Television

"Never buy a film without seeing it, especially if it boasts of a big star-cast" : Shravan Shroff - Shringar Cinemas head

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The name is Shroff... Shravan Shroff. Claim to fame: Fame Adlabs. Armed with an MBA degree, this alumnus of Melbourne Business School, Australia came back to Mumbai to introduce the concept of modern and plush cinema halls in Mumbai.

As of now, he is all set to spread the multiplex web across the country. His vision is to institutionalise the film trade business; gear up to produce, distribute and exhibit films under the same banner.

All of 34 years, Shroff is an entrepreneur to look out for. And to think he wasn't even keen on the cinema business. But something about the industry triggered off the business man in him and he embarked on to the journey to bring about some order in this highly disorganised business.

Although he is proud to be his father's son, he is loathe to the idea of being identified by it. It is quite something to watch this soft spoken guy gets transformed into a hard as a knuckles business man. In a tete-e-tete with indiantelevision.com's Trupti Ghag he talks about his journey, his achievements and his ambitions.

Excerpts:

Was it always assumed that you would be joining the business? I remember reading that you were keen on becoming a pilot...

Actually, I know as much about the civil aviation industry as I know about the movie business and I still keep track of what is happening.



Honestly, when I was in school I thought I would join the business. Though I wan't a 'filmy kid', I was keen on the trade aspect. I was clued on to the trade magazines that dad got home.

I did join the family business during my college days. The first film that I actually worked on was 1942 - A love story. The movie was released in 1994 and it was distributed by us. But the movie, despite a great story line, didn't do too well. During the same time - Hum Aapke Hai Kaun - a Rajshri movie - did really well. I was pretty disillusioned.

But I took that opportunity to think more about it. I then decided that I need to study more and get more experience. I was just a BCom graduate, so I went abroad to study.

How was the experience? Was it helpful?

It was a great experience as far as I was concerned. People are very hard working there. Most of the guys had enrolled for part-time MBA classes. They used to get up early, get ready, drop their kids to school, attend the morning classes at 8:30 am and then go to work. Then they used to be back for evening lecture. It was a tough life.

Unfortunately, people in the film industry here don't value time. And after Australia, I realised that I couldn't work like that.

But I understand that after coming back to India, you weren't quite keen to join the business?

Honestly, when I came to India I didn't think that I would be staying here for long. I didn't have too much love for the family business and I was disappointed with the general attitude.



But after some time, I noticed that there is an opportunity. I still had to figure out where it was. What I was clear about was that I did not want to be known as my father's son.

And where exactly did you find that opportunity?

While I was doing my final year, I had a course Strategic Management. I did a case study Carlton United Breweries. They are the producers of the beer brand Fosters. What was significant is how they took the business ahead. They had introduced portal psychosis: vertical integration and backward integration. Pretty much what Reliance has done in India.

While I was tinkering away, I thought that I should do something similar for Shringar. So I did a case study for Shringar in 1996, and bingo! It made a lot of sense, for my business, to do either production or exhibition. So I sent an e-mail to dad and he said that it was great and I needed to come back to India if I was serious about implementing it.

I started to experiment with production, but it was a culture shock for me. Owing to my father's name it was easy for me to meet people, producers directors but I didn't like what I saw. Being an organised person, I felt a complete misfit. I quickly realised that I can't do production and I didn't want to do distribution. It would have been foolish to chuck the family business away because of the kick start I had.



By that logic, I had to start looking at exhibition. I knew that there is a gap in the market. Also what was helpful was a small stint at a multiplex company in Australia. So, I started developing the exhibition business.

And how exactly did you go ahead with it?

I found two theatre complexes that could be taken up. The first one in Goregaon, which we named Cinemax and second was Cinestar in Kandivali.

I readied a business plan and approached my dad for money. The capital investment was to be done by the owner and all that I had to do was to pay the weekly rent and deposit Rs 5 million. Although dad gave me the cheque, he told me 'son you can either blow this money and I can afford it or you can make this Rs 5 million into Rs 50 million. The choice is yours. I just hope that you won't squander the money.'

I had it my head that I needed to repay it back and with a good return.

Then what?

I started of by working on the shop floor; made popcorn, learnt how to work the projectors, got to know how people cut corners, cheat their employers. I literally rolled up my sleeves and started working. I have no regrets about it because that is the only way, I believe, one can learn the retail business.

If it had been super flop, people would have called me an idiot. If I had succeeded they would have said 'with his connections and education it was just so easy'. So I really had to do it for myself.

