Karan Johar and Adar Poonawalla’s surprising partnership: What to expect

Pharmaceutical tycoon Adar Poonawalla’s collaboration with popular filmmaker Karan Johar on Monday left both the business and film industries surprised. Social media buzzed with reactions to the news, with some netizens playfully dubbing their partnership “BrahmastraZeneca,” a nod to the Oxford-AstraZeneca vaccine (known as Covishield in India) produced by Poonawalla’s Serum Institute of India.

As part of the deal, Adar Poonawalla , CEO of Serum Institute and founder-chairman of Poonawalla Fincorp, announced a personal investment of ?1,000 crore for a 50% stake in Karan Johar's Dharma Productions and Dharmatic Entertainment. The deal aims at leveraging Poonawalla's financial strength to expand Dharma’s content on global platforms.

The move ended months of speculation regarding potential suitors for a stake in Dharma, with rumoured contenders including RP-Sanjiv Goenka Group’s Saregama, billionaire Mukesh Ambani’s Jio Studios and Adani Group.

Stake in Dharma marks Poonawalla’s second major investment outside the pharmaceutical realm since 2021, when he acquired a 20% stake in Wakau Interactive, a community-driven social media platform and subsidiary of JetSynthesys. Interestingly, Poonawalla incorporated a firm Serene Productions just a week ago to facilitate the deal with Dharma.

The partnership has elicited both amusement and skepticism. After all, Poonawalla is a seasoned businessman; as CEO of the Serum Institute of India (SII)—the world’s largest vaccine manufacturer, founded by his father, Dr. Cyrus Poonawalla in 1966—he is no stranger to high-stakes ventures.

Born into the ultra-wealthy Poonawalla family, with a collective wealth estimated at $16.6 billion in 2021, Adar also established Poonawalla Fincorp. Together with his wife Natasha, the executive director of SII, he founded the Villoo Poonawalla Charitable Foundation in 2012, reflecting his philanthropic ambitions.

However, neither Natasha nor Adar has a known history in the film industry, although Natasha is a fashion icon frequently seen mingling with Bollywood A-listers.

On the other hand, Johar leads Dharma, one of India’s premier studios set up by his father Yash Johar in 1976. Dharma is known for blockbuster hits like the celebrity talk show "Koffee with Karan" and films such as “Kuchh Kuchh Hota Hai”, "Kabhi Khushi Kabhie Gham" and "My Name Is Khan."

Dharma has existing deals with Netflix and Prime Video but has faced turbulence recently, with revenue plummeting from ?1,040 crore to ?500 crore between FY23 and FY24. Profits dwindled to just ?59 lakhs in FY24, according to data obtained from Tofler.

Positive news in challenging times

Poonawalla is not the first Indian corporate leader making foray into film industry. Kumar Mangalam Birla, the chairman of the Aditya Birla Group, for instance, revived Applause Entertainment in 2017. Late Ratan Tata in 2004 co-produced ‘Aetbaar’, a romantic psychological thriller directed by Vikram Bhatt. Besides, Mukesh Ambani’s JioStudio, Anil Ambani’s Reliance Entertainment and Hinduja group’s IN Entertainment are full-fledged filmmaking ventures.

Poonawalla’s entry into Bollywood has energized the entire ecosystem of the entertainment industry. Filmmakers called it a “welcome move” which has come at a time when the industry is grappling with rising content production costs, dwindling footfall to multiplexes and intense competition from the OTT sector.

Kunal Kohli, noted filmmaker and actor, calls the move as “positive news” and hopes more and more corporates would think of financing films now. “Adar Poonawalla is a reputed businessman who made his name globally during the Covid pandemic by providing free vaccines to not only India but several other countries. His move to acquire 50 percent stakes in Dharma is really wonderful. This will encourage more corporates to come forward and finance films,” Kohli noted.

Karan Taurani, Media Sector Analyst, Elara Capital, echoes the sentiments, “The entry of a significant player like Poonawalla could encourage other deep-pocketed conglomerates to explore opportunities in the film sector, especially as several global studios have exited or scaled back their operations in India.”

The Indian film industry is one of the largest film industries in the world, producing between 1,500 and 2,000 films each year in more than 20 languages. However, the Hindi film industry is experiencing a crisis due to fewer theatrical releases.

A recent report by media consulting firm Ormax reveals that 157 million Indians watched at least one film in a theatre in 2023, resulting in 943 million footfalls at the domestic box office. However, this translates to an average of just six films per theatre-goer annually, with Hindi films drawing particularly low numbers—only three per person. In contrast, Tamil and Telugu films see averages of 8.1 and 9.2, respectively.

“The biggest hindrance to cinema-going emerging as a definitive habit in India, is the sizeable variance in the quality of the movies being created. Uncertainty about the quality of films and the absence of a strong string of films as a given, prevents greater involvement in the activity,” Ormax said.

“Dharma will scale up”

Currently, studios like Yash Raj, Zee Studios, Jio Studios, T-Series, and Sony Pictures dominate the Hindi film landscape.

Industry executives believe that with the fresh infusion of funds, Dharma could scale up and could take a lead in the Hindi film industry adopting an innovative approach to content which could bring back consumers to theatres.

“Dharma Productions is poised to benefit from the scale and financial support of a major conglomerate. The industry is currently in a winner-takes-all phase, with large-budget films representing 85-90% of the Hindi box office in the post-Covid era. This partnership signals a long-term equity-driven collaboration, allowing Dharma to continue investing in high-budget projects, especially given its history of working with studios like Disney and Zee,” says Taurani.

Johar shares his commitment, “Today, as we join forces with Adar, a close friend and an exceptional visionary and innovator, we're poised to elevate Dharma's legacy to new heights. This partnership represents a perfect blend of our emotional storytelling prowess and forward-thinking business strategies. It's about honouring our roots while embracing the future of global entertainment. Dharma's journey has been remarkable, and this collaboration opens up a world of possibilities for creating content that will resonate across borders and generations."

Taurani, however, feels, while the Poonawallas’ involvement may not bring substantial strategic value or synergies to Dharma, the production house is likely to maintain its operational independence under Johar’s leadership.

Nevertheless, Johar’s promises have sparked hope among both moviegoers and OTT consumers across various demographics. “The revamped Dharma Productions will emerge as a professionally run media house. The collaboration is likely to focus on content for OTT platforms, reflecting the sector’s rapid growth and the need to alleviate financial pressures,” shares Adv. Shashank Agarwal of the Delhi High Court.

Kunal Sharma, Partner at Singhania & Co, concurs: “This strategic alliance is poised to harness the complementary strengths of both entities, addressing the evolving preferences of today’s digitally savvy consumers while advancing the frontiers of creative storytelling.”

“Glam-Q for Poonawalla”

“In the past, business leaders built temples and engaged in philanthropic activities to gain popularity. Today, corporate leaders seek glamour to enhance their personal brand value, aiming to become media talk and trending topics, particularly on social media. This desire often leads them into uncharted territory. For example, the JSW Group formed a joint venture with MG Motors in 2023 to capture the spotlight that the steel industry typically lacks,” remarks Dr. Sandeep Goyal, veteran adman and Managing Director of Rediffusion.

Dr Goyal adds, “Poonawalla has been at the helm of the largest vaccine manufacturing firm which generates multibillion-dollar revenues globally, yet it lacks the glamour associated with entertainment. For him, this investment serves as a gateway into the entertainment world, where he can participate in film launches, music premieres, and other high-profile events that will undoubtedly enhance his public image.”