Bankruptcy Blues

EVEN as Amitabh Bachchan makes his long-awaited return to the silver screen with Mrityudaata, an unsavoury controversy over his larger-than-life Rs 64-crore business venture threatens to sour his probable box-office success. Mired in substantial debt for over a year, the Amitabh Bachchan Corporation Ltd (ABCL) is now facing an unprecedented liquidity crunch. Substantial funds are blocked in production and distribution of films; staff salaries are not being paid on time; and public confidence has nosedived. Chief executive Sanjeev Gupta put in his papers earlier this month, to be followed soon, reliable sources say, by M. Suku, vice president-marketing and the other half of the brains trust.

It seems a far cry from last year when ABCL proudly announced a turnover of Rs 64 crore, against a projection of Rs 57 crore, and a profit of Rs 15 crore. Its turnover projection for 1996-97 is Rs 100 crore. The figures didn't impress too many. Now to bail out his company, Bachchan has conjured up a successor to Gupta, Gautam Berry, and is selling off his stake in Ipca Laboratories. This should yield close to Rs 45 crore, more than his Rs 19-crore seed capital in ABCL.

ABCL was Bachchan's most ambitious project after a string of modest business attempts. He reportedly lost over Rs 20 crore in a television channel he had started in the UK and discontinued. Another direct-to-home channel started in the US has yet to yield profits. ABCL was a pioneering attempt to evolve a corporatised entertainment company on the lines of the Hollywood studios. But in its tearing hurry to grow and expand, it seemed to have spread itself too thin without proper planning and management control.

The gravest mistake was the lack of control on the purse strings. ABCL ran up overhead expenses of Rs 2 crore a month, or roughly 40 per cent of its annual turnover. Says Sunil Man-chanda, joint managing director, MAD Entertainment Ltd, and a minority shareholder: "A company cannot afford overheads of more than 10 to 12 per cent of its turnover to be financially stable." Overpaid, often underperforming executives did the rest of the damage. Top executives took home annual salaries from Rs 18 lakh to over Rs 40 lakh. Expense accounts were plundered and facilities misused. A senior executive, heading one of the worst-performing divisions, is alleged to have run up astronomical cellphone bills.

Says a senior film industry source: "The Bachchans themselves, like successful film-stars, are used to having large, personal coffers. It requires extreme discipline to let your money be managed professionally and not at personal whim." Sources reveal that Gupta had clamped down on indiscriminate expenditure; he wanted to complete a few projects so that they could generate money for the rest. Gupta refused to speak on the affairs of the company but sources say though he was successful to an extent, he didn't manage to save the day.

The coffers ran dry after ABCL failed to raise enough money from the market. Its public issue came with a bang, backed by the Big B's name and Kotak Mahindra Capital (KMC) as underwriters for the issue. KMC also provided Rs 4 crore out of the Rs 32-crore seed capital. KMC vice-president K. Satish Shenoy had said then: "We are on the right track." Despite market indications that the expected price of Rs 250 would have been too optimistic. In fact, even at Rs 150 there weren't enough takers. ABCL went into film distribution as an educative precursor to actual film production. But it erred in the choice of films. While

Bandit Queen and home production Tere Mere Sapne fared reasonably well, the miserable box-office failure of Kaala Pani overshadowed their rather modest success. Alongside, the company reportedly commissioned over 10 films. While a smaller film with debutant actors like Tere Mere Sapne costs up to Rs 3 crore, larger projects can cost up to Rs 10 crore. Bachchan himself is paid Rs 3 crore per film. Except for Mrityudaata, the rest are languishing in different stages of production.

Simultaneously, the company went into several 'related' fields like television time marketing, celebrity management, music, event management and media buying. Says an industry source: "Bach-chan couldn't make out where a business endeavour was not close enough to the film business he knew best about." In the absence of right personnel to spearhead the diverse entries, resources were spread thin and mismanagement ensued.

Take, for instance, the company's foray into television time buying and selling. Typically, private parties buy free commercial time (FCT) from producers or Doordarshan and sell it to advertisers. To be successful, the marketer needs to know what programme or serial will draw audiences and must accordingly negotiate rates on both ends. ABCL started with a comedy serial but couldn't sell a single second of FCT for the first six weeks. Then in a gross unprofessional move, it opted out of the agreement at one day's notice, deserting the producer. The story was repeated with its next serial. Then it took on a news-based programme; here it could sell hardly half the FCT allotted. Another morning breakfast news show was sold at a big discount. Yet ABCL managed to sell just about two-thirds of the allotted time, a chunk of which was devoted to house ads. Then came its ambitious venture during the Olympics. With a guarantee of Rs 6.12 crore to be paid to DD, it could have broken even at an earning of about Rs 7.5 crore. Reliable market sources estimate their sale at about half the figure.

ABCL's attempts at event management threw up more fits than profits. The Miss World contest, its first such attempt, was riddled with controversies, beginning with protests from women's groups and ending with the Spastics Society publicly denouncing the company's inability topay up its promised charity until recently. The Miss World international organisation expected a fee of $2 million from the local event manager. Along with other costs, ABCL would have run up a bill of an estimated $5 million (Rs 17.5 crore). Even a modest estimate puts ABCL's loss at about Rs 4 crore.

At about the same time, ABCL went into media buying services. The only account it got for a long while was BPL, that too for TV alone, not print. It is well-known in the fin-ancial world that BPL is among the worst paymasters in the industry. ABCL's margin was 2.5 per cent—quite a shock for the division head who hailed originally from the print media and was used to an 85 per cent margin. (On every ad a publication prints, it keeps 85 per cent of the revenue and returns 15 per cent to the advertising agency. This 15 per cent is often divided between individual creative and media companies.) ABCL also overestimated the worth of its trump card. The company tried to get the Coca-Cola media account. To ensure success it informed Coke that Bachchan himself would like to come and negotiate. Coke, however, didn't seem impressed and ABCL did not get past the preliminaries. In business areas outside of films the Bach-chan equity was, apparently, not selling.

Says Manchanda of MAD: "Every company goes through ups and downs. In the case of ABCL, a lot of the speculation would have ceased and controversies put to rest if Bachchan himself could come out and make a statement regarding the present affairs of the company." Nor is any other senior official prepared to speak. For now, ABCL is pinning its hopes on the success of the just-released Mrityudaata. Even if the film is able to infuse life into the company for the time being, to survive in the long run ABCL will have to overhaul its business strategy. It has to identify a master plan to channel its funds judiciously and find the right people to head the various divisions. Clearly, even the power of the Big B, who defines the company's psychological bottomline, has not been enough to protect the company's real balance-sheet.