Faced with a ban on his movie, director Karan Joharpledged not to work with Pakistani artistes anymore. With the Maharashtra Navmirman Sena (MNS) threatening to disrupt screenings of his movie featuring Pakistani actorFawad Khan along with other Indian film actors, Home Minister Rajnath Singh has had to intervene to assure Johar of a peaceful release.
Unusual as it may be for a country’s Home Minister to intervene in a movie release, Singh’s assurance has come at a crucial time for Johar. His film production house is facing a financial squeeze. According to its Registrar ofCompanies (RoC) filings, Dharma Productions Private Limited, which has produced the movie titled Ae Dil Hai Mushkil reportedly at a budget exceeding Rs 50 crore, has been facing losses since 2011-12. Under such circumstances, Johar is banking heavily on this movie’s release to get his company back in shape.
Dharma Productions earned Rs 210 crore and posted a Rs 11 crore loss in 2013-14. The previous year, its loss was Rs 8 crore on a revenue of Rs 77 crore. The Mumbai-centered industry as a whole was stagnant in 2014 according to FICCI and KPMG.(Click to read: Film Industry Battles High Cost And Low Revenues). Both, big corporate studios and family-run production houses like Johar’s running the Rs 12,600 crore film industry are reported to be stagnating in the face of rising costs.
During better times, Dharma Productions has indulged in its share of extravagance. Its financial statements show that it had spent Rs 22 crore in 2006 to produce an animated movie. In 2008, the project was abandoned.
Dharma Productions told regulators, “The findings of the distributors, with respect to commercial exploitation of this film, is not very encouraging and there is no justification of incurring cost to complete the balance animated film and incur marketing and promotion cost. Considering the various aspects, the management of the Company has decided to abandon the project.”
Almost 90 per cent of the money spent was paid to its overseas animators. The movie was partially financed by IDBI, which extended $2 million in “assistance” to fund the project. The money was returned by Johar on June 14, 2010 and the losses absorbed.
The company is also spending less on shooting overseas than it used to. Johar’s late father, Yash Johar had a preference for Switzerland. The 2013 cash flow statements show that it spent Rs 13 crore on shooting overseas. In 2014, the overseas shoot spending was down to Rs 4 crore.
Johar’s company is unlike the big corporate studios like 21st Century Fox, Sony, Universal and others. It is a family-owned, medium-sized production house and has fewer resources at disposal. What it has is a talented pool of directors and newer actors willing to work under its banner. Unlike other director owned movie making companies, Johar has not sold his company to bigger corporate studious. For instance, director Anurag Kashyap sold half his company, Phantom Films, to Anil Ambani owned Reliance Entertainment last year for an undisclosed sum.
The corporatization of the movie business that began with the A B Vajpayee-led NDA government granting it ‘industry’ status in 2001, hasn’t left Johar’s business untouched. Like the corporate studios, Dharma Productions has started increasingly relying on bank finance for its movies. In 2011, it took a loan of Rs 35 crore from Yes Bank to make Agneepath-2. In 2012, it partly financedYeh Jawaani Hai Deewani by taking a loan of Rs 25 crore from Central Bank of India.
The performance of Johar’s movies is equally vital for the banks lending money to him. That’s because banks enter into contracts that entitle them to a share of revenue from the sale of rights of movies if the borrower cannot repay his debt.
Johar, for instance, has pledged 25 per cent of the cable and satellite rights revenue of six of his films for availing loans from Yes Bank. In return, the bank has extended him a loan of Rs 100 crore. With overdraft and other facilities, the amount of credit available to Johar from Yes Bank is Rs 145 crore.
Banks are also hedging on the unknown while extending loans for movies. Among the rights of the six movies mortgaged by Johar to avail the Rs 145 crore loan facility, one doesn’t have a working title. It is only described as being directed by Ayan Mukherjee in loan documents. The other movie mortgaged for the loan was Shuddhi. Reports suggest that the movie has been abandoned after spending considerable money on it.
Dharma Productions has also winded down its overseas subsidiaries. It had one called Dharma Productions International Ltd registered in the Channel Islands, a British protectorate and known tax haven. This company registered in 2006 was a vehicle for making and receiving payments for film royalties. By 2012, Johar winded it down by stating before the Jersey Financial Services Commission that paying and receiving movie royalties wasn’t profitable anymore. Months before the Channel Islands company was dissolved, an amount of around $40000 was transferred to it as an unsecured loan by the Mumbai based Dharma Productions.
With continuing threats of screening disruptions by the MNS amidst assurances by top ministers of beefed up security, Johar’s promise to not entertain Pakistani artistes anymore is rooted more in concerns about the future of his loss making movie business than in placating high decibel ultra-nationalists. After all, a lot rides on a movie that is not just financed but also written and directed by Johar himself.
[Source:-Business Standard]
