1.Has Yes Bank slowed down on film financing and, if so, why?
YES BANK has been one of the pioneers in the Media & Entertainment banking in India through our knowledge banking approach and is a banker to most of the reputed corporate in this segment. The bank continues to play a caliberated role in film financing. We evaluate each project based on our knowledge banking expertise and experience in the media and entertainment industry – including film entertainment, broadcast, print and other ancillary M&E verticals and put in place relevant ring fencing structures.
2.Generally speaking, why are banks reluctant to finance films and what can the film industry/ producers do to ease banks’ reluctance?
Since the film industry is not a conventional brick & mortar one, there are specific customsed issues to keep in mind. One of the major factors is that the cash flow predictability is non-linear, and therefore financial institutions usually find it difficult to fund films. This can be addressed by the Industry/ production houses by ensuring greater transparency of the cash flows, and ensuring market & financial credibility which could aid the financing process.
3.Are there any specific criteria that a production house should keep in mind before applying for a loan?
There is not one single criteria but a multitude of factors which are thoroughly evaluated on a case-to-case basis. At YES BANK, we generally tend to look at production houses/ distribution houses that have significant vintage value, credibility and track record in the industry. A similar yardstick is also applicable for financing projects.
4.What sort of collateral do banks typically expect from those applying for film loans?
The collateral is also dependent on the merits of a particular case. It is a combination of the factors mentioned above.
5.What is your outlook for institutional finance in the coming years?
Institutional finance looks neutral to positive in the coming years. The industry should ensure that they take relevant and encouraging steps to increase the pie of organized capital and boost the confidence of banking institutions to support this vibrant industry.
The biggest irony in this domain is that the government recognizes us as an industry but the financial sector doesn’t. We have come a long way in the last three to four years. For example, paperwork is more structured today. Everything is backed by adequate paperwork to prove commercial transactions between two individuals on a particular matter. In that sense, things have evolved but banks are still skeptical, and I think that one can’t blame them because they have no way of valuing or evaluating a film project.
This is the only business where past performance is no indicator of future performance. There is no pattern to suggest that an actor’s track record will lead to success in future ventures. There is no way to predict performance and quantify risk in this business. Every project is unique and the risk that every project carries is unique. There are no benchmarks or parameters to examine creativity and this space is driven by subjectivity. So the only thing banks can do is loan money to production houses that have got it right more often than not, and whose track record speaks more than that of an individual film. We have seen big star cast films flop and small films doing surprisingly well. So it is a toss-up, really.
These problems are not exactly universal because internationally, they have bonded finance schemes. There are films that are bonded and the producers need to commit by ensuring they complete the film in a certain number of days by following certain processes. This essentially helps financial institutions understand the risk involved and helps them de-risk themselves when lending money. There is an insurance premium that covers the risk. We are far away from that. But as filmmaking gets more and more expensive, I am sure banks will step in.