Will Karan’s Dharma Revive Now?

‘What
is
Balaji
without
Ekta
(Kapoor),
what
is
Dharma
without
Karan
(Johar?)’

Kuch
Kuch
Hota
Hai,
Kabhi
Khushi
Kabhie
Gham
and

Rocky
aur
Rani
Ki
Prem
Kahani
are
among
film-maker
Karan
Johar’s
biggest
hits.
They
are
sweet,
funny,
and
romantic.
None,
however,
had
an
unexpected
twist
in
the
tale
like
the


announcement
that
came
last
week.

Johar
will
sell
half
his
stake
in
Dharma
Productions,
the
company
he
owns
and
runs
as
executive
chairperson,
to
Serum
Institute
of
India’s
Chief
Executive
Officer
Adar
Poonawalla
for
Rs
1,000
crore
(Rs
10
billion).

There
had
been
speculation
about
Dharma
selling
to
either
Saregama,
Reliance
Industries
or
the
Adani
Group.
Poonawalla,
however,
was
never
in
the
reckoning,
not
even
by
some
of
the
biggest
advisory
firms
representing
potential
buyers
for
Dharma.

“This
has
to
be
one
of
the
weirdest
couplings,”
says
one
consultant.

“There
is
a
dearth
of
strategic
capital
to
fuel
this
business.
What
you
are
seeing
is
consolidation
and
external
capital
coming
in.
It
is
a
very
welcome
move,”
says
Vikram
Malhotra,
founder
and
CEO
of
Abundantia
Entertainment,
the
makers
of

Toilet:
Ek
Prem
Katha
and

Airlift
among
others.

That
is
the
first
important
takeaway
from
this
deal
—
the
business
of
making
films
and
TV
shows
needs
capital.
And
sellers
(and
their
investment
bankers)
need
to
cast
their
net
far
and
wide
—
capital
could
be
sitting
anywhere.

Dharma
logged
revenues
of
Rs
520
crore
(Rs
5.2
billion)
in
the
financial
year
ended
March
2024.
This
deal
values
Dharma
at
Rs
2,000
crore
(Rs
20
billion),
twice
the
valuation
other
companies
reportedly
in
talks
with
Dharma
were
attaching
to
it.

A
bulk
of
the
Rs
1,000
crore
(Rs
10
billion)
that
Poonawalla’s
Serene
Productions
is
investing
“will
go
into
growth
capital”,
says
a
person
close
to
the
firm.

The
press
release
says
the
investment
is
aimed
at
expanding
large-scale,
multilingual
productions,
building
franchises,
and
elevating
traditional
entertainment
formats.
The
remainder
will
serve
as
a
nest
egg
for
Johar,
who
is
now
in
his
fifties.
He
and
his
mother,
Hiroo
Johar,
own
100
per
cent
of
Dharma,
which
was
set
up
in
1976
by
his
father,
Yash
Johar.

Dharma
had
some
hits
like

Dostana
and

Duplicate
but
never
made
it
to
the
big
league.
It
was
Karan
Johar,
an
English-speaking
South
Mumbai
boy
who
loved
Hindi
cinema,
who
revived
the
company
with
his
directorial
venture

Kuch
Kuch
Hota
Hai
(1998).

He
has
since
gone
on
to
become
one
of
the
most
influential
figures
in
Indian
cinema,
as
well
as
a
model
and
TV
host
(Koffee
with
Karan).
His
studio
has
launched
and
nurtured
talented
young
directors
such
as
Shakun
Batra,
Nikkhil
Advani,
and
Ayan
Mukerji.

Its
repertoire
of
45
films
includes

Kal
Ho
Naa
Ho,
Kapoor
&
Sons,
Two
States,
Shershah
and

Raazi,
among
others.
Johar
and
his
close
friend
Apoorva
Mehta,
who
took
over
as
CEO
in
2004,
remain
the
heart
and
soul
of
Dharma.

“Poonawalla
is
a
non-strategic
investor.
Creative
freedom
with
this
size
of
investment
is
rare,”
says
one
observer.
“What
is
Balaji
without
Ekta
(Kapoor),
what
is
Dharma
without
Karan?
This
business
does
not
scale,”
adds
a
consultant.

And
that
leads
to
the
second
major
takeaway
—
the
quest
for
scale
has
begun
in
earnest
among
India’s
one-man,
one-woman
production
houses.

Dharma’s
revenues,
like
those
of
Yash
Raj
Films,
T-Series,
Excel
Entertainment,
and
many
of
the
good
Indian
studios,
have
always
fluctuated.
Dharma
was
at
Rs
278
crore
(Rs
2.78
billion)
in
FY22,
hit
Rs
1,044
crore
(Rs
10.44
billion)
in
FY23,
before
dropping
to
Rs
520
crore
(Rs
5.2
billion)
this
year.

The
hit-and-miss
nature
of
the
movie
business
makes
it
impossible
for
a
small
production
house
to
hold
steady
growth,
especially
in
a
market
that
is
transitioning.
The
Rs
19,700
crore
(Rs
197
billion)
film
industry,
Rs
31,000
crore
(Rs
310
billion)
streaming
business,
and
Rs
70,000
crore
(Rs
700
billion)
television
sector
continue
to
see
consumption
grow.

On
the
supply
side,
however,
consolidation
has
meant
that
the
list
of
buyers
for
professionally
generated
content
is
shrinking
—
PVR-Inox,
Reliance-Disney,
Netflix,
and
Amazon
Prime
Video
are
now
among
the
biggest.
The
other
major
players,
YouTube
and
Meta,
use
billions
of
hours
of
user-generated
content.

That
is
why
scale
is
critical,
say
analysts,
it
becomes
a
buffer
against
the
vagaries
of
the
business.

“Fox
and
Disney
are
strategic
players
with
economic
models
built
around
movies,”
says
Malhotra.

The
consultant
advocates
for
a
larger,
fund-backed
play
that
could
aggregate
the
better
production
houses,
similar
to
Candle
Media.
The
Blackstone-backed
firm,
founded
and
run
by
Disney
veteran
Kevin
Mayer,
owns
several
smaller
production
firms
like
Moonbug
Entertainment
and
Hello
Sunshine,
which
operate
independently.

Imagine
a
Poonawalla-type
investor
aggregating
firms
like
Excel
Entertainment,
Roy-Kapur
Films,
Applause,
and
Arka
Media
Works.

That
would
be
another
twist
in
the
Indian
cinema
tale.