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Saregama India Ltd
Earnings Call Analysis
Q1-2025 Analysis
Saregama India Ltd
In the first quarter of FY '25, Saregama India Limited reported an operating revenue of INR 205 crores, marking a substantial year-on-year increase of 26%. This growth is consistent with their projection of a 30% revenue increase for the entire fiscal year. Importantly, the company maintains a robust EBITDA margin of 33%, indicating healthy profitability within its operations.
While the music segment showed a 7% increase in revenue, there was an expectation of higher growth, attributed to the introduction of artist management as a reporting line. Saregama emphasized that when aggregating music licensing and artist management, the growth trajectory is on track to achieve the guidance of 25% to 26% for the financial year. Recent successful releases, such as 'Tauba Tauba' from the movie Bad Newz, have dominated music charts and highlight the company's competitive edge in the market.
Saregama is actively investing in new content, with content charges increasing by 48% year-over-year to facilitate this growth strategy. While these investments may lead to a short-term margin compression, the management expects this to stabilize over the next 12 to 18 months. They have a long-term outlook, aiming for a payback period of five years for content investments. The management believes these upfront costs will yield significant returns in subsequent years.
The company is witnessing strong performance not only from traditional channels but also from digital platforms. The total internet footprint controlled by Saregama and partnered artists stands at 262 million followers across various channels. This diverse reach positions them favorably to capitalize on digital advertising revenue, anticipated to grow around 15%. Saregama aims for the licensing vertical to double its revenue within three years, with a focus on capturing a significant share of new music releases.
Looking ahead, Saregama projects a compounded annual growth rate (CAGR) of 30% in revenue over the next three years, with an expected doubling of profit before tax (PBT) over the next 3 to 4 years. The management firmly believes that rigorous investment in quality content will not only drive revenue but also enhance profit margins. Their focus remains on leveraging existing intellectual property (IP) and building a sustainable entertainment ecosystem.
Despite robust revenue growth, some concerns have arisen regarding the volatility in margins, particularly within the music segment due to mixed performance in revenue streams and the strategic move to invest significantly in new content. Earnings from artist management are expected to contribute steadily, with a projection to reach breakeven by the end of the fiscal year. The management is committed to ensuring higher profitability margins, projecting future improvements even amidst current investments.
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Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Results Conference Call of Saregama India Limited hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Pulkit Chawla from Emkay Global Financial Services. Thank you, and over to you, sir.
Thank you, Neha. Good afternoon, everyone, and welcome to the Q1 FY '25 earnings call for Saregama. From the management, we have with us today, Mr. Vikram Mehra, Managing Director; Mr. Pankaj Chaturvedi, Chief Financial Officer; Mr. Saket Shah, Group Head, Investor Relations and ESG Reporting; and Mr. Pankaj Kedia, Vice President, Investor Relations.
Without any further delay, I shall now hand over the call to the management for their opening remarks. Over to you, Vikram.
Thank you, and good afternoon, everyone. This quarter saw operating revenue of INR 205 crores and PBT of INR 51 crores. Our revenue is a 26% increase over the last year and is in sync with a guidance of 30% revenue increase in financial year '25. Our EBITDA increased by 9% and is currently at 33% of the revenue, which again is in sync with the guidance that we have been giving for our adjusted EBITDA.
As always, I will request you to evaluate us on a rolling 12-month basis and not on a quarterly basis. I said this when we had a great quarter 4 last year, I'm saying the same thing when we have in this quarter. On a full year basis, we are confident that we will end up meeting all our guidances that we have given to the market.
Let me start as always with the first vertical, music. If we look at numbers right now, there seems to be an apparent drop in the Music segment revenue. I just need to clarify that actually, there is no drop. What you see is on account of Carvaan numbers also being there, I can give you comfort that the music revenue, which is a combination of music plus artist management, is on track to achieve our guidance of 25% to 26% growth in the financial year '25. We don't see any problem there.
This quarter saw a release of our song, Tauba Tauba from the movie Bad Newz. This song has topped every possible chart in the country, from Spotify, Instagram, Radio, YouTube, you name it, and we're there. It's Spotify's #1 song in India since 9th of July. In fact, it's on YouTube Music videos is global #1 music video on YouTube since last 28 days today, the 29th day. As I talk to you, #2 and the #3 from also on the YouTube global list actually belong to us.