"Corruption works only to move the file. It does not work to bend the rule"

How did the multiplex business come about?

When you are on the job, hands on, you quickly realise where the gaps are. I realised that the future of the business lay in multiplexes and not in single theatres.

I spoke to my dad about it. He said that it was a great idea. So I asked him for another loan of Rs 50 million. He was shocked but he agreed to give me Rs 25 million and the rest I had to arrange on my own.

So I contacted Adlabs and took them through the entire proposal. They agreed to invest another Rs 25 million but their mandate was clear: 'We will only invest, you have to run the business'.

The cost of the project was Rs 150-160 millions, so I decided to raise rest of the money through debt. But that was easier said than done as no bank was ready to give that kind of money to a multiplex. I managed to get Rs 95 million from IDBI bank. That was after I spent about nine to 10 months pursuing them.



Later, a venture capitalist showed interest and by 2001, we had raised Rs 180 million, which I think was my biggest achievement. I was able to raise organised capital in the country.

Once the organised capital came in, I could instal the system, employ people and hire processes. We got better auditors and hired professionals.



Once the ball started rolling things were a bit easier. The industry got recognised. Fame Adlabs started working, and we did well. We organised the distribution business. We opened up local operations in Ahmedabad, Delhi and Madras.

Instead of starting off something completely new, why didn't you think about growing the distribution business further? Weren't the stakes higher?

I never liked distribution because I don't like the movie business per se. I am not a movie buff. I am retail oriented and I just can't work with the producers. I think I am a very meticulous person. I like agreements, working by LOI's but the movie business unfortunately is still by and large unorganised. So I started concentrating only on the exhibition business.



Unfortunately for us, last year, a couple of my properties, which were supposed to come up, got delayed. But this year is a big year for us. We have five properties, which include In Orbit in Malad, a four screen project with a mall - Raghuleela in Kandivili, and another four screen project in Kolkata. We will be inaugurating a six screen multiplex in Surat in July and another three screen one in Nasik in November. We plan to open up four-six properties every year in the next four years.

You had announced plans to open up multiplexes in Bangalore and Ahmedabad? What about that?

We haven't moved on the plans for Ahmedabad, but construction has started for a four screen multiplex in Bangalore and it should be ready to do business next year.

Another six screen project in Kolkata is in the pipeline along with a four screen one in Pune. Almost 100 per cent of my time is spent in the exhibition business. I am constantly negotiating for new properties

Could you explain to me what Shringar is all about? The operations started of as film financiers and then you branched off into distribution? What is the structure of the company like?

Prior to getting into exhibition three years ago, we have been distributing movies. Though we did start as a film financing company, 50 years ago. Currently, there are two companies Shringar Films Pvt Ltd and Shringar Cinemas Pvt Ltd.

The mandate of Shringar Films is distribution and the mandate of Shringar Cinema is to run multiplexes, single screen and to do programming of theatre. In future, if we do production we will either do it under the Shringar Films banner or shoot off another company.

But we don't want to get into production for the next two years because we have too much on our plate.

Our future plan is to integrate a value chain. A good example of vertical chain integration is IMAX Adlabs, which is into processing, distribution and exhibition. Rajshri is another good example which is into production, distribution and now into exhibition.

Something like a Studio Model?

Yes.

Is film distribution an organised industry?

Some companies are and some aren't. It is not as organised as the exhibition business. Even in exhibition business, multiplexes are organised and single screens aren't. But I believe that that it is because there is new blood coming into the business. Actually it is not just about movie business. Every other business is unorganised take, for instance, retail business. Big retail stores like Shoppers Stop, Lifestyle are but the smaller chains aren't. But once you have organised guys coming in the disorganised guys will die.

What is the logistics of the multiples business? Is the audience base growing? How is the competition with the small screens? Do single screens have chance to survive?

Honestly, single screens have a great chance of surviving. But by acting stubborn, they are doing a great disservice to themselves. Single screens have never faced competition in their life, they have become complacent.

I would compare multiplexes to five star hotels and single screen to three-two star hotel. There is room for everyone. Just like the automobile business where you have a Honda Accord doing equally good business as Maruti Alto. There is a buyer for everything provided the product is good.

As for single theaters, some of them are so badly maintained that consumers don't want to go there. What they have to realise is that they are placed in fabulous locations, unlike multiplexes, which are far-flung.

