DealZone

From Hollywood to Bollywood and back

May 19, 2008

U.S. investors are flooding into India’s entertainment industry even as Indian moguls send money over to Hollywood.
 
While the credit crunch has stalled private investment in Hollywood films, U.S. financial firms are looking to tap into the 17 percent annual growth enjoyed by the Indian media industry.
 
India’s Economic Times reported investors including Blackstone, Goldman Sachs and Lehman Brothers have flocked to the Indian industry, while media titans like Viacom, Disney and BBC have partnered up with entertainment companies in a trend that’s expected to continue.
 
Smaller investors are getting into the game too. Already 34 mutual funds have been set up to take advantage of India’s growing entertainment industry. Two Indian investment funds, Pyramid Saimira and Vistaar Entertainment Ventures, are each launching a fund that invests solely in India’s film industry, also called Bollywood, the Economic Times reported.
 
Bollywood is the world’s largest film industry by volume. More than 1,000 movies are released every year and about 3.7 billion tickets are sold — more than twice as many as the next largest market, the United States, according to a recent report by Ernst & Young. 
 
But the money is flowing both ways, with Indian moguls sending money over to Hollywood as well. Billionaire industrialist Anil Ambani just announced that he will invest $1 billion in deals with the production companies of George Clooney, Nicholas Cage, Tom Hanks and Brad Pitt, according to UK’s Times Online.
 
The cash is greatly appreciated. The subprime crisis has caused a drought in U.S. movie investment. As the credit crunch continues to blow up hedge funds, survivors are circling the wagons and putting money into more conservative bets — and the film industry is feeling left out.
 
And while the big Hollywood names can pull in some international funding, lesser known filmmakers are caught in limbo as investors walk away, according to an  article in the New York Times.
 
The New York Times piece profiles Sanjay Sanghoee, a New York investment banker and novelist, scrambling to raise money for his film “Merger,” which he based on his novel by the same name.
 
“Merger” had received hedge fund interest last October before the credit markets got real ugly. Sanghoee even doubled his budget to $15 million from $7 million. And who wouldn’t want to invest in a plot that has it all: spy satellites, CIA conspiracies, blackmail, sexual deviance, hostile takeovers — just a normal Tuesday for your average I-banker.

But as investors reduce their funding or drop out completely, Sanghoee is searching for capital. And now the Indian born I-banker might be wise to turn to Mumbai to find funding for his Hollywood film.

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