MUMBAI: Venture capitalists (VCs) haven't changed their outlook on the entertainment industry despite the recent sops offered by union minister of law & justice, commerce & industry Arun Jaitley in the EXIM policy announced on 31 March 2003.

Jaitley had mentioned the following in his speech: "For entertainment services, which is singularly handicapped by lack of investment, but has tremendous opportunities for exports, it is proposed to promote through suitable tax incentives contributions to venture capital funds which will provide finance to this sector. We are in dialogue with ministry of finance how best this can be done."

The verdict of the VC financing and mentoring session on the opening day of the Ficci FRAMES 2003 held on 13 March was clearly in favour of corporate governance and more transparency in the media business.

The Indus Entrepreneurs' (TIE) president elect and PassionFund CEO Mahesh Murthy says: "Nice though the policy is, I think there are very few or no venture capitalists who are even interested in funding efforts in the entertainment sector. The issue is not taxes - I am not sure that is the major problem."

"The key issues stopping investment in the entertainment and media sector are everything from a lack of corporatisation, over-dependance on personalities in businesses, low creation of intellectual property, the non-transparency of distribution and doubtful exit routes," says Murthy.

Murthy adds that VCs need to know whether they can get money out of any investment. Then, they would want to figure out if they could make any profits out of the investments. Then, and only then would they even begin worrying about taxes.

Enam Financial Consultant CEO Mahesh Chhabria also seconds the view: "Well, one needs to go through the fine print in greater detail. As of now, nothing much has changed. Indian media companies have failed to create sustainable media properties, create workable business system models, tackle competition, develop alternate business models, and ensure adequate returns to investors through corporate governance. The companies have also failed to develop scalable models."

While speaking during the Ficci FRAMES 2003 session, Ambit Finance pte MD Ashok Wadhwa had said: "The bad news is that VCs in the television content business no longer exist - what remains is private equity funding. "The so-called 'VCs' lost so much money in the last two years that they have become hesitant."

Several other media analysts who spoke to indiantelevision.com also voiced similar concerns. However, they added that the recent crisis in Asian financial markets would definitely benefit listed Indian companies as foreign financial institutions will channelise funds into India. "But very little of this inflow will find its way into the entertainment sector," they add.

Union minister of law & justice, commerce & industry Arun Jaitley had admitted that there were problems stunting growth in the course of his speech by saying: "We have immense potential for exports in certain services sectors such as entertainment and education. Each sector has its own specific problems such as lack of investment, inadequacy of laws relating to piracy. Nonetheless, we have to leverage India�s obvious advantages in these sectors."

The minister proposed to set up sector-specific working groups with representatives of ministry of finance, the administrative ministries concerned, the state governments, financial institutions and the industry to work towards a common goal by framing action plans to achieve the potential to be implemented within a specified time schedule.