Business News/ Industry / Media/ Poonawala-Dharma Productions deal: Why Bollywood studios are wooing non-film suitors
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Adar Poonawalla is a man who dons many hats. He is equally at home posing next to vaccines for dangerous diseases as he is next to prize horses, sports cars, or celebrities. But outside of partying hard with Bollywood stars, he hasn’t really had anything to do with the film business. That changed late in October, when the Serum Institute of India CEO announced he had purchased a 50% stake in veteran Bollywood filmmaker Karan Johar’s Dharma Productions, known for hits such as Kuch Kuch Hota Hai and Kabhi Khushi Kabhie Gham, for ₹1,000 crore.
Adar Poonawalla is a man who dons many hats. He is equally at home posing next to vaccines for dangerous diseases as he is next to prize horses, sports cars, or celebrities. But outside of partying hard with Bollywood stars, he hasn’t really had anything to do with the film business. That changed late in October, when the Serum Institute of India CEO announced he had purchased a 50% stake in veteran Bollywood filmmaker Karan Johar’s Dharma Productions, known for hits such as Kuch Kuch Hota Hai and Kabhi Khushi Kabhie Gham, for ₹1,000 crore.
The deal included Dharma Productions’ digital content arm Dharmatic Entertainment, which has produced over-the-top (OTT) originals such as Koffee With Karan (on Disney+ Hotstar), Fabulous Lives of Bollywood Wives (Netflix), and Call Me Bae (Amazon Prime Video).
“I am delighted to have the opportunity to partner with one of the most iconic production houses in our nation, along with my friend Karan Johar. We hope to build and grow Dharma and scale even greater heights in the years to come," Poonawalla had said in a statement announcing the deal. Mint has reached out to him for a comment but had not received a response at the time of publishing.
But while the development may have taken the general public by surprise, industry insiders did not bat an eyelid. “Dharma was out in the market for a while. The studio was looking to raise money considering how some of its recent films have fared (not well) and how streaming services are turning cold," a senior movie producer told Mint, on condition of anonymity.
Music label Saregama India Ltd was reportedly in talks to acquire a majority stake in the Bollywood film production house, and conglomerate Reliance Industries, too, had evinced interest. Eventually, it was vaccine tycoon Poonawala who pulled the trigger and inked a deal.
Dharma Productions, which primarily produces and distributes Hindi films, brings a lot to the Poonawalla table. In recent months, it has released Kill, Bad Newz, Yodha and Mr & Mrs Mahi in theatres. It also has a rich library of hits aside from the two mentioned earlier, including Kal Ho Naa Ho and Yeh Jawaani Hai Deewani.
The studio’s latest financials, taken from financial intelligence firm Tofler, show that it recorded a profit of ₹10.69 crore in FY23, on revenue of ₹1,044.16 crore.
Johar’s studio is not the only one that has been angling for investors and more such deals are on the horizon for the content production industry. Abundantia Entertainment, Excel Entertainment and Roy Kapur Films, for instance, are said to be in talks to sell stakes and raise money.
It is not hard to see why the studios, which have hitherto been running on their own steam, have been seeking investments. Despite India being the largest film producing nation in the world, the film business has failed to live up to its potential because of its mercurial nature and has been deemed to be unsafe for investments.
Currently, Hindi films are enjoying an increase in revenue, but in a manner that might not be sustainable over the long term. Collections of Hindi films rose from ₹4,831 crore in 2019 to ₹5,380 crore in 2023, according to the Box Office Report: 2023 from media consulting firm Ormax, but footfalls shrank from 341 million to 275 million, respectively, in those same years.
The increase in collections came about only because of a sharp rise in ticket prices, which helped bridge the ‘footfall’ gap. Average ticket prices (ATP) grew by 9% in 2023 over 2022, according to the Ormax report, and are now 22% higher than 2019 levels.
