DQ Entertainment in JV with French firm; plans to invest Rs 2.5 billion over 3 yrs

MUMBAI: Hyderabad-based DQ Entertainment (DQE) is eyeing joint venture deals with international animation companies that would assure it of a product pipeline. As a step in this direction, the company has entered into a 51:49 per cent joint venture with France's animation powerhouse Onyx Films to produce high-end CGI feature films.

"We are looking at more such deals with other companies which would boost our product pipeline. That will form a part of our expansion strategy," says DQ Entertainment MD and CEO Tapaas Chakravarti.

The JV with Onyx Films, in which DQE will make an initial investment of Euro 1.5 million (around Rs 90 million), has identified three feature films valued at $89.5 million including Skyland (budget of $31.5 million), Night of the Child King ($30 million) and The Enchanted Boy ($28 million). While Skyland is funded fully, the process of arranging money is on for Night of the Child King. "Besides these three movies, the aim of the JV is to launch one feature film every year from 2008 onwards," says Chakravarti.

DQE is also buying a 20 per cent strategic stake in TV production company Method Films, a sister concern of Onyx, for Euro 2.5 million (around Rs 150 million). Already lined up is a slate of nine TV series for major broadcasters in the US, Canada and Europe, six of which are currently under production. "The strategic stake in Method Films will help us access global revenue and overseas funds for the entire production. It will also provide DQE a huge order pipeline in the area of animation, VFX and post production work in the years to come," says Chakravarti.

DQE is planning to invest Rs 2.5 billion over three years while ramping up its 3,000-seater capacity to a strength of 5,000. The company is currently capitalised to the extent of $12 million and has private equity investors including International Finance Corporation (IFC), India Value Fund, IL&FS Investment Managers Ltd and TDA Capital Partners.

The company clocked $12 million in FY06 and is projecting a turnover of $25 million this fiscal. The target will be much higher once DQE has established itself in the value chain game. The JV will help it leap into the status of feature film producers while guaranteeing utilisation of production facilities and additional streams of revenue.

"Strategic alliances are extremely important and will bring about strong presence of creativity, powered by massive production capabilities," says Onyx Films chairman and Method Films CEO Aton Soumache.

The private equity investors in DQE are bullish about the growth prospects of the company. "DQE is beginning to work on the content side of the animation business rather than being a pure outsourcing player. By entering into this joint venture, the company has shown that it is keen to participate in the financial risk of the animation business. This way there can be substantial upsides," says Rajeev Agrawal, fund manager at India Value Fund.

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