 10 to 15 per cent of the share floats would be worth investing in.

"The rest is all junk. They will ruin the market and investors will be taken to the cleaners," he said.

However, Nanda saw great potential for the industry.

"After Hollywood, India is the only country from where films and television software are exported to more than 100 countries and not just to viewers of Indian origin.

"If these producers turn out quality stuff for the export market the domestic industry can be second only to the IT industry," he said.

International consulting firm Arthur Anderson forecasts major growth in the domestic entertainment industry by 2005.

A report prepared by the firm sees film revenues rising five-fold to around Rs 340 billion, while television software exports are forecast to go up 17 times to Rs 58 billion.