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“It pays to do something new”.

Jun 9, 2001

Mr. Manmohan Shetty is an arts graduate by qualification and has 26 years of experience in film processing and printing. Starting his career with a small film-processing studio where he gained first hand experience, he worked for eight years before starting his own laboratory, Adlabs, which now has a leadership position in the film processing business. The company has recently set up India’s first and world’s largest dome screen IMAX theatre. The company recently completed its IPO of Rs 528 m in December 2000.

In an interview with Equitymaster.com Mr. Shetty gave his forthright views on the trend of film processing business and status of his adventurous Imax venture.

EQM:  What is your view on the future prospects of the Indian film industry?

Mr. Shetty: Unlike other countries television and film industry in India are still not becoming completely separate segments of entertainment industry. The small screen still depends on the film based programs. The interlink ratio between them in India is very high. Abroad, film industry and the TV industry work as independent businesses. I feel that all the facets of the entertainment industry including music, multiplexes, small screen are all inter-dependent on the film industry. If the entertainment industry in India has to grow, film industry has to take the lead.

However, I personally feel that growth rates targeted by FICCI-Anderson report on the entertainment industry are bit optimistic.

EQM:  What changes do you see taking place with the introduction of structured finance for the industry?

Mr. Shetty: I don’t think structured finance would come in to picture only because the industry has been granted industry status. It would come otherwise also. For that matter the State of Hyderabad, Karnataka and Tamil Nadu have announced this status to the film industry long back. But what difference it has made to the industry? The industry has been there for more than 50 years now. I think granting of industry status by the centre is just only one more acclamation. The industry as a whole is going through reforms slowly but steadily since a long time now. It is just a matter of time. More and more companies are getting corporatised. These things are only a part of a bigger process. Further, I don’t think that structured finance would be offered so easily to the industry. The financing norms are very tough.

EQM:  What further steps, in your view are necessary for improving the image of the film industry, in terms of transparency?

Mr. Shetty: To answer that question, I need to understand where is the industry lacking transparency currently. I don’t agree that the film industry is not transparent.

EQM:  ...So you think that the industry is as transparent as it should be?

Mr. Shetty:  It should be seen in a relative term. If you go back 15 years back, every star and every production company was raided by the income tax. Do you hear of income tax raids that often now? Name me any production house worth its salt that is not transparent. You cannot take an isolated case and blame the industry as a whole. That’s not fair.

EQM:  So far, Adlabs has been in a near monopoly situation as far as film-processing business is concerned. Do you see competition coming in? What opportunities and threats do you see in this business?

Mr. Shetty: I don’t agree we are in a monopoly situation. It was only because over a period of time we have increased our market share to such an extent that people think we are in a monopoly. There were other players also who didn’t survive. We lead the industry because we always strived to provide highest quality to our customers and because we continuously upgraded our technical standards. Besides, we have also tried to keep our costs at minimum levels.

I won’t say that there is no competition coming in. Lot of players has evinced interest in setting up processing labs, but no concrete thing has happened yet. But it can happen. Nobody knows!

As far as opportunities are concerned with the number of theaters going up, we would benefit, as that will finally increase number of copies per film. I think that the number of prints for a blockbuster movie has gone up significantly in the past few years. For example, we processed close to 500 copies of ‘Yaadein’ compared to around 300 copies processed for ‘Taal’.

We are not expecting any superficial growth in this space. However, we would be able to register a modest 7-8% growth comfortably.

EQM:  So far, Adlabs has only concentrated on Hindi films. With regional film industry growing at a fast pace, do you plan to expand to regional film processing?

Mr. Shetty: We have no plans at present to expand to regional markets. Given the investments required I don’t think that’s an attractive proposition. We want to first stabilize our Imax and multiplexes projects. Only, after we make both the projects profitable, we will consider venturing into other areas.

EQM:  Tell us something about your Dome theatre (Imax) venture? Considering that Imax being a risky venture, what made you confident to enter into this business?

Mr. Shetty: I would say the first mover advantage. It’s not that beginners always strike lucky. But in the entertainment industry, it definitely pays to do something new. And I thought Imax was a very interesting formula. Though expensive, I thought it would surely work. The cream for business in the entertainment is in the initial years. I thought that I am doing a very adventurous thing, but after Imax became operational, there have been six other dome theater projects announced that are coming up across the country. But I think they would lack the spice of novelty.

EQM:  Any comments on the success of dome theatres in other Asian countries?

Mr. Shetty: The only country we keep getting information is that of Bangkok. The response there has been extremely encouraging. Some years back, there was no dome theatre in Australia. Now there are five dome theaters in Australia.

EQM:  How has been the response for Imax so far? How has been the capacity utilization compared to targets?

Mr. Shetty: We were targeting around 55% capacity utilization, but we are currently running at 44% capacity utilisation. We are running 7 shows a day.

EQM:  ...But you were targeting 10 shows a day?

Mr. Shetty: Our projections were based on the experience in some other countries, for e.g., in Bangkok they run 11 shows a day. Though, we started with 8 shows a day, starting from 11.00 a.m., we realized that we could not get enough people from 11 a.m. -1 p.m. So to save on administrative costs we decided to reduce the number of shows to 7 a day. However, on Saturday’s & Sunday’s we start at 11.30 a.m. We are planning to tie-up with schools for dedicated shows. However, business from schools would start only after they open in mid-June.

EQM:  ...So to be on the cautious side, should one revise projections downwards?

Mr. Shetty: Yes, we need to revise our projections a bit downward till the new multiplex starts. Once the multiplex starts we will have the complete picture in front of us. Hopefully, we will start the multiplexes by mid-July. We need another three to six months time to know the actual response, whether it’s good, bad, or indifferent. After six months, we won’t fluctuate like this.

EQM:  Where do you expect the growth to come in future?

Mr. Shetty: As I said, our film processing business would continue to record a modest 7-8% growth. We don’t want to grow at a rate, which we cannot manage. Only after we make the Imax and Multiplex business profitable, we would think of expanding into other areas.

EQM:  On a personal note, please tell us about the personalities that have influenced you the most.

Mr. Shetty: I thought I am a role model for a lot of people (laughs).

EQM:  Can you tell us something about your hobbies?

Mr. Shetty: Working. I am an extremely workaholic person.


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