In an interaction with Abhishek More, Founder and Group CEO of Digikore Studios
Digikore has always been at the forefront of innovation and technology, in fact, we started using AI in early 2022 when few people had heard about it, states Abhishek More, Founder and Group CEO of Digikore Studios
Can you explain how the VFX business works in simple terms, including how you acquire clients?
Visual Effects (VFX) is the process of enhancing/modifying/adding computer-generated elements to Live Footage. VFX is an important component of any filmed media including films, episodic, commercials and documentaries. We are among the few VFX studios in India audited/approved by TPN, Disney/Marvel, Netflix, Amazon, Apple, Warner Bros., Paramount and Lionsgate. Our clients are Producers / Production Houses who produce content for studios like the above. Securing clients in the Film and television industry is very relationship-based.
Most of the new projects we get are due to the relationships we have built over the last 13 years and also referrals from our existing clients. A client like Netflix sends us new projects almost every month.
Could you provide an overview of your current working capital situation, its evolution in recent years, and your plans for managing future working capital needs, considering the dynamic nature of the VFX industry?
The VFX industry being very labour intensive is highly working capital dependent. Our growth depends on the availability of working capital. The payment terms vary between 30 days to 60 days after delivery of a project and we are carrying costs for anywhere between 30 days to 90 days depending on the project. Employee costs can account for up to 35 per cent to 40 per cent of the costs of a VFX studio. Our working capital needs have also shot up since we are in a high growth phase. We are working hard towards shifting our revenue mix from an 80:20 to a 20:80 subcontracting to a direct project mix which will help us increase our profit margins substantially. This will also help ease our working capital needs.
Regarding your company’s logo registration, how long is the expected registration process, and are there contingency plans if registration fails to protect your brand-building efforts?
The word “Digikore” is already a Registered Trademark owned by us. The Trademark for “Digikore Studios” is under process and the current status is “Formalities Chk Pass”. Since we already own the registered trademark for “Digikore” there is a very bleak chance of us not getting the trademark for “Digikore Studios”.
In what ways has your company incorporated recent technological advancements in the VFX industry, such as AI and real-time rendering?
Digikore has always been at the forefront of innovation and technology. In fact, we are very proud of our progress in staying ahead of technological advancements. We have always embraced and incorporated new technologies before most VFX studios. We started using AI in early 2022 when few people had heard about AI. We are also among the forerunners in the World in Virtual Production technology, a disruptive technology in filmmaking. The company will revolutionise filmmaking with our Virtual Production technology. We are among the forerunners in India in creating Virtual Production sets for filming. Our technology will democratise filmmaking and change the way films, episodic and commercials are filmed.
The trade receivables of your company have seen fluctuations over the past years. Could you clarify the reasons behind these fluctuations, especially the significant increase from March 2022 to March 2023?
The significant increase in trade receivables from March 2022 to March 2023 is because of the following reasons:
- High growth in this period.
- Slowdown in VFX industry from November 2022 to February 2023 which impacted the cash flows of most of our clients.
What do you consider the key drivers for your company's future growth in the VFX industry?
Growth is normally dependent on internal as well as external factors. On the external side, massive content creation industry tailwinds across the globe are fuelling high growth in the VFX industry. On the Internal side, we have invested the last 13 years in building a solid foundation for the company. In this period, we have built very good connections with current and potential clients and most importantly built a reputation as a trusted VFX studio capable of delivering very good work at great prices. We will now be strengthening our presence in the US and Canada by adding some key creative and production talent in that region. This will provide us an opportunity to bid for films and episodic with more complicated VFX needs and hence larger budgets. Our target is to not only increase the number of projects we work on every year but to also increase the average value per project by adding some key creative and production talent in the US and Canada. We will also be increasing our India headcount to 900 employees over the next 24 months. Our target is to achieve a revenue of USD 25 million by March 2026.
With the hiring of key creative and production talent in the US and Canada, we are also confident of shifting our revenue mix from an 80:20 to a 20:80 subcontracting to direct project mix which will help us increase our profit margins substantially. Currently, about 80 per cent of our revenue is from subcontracting where the margins are lower and over the next 24 months, we will shift this to 80 per cent of revenue from direct projects where the margins are substantially higher.
How diversified is your client base, and what strategies are you implementing to reduce dependency on a few key clients?
We currently have over 80 clients across the globe. While the general rule of thumb is that 80 per cent of the revenue comes from 20 per cent of the clients, we have worked hard to achieve 80 per cent of our revenue coming from about 40 per cent of our clients. We understand the dangers of being dependent on a few clients and hence constantly work towards ensuring a good revenue spread between a larger client base.
How do you perceive the current market trends in the VFX industry, and how is your company positioned to take advantage of these trends?
An important development in the VFX industry is the visible shift from traditional methods of filming and VFX to using Virtual Production for filming and VFX. The adoption of Virtual Production is gaining speed and it will be the new norm in just a few years. Digikore is among the forerunners in Virtual Production and our early inroads in Virtual Production have already put us in a first-mover advantage. This advantageous position will result in substantial revenue and profits for Digikore over the next few years.
Given your substantial working capital requirements and a significant portion allocated to employee costs for about 357 employees in the company, how is the dependency per employee? Can you provide insights into the dependency per employee and the attrition rate over the last three years?
With an attrition rate of less than 5 per cent, we are well below the industry average. Employee engagement and satisfaction are of high importance at Digikore. We have a stable and satisfied workforce which is a positive indicator of our culture and operational continuity.
What has been the driving force behind your success?
Persistence, constant innovation and being highly self-motivated. Also, surrounding myself with positivity, celebrating small wins and constant learning. I am a firm believer of the below quote,
“Some men see things as they are, and ask why. I dream of things that never were, and ask why not.”