A very good evening everyone. It's great to be here. Hi Karan and hi Adar. It was less than a month ago that the Indian media and entertainment industry woke up to the pretty sensational news that Dharma and Adar Poonawalla were coming together to do a 50-50 joint venture, and that Dharma Productions would now be a partnership between Karan and Adar. This news was greeted with a tremendous amount of excitement, I think, in the Indian media and entertainment community because, as we know, a lot of consolidation has happened on the studio and the platform side, but we haven't really seen that much activity on the content creation side with regard to outside investment coming into the industry. It's been a traditional, closed industry as far as outside investment is concerned. So, Karan and Adar, I mean, I'm sure you are sick of the memes that have been circulated, but I can't help but say, you know, Adar, I hope you are not going to be changing Covishield to a K. And Karan, I hope Brahmastra Janhvi is not going to be the name of your sequel to Brahmastra. But I'm definitely changing the company to Pharma Productions. Adar, one was Kabhi Khushi Kabhie Serum. Perfect. Now, this is CNBC, so Archana, I'm not going to be able to do any more of those puns. I need to be all serious and business-like. But since it is Karan Johar, I have to ask him what he was manifesting when he decided that Dharma Productions would now move into this new generation of raising capital. Because, as we know, films have been his passion, his father's passion, and Dharma Productions has been a passion project for all these years. So, what were your personal and your business considerations? It'll be great to get a sense of both because that will give us a sense of where the media and entertainment industry is headed as well.
Thank you. Firstly, thank you so much for moderating the session. I couldn't have asked for someone better to do this. Thank you so much on behalf of both Adar and I. I have to say that contrary to what people might know or feel of Dharma Productions, actually, it's a rather nascent company when it comes to multiple productions and building it in a studio model. We actually began our journey when you were very much part of the family with UTV. At that time, with multiple productions, that we started with Wake Up Sid and I Hate Luv Storys, and a film called Kurbaan, and I signed my first deal, so to say, with Ronnie Screwvala. So the Parsi community has been very kind to me. And subsequently, we built Dharma Productions right up to 2023. So in a sense, our journey of producing multiple films and content has been 15 years old. Prior to that, it was just films that I directed, you know, that my father had curated over the years, which were very few films, really. And there came a point of time where I felt that we needed, for our own growth, we needed the investment, we needed to kind of not partner with everyone and increase our profitability. And there came the decision to sell a stake and, you know, build in a partnership with somebody. At that point, you know, we did all the due diligence, we did all the, you know, work, and the idea was to kind of create further verticals at Dharma Productions. Besides, we have Dharma, we have Dharmatic, we have an ad division at Dharma 2.0. But, you know, the whole idea to build our own distribution network, perhaps, and maybe double in the music arena and many other verticals is something that I dreamed of, but I needed the partnership for that. And in many ways, when Adar, who has been a dear, dear family friend for many years, spoke to me, and we decided to come together on this, I felt it was the best decision for us because it was the coming together of some great people and also someone who possibly would allow me my creative vision and yet contribute so strongly to the growth by giving me his terrific business insight. So I thought it was a great marriage of two minds, you know, and it really wasn't a big decision for us because when it came to partnering with Adar, it was just easy. It was like both Apoorva and I, who built the company together, both knew that he was the best possible partnership for Dharma Productions and for where we want to take it.
No, thanks. That gives a great sense of what the considerations were when you were looking at doing this. And Adar, I'd love to ask you, you know, from saving our lives over the last, you know, decade, what is it that led you to believe that this was something that you wanted to get involved in? Because, of course, you've known Karan for many, many years, but one never really thought of you as being someone who had a great amount of interest in the media and entertainment business. So it'll be great to get your perspective on how you see the business and this partnership going forward.
Thank you. I was kind of shocked everyone else was for making this move. Let's share some of my thoughts on why I went ahead and really did this. You know, we've been influenced by movies and shows from never as far back when, but partnering with an iconic brand and an iconic person like Karan to tell stories, to influence, change people's minds, making iconic films and content like this is soft power, no doubt. And the way a corporate group could use the soft power to project and tell stories about their planet, about how it can help with our businesses is yet to be seen, and that's something we're strategizing over. But, you know, since this is such a serious news channel and we talk about IRR and all this kind of things, questions was why did I pay so much, what was the basis of this valuation? And I didn't reply to any of those questions because how does one quantify, you know, IRRs and the typical ways of EBITDA margin and what's the clear line of sight to growth and all this very serious financial questions when you make any investment. Intangibles, I see partnering with Dharma and with Karan, and of course, it's not such a bad business per se. Well, you know, other verticals like music distribution, building up more production and content creation, things that will drive, you know, the next two, three years of growth at Dharma. And some of the reasons I did it, and let's not forget, it's not such a bad idea to have a little bit of fun also. It's not all about just, you know, making money and getting returns. So those were the reasons and, you know, thinking behind why I decided to, you know, partner with Karan. You know, I mean, you said, I guess people ask you why you paid so much money. Karan might say it was so much. I didn't know. I had a value I found out. You know, I have to say this, and I probably am not going to come across very clever when I do, but, you know, it's just the way I want to come across is who I am. I was traumatized many of those meetings, you know, when we spoke, the things and terms that I am a creative artist, what is a put and what is a call and what is an exit, drag and tag. I never thought we'd hear the words coming out of his mouth, drag and tag. And then he kept saying, you know, I will drag and you will tag. And I was like, I was like, I know, I know what drag is in a totally different way, and I know, I know what tag is from a price tag that I pay in the retail zone. For I know what put is and call is in a very different way altogether. But I had no idea what was happening when those Excel sheets would come in front of me, and, you know, your reality is staring at you, and you think that you've done something so wide and vast, and then there is a value put. So when people tell Adar, you know, like you paid so much money, I'm like, has he really? I said that, but to give you a chance to say it, because I feel like, firstly, I have to tell you, the dynamism displayed by Adar Poonawalla was almost inspirational to me and to everyone. We cracked the major part of this deal on a Zoom call, I want to tell you, and he was like a superstar in that. Like, it was literally, he had a few questions which were answered, and then he was like, okay, so when do we sign? And I'm like, for one and a half years we were in deliberation, we are talking about put and call and exit and entry and everything that you can think of, and then like he comes in, sweeping us off our collective feet, and I am like, this is probably how I would have loved to do business if I could afford to. And I can't afford to, of course, he can, but I just thought it was also the most essential thing is I am here today feeling even more accountable and responsible than I ever was prior to this. I was like running my own ship, right, Apoorva and I, two people, run our company like siblings. He took care of finance, admin, legal, everything, all the stress points, and I did the creativity. Today I am talking about profit margins, profitability, reduce costs, how do we show to Adar how immensely profitable we are going to make this conglomerate. And to me, that is giving me the most exciting sleepless nights. I never thought that I would feel this accountable in my life, and this is great accountability. This is what I think my father tried to make me, and Apoorva tried to make me the last 25 years of my life. Adar Poonawalla has done it in three months.
I am so happy you said that, Karan. Thank you. I hope this is recorded and kept in the archives forever. Well, unfortunately, it is recorded. Everything I say today, I am staring at Ajay Bijli, a big reason why we're here today, and I want to say the prices are really great at all multiplexes, the popcorn is cheap now. The Karan's secured the investment, so I'm scared I'll get into trouble. I am just staring at Ajay Bijli. I am like, the Bijli, everything in those cinema halls is cheap. Go watch movies, guys. We need you. We need your footfalls.
What would you say, Adar, to those who might be looking at this industry and have all these myths surrounding it that sort of keep them away from investing in it? Because, as you know, it's been an industry which a lot of people have circled around, but we've never had this kind of a structured investment from someone from outside the business who's come in. You've had a lot of strategic coming in, of course, you know, the studios from the West, and hopefully the OTT players are also looking at it. But on the content side, I believe there's vast potential in taking the sector forward, being able to hold on to IP, being able to monetize that in the way it should be. But what's held it back really has been the lack of capital and the myths that surround the industry that have just lingered on for this long. So it'll be great to hear from you on what you say to people who might be looking at this business.
So I think a lot of other corporate houses or funds and investors perhaps haven't invested in this area because generally an investor wants a clear line of sight on growth, scaling up, profitability. We know this industry has its ups and downs, you know, with films doing well, some doing badly, some may go over budget. Now, if we can manage that risk, keep growing in terms of scale, of creating more and more content, you've got so many OTT platforms and now some others coming about, I am very bullish in this area. Now, when exactly is it that we're going to hit, you know, big profit numbers or whatever, you know, it's tough to say. So you have to have a little bit of passion and patience in this area. It can't be like what you've seen in e-commerce or in other manufacturing sectors. There's always going to be some kind of gestation period. So we're going to go through that over the next five years. And, you know, if we have this conversation in two or three years' time, I can tell you if some of those myths were true or not. Fair enough, it's up to us as an industry to dispel that. As far as you're concerned, this obviously is a big move forward. Do you see yourself becoming a studio now completely and holding on to the IP that you are creating and therefore being able to monetize that and build value for the long term?
Absolutely. And the idea, of course, the good thing is that, you know, we have the IP has been a huge part of, you know, our valuation as well, built over, you know, a large period of time with all the films that we've done. We've held very strong on to IP for everything that we've done. The real issue sometimes was because of the funding that you had to leverage, partner with an assisting studio on the bigger and larger films. And with that, even when we made big hits, we were always sharing the profit. In this scenario, it gives us the opportunity of actually increasing and enhancing our profitability by owning the film entirely. But yet, there will be those massive Brahmastras that we will make that will need the support of a studio. If I make a film that is over 250 crore, 200, 300 crores, it's not possible to fund that totally at our stage, even now. But yet, it's the middle-budget film where the cost-to-profit is super high. Those are the films that you can actually fund and you can enjoy and reap the benefits of that big breakthrough profit that is to happen. Because I believe the real bread and butter, the real money comes from that middle-budget film. Because in the big-budget films, you know, while you might make that money up, and it's a large journey to cover that money, and then, you know, the cost of capital and then the cost of P&A, the margins are not very large. But when you strike it in a 65 to 80 crore window film and you really hit the large number, that is the film I am chasing. So more than the tentpole film, I am chasing the middle-budget film that gives me a larger return. But tentpole films give you new multipliers, that much more. Everybody thinks bigger the film, bigger the money made. It's not always true because bigger the money, bigger the money spent is also the bigger, larger journey to recovery, you know. So that's what we do. And then the verticals that we are in, the near future, going to make some announcements about verticals that we are going to be in. And we do hope that everyone eventually wakes up to the fact that we now truly mean business.
So would you do the same thing on the streaming side as well? When you are making series, would you adopt the same model? Maybe the larger tentpole ones are ones that you don't necessarily need to fund yourself, but the middle ones you might look at actually going in and investing?