In parallel, satellite and digital sales have shrunk over the past few years with buyers turning cold. And Hollywood studios, which had been bankrolling content from India for a while, have also slowed their investments in the country.
Consequently, Bollywood’s film studios have not been able to scale up on their own. Poonawalla’s investment in Dharma Productions, therefore, could not have come at a better time. Could such strategic funding be the shot in the arm Bollywood’s independent production houses, especially those rich with intellectual property (IP), need to scale up?
Filling the financing void
Monisha Advani, a producer at Emmay Entertainment, which is known for films such as Mrs Chatterjee vs Norway and the show Rocket Boys, said one of the biggest impediments to content studios scaling up is financing. Banks, for instance, don’t lend to production houses against their balance sheets, she pointed out. “One can raise capital against a piece of art, which has notional value, but not against the negative of a film," said Advani. “Studios stake claim on IP and acquire 100% of it prior to creation, and yet financial institutions and banks don’t see merit in lending against that same IP."
Strategic external funding has the potential to transform the entire film industry by addressing challenges across production, distribution, and exhibition, “When content studios get the funding they need, it doesn’t just benefit them, it raises the bar for the whole industry," said Parth Arora, co-founder and chief operating officer of The Salt Inc., an independent content and design agency. Many of these studios are now operating more like startups, with a focus on transparency and accountability, which makes them more appealing to investors and sets an example for traditional players to follow, he noted.
But what’s in it for investors? While the glamorous side of the film business is undeniable, investment experts say funders are not married to a specific industry and are simply looking for business opportunities. “Once one company sells a stake, others, too, will become open to investments," said a senior producer declining to be named. “Funders are simply trying to see if there is potential to make a business sustainable, especially since film and content viewing is such an entrenched habit in India."
Funding will also allow studios to take more risks, moving beyond big-budget, star-driven films to invest in smaller, more diverse projects. These films often have incredible creative potential but lack the marketing support or distribution to reach audiences. The focus tends to be on big-budget films with well-known stars, leaving smaller ones struggling to get noticed.
To be sure, several small-scale films, despite critical acclaim, have suffered because of inadequate showcasing. Titles such as All India Rank and Joram only earned ₹35 lakh and ₹40 lakh at the box office respectively, with audiences either not aware of their theatrical release or cinemas unable to grant them significant showcasing. Further, while many of these titles are perceived as subjects suitable for OTT viewing, they find it difficult to lock streaming deals.
Indeed, the one big difference such funding could bring about would be to reduce the dependence on OTT buyers, who have been tightening their purse strings and steering clear of films that don’t do well at the box office.
Over the past few months, Hindi language films such as Aankh Micholi, Zwigato and Jogira Sara Ra Ra, among others, were released in cinemas without OTT partners. They are yet to appear on any platform or did so only after a significant delay.
Other high-profile films had announced they would stream on specific platforms after their theatrical release but the services backed out after the films failed at the box-office. For instance, Tiger Shroff’s Ganapath and thriller The Lady Killer were to premiere on Netflix, but are not on it.
Southern interlopers
One of the biggest challenges for Hindi films today is dwindling footfalls, especially outside the country’s big cities. One reason for that is the shift in the kind of fare they dish out.
For many decades, Bollywood had championed tales that spoke to lower middle class, small-town and family audiences. Movies such as Sholay, Hum Aapke Hain Koun and Dilwale Dulhania Le Jayenge enthralled millions for years on end, given that they spoke a language that resonated with viewers. The themes were simple yet meaningful, the music was memorable, and most importantly, single-screen cinemas sold tickets at reasonable rates, allowing for repeat viewing.
But Cinema owners in small towns lament that Hindi films today are no longer created or conceptualized for the common man—their themes are relatively urban and lead actors are unable to draw tier-two and tier-three audiences to theatres, thereby deterring new ones from coming up.
