New Delhi: Serum Institute of India CEO Adar Poonawalla’s Rs 1,000 crore acquisition of 50 per cent stake in Karan Johar’s Dharma Productions promises to inject a fresh flow of funds into the entertainment industry.
The latest acquisition is seen as favourable by both industry insiders and business analysts, especially for diverse filmmaking opportunities. “Dharma Productions have been content pioneers with their breakthrough content and have lately diversified their production business into ad films, digital series, reality shows, and associating with regional cinema. The investment they secured should be used to take these diverse production avenues forward,” said Pranjal Khandhdiya, producer and head of Outsiders Films.
Poonawalla’s stake in Johar’s Dharma Production and Dharmatic Entertainment brings months of speculation to an end. Reliance India Limited and Saregama India were seen as potential investors earlier.
“It is surprising because both Reliance and Saregama are part of the media industry, and they have reasonable size and exposure and could have shared more synergies, especially with Reliance,” said Karan Taurani, senior vice president of Gurgram-based investment and advisory firm Elara Capital.
The investment was made through Poonawalla’s Serene Productions. Johar will stay on as the executive chairman, while Apoorva Mehta will remain the Chief Executive Officer of the production house.
“In this case, the ethos, culture and values are going to be largely led by Dharma. So there are no strategic changes. Dharma will get more freedom to work how it has, and this is more about cash infusion to boost the scale of the business,” Taurani added.
This is Poonawalla’s second major investment outside the pharma sector. In 2021, he bought a 20 per cent stake in social media platform Wakau Interactive.
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Win for Dharma
This year has seen Bollywood overall struggling to find its footing in terms of storytelling, vision, creativity and newness of content. An increase in the number of OTT platforms, both regional and international, entering the market has also impacted filmmaking.
Karan Johar recently spoke about exorbitant star fees and rising entourage costs, which were affecting the industry and production of films. Multiple news reports also came out about the filmmaker looking for potential investors.
“This partnership represents a perfect blend of our emotional storytelling prowess and forward-thinking business strategies,” said Johar in a press note about the deal with Poonawalla.
The development follows Mukesh Ambani’s Reliance Industries Ltd. (RIL) and the Walt Disney Company announcing the merger of their digital streaming and television assets in India. The merger has brought together 120 channels across entertainment and sports, and two digital streaming platforms, Disney Hotstar and Jio Cinemas. It also has exclusive rights to Indian Premier League (IPL), and Disney film productions in India. This will also effectively create India’s largest media empire worth over Rs 70,000 crore.
The merger between Zee and Sony however fell through in August. Zee and Sony Pictures announced on 27 August that they had settled their six-month dispute related to the failed merger and agreed to withdraw all claims against each other.
“Dharma gets the capital for doing business, scaling up and making big franchise films. They have partnerships with Disney and Zee. But this one has dilution of equities, so ties are going to be stronger,” said Taurani.
In FY23, Dharma Productions posted revenue of Rs 1,040 crore, which had increased four times from Rs 276 crore in FY 2022. Its net profit fell 59 per cent to Rs 11 crore over an increase in expenses at Rs 1,028 crore. In FY23, it earned Rs 656 crore from distribution rights, Rs 140 crore from digital, Rs 83 crore from satellite rights, and Rs 75 crore from music.
Industry experts have said that a conglomerate like Poonawalla coming into the filmmaking business will boost the potential number of films, the scale of films, and also box office collections in turn.
“All in all a win for Dharma but an overall victory for Hindi film producers/ production houses,” said Khandhdiya.