The other songs of Bad Newz, Jaanam and Mere Mehboob are also part of Spotify top 50 charts for weeks now. We also saw the release of Prabhas, Amitabh Bachchan and Deepika Padukone's movie Kalki 2898 AD. Just like the movie, the music is very well and has topped the Telugu charts. Other big album this quarter was Movie Mandakini, whose song, Vatteppam topped the charts in Malayalam language. In non-films category, company released songs like Morni by Raftaar, who's a very, very big rapper. Kaala Chashma Laga Lijiye by Neel Kamal in Bhojpuri; Piyu Maano Maru by Kajal Maheriya in Gujarati; and the devotional song, Suno Krishna Pyaare by Swati Mishra, and these are some of the names that have taken. Overall, we released 330-plus original and premium recreation songs across multiple languages, which includes Hindi, Bhojpuri, Gujarati, Punjabi, Tamil, Telugu, Malayalam, Marathi and Bengali.
Our lineup for the next 12 months is all in place, where we have the music or some of the biggest trends of the year. We have just released in the month of July 2 songs from the next movie called Stree 2. Both of the songs are doing extremely well. One of them is global music video #2. And the third -- second song is global music video #3 on YouTube Music video charts. That means global #1, #2 and #3, all belong to Saregama today.
Some of the movies which are going to get released in the next few months, are Dharma production's Jigra which stars Alia Bhatt; [indiscernible]; Tamil fantasy film, Kanguva, where Tamil superstar Surya is acting; Mammootty's, Bazooka in Malayalam; Kannada superstar Sudeep Kichcha's film. As shared with you in May, this will be the year where we start the journey of future-proofing our company by investing in newer content. It will also be the year to start the process of moving Saregama from being the #2 label to the #1 label of the country. This means this is a 3-year period right now, where we will buy big in terms of content, but we will always buy smart so that we have one of the best ROIs in the market.
This quarter, we charge-off on account on new content has gone up by 48% year-on-year. We are currently in a transitional state where our new content expenses are going up in a step-function manner, resulting in the incremental revenue just about matching the content charge-off. Over a period of next 18 months, this will stabilize. And the content investment going up will start going up linearly after that and not in a step function.
And the additional revenue that we'll be generating on account of the content we will be taking over these 2 years, and the new content that will pick up, will far exceed then the charge-off that will start coming in because the content investment will go up in a linear fashion and then, which means the profit should also start rising up in a steep fashion.
With all this content and -- all this investment in new content, we maintain our guidance of a 5-year payback period. That means whatever you spend today across all languages, at maximum 5 years, we will get our money back and then we have anything between 55 to 75 years to make money from that content.
This quarter was the last one with the base effect of freeze streaming moving to pay. We had 2 of our partner platforms who had contributed revenue on the free side in Q1 FY '24, which from Q2 onwards completely moved behind the paywall. But this impact gets over from Q2 onwards, we will not have this impact any longer on our books.
On YouTube revenue front, quarter 1, saw some pressure on account of most advertising actually being -- moving to -- coming from the political advertising or it was IPL advertising. June onwards, we started seeing very, very stable growth. As we go forward in the year right now, we see the numbers looking good.
Overall, we aim for the music vertical, which includes licensing as well as artist management to grow its revenue by a minimum 26% during the year. Artist management, the new vertical that we have under music, their artists are made popular through our IP releases, which may be music or short format films or longer format films. And then we monetize these artists by booking them for live events, weddings and brand endorsements, and Saregama gets a share of their money.
During the quarter, 30-plus new influencers and music artists were added, making our overall portfolio upwards of 150. These artists between them have over 100 million followers and subscribers on Instagram and YouTube. As the investment in newer content goes up, these artists are going to become bigger and bigger.
The most pessimistic estimates also on digital advertising growth are giving a number around 15%. A large amount of this money is going to flow down to -- on content which is riding on the digital platforms. And with the might that we people have between our own content and the content which is created by the artist whom we are managing, we believe we will have a very strong position to grab a lion's share of their advertising budget, both on the music side and more importantly through Pocket Aces, Clout, we believe right now, we will be having a clear #1 position here.
Two of the artists on the met side released their songs. They were Arjun Tanwar's song, Banjaare that was launched, and Maahi released his second song, Jaadugari. Net-net, with a stated goal of acquiring 25% to 30% of all new music releases in India, the licensing vertical should double its revenue something between 3, 3.5 years, which is 25% to 36% growth year-on-year. And this entire investment is going to be funded through our internal accruals or the QIP money, which is lying with us. No additional investments are needed -- no additional fundraise is needed.
