Explained: What the Rs 1000 crore deal means for KJo and Adar Poonawalla

Adar Poonawalla and Karan Johar

Serum Institute of India CEO Adar Poonawalla-led Serene Productions on Monday said it will pick up a 50 per cent stake in Karan Johar's Dharma Productions and Dharmatic Entertainment for Rs 1,000 crore.

The past few months had witnessed speculation in the entertainment industry that Karan Johar was planning to sell a stake of Dharma Productions. Saregama and Reliance were said to be frontrunners.

Brahmastra: Part One - Shiva (2022) and Rocky Aur Rani Kii Prem Kahaani (2023) were two of Dharma's recent hits

With this deal, Poonawalla - the CEO of Serum Institute of India (SII), and Chairman of Poonawalla Fincorp - is foraying into entertainment through his Serene Productions.

The deal, which sees Karan retaining his position as the Executive Chairman and Apoorva Mehta as the CEO, is being viewed as a win-win for both parties. In terms of numbers prima facie, this deal values Dharma - which includes its digital arm, Dharmatic Entertainment - at Rs 2,000 crore. Sources say it is an optimistic valuation. An insider says, "Karan has got a good valuation. Technically, Dharma's revenue fell by 50 per cent in the last financial year. In 2022-2023, its revenue was said to be at Rs 1,000 crore. Brahmāstra: Part One - Shiva [2022] was a major contributor to the profit. However, in 2023-24, even though the company witnessed a spike in its digital and music earnings, its total revenue had a 50 per cent drop as it did not have a blockbuster. But Adar has invested in the company, looking at its equity and Karan's creative might. A part of the Rs 1,000-crore investment will be directed to the original investors - Karan and his mother Hiroo Johar - while the remaining will be allocated towards production."

Adar Poonawalla and Karan Johar

For Poonawalla, who has long been friends with Karan, it is a strategic investment as it gives him a significant stake in the media industry. Another source breaks it down, "For Adar Poonawalla, it's a great diversification after dominating the pharmaceutical and financial sectors. This move will bring corporate culture into the corridors of Dharma. All the heavy lifting that Karan and Apoorva had been doing, in terms of cost management, will now be delegated." As is the norm with such deals, the company is expected to undergo restructuring. "Some of Adar's people will take key positions at Dharma, and there will be a lot of lay-offs," says
another source.

It is understood that the roles will be clearly divided in the 50-50 partnership. Decades after his filmmaker-father Yash Johar founded Dharma in 1976, Karan took the company to new heights with his vision. He not only helmed many blockbusters - from Kuch Kuch Hota Hai (1998) to Student of the Year (2012) - but also backed many directors, becoming something of Bollywood's big daddy. "Now, Karan will spearhead the company's creative operations and lead it from the front. Adar wants to stay away from the creative aspect. So, everything related to films will be handled by Karan, including the star fees and the budget on which a film is to be mounted. Adar will look at the operational aspects, probably telling him how much money can be spent on the workforce, how much bonus to be given, and so on."

The equal partnership that Poonawalla's deal afforded was one of the reasons why Karan inked the deal. In contrast, Saregama, owned by Sanjeev Goenka, and Reliance Industries were reportedly in the bidding war to buy a majority stake in Dharma. A source reveals, "Saregama was willing to acquire the stake for R800 crore. Adar outbid both the players. But another crucial reason is that neither of those giants would have gone into a 50-50 partnership. It has been seen historically that Reliance eventually acquires the companies it buys stakes in." The partnership is being viewed as a huge boost for the Hindi film industry, which has been struggling since theatres reopened after the pandemic-induced shutdown.

When pharma meets films

1) Adar Poonawalla is the CEO of Serum Institute of India, the world's largest vaccine-producing company in terms of volume, which produced Covishield in India. He is also the Chairman of Poonawalla Fincorp.

2) The Rs 1,000-crore investment in Dharma Productions marks the pharma tycoon's foray into the entertainment industry with Serene Productions.

3) In the 50-50 partnership, Karan Johar will retain his Executive Chairman position and spearhead the creative operations. Apoorva Mehta will continue as the CEO.

4) Part of the investment will be directed to the original investors - Karan and his mother Hiroo Johar - while the remaining will be allocated towards production.

5) Saregama and Reliance Industries were said to be in the bidding war to buy a majority stake in Dharma.