Bipasha Basu, who acted in Raaz

Mumbai, March 29: ?B-grade? films form the bulk of Bollywood?s investments and investors are warned to keep off them, says a recent report on the entertainment industry.

The report, released by the Confederation of Indian Industry (CII) and KPMG, a management consultant firm, last week, says the ?B-graders?, made with a budget of Rs 3-8 crore and with or without well-known actors, account for 40 per cent of investments in mainstream Hindi films.

B-grade films also number the highest among the 150-odd Hindi movies made every year, but the report says there is a huge mismatch between the production cost and the revenue potential.

The report, which looks at investment opportunities in Hindi films from a corporate perspective, divides mainstream Hindi cinema into five categories and grades them according to their commercial viability.

The report suggests that since only 30 per cent of all the films made contribute to 90 per cent of the revenue of the industry, it would benefit the industry greatly if film finances were better managed on corporate principles.

Category B films are made by relatively weaker producers and in many cases the completion of the film gets delayed due to lack of last-mile finance, the report says.

It does not mention any film, but the Bipasha Basu-starrer Raaz would be the example of a very successful film from this category.

?The producers, who do not often have their own sources of finances, tap the market for funds. Sometimes, the directors of these films have a mediocre track record with negligible past box office run,? the report adds.

But these films continue to be funded because of private financiers ? individuals who often provide the money because of personal attachments, rather than to make a good business investment, says Anindya Roychowdhury, associate director, KPMG.

He says the other four categories of films are AA, A, C and D.

AA movies are the big-budget star-studded films that are made with a budget of Rs 15-30 crore. A-grade movies are made with Rs 8-15 crore, usually with big stars.

C-grade films, a proliferating category, would cost between Rs 1 and Rs 3 crore and cut across a range of films: they are a mix of ?low-budget, high-quality-content? films with a high profit potential ?to still-born projects characterised by lack of quality content and mediocre music on the other hand?, the report says.

D-category films cost even less and are marked by very shoddy production, he says.

A-grade and C-grade films make for the best investments. ?A lot of corporate funding is behind the C-grade films. They are low budget and even if a corporate loses money on seven to eight films, it can be recovered with one successful film,? says Roychowdhury.

Jhankar Beats was a successful film in the C category.

Investors can also bank on A-category films as they generally recover the cost in the first four weeks of their release, the report says.

But AA-category films remain high-risk because of the amount of investment and the burden on distributors, who often bear the brunt of losses. D-category films would not even be considered for corporate finance, he says.

?If there was corporate funding, about 40 to 50 per cent films would not be even taken into consideration,? adds Roychowdhury.

He agrees that despite the buzz that has been there about corporatisation of the industry over the past four or five years, corporate financers still shy away. ?There is a great lack of data and accountability. But there has been a 100 per cent increase in corporate funding of smaller movies in one year,? he says.

Roychowdhury adds that black money has also come down a lot, though potential investors are still in the dark about it since the entertainment industry has very bad ?PR?.