Let me now shift to the video vertical, where we make films under the brand name Yoodlee, we make digital CDs under brand name Dice, which blocks the Pocket Aces, short format content under FilterCopy, Nutshell, et cetera, and TV serials for Sun TV. The explosion of smartphone ownership and cheap data are the biggest driver of this vertical. We are still in very early stages of building this business. We believe over the next 5 years, we should be able to grow this business at 25% CAGR.
Please remember, every time we look at video, video has to make money on its own, and we are all very clear about it. But we should also keep in mind the amazing amount of impact it has on the music business. It allows us the music that -- it allows us, firstly, content guarantee. Since most of our competitors also have a video arm, we never want to be caught in a position where it becomes difficult for us to acquire content from the market.
Secondly, the content that is the music, which is put in a Yoodlee film, ends up giving us a much better ROI than something that we're acquiring from the outside, obviously, because we have complete control on what music and what singers are involved in that music.
This quarter saw a release of 2 of Punjabi films, Gippy Grewal's Shinda Shinda No Papa and Ni Main Sass Kuttni Part 2. Quarter 1 also saw the release of Bada Sheher Choti Family, our branded web series with Maruti as a principal sponsor, which was released in FilterCopy. Agra Affairs, a Dice creation was delivered to Amazon Mini TV. And Gobble had a web series called Carpool Biryani, which was -- had the backing of the sponsor Thumbs Up.
In the last few quarters with various consolidations that are going on in the media sector, there is a little bit of uncertainty on the digital platforms and TV channels. We believe all these things should sort themselves out over the period of next 12 months. And the market is, once again, going to have a lot of hunger with more and more of video content, both on the film side as well as on the short and long format video content.
On the live events side, we started the Dil Luminati tour of Diljit Dosanjh in Vancouver with a record-breaking turnout of over 50,000 fans. Overall, 11 concerts were held in Canada and U.S.A. Multiple shows are planned in India and UAE in the coming quarters. We also launched That’s So Viraj - With Friends, a live comedy show with a Clout exclusive artist called Viraj Ghelani. These are great examples our synergy is being drawn between various verticals of Saregama. So that the overall result is much greater than the sum of individual parts.
Two of the shows were held in Mumbai and now we are planning the shows internationally also. As shared in the past, events business is a very high revenue, low margin but a high IRR business. So in quarters where there are a lot of concerts, it may make our EBITDA margins look a little low. But the fact is very little capital gets locked in events business, and that also for a very short duration, which results in a very high IRR for the business even though the margins are less. A typical scene is that if a concert is happening, our actual money is getting locked for anything not more than 15 to 30 days, and more often than not our ticketing partner ends up giving us an advance, which takes care of the investment that we have to make initially.
As for Carvaan is concerned, we have rolled out a new retail strategy whereby we'll be selling this product only from e-commerce and modern trade stores. This entire thing is getting rolled out in various parts of the country. Over the next few quarters, we will start getting out of the individual stores. While our top line -- while the number of units sold of Carvaan and hence a result in top line will shrink on account of we getting out of the retail store, we believe our profitability margins are going to improve through better control on the cost structures, which were directly attributed to the physical distribution.
As promised earlier, from this quarter onwards, we have started sharing the Carvaan revenue number separately. This quarter, Carvaan revenue was INR 24.7 crores, which is a significant drop over quarter 1 financial year '24 fall.
If I look -- talk a little bit long term, over the next 3 years, we will be investing over INR 1,000 crores in new music content. This will not only contribute to immediate growth, but also put the company on a long-term growth path. And this is something I want to reiterate. I said it many times. We've always had the option to be happy being a music-only, catalog only company and drive very high margins. And yes, the margins can be very high if we continue only being that.
We believe that's not going to prepare the company for future. We are making these high margin because we made the investments 30 years ago on the catalog content. Similarly, we have to make investments today, so that 50 years down the line also, the company remains relevant and remains as one of the most successful entertainment company you've ever seen in India.
Also, we don't want to be dependent ever only on one vertical. And in today's digital environment, all verticals are feeding off each other, events feeds off music, music feeds off films, films [indiscernible] to promote artists, and the same artists are then going out there and performing in events. So for us, there's a lot of synergy we believe we can drive of each other. And you will start seeing the impact of this over the next 2 to 3 years.
