Great Lakes - Fabulous Four

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PwC Directi Case study Contest Finance – Cine : A Movie Financing Venture Wednesday, May 18, 2 022 Presented by: Fabulous four Mahesh Panigrahy Namita Joshi Namratha Vaidya Sanyukta Sen
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Transcript of Great Lakes - Fabulous Four

Page 1: Great Lakes - Fabulous Four

Directi Case study Contest

Finance – Cine : A Movie Financing Venture

Presented by:

Fabulous four

Mahesh Panigrahy

Namita Joshi

Namratha Vaidya

Sanyukta Sen

Page 2: Great Lakes - Fabulous Four

Introduction

Finance – Cine We are :

•The first platform for the movie makers to connect with the viewers for funding purpose

• A service provider that facilitates raising capital for movies through its own viewers

•A medium by which users can reap more ROI as compared to traditional investments

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Finance - Cine

Producers can raise money by issuing movie

bonds

Exchange will enable trading of purchased bonds

by traders

Users can purchase movie

bonds

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Product

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Product – Conception and Timeline

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Movie Financing Timeline

Start of movie

Production

Capital is raised

Trading of Movie Bonds

on the Exchange

Movie Completi

on & Release

Bond Maturity

• Finance – Cine issues bonds to the public on behalf of the Production House for funding the specific movie

• The New Fund Offer expires after a certain duration

• Bonds are purchased by the users

• No bonds can be issued purchased after the NFO close date

• Production house start the movie with the raised capital

• Bonds will be traded on the exchange after the NFO close date till maturity

• Maturity Date will be some weeks after the release of the movie

• Coupons will be paid regularly to the bond holders till movie completion and few weeks after release

• Production House will have pay back the capital to the bond holders

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Movie Financing – Current Scenario

Major Funding Sources:

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Black Money

•Till 1990’s movies were funded by underworld, diamond merchants

Bank Loans •This can be obtained at high interest rates(10 -15% in 2011) based on your financial muscle

IPO •Raising capital from people in the equity

Distribution Financing

•Fund is obtained from distirbutors by selling distribution rights

HNIs •HNIs pump in money, who put money as equity

Completion Bonds •Issued by US based Film finance Inc

Problems with the Current Funding Sources:

Black

Money

•This creates hegemony of underworld in the movie industry

Bank

Loans

•Problem with this fund source is that it has to be repaid before movie release

IPO

•IPOs generally are prefered only upto 20% of the total capital requirement

Distribution

Financin

g

•This reduces the bargaining of the producer over distributor

HNIs

•Raising money through equity will lead to dilution

Completion

Bonds

•Issuers asks for guarantees(upto 3 -5 % of film budget)

•They scrutinize budgets, schedules and control the same

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Product - Benefits

Benefits of our service to the producer:

•Finance – Cine will directly transfer funds to Production Houses after charging a minimal fee

•No ownership, control, scrutiny or interference by Finance – Cine or by bond holders(viewers), as there is no dilution of equity

•Trading of the bonds in volatile Indian markets will lead to price fluctuations thus popularizing the movie

•High Trade Volumes just before./after release of the movie will increase viewership of movies, thus increasing profitability

•Interest paid on bonds would be tax deductible business expense

Benefits to the user:

•Higher interest more than the risk free rate without incurring much risk

• The benefits similar to US prediction markets can be reaped without actually betting

•For traders it is a good route for diversification in short term investments

•Minimum or No credit risk, as defaulting on part of the production house would lead to the loss of viewership of subsequent movies by the production house

•User friendly interface of the portal and timely updatesApril 7, 2023

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Technology

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Technological Aspect of the Product / Service

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Online

Portal

• Producers issue bonds

• Users buy bonds

Mobile Application

• Producers issue bonds

• Users buy bonds

Finance - Cine

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Business Model

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Why is the business model sustainable ?