If the single screen owners decide to upgrade their theater, for say about Rs 10-15 millions, and work out a decent offering they can give the multiplex owners a run for their money. What they don't realise is that multiplexes have invested Rs 150-160 million, so they are in no position of taking heavy cuts in their profit. But what the single screens have to realise is that the day we finish with the multiplex business were going to go after the single screen business.

We, at Shringar, are already planning to rent out the single screens, refurbish and run them. If you come up with a quality product, which is priced less, people are going to make a run for it.

How has the Fame Adlabs fared in the last three years?

The first year was very good. We were guaranteed consumers because as far as the location goes it was a no brainier. We had the best location.

And what happened after you had competition right across the road?

Initially, we were apprehensive about competition coming right across the road. But interestingly, Fun Republic has grown the market. We used to clock about Rs 1.7-1.8 million per week and now we collectively get in about Rs 2.9 million per week. Fortunately we do eight to ten per cent more business than them.

Isn't that due to first mover's advantage?

That and plus, I think, we have a better location than Fun Republic. Also I think that they could have done up their mall much better.

What about your own mall? It isn't in such great shape either?

The entire building is not owned by us. We just own the theatre part of it. We have nothing to do with Citi Mall. And I agree, that is not the way a mall should be. It is actually a shopping complex and not a mall.

A mall should be like our In-Orbit. We have 2000 car parking space, anchors, brands...

But In-orbit is a high end product?

No, it is a better offering at the same price. It is just a perception that it is priced high.

"Interestingly, Fun Republic has grown the market. We used to clock about Rs 1.7-1.8 million per week, now we collectively get in about Rs 2.9 million per week. Fortunately we do eight to ten per cent more business than them"

What is the safety procedure at the theatre like? I realise that the entrance to Fame Adlabs is rather narrow?

That is a perception. Any public space has to be passed by the government. And let me assure you that they do not relent on safety procedures.

Every year, I have to renew my license and honestly corruption works only to move the file. It does not work to bend the rules.

If you bend rules then you have something like Telgi happening.

Does the government contribute towards the growth of multiplexes?

It all depends on state governments. While the government in Maharastra has been supportive by announcing entertainment tax incentives, the Karnataka government isn't. The governments of Kolkata and Bihar, on the other hand, are supportive.

According to you what is the roadblock in the growth of the exhibition business?

We must allow single screen theatres to shut down in Maharastra. As you must be aware, there is a rule that if a single screen theatre has to shut down then you can use the premises provided you set up another theatre one third its capacity. But I think that is unfair. Anybody should be allowed to enter into a business and exit from a business. The government is not giving any subsidy to run the theatre, so I think it is unfair on their part. I think it is an unconstitutional.

What is the annual turnover at Shringar like? What turn over is the exhibition business targeting for the year ahead?

At Shringar Films, the turnover clocked for the year 03-04 has been Rs 250 million and at Shringar Cinemas it has been about Rs 375 million. We are targeting Rs 1 billion for the year ahead at Shringar Cinemas.

What is the revenue pie at Shringar Cinemas like?

About 60-65 per cent of our revenue comes from ticket sales, about 20-25 from food sales, and the remaining 5-10 per cent comes from the in-theatre advertising. We are constantly trying to maximise the advertising revenue because it goes straight to the bottom line.

But really how effective are in-theatre ads? Are the planners looking at it seriously?

There are players looking at in-theatre ads. But they are yet to look at it very seriously. And the theatre owners are to be blamed for that. The reason is that the traditionally theatres have either not been displaying the advertisement or are editing the time. Advertisers are really upset because the data cannot be authenticated. Agreed it is only drop in the ocean but it is effective, you have undivided attention of the audience.

We as a multiplex company are now talking to the Nielsen guys. We are negotiation for a process to authenticate the data. It will happen this year.

What do you look for in a product before taking it on board? For distribution that is..

Honestly, we look at how genuine the person selling it is. We look at whether he or her made the movie with conviction or not. No one was buying Hyderabad Blues. We did because we believed in it.

Is there like a 60-40 formula that you incorporate? For example 60 per cent of the movies that you take on board are certified winners and 40 per cent are ones you believe will deliver...

We have a 100 per cent belief structure. But after LoC (the super flop Line of Control) we have imbibed one learning. Never buy a film without seeing it, especially if it boasts of a big star-cast. Imagine, we realised this after being 30 years in the business.

Would you ever get into television production?

No. We would be stupid if we even decide to do so. The players in the field are strong players and we wouldn't get into an industry if we aren't sure that we can be amongst the top three players.

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