Big Future Seen For Bollywood Films

Long derided for cranking out kitschy melodramas and escapist claptrap, the Indian film industry is suddenly attracting attention of a different sort.

The critical and box-office success of movies from Bollywood, Mumbai's answer to Hollywood, has thrown a spotlight on an increasingly lucrative industry which some say is being held back by a lack of access to credit and legal agreements.

Lagaan, a period epic about Indian farmers who best their colonial rulers in a game of cricket, is one of this year's nominees for the Academy Award in the Best Foreign Film category.

In January, Kabhi Khushi Khabie Gham rang up 500,000 pounds ($706,400) in ticket sales in its first week of release in Britain, making it the number three box-office draw.

In North America the film, at $10 million the most expensive Indian movie ever made, took in $1.37 million its first week, placing it in the Top 10.

Mira Nair's exquisitely crafted Monsoon Wedding and epics like Gadar and Yaadein have also done well aboard, stirring a new interest in Bollywood, the world's most prolific film industry.

Nobody is watching these events with greater attention than the Indian government, which recently declared the entertainment industry a high-priority growth area. It is doling out tax breaks and other support aimed at helping the film industry grows like the nation's booming technology sector.

Even before Lagaan makes its Oscar appearance, March has been a stellar month for India's entertainment industry.

India's largest publicly listed media company, Zee Telefilms Ltd, unveiled plans to become a force in the $64 billion global animation market by creating one of the largest animation studios in Asia, having already diversified into film production.

The Discovery Channel and Sony Entertainment Television India announced a programming alliance, and one of the media world's most powerful people, AOL-Time Warner chief executive Gerald Levin, huddled discreetly midweek in Delhi with Indian business leaders.

The key players in India's entertainment world -- directors, TV bosses and heads of film and music production houses -- networked with bankers, dealmakers and government planners at Frames 2002, a two-day industry convention in Bombay.

Industry czars are attracted by the projected growth rate of the Indian entertainment industry and cheap production costs.

"The industry is likely to witness path-breaking initiatives spanning the whole film value chain over the next two-to-three years, which will drive the industry towards major expansion," Rabo India Finance wrote in a recent report.

Revenues -- including films, TV and music -- are projected to more than double to 293 billion rupees by 2006, according to a report prepared for the Federation of Indian Chambers of Commerce and Industry.

The industry, which churned out 1,013 films last year -- almost three a day -- is forecast to be among the fastest growing sectors as distributors like AOL-Time Warner bid for content.

But to realize the potential of its massive pool of creative and technical talent, available at prices far below North American and European rates, Bollywood needs to change its free-wheeling ways, industry watchers say.

Now virtually all Indian movies are made by individuals or partnerships relying on relatives, friends and private financiers for funding. The average cost per film is only $500,000, compared to $14 million in the United States.

Family-owned production companies like Rajshri Productions, Yash Raj Films, Dharma Productions and Puja Films typically make one to two films every two to three years.

Bollywood's filmmakers are now being pushed by the government to adopt a more button-down approach if they want to qualify for newly available bank and equity financing, the key to producing and marketing the sort of bigger-budget flicks that win international recognition.

The government recently conferred industry status upon Bollywood, thereby making it eligible for bank financing.

State-run Industrial Development Bank of India (IDBI.BO) quickly responded by earmarking one billion rupees ($20.5 million) for film financing last year, the first bank to do so.

Viney Kumar, general manager of IDBI's film unit, said the bank has so far lent 710 million rupees to 10 companies for 12 films.

But other lenders and venture capitalists have been reluctant to follow IDBI's lead until Bollywood adopts a more standard approach and starts using film insurance.

Completion bonds, a written contract agreeing that a movie will be finished on schedule and within budget, are not yet available in Bollywood.

The global meltdown in technology and media stocks since 2000 has also reined in efforts by Indian production houses to raise funds -- although some such as Mukta Arts Ltd, Pritish Nandy Communications Ltd and Padmalaya Telefilms Ltd have pressed ahead with initial public offerings.

"Investors want to see corporate discipline, financial discipline," said Ashok Wadhwa, managing director of Ambit Corp Finance Ltd, a venture capital fund.