@yrm91 ji - Why are you linking an Investment to Pending receivables… could you share the basis of your assumption that this 17 crore advance amount is an adjustment against the pending Receivables from KJR studios
As per the Annual Report, the total Receivables as on 31st March 23 is only 15.53 crores and this is less than the Investment amount of 17 crores.
The ageing schedule of these Receivables is given below
12 crores is categorised as not due (probably this is less than 45 days old)
3.34 crores is < 6 months old
13.64 lakhs is > 6 months old
0.01 lakh is above 1 year
It’s Receivables above 6 months and above 1 year are just in lakhs…there is no way a company would try to make an adjustment of 17 crores against few lakhs…Even if we consider the total Receivables and assuming all are pending only from KJR Studios (highly unlikely) this is still around 15.5
Second thing is that, in order to make an adjustment the company has to first classify this receivable as a Default. Which they would do only after a certain period say 1 year or above or basis any other adverse event…further they would initiate a Recovery step and any adjustment agreed between these parties, in my view would be requiring BOD meeting and approval …we would have got intimated had this event ever happened
Third, as on 31st March the movie was in production stage… by this time Phantom would have just completed the pre production work and might be in early stages of post production work.
To my knowledge this movies budget is around 100 crores…this includes Remuneration for Director, Hero, Heroines and other Actors and Technicians plus other production costs like Sets, Properties, Costumes etc;…Given that this is a VFX heavy movie we can assume 50% is the VFX budget which is 50 crores… Out of this there is no way that 17 crores is spent only for pre production
Last, the Annual Report clearly states that this is an “Advance for Distribution Rights”…Given that this is a custom line item where in you can write any meaningful text, they would have mentioned it clearly as “Receivables Adjusted towards Distribution Rights” and not as Advance amount
As I mentioned before this is a situation which Phantom came across and grabbed it as they saw this as an opportunity to get Rights at low cost …a good deal and nothing more than that
Any idea what’s the impact Phantom is expecting because of writers’ and actors’ guild strike in Hollywood?
@Venky_Thiriveedhi What is the company’s strength? Distribution or VFX? Is the company following its core competency? Take Rs.17 crore calculate what percentage of balance sheet is deployed into distribution rights. If this movie doesn’t work out what will be the accounting treatment of this Rs17 crore? This calculation will tell you what is the risk it has taken. For any distributor usually the 7-8% s the commission of theatrical share. Do you have any idea about the agreement it has done with the Ayalan movie producer for the share of rights it has taken? Is is a good investment that it has done? Also I would like to ask you that as an investor what probability do you attach to this film becoming a hit. Can you please share your fair value of this company’s stock price and explain how you arrived at that fair value.
Not sure what to make if their new business interests and foray into new businesses. Anyone has more insight into it?
My 2 cents on their distribution foray and the concerns arising henceforth, the filming of the movie Ayalan started closely 5 years ago and being a VFX heavy project the filmmaker got the same team(PhantomFx) from his previous movie (Indru netru naalai) , with over 4500 vfx shots this ended up being amongst the movies with the most number of VFX shots in India, they overshot the budget and subsequently the producer ran into financial issues, that is when phantomFx would have chiped in with their idea of co-producing (albeit unintentionally) to recover their costs. If the movie sees the light of the day soon they perhaps will recover the costs because the director’s earlier movie had a good storyline backed by decent VFX.
I could be wrong here, they have made their intentions clear that they would target international projects and OTT content more and their foray into distribution appears to be a one off incident which they were forced into.
If we look at VFX industry as a whole then one can compare it to IT service industry, at least at the top. And the factors which played out in favor of IT sector in India, similar factors such as labor arbitrage, good communications skills etc. can play out in VFX industry and we possibly can see VFX service exports growing at handsome rate.
However, there is one major difference between the two. The VFX industry is commodity industry as compared to IT service companies because in case of VFX, the skills required, the operations to be performed and the output to be delivered has limited variations. The only differentiating factor is the creativity and decision making around how one wants to design & shoot a particular shot and in turn a movie. And this is the factor that no movie maker would want to outsource. I think Phantom could possibly in a better condition considering that it is a creative studio rather than just a skill based studio.
Also was thinking about disruption that AI can cause in the VFX industry. As @SambitMishra has pointed out in his post earlier that there is possibility that AI can take away some base level jobs and I had similar feedback from a relative of mine who works as cinematographer with very known production house. So the question remains - If AI can do some of the low level jobs and can reduce the time & efforts required, wouldn’t it reduce the cost difference that Indian studios were able to offer because of the labor arbitrage?
This site has a list of VFX studios in India and the projects they have worked in. Some of them are working on the same film. Maybe the production house divides the scenes among various studios.