At the consolidated company level, we expect revenue, excluding Carvaan, to grow at a CAGR of 30% over the next 3 years and PBT to double over the next 3 to 4 years. On the EBITDA side, we maintain our adjusted EBITDA guidance of 32% to 33%. With the strength of what we -- the IP that we people own, a long-term strategic thinking, adequacy of capital on our balance sheet and a fast-growing digital footprint. Today, just for your information, we people have direct or indirect controlling 262 million follower Internet footprint between various channels of Saregama, Pocket Aces and the artists that we people manage. Strength of all this will ensure that we will be successful in our aim to become one of the biggest and on the most profitable IP company from India.
Thank you, and we'll be happy to take questions now.
[Operator Instructions] The first question is from the line of Kavish Parekh from B&K Securities.
So at the start of the call, you alluded that the music business needs to be looked at on a 12-month basis. Even then music revenues are up only 7%, further margins too have been volatile. So what explains this, sir? What led to the sharp fall in margin -- music margin this quarter? And secondly, any color on the performance of Pocket Aces? Numbers suggest that Pocket Aces is now close to breakeven. So is that the right understanding?
So let me answer Pocket Aces first. End of the year, you will find Pocket Aces at a breakeven level. We are not there yet, but we will be there before the end of the year. Regarding on the first one, when you're, please, looking at our music revenue, you have to combine music and artist management, that's all music here.
On a combined basis right now, basis, the people have been growing at over 23% year-on-year, and we will -- this year, in fact, our guidance is that we will grow at 26%. You had a question on the profitability. Please remember, at the moment, we started investing more and more on the newer content as stated earlier, the increase in revenue in the initial year was just about match the charge-off that we will end up taking on the content, give it another 18 months, post which the impact of the revenue will be far higher than the charge-offs that we'll be taking. And you will be seeing profitability also start moving at the same level as which revenue will be going up.
Right, right. Just as a follow-up on the artist management vertical, revenues from the same have started flowing in only 3Q FY '24 onwards?
No. They started reporting them separately now. They were earlier part of the music vertical. .
All right, all right, all right.
The next question is from the line of [ Yash ] from Stallion Asset.
Just got one basic data-keeping question. How much revenue comes from YouTube and Instagram for Saregama across all the segments?
I can't give you specific platform level information, it's confidential in nature.
Okay. Okay. But you just directionally, would it be like a majority of your revenue? Or are there other streaming platforms that also contributed? Or is it more diversified? That's what I'm trying to understand.
We don't have dependence on any 1 platform or 1 partner to that extent. YouTube definitely is a large enough player right now, but so is the streaming platforms like Spotify. So a short format platforms like Instagram and so are the big television channel networks who end up taking a license from our side.
So are the societies from whom we end up getting money typically in quarter 4 of our. So we are -- we have very consciously worked in a fashion right now that there is not overdependence on any 1 player.
The next question is from the line of Jyoti Singh, Arihant Capital Markets Limited.
Sir, my question is on the event side performance. If you can shed some light and also impact on revenue coming from the Diljit Dosanjh concert that was held in U.S. and Canada in Q1. And third, sir, just wanted your view on the influencer side, like we are focusing to advertising through influencers. So like a lot of focus RPSG Group to go with the influencers. So this will going to be our strategy for most of the group companies that we are doing?
Let me see, I'm in a position only to comment on Saregama. When we look at influencer, we very strongly believe that in the days to come, more and more younger people prefer following their local influencers that they look up to rather than only the top cricketers or the top Bollywood actors. People go by the brand recommendation made by somebody they can relate to rather than only a movie idle. And brands are recognizing this. So more and more brands don't want to work with the influencer. We understand that reality. Hence, we want to build that vertical up. The key challenge is anybody can tomorrow start representing influencers. Why we are unique because we are the only influencer management company, which also is in the business of creating content.
Hence, the influencer who signs with us, we can make the influencer that much bigger by giving them chances to appear in our music videos or give them chances to appear in the video content that we are creating for a FilterCopy or a Gobble or a Nutshell or a [ Yoodlee ]. So that's our overall strategy on the influencer. Once the influencer becomes big, whatever money influencer makes through brand endorsements, through live performances at weddings or any other mode right now, we end up getting a percentage share of that revenue. This is as far as the influencer part you asked.
