Valuing art: The role of provenance and auction


D. Murali and Kumar Shankar Roy

Chennai: The French verb provenir means to come from/stem from, referring to the source. Art is perhaps one of the very few asset classes, where valuations depend so much on its source. This explains why ‘provenance’ (pronounced as ‘prov-uh-nuhns’) attains overriding logic. Comparative techniques, expert opinions, written and verbal records and the data from scientific tests are time and again used to help ascertain ‘provenance’ of a work of art. Like accounting, it’s all in the detail.

Sellers would want to discover the ‘real’ worth of a Ravi Varma work based on history, while buyers would look for future promise. Ask Mr M Maher Dadha, Chairman and Managing Director of homegrown fine art auction house Bid & Hammer. “Valuations are arrived at through a process based on evaluation of the different phases of the artist in the past, places of exhibition, price realisations in the past, and the present phase of the artist with regards to the work,” he replies, swirling a glass of wine, as we walk around the Taj Ballroom, Chennai on June 2. Beside us is an ‘oil on canvas’ titled ‘Female nude under shadow of leaf’ by Antonio Xavier Trindade (1870-1935), the most expensive painting among the collection going under the hammer on June 15.

Art value could be driven by aesthetics, but the domestic art market, which is worth Rs 1,000 crore, like any other financial market is not impassive to demand, supply, expert opinion and moods. This is why the role of an auction is vital for ‘value’ discovery. “As such there is no fixed valuation model and the purpose of an auction is to let the public determine the prices they feel the art work is worth – hence, when a work sells through an auction both the buyer and the seller are happy,” Mr Dadha tells Business Line in an exclusive interview done over email. Read on, if art is where heart is…

Excerpts.

Why should one buy ‘art’ as an investment?

In today’s economic scenario, investing in art is not only about investing in aesthetics but investing in a genuine asset class. Historically, art markets have shown lower volatility and co-relation with other asset classes. Art is now considered a reliable option for portfolio diversification.

How big is the art market, globally and in India? Is it growing?

The Indian art market, I believe, is worth more than Rs 1,000 crore. Globally, I have been told it is in excess of $40 billion (Rs 1,60,000 crore). Taking 2003 as the benchmark year from when Indian art prices started escalating, the market has been growing at an average rate of between 20-30 per cent an year.

What’s been Bid and Hammer’s experience with art auction?

Bid & Hammer was established in November 2006. We had our first auction in January this year, wherein we had a total offering of approximately Rs 10 crore (lower estimate). Of that we sold works to the tune of Rs 3.46 crores and 46 per cent in terms of the lots on offer. However, we would have done much better had it not been for the fact that our opening preview coincided with the stock market crash in excess of 2,000 points, on January 21, 2008. Nonetheless, we expect to conduct 3 more auctions this year with the total size of offerings pegged at Rs 30 crore. We hope to increase the number of auctions and the size of the offerings from mid-2009.

Are there valuation models to ascertain art?

Valuations are arrived at through a process based on evaluation of the different phases of the artist in the past, places where he or she has exhibited, price realisations in the past and the present phase of the artist with regards to his or her work coupled with the demand, supply, expert opinion and mood of the market in general.

As such there is no fixed valuation model and the purpose of an auction is to let the public determine the prices they feel the art work is worth – hence, when a work sells through an auction both the buyer and the seller are happy.

Is marketing a problem?

Yes. Like in any other business marketing efforts are important more so when you have just started the business.

What are the common myths about art as an avenue for investment?

Today people think of art as a very lucrative sector. Naturally, new entrants (includes buyers, sellers as well as the ‘artists’) to the art scene have very unrealistic expectations. I am talking about valuations and price realisations here.

Unfortunately, this is justified to some extent due to the speculative tendency prevalent in today’s Indian art market. But any person who wishes to be in the market for the longer term will realise that the art business is like any other business. It requires perseverance and commitment.

Considering that art is creative, are there metrics that help one decide what to invest in?

There is no specific metric and as such the demand and supply determines what sells and what does not. Art is subjective but one can distinguish between good and not so good quality art, but again buying preferences are also based on one’s personal liking and budget, irrespective of the quality of the work or the name of the artist.

We have heard about the menace of fakes in the space. How far is this true?

If an artist has made a name for himself or herself and works are hard to come by or are rare and command prices that are beyond the reach of but a few super rich collectors, it undoubtedly gives rise to production of fakes. However, as an auction house our main job is to try and ensure that no fakes go under our hammer.

Is there a competition between imported art and Indian art, in India?

As buyers the world over, including India, are increasingly becoming discerning and buy art based on one’s social sensibilities, preferences and budgetary constraints, competition is not a matter of concern.

On the converse, how well is our art accepted in other countries?

Westerner’s have had a long standing fascination for Indian art and antiquities and now they are also taking note of modern and contemporary Indian art which is slowly but surely gaining in worldwide appeal.

Where is growth coming from in this market?

As for the growth I think the Eastern markets like Japan, Korea, China etc. will be instrumental components of demand in the foreseeable future.

Are our laws and taxes constricting in nature, with regard to art?

To an extent, yes. The Archaeological Survey of India needs to become more accessible and empathic towards the sentiments and requirements of the art community that is trying to put Indian art on the world map.

Is there a way to bring back Indian antiquities that are housed in museums around the world?

It would indeed be great for the country if this can happen on a big scale. The Government will have a major role to play.

Lastly, a thing that you like to see in art education in the country would be…

Education in art management is one area where Indian institutes need to buck up so as to support the growing demand for professional ‘art business’ managers. Art education in India specifically in terms of understanding and appreciating art is strong but we have to catch up in art management.
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