When Hindi films do go deep into Bharat, as Pathaan and Jawan did, they break the box office. But in recent years, content-heavy films targeted at multiplex audiences, such as Badhaai Do, Article 15 and Gully Boy, have outnumbered mass commercial entertainers. And that has opened the door for the Hindi versions of southern blockbusters to rule the box office.
Earlier this month, trade pundits and theatre owners in the Hindi-speaking belt were stunned. While expecting Telugu action film Pushpa 2: The Rule to do well, they were still taken aback when the dubbed Hindi version of the Allu Arjun-starrer broke all records to earn ₹72 crore on its opening day. This is the second-highest opening day of all time in the Hindi market, after Shah Rukh Khan’s Jawan, which had made ₹75 crore last year.
While that is reason to cheer, many also point out that it is proof that there is something terribly wrong with the content and marketing techniques of Hindi films and the studios backing them. This holds true not just for films released in 2024, but for the past couple of years, when southern language films, particularly those originating from the Telugu industry, such as the Baahubali franchise, RRR and others, filled the void left behind by Hindi films.
Hollywood exits
The studios’ hunt for investments also come at a time when global entertainment firms have shown a growing disenchantment with the Indian market. Hollywood studios’ movie production operations in India are more or less defunct.
Close to three decades after launching iconic youth and music channel MTV in India, M&E conglomerate Paramount Global quit the country this year, selling its entire stake in Viacom18 to Mukesh Ambani’s Reliance Industries (RIL).
In 2009, NBCUniversal had exited its partnership with the NDTV Group, which had led to the formation of NDTV Imagine, while in 2016, Walt Disney had pulled the plug on UTV Motion Pictures closing Hindi film production. Further, in 2020, Universal Pictures shut its India office, with all its Hollywood titles now distributed in the country by Warner Bros.
Reasons for the disenchantment with India vary—from an unpredictable theatrical box office to uneasy intellectual property (IP) sharing terms with local producers, to broadcast regulations that make operations challenging.
What investors bring in
It is not uncommon to see an Indian studio have a monster hit followed by a string of flops. This, said Harit Nagpal, managing director and chief executive officer of direct-to-home television service provider Tata Play, suggests that the movie and content business runs on creative whims, and is symptomatic of a core expertise that needs organization. The hit or miss nature of the business has made investors give the industry a wide berth.
Arora concurred with Nagpal’s assessment. “The Indian film industry has so much potential, but there are several interconnected challenges holding it back from truly scaling up. Unlike other industries, where outcomes are more predictable, filmmaking relies heavily on creativity and artistic intuition, which can feel too risky for many investors," he told Mint. “There’s also a general lack of understanding about how the industry works, which keeps a lot of potential funding on the sidelines."
While success in no business is guaranteed 100%, there is a need to move the needle from the 20% kind of ratio seen in the film business, as of now, said Nagpal. “There is a need to make money … and run in a sustainable fashion. It’s all about finding the right product for the audience, else everything just works on tukka (by fluke)," he explained. In this context, external strategic funding, which is very common in other businesses, could make sense for the film and content production industry, said the Tata group executive.
On their part, investors can do much more than just provide funding, said Vikram Malhotra, founder and CEO of Abundantia Entertainment, which is known for titles such as Sarfira and Toilet: Ek Prem Katha. “They also bring great practices, processes and know-how to the table. There is a lot to gain from long-term, strategic investors in terms of good governance, business wisdom and advisory aspects that money can’t buy," he added.
Nagpal agreed, noting that external funders will be able to fathom customer needs, identify gaps and see how they can be fulfilled in order to make the business more predictable.
That said, external funding may not be the answer to all of Bollywood’s woes. A senior studio executive said that while the Dharma-Poonawalla deal has raised expectations, the real, long tail value of video IP is slowly decreasing as fewer audiences go back to old films for repeat viewing and short video takes over limited attention spans. As he put it, “Short video is killing long-format content and that trajectory is unmistakable. It’s the writing on the wall."
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