Dharma will get the scale and backing of a large conglomerate in terms of funding
Adhar Poonawala acquiring Dharma Production is some good news for the Indian film industry
Dharma will get the scale and backing of a large conglomerate in terms of funding. The industry is moving through a phase wherein it’s a winner-takes-all market, as large scale budget films account for 85-90% of Hindi Box Office in the post Covid era. We believe this deal is a longer term equity led partnership, wherein Dharma will continue to invest in large budget films given the capital raise; Dharma has had partnerships with studios like Disney and Zee in the past for making Hindi films
The above may trigger entry of another large conglomerate with deep pockets in the film industry, as India has seen exit/scale down by multiple global studios in the past within the film content business. Studios like Yashraj, Zee Studios, Jio Studios, T-series and Sony Pictures are the ones dominating Hindi film industry for now .
We believe entry of Poonawalas may not add any strategic value/synergies for a production house like Dharma and it may continue to run its business operations independently under the expertise of its founder
This backing from a strong conglomerate and infused capital of INR 10bn will enhance capabilities of production house to make large-budget films; an average budget of one large scale led Hindi film is in the range of INR 2-3bn. Valuations for Dharma Productions basis this deal appear fair, as the deal is basis 4x EV/sales (trailing – FY24); Karan Johar and family would own 100% of Dharma Productions, before this deal
We believe this deal should augur well for the film industry in terms of size, scale and number of Hindi films made going ahead, which could eventually also be a mild positive for cinema occupancy levels over the medium term
Highlights
As per media articles, Karan Johar sells a 50% stake of Dharma Production to Adar Poonawala, a renowned industrialist for INR 10bn valuing the production house at INR 20bn.
Both parties formed a binding agreement and Serene Productions (Adar Poonawala’s investment vehicle) to invest INR 10bn in the company.
Karan Johar will be spearheading the company as an executive chairman while Apoorva Mehta will be the Chief executive officer of the entity
Earlier Dharma Production was engaged in discussions with multiple parties including Saregama Music and Reliance Industries Ltd.
In FY23, Dharma Production reported a loss of INR 0.11bn as against a loss of INR 0.27bn in FY22.
In FY24, Dharma Production’s revenue halved to INR5bn, as per VCC Edge.
The production house was founded in 1976 by Yash Johar (Karan Johar’s father); Karan Johar with family would own 100% stake in Dharma Productions, before this deal