•The Product offering / service is unique, so this gives Finance – Cine, the first mover advantage

•With 1000+ Bollywood movies and 3000+ Indian movies, the movie financing market, is yet to flourish leaving large untapped market segment

•Financing of movies through issuance of bonds will appeal even to the common masses as they can connect well with the movie

•Movie bonds will give traders a diversification strategy, thereby enabling us to make sustainable profits

•Issuance of bonds through electronic media will help cater the needs of 150 Million Indian Internet users and 27 Million smartphone users

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Assessing Porter’s Five Forces

Bargaining Powers of Supplier +1

•High number of suppliers •Unique Service•Low probability of forward integration

Bargaining powers of Customer+1

•Large customer base to raise fund •No competitor•High cost of changing

Competitive Rivalry+1

•No Competitor•First mover advantage

Threat of Substitution+0.5

•No substitution as it’s a unique product

Threat of new entry-0.5

•High time and energy cost•Low technology protection•Low entry barriers

Balance of Power

(Out of 5 our firm is

scoring 3)

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Profit Model

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Profit Projection

Profit Model:

•The margins obtained from the issuance of bonds by the seller and buyer will contribute to profits

Assumptions:

Film Business Assumptions:

•No. of movies financed in the first year is 40 and will grow at the rate of 20%

•Average budget of Indian movies is 87 Million and will grow at the rate of inflation

•Permissible Financing Ratio will be 25% of the budget

•Average duration for the movie production is 24 months

Product/Service Assumptions:

•Face Value of the bonds issued will be Rs. 1000

•Margins from the seller and buyer will be .25% each

•Bond trading Margins would be .02%

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Income Statement Projection – 5 years

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Income Statement Projection

 (Rs.) Year 1 Year 2 Year 3 Year 4 Year 5

Revenue          

Initial Margin 4,375,000 5,722,500 7,485,030 9,790,419 12,805,868

Trading Volume 1,750 1,750 1,750 1,750 1,750

Sales from Application 866,250 944,213 1,029,192 1,121,819 1,222,783

Total Revenue 5,243,000 6,668,463 8,515,972 10,913,988 14,030,401

           

Expense          

Fees for NSE Listing 250,000 250,000 250,000 250,000 250,000

Other Expense 2,097,200 2,667,385 3,406,389 4,365,595 5,612,160

Total Expense 2,347,200 2,917,385 3,656,389 4,615,595 5,862,160

           

Profit Before Tax 2,895,800 3,751,078 4,859,583 6,298,393 8,168,241

Tax 955,614 1,237,856 1,603,662 2,078,470 2,695,519

           

Profit After Tax 1,940,186 2,513,222 3,255,921 4,219,923 5,472,721

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Profit Projection for 5 years

Assumptions:

Film Business Assumptions:

•No. of movies financed in the first year is 40 and will grow at the rate of 20%

•Average budget of Indian movies is 87 Million and will grow at the rate of inflation

•Permissible Financing Ratio will be 25% of the budget

•Average duration for the movie production is 24 months

Product/Service Assumptions:

•Face Value of the bonds issued will be Rs. 1000

•Margins from the seller and buyer will be .25% each

•Bond trading Margins would be .02%

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Marketing Strategies

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Segmentation, Targeting, and Positioning for Production Houses

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Budget of movie making (demographic)Big, Medium & Low Budget, Art & Parallel Movie

•Large & Medium Production House • 15 & 30 nos.

•Big & Medium Budget movies• 40 movies

•Fund house•Ease of raising capital•High consumer Base•Low interest payments•Establishment of new relationship• with customer with increased credibility

MarketPositioning

MarketTargeting

Market Segmentation

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Segmentation, Targeting, and Positioning for Consumers (Bond Traders)

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Movie Viewers in India50% of 14.5 million daily Viewers

Online traders

•Security•Easy Accessibility

MarketPositioning

MarketTargeting

Market Segmentation

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Risk

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Risk

Although our business model is robust it is prone to certain risk such as:

•The production houses that run out of money before producing a movie and those who abscond will result in credit default risk

•If funds are not collected before the close of the NFO, the production house runs the risk of raising insufficient funds

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References

http://www.mpaa-india.org/hollywoodinvestment.html

http://www.rediff.com/money/2006/may/27spec1.htm

http://www.investopedia.com/ask/answers/09/bond-over-the-counter.asp#ixzz2B8OaR4JN

http://businessofcinema.com/bollywood-news/indian-film-industry-to-grow-at-9-to-touch-rs-137-billion-by-2014/30681

http://www.marketing91.com/swot-analysis-bollywood/

http://www.nishithdesai.com/hollywood-bollywood/media-chap-3-C.htm

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Thank You

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