The Hindu Business Line : Film financing scripts happy tale for bankers

On a song
Exim Bank saw 75% growth in sanctions, disbursements last fiscal.
IDBI enhanced sectoral financing limit to Rs 300 cr this fiscal.

Mumbai June 11 Bankers may not break into a jig to the tunes of ringing cash registers in the manner of heroes of films that they finance. But they have reasons to feel happy.

With a better repayment record than conventional loans, film financing has the best script in their business. "The film-financing scheme has been quite successful and bad loans so far are negligible," says Mr Jitender Balakrishnan, Deputy Managing Director, IDBI Bank, a big player in this business.

For Exim Bank it is an even better story. "There are no bad loans in this segment," said Mr Mathew John, General Manager and Head-Corporate Banking, Exim Bank.

Quality hasn't come at the cost of sluggish growth. In 2006- 07, Exim Bank recorded over 75 per cent growth in sanctions and disbursements over the previous year. For IDBI Bank, disbursements grew by about 87 per cent and it has also enhanced its sectoral limit for film financing to Rs 300 crore in 2007-08.

Average size of loan for Hindi films would be in the range of Rs 6 crore to Rs 8 crore.

What explains the exceptional performance? Mr Balakrishnan, in an e-mail response to a questionnaire by Business Line, said: "There are mainly two risks associated with film financing, one is the completion risk and the other is the marketing risk. These risks are mitigated by a stringent selection criteria and ensuring that only producers with satisfactory track record are considered for assistance."

The fact that Indian films enjoy greater acceptance, and across a wider geographical market, is another reason, these bankers point out. Throw in music, satellite and home video rights and the risks get further narrowed.

According to a report by FICCI and PricewaterhouseCoopers, the Indian film industry is expected to grow at a compounded annual growth rate of 16 per cent by 2011.

That should be music to the bankers' ears.

Is there good money in such lending? Interest rates are confidential and cannot be divulged, said Mr John of Exim Bank.