On the event side, remember the nature of the business is that you invest some money for a very short span of time, concerts typically don't require long gestation periods. If you -- if a concert is happening right now in the month of October, you -- typically, we end up putting our money right now only in the month of August. In the month of September, we end up getting advances from our partners who may be doing the ticketing for that show. So the money is locked for a pretty limited time. October, the deal gets over, money is back, brand money is also in. So the money -- the same money can be circulated 6x -- 8x during the year. Hence, on the margin side, it will always be single-digit margin, mid-single-digit margin kind of number.
But on the IRR side, it becomes triple-digit IRRs if the money is deployed properly. Hope I've answered all your questions.
Yes, sir. Sir, just one more thing. As we are now focusing more of launching younger generation singles. So what your comment on that side like because it will be lesser in cost. So it will obviously going to help us to reduce our costs. So how it will go into benefit for us?
So it will benefit us, but maybe the reason that you're given may not be right. So what happens when you work with very big artists, you end up paying a large amount of money to the artist, but the marketing requirements are lower, because artists is already very well known. When you're working with younger artists, the artist fee is practically 0, but the marketing fees are very, very big because the artist needs to get established in the market first.
Our strategy of investing in the newer artist is that not only do we want to make money from the songs that the artists are creating. But if the artist becomes big, the artist will get invitations to perform in weddings or corporate functions or brands will like him or her do brand endorsement. We will also get a share of that money. So unlike your big artists where you make money only from the songs, with the younger artists, the risk is higher, but the monies can be made both from the song as well as from the fee that the artists will be making.
The next question is from the line of Lokesh Manik from Vallum Capital.
Just 1 question from my end. The music revenue this quarter was at INR 140 crores versus INR 149 crores June of last year...
It's not INR 142 crores. It's INR 142 crores, plus INR 62 crores -- INR 16 crores, so it's INR 158 crores.
INR 158 crores.
Artist management always have to be seen as music, please. I've been stating this. When we were adding the artist management vertical in a separate reporting and this is going to happen, please -- because artist management is nothing but music.
Fair enough. So my question was even if you see INR 157 crores versus INR 150 crores, and we had a content charge last year at INR 18 crores for this -- the June quarter last year. So are we not seeing the throughput or there's nothing much to read into this...
Nothing. My only part, which I said earlier also, when you're comparing INR 158 crores versus INR 149 crores number, also keep and see us include Carvaan revenues on both sides and Carvaan actually has seen a decline in this quarter, a reasonable decline in this quarter. Music licensing revenue, which is a combination of music and artist management, on its own as a vertical is very steady. But I'm continuing with my guidance of a 26% growth during the year.
Fair enough. So far to move Carvaan, then this has actually grown because Carvaan was there last quarter. And it's not there this quarter, is that right?
You will see end of year a 26% growth, please -- even if the quarter news is very good or very bad, ignore it. See us either on a 12-month rolling basis or a 12-month future basis.
No -- that's why I'm comparing 12 months. So I was just comparing it to the content costs that we incurred last year to just to gauge if we're getting the figure. But I do not include the Carvaan numbers, so -- or exclude the Carvaan numbers, so probably that may be the reason why the discrepancy arise. Great. That's it from my side.
The next question is from the line of Pulkit Chawla from Emkay Global Financial Services.
Vikram sir, my first question related to YouTube. So just wanted to understand the impact of realizations on YouTube compared to, let's say, sequentially, you did highlight there has been some decrease because of diversion of advertising funds annulated. Approximately what proportion of the YouTube views that you typically do report? Is that on the Shorts platform?
So on the reporting side, a large significant amount of views are coming actually from the [ Shorts ] platform only. Since [indiscernible] right now to start reporting all views, that's why earlier days, we never used to report Shorts, fixed fee deal. And UGC on YouTube is a variable deal. Your question broadly, so maybe I've answered it. Maybe I have not. Tell me what exactly do you want to know?
So I just wanted to understand, you mentioned about, let's say, because our YouTube views have actually gone up this quarter on a sequential basis, but there seems to be some weakness on a realization basis [indiscernible] basis.
So on April, May combined, and that was more of a little qualitative statement, April, May combined we saw more advertising money which we are flowing on new stuff because of elections and then on IPL, which happens every year. And every year, April, May, they are not so tight, but April, May are tight because most big advertisers want to advertise on IPL and nothing else.
And this is what was expected, and I had said this in my last quarter's analyst call also. And June became completely stable, and we were back to normal rosy days and July has been going very, very steady for us.
Got it. Second, on the event side, this quarter, you had 11 concerts with Diljit in the U.S. Canada, but revenue obviously doesn't seem to be that high if you're comparing on a sequential basis. And you did highlight that you've had a relook at the entire strategy last quarter. So is that -- if you could throw some light on that?
So on the events business, can you just be a little bit more specific, Pulkit. What is the exact information...
So you're exactly -- you've done around 11 concerts with Diljit, right? But I think if you look at the revenue on a sequential basis, there hasn't been too much of an improvement also. And you did highlight in terms of your -- you had a relook at strategy, right, last quarter. So just wanted to have some color on as to what the -- what the new strategy has been in the event side?
It all depends on how we are structuring the entire event. While we take care of the -- lease entire event, the revenues that we realize depend on what kind of structuring is being done on the entire event because these are being done overseas, and we've got different partners managing different events in the shows. So yes, you will see event revenue.
So the event revenue in U.S., the way we have treated it right now is very different from the deals that we have in India. India, we are managing it 100%. In U.S., it's an easy call to go out there with a local partner. And we people ended up taking right now only our share out of it on the profit side. We didn't want to take a risk of such a large revenue coming on our books.
Got it. Yes, that's helpful. And my last question is on the artist side. I mean, given that you've reported, let's say, low single-digit margins for the couple of quarters that you've reported your numbers, where do you typically see medium-term margins trending towards in this particular segment?
See -- on artist side, typically, the best margins that you can end up doing -- artist -- firstly, remember, there's no capital that artist management takes. Artist management is literally in a way right because all the capital is on music. Artist management on its own, apart from having a team, there's nothing else that people are spending there. Typical margins on the music side of artists can vary anything between 20% to 30% to 40%, while on the influencer side is between 15% to 20% is the gross margin, you deduct the expenses of your team members out there. So that's a range you are going to be in unless you have a breakout artist coming out. Remember, this is whatever we make out there as straight as additional money that we are making because there is no cost.
Our next question is from the line of Dheeresh from WhiteOak Capital Management.
Just for clarity, the -- in Pocket Aces, revenue is being partly reflected in artist management as well as in video. Those are the 2 places where it is getting reflected, right?
You're right.
So when you say that INR 16 crores, so you said music is INR 142 crores plus INR 16 crores. So this INR 16 crores which you're carving out now, in the base quarter, June '23 quarter, how much would have been the artist management?
So artist management today is a combination of what we people are doing with -- in Pocket Aces. And in Pocket Aces also there are music influencers and acting influencer as well as the artist management that we are doing within Saregama. So it's a combination that you are seeing in out there.
Correct. So the INR 16 crores this quarter is a combination of your legacy artist management and the Pocket Aces artist management, right? In the base quarter, June '23, you would not have the Pocket Aces artist management, but you would have your existing base legacy artist management. So that legacy artist management in the base quarter, if you can give a ballpark number to that extent?
Let me not get it with that much of detailing at this moment. See, again, if the objective is to understand that is the music business growing at the pace at which management had given the guidance. I'm holding my commitment that we are on track for a 26% year-on-year increase on the music business, which is a combination of music licensing and artist management.
But without artist management, the music licensing itself also should be in 20% plus, right? Because before we had acquired...
There's no without -- it's the same business for us. It just that there were so many questions coming on artist management. So we said we start reporting them separately. It's the same business. At the end of the day, those artists are appearing in my music videos. So there is -- and we are taking risk by having the same artist appearing in 3 of my music videos or singing 5 of my songs. So the revenue I'm going to make from it right now is also a music revenue. So we are very clear. It is a music-driven business.
Okay. And just -- I mean, I know there is some variability quarterly, but compared to the other industry peers, why is there so much deviation in the quarter-on-quarter performance?
See, it will be nice right now -- I think in the corporate -- quarterly presentation, again, we have given the quarter numbers for the last, I think, 12 or 13 quarters. And the nature of our best is this. One, there's advertising revenue, which is highest in quarter 3 is typically a lot dependent on advertising revenues. Two of my -- both on the video side as well as on the music side, a large contribution is a percentage of the advertising revenues, which is seasonal in nature.
Second, overflows nature, the way our deals on, we have told you in the past also, the way our deals are -- there are minimum-guarantee deals with potential for overflow. Minimum -- in those kind of deals, we book revenues basis only the minimum guarantee value unless -- and overflows come when they actually start hitting us once we exceed the minimum guarantee. And these deals at times are allowed to live for the entire period of 2 years, sometimes get renegotiated because of various reasons earlier. So the moment we're renegotiating the deals, overflows are going to get booked. So whenever you're looking at us, please look at us on a 12-month basis.
The next question is from the line of Swapnil from JM Financial.
So my first question is with respect to your Carvaan revenue. Could you give a sense as to what was the Carvaan revenue last year same quarter? .
So those -- see, we have started sharing those numbers from this quarter onwards, you have the number for the last full financial year. It will be easy for you to make an estimate out of that. We have seen a decline in this quarter, I will acknowledge that. We have cut down our retail network dramatically, and we will keep on cutting it down over the next 2 quarters. By the time we people end this financial year, it will become only e-commerce and a modern trade product.
Okay. Okay. Got it. The second question is with respect to a multiyear deal that one of our competitors have signed with a global music label, which I think is helping them get better rates from global OTTs. Have you thought on those lines, getting in those kind of deals where we align with some global music label and...
I will not comment on competitor. Let me tell you our strategy. We, as a company, want to be taking this as a company looking for 20, 30 years ahead. The whole reason we're investing in newer content is the same. And similarly, the rationale that our fortune should be in our hand, whereby we build relationships with each of the individual platforms rather than for a guaranteed amount of money handed over to some other labels. That means, I will have no understanding in future how Spotify is functioning or an Instagram is functioning. We don't want to be caught in that particular situation.
Please remember, every step we are taking in this company is not looking for just the next 12 months. We are looking at anything between at least 5 to 10 years ahead. And saying in the base where there will be a limited number of platforms, there should be enough competence sitting within Saregama that we know how to read data which is coming in. A good example today is on a daily basis, my team comes to note every -- every 150,000, every song, every platform, if there is more than 5% variance in the daily views or streams compared to the last 1 month average and we take immediate actions on this.
All this intelligence that we are building on the analytics side and on marketing issue, the platforms can come only if you have direct relationships. So I often joke to that even if somebody is ready to pay a little bit of a premium, we let go of that. We much rather prefer that we build this competency now and have direct relationship going on the platforms.
Fair enough. That's very well explained. The next question is with respect to how much content acquisition are we planning to -- I think in the cash flow statement, you have shown around INR 47 crores of content being acquired for this particular quarter. For the full year, where will we stand?
We have given an estimate of INR 1,000 crores for the next 3 years. At a very broad level, we are looking at number of anything around a little upwards of INR 300 crores.
Okay. And how much cash would we have on the balance sheet as of today?
Yes. We already disclosed something in excess of INR 600 crores if you see our cash flow statement in the investor presentation.
The next question is from the line of Mayur Patel from 360 ONE AMC.
Just want to confirm one thing, Music and Artist Management segment grew by 6% year-on-year in this quarter. So are we on track to deliver 25% plus for the year?
We will grow music and licensing business of ours, which is music plus artist management minus Carvaan, minimum 26% growth. We're confident we will end up achieving those numbers before the year ends.
Sure, Vikram. Just one more thing. Can I just -- my line was not clear. Content acquisition was INR 27 crores in this quarter, and you're guiding for INR 300 crores for this year. Is it right?
That's a content charge, not acquisition value.
Okay. What was the acquisition value for this quarter?
We don't share the acquisition value every quarter. Like the guidance has been given on the content investment. That's the value of the total content that gets released during the quarter. And the INR 1,000 crores is a number for 3 years, around INR 300 crores plus is a number for this year. We will...
We are on track to achieve this INR 300 crores content acquisition for this year?
For this year, yes, INR 300 crores plus is the target and we are on course to meet it. .
The next question is from the line of Ashish from InvesQ Investment Advisors.
Sir, just 1 bookkeeping question. Would it be possible for you to share the content cost between amortization and other parts of the P&L that has gone in this quarter?
See, the content cost is in different line items. It's part of the advertising costs as well as our depreciation. But to give a full clarity on the charge, we are reporting the entire content cost separately in the investor presentation.
Okay. So what was it this quarter, total?
It was INR 27 crores. Yes. Total.
INR 27 crores?
Yes.
Okay. So sir, I think our policy is of writing off maybe 30% in the first year. So reverse calculation of this would be a right figure to go for the content expenditure that we have booked this quarter?
Not really because the phasing of the content getting released is very important. The marketing gets charