As a small boy, Tapaas Chakravarti never had a set group of friends. His father was an employee with the Indian Railways and had to move town every couple of years. So Chakravarti did the next best thing. He created his own set of friends; he dreamed up characters and borrowed liberally from his collection of over 4,000 comic books. He had his own world — his very own Neverland. He played Peter Pan, the boy who never grew up.
Some thirty years on, Chakravarti is sitting in his office in Hyderabad’s Banjara Hills. He is surrounded by pictures and models of Mickey Mouse, Iron Man, Mowgli and Casper. He exclaims, “I’m living my dream!” The dreamer-turned-entrepreneur has created a business out of his heroes and fantasy worlds. His company, Hyderabad-based DQ Entertainment, is the largest animation company in India. With 3,500 employees, its shop floor is among the largest in the world.
In its 11 years of existence though, DQE has remained relatively unknown outside the industry. It was only earlier this year that the investment community woke up to it when DQE announced plans to raise Rs. 150 crore through an initial public offering (IPO). The IPO was oversubscribed by more than 80 times, at a time when a much bigger offering from NMDC failed to create much excitement.
DQE, like its peers, Crest Animation Studios and Toonz Entertainment, started off creating content for global broadcasting majors like BBC and studios like Warner Brothers and Walt Disney. As in other verticals of business process outsourcing, India was a low-cost production destination for animation. DQE later went a step higher on the value chain and ventured into co-production. Instead of just creating content for others, the company was also investing in projects to take minor rights over the ‘property’.
Two years ago, DQE took a bigger step, one that was new for the Indian animation industry. Patents on many historic animation characters were expiring. Chakravarti saw the opportunity and started buying up. His first two buys were Jungle Book and Peter Pan. Chakravarti’s version of Mowgli and his wild friends is slated to hit global cartoon channels by the end of 2010. But even before that, the entrepreneur has managed to sell the ‘property’ in more than 130 countries.
“We follow a pre-sale model, by which almost 80 percent of the production costs are covered by selling the property rights in various regions,” says Chakravarti.
While others like Crest and Ken Creative also follow the pre-sale model, DQE is the first from the country to start building an intellectual property library. The company wants to make $250 million from Jungle Book and Peter Pan alone. Industry executives whom Forbes India talked to, agree that having patents can be a boon to DQE. Chakravarti himself is most enthusiastic about the animation movie part, something that he has consciously stayed away from till now. “I was creating the ability. Now we have that. Starting from 2011, we will be releasing one movie each year meant for the global audience. Each of these movies will cost $25 million to $30 million,” he says.
At that budget, the movies are at least 10 times more expensive than the average Bollywood potboiler. But unlike the earlier Indian animation movies that targeted the local market, Chakravarti is eyeing the bigger, global pie. “And we will follow the same pre-sale model for movies also. It will be completely risk-free for us,” contends Chakravarti.
His peers agree that the model carries few risks but question if DQE’s factory-like model is becoming too large to handle. “If you look at the model followed by American studios, none now has a huge team anymore. It is not surprising that DQE went for the IPO as it has to sustain the business and the huge workforce,” says an industry executive on the condition of anonymity. Moreover, Indian animation movies have given dismal performances till now. The most recent being the much publicised Roadside Romeo
, co-produced by Yash Raj Films and Walt Disney Pictures, that tanked at the box office. Can DQE get the formula right while making the jump to the big screen? Building the Business
Chakravarti’s Neverland dreams were initially cut off by practical hurdles. His father wanted the family’s brightest child to follow the tradition and join the civil services. But despite clearing the initial round of exams, Chakravarti left home to become a medical representative with Sandoz. A year later, he joined an MBA programme at Benaras Hindu University and sustained himself by teaching five tuition classes a day. In the next few years, Chakravarti cut his teeth in the corporate world at companies like Usha. But it was not until he met his future partner Rusi Brij, who was vice chairman and CEO of Hexaware Technologies, that the entrepreneur within him emerged. The two got together to set up Dataquest Management and Communications Ltd, a start-up consultant, in the early 90s and helped other budding entrepreneurs set up businesses.
“The corporate experience gave me learning on things like governance, audit and maintaining a book,” says Chakravarti. A bigger learning was about to happen.
While travelling around the world for his clients, Chakravarti noticed the revolution in children’s entertainment that was taking place in the Western markets. Broadcasters and studios were starting channels for children and there was a huge demand for content. Chakravarti finally saw the chance to make true his Neverland. He changed track and turned Dataquest into DQ Entertainment in 1999.
In India, companies like Pentamedia Graphics had spotted the opportunity. The Chennai-based company had incredible initial success but later became infamous for its equally drastic downfall. Though its movies like Sinbad and Alladin created a good impression, money didn’t pour in as expected from the Indian market. Infographic by Malay Karmakar
“It also had problems like huge staff, misguided management decisions and too many varied businesses,” says an industry executive. Chakravarti made sure that he didn’t commit these mistakes. First, he separated art from business. “I was completely clear that while the creative part will be taken care of by experts from the industry, the company will be run by people with management skills,” says Chakravarti. For instance, Vishal Dudeja, who handles operations and production, comes from the FMCG industry and Sumedha Saraogi, in charge of global business and branding, earlier had stints in the garment exports sector. Chakravarti initially got experts from Canada and the Philippines to mentor junior artists in India. Later he set up an animation school to bridge the gap in demand. “Today our schools have 900 students and most of our 3,500 employees come from there,” says Saraogi. In Neverland
The team strength is in full show at the three production facilities in Hyderabad. The biggest one in Hi Tech City, the information technology hub, looks like a call centre. Rows of mostly young employees are busy with mouse and keys. Computer graphics are being produced on a mega scale that will be used for 3D animation. About 15 minutes away is the second facility, another rows and rows of youngsters hunched over drawing boards, sketching. This is 2D animation. Just around the corner is the third office, which houses the team that is producing Jungle Book. The “ideating team” sits at the corporate office at Banjara Hills, which looks more like a resort with a small pond, open canteen and huge trees.
Though the industry might question the sustainability of a large workforce, Chakravarti is banking on this human resource strength to make DQE into an assembly unit of animation production, and to take the big leap into making movies.
Internationally, he laid the foundation by buying a stake in French company, Method Animation, and also set up sales offices in Europe and the US. “Today, the outsourcing business brings in only 20 percent of our revenues. The rest comes from co-production. We have consciously gone up the value chain,” says Saraogi, giving another hint on the big leap.
The initiatives have seen DQE scaling up its operations. Two years ago, it had up to 12 projects at a time. Today it has over 30 projects, the highest number as yet for an Indian company. To get over the costing issues, a key to making every project profitable, Chakravarti has appointed a head for each vertical like 2D, 3D and Stereoscopic. The head is in charge of on-time delivery of the projects, an important part in keeping business profitable, as crossing deadlines and cost overcharges are common industry ills. For seamless and paperless co-ordination of the huge workforce, DQE has developed software called Tracker that keeps tab on each employee.
Production head Dudeja adds that training of the work force has already begun, keeping in mind the future needs. “For instance, in making the TV production of Peter Pan we have already started using the detailing that will be needed to make its theatrical version,” he says. To make sure that the movies don’t lack in quality story line, as seen in recent Indian theatre releases, the company has roped in writers in London and the voice recording is being done in France, says Saraogi.
DQE has also bought complete or part rights on Lassie the Dog, Charlie Chaplin, Iron Man and Feluda, the famous detective character created by Satyajit Ray. Chakravarti says that there are more in the pipeline and that each one of them will be brought on to the big screen.
What if these fail? “With the pre-sale model, we have no risks, except that our ego might be hurt,” Chakravarti adds. But industry experts warn that even with this model, the company does need to make its own investments, up to 20 percent of the total cost of $30 million.
That would be big enough to cause serious damage to DQE’s now near Rs. 200 crore yearly business.
Fortunately for Chakravarti and DQE, the global animation movie market, unlike its Indian cousin, has made hay in recent times. Avatar, Alice in Wonderland
and How To Train Your Dragon
have grossed over $3.5 billion collectively. The projections are sunny but Chakravarti’s Neverland is yet not complete. “Only when I take Jungle Book to the Broadway will I say that DQE has arrived,” he says.
(This story appears in the 02 July, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)