Crest looking at cutting costs by 50% to combat cash crunch
Crest Animation Studios plans slash nearly two thirds of its work force on the back of a severe cash crunch. The company made losses to the tune of Rs 13.82 crore in FY13. The company hopes to cut costs up to 50% through this move along with reducing expenses incurred on rent by relocating to different premises. It is currently based in Ghatkopar west in Mumbai.
It also has operations in United States through Rich Animation Studios that it acquired in 2000, which will see retrenchment of up to 20%. In a statement to the press, the company said, “Much against our wishes and the expectations of our employees, yes, we have had to announce temporary layoffs across the board, purely based on business demands. Our people have been our most valuable asset and will continue to remain so." The retained employees of the company may also be looking at salary cuts.
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Waving off reports that the company is shutting down altogether, Crest management clarified that it intends to diversify its business in the Computer Generated Imagery (CGI) animation space and explore opportunities in the Indian market. Till now, most its projects were based in Hollywood and it also took up outsourcing work for films requiring CGI animation.
P Rajasekhar, CEO, Crest Animation Studios says, “When you start having a rough patch, you wait it out and do the best you can. There comes a time though when you need to take a step back, relook at yourself and make some changes to break the pattern. This is what we are doing." He goes on to say that when the cash flow is stabilised, Crest intends to rehire some of the employees they are letting go and hire new ones as well. This though will take some time. Meanwhile, the studio has finished all its pending commitments in the third quarter of FY13 and from January to October 2013 it will focus on the restructuring exercise.
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The studio till now focused on Hollywood productions (for in house productions and outsourced projects). Since there has been a substantial decrease in the quantum and the financial value of projects outsourced by Hollywood majors to India, it is evident why Crest has been hit hard. Seemha Ramanna, chairperson and managing director. Crest Animation Studios explains, “With the slump that hit US in 2008, a lot of the media entities got hit and we were one of them. However, we continue to be in the business of providing high quality CGI products and services to the global markets. In addition we also intend to enter into new business avenues wherein we can leverage on our capabilities and capacities."
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Crest has identified three areas which it would seek expansion into – visual effects (VFX), simulation and education. While the studio already does VFX for its clients, the areas of simulation and education will be explored as new revenue streams. Apart from cutting costs and restructuring the company, Crest is also in talks with investors to raise funds. In India, it will be looking at raising debt funding, in the US, it is in talks with private equity firms.
While Ramanna refused to comment on the matter, sources reveal that the studio is also in talks with Chinese studios to partner for their next production Norm of the North. The movie which was slated for a 2014 release ran into trouble when one of the financiers backed out. Crest intends to get the project up and running for a 2015 release. Ramanna however did concede that she was not averse to being part of a bigger studio, if the deal is suitable to the conditions put forward by Crest. The studio currently has a three picture deal with Lionsgate in the US where the latter distributes its animated feature films in North America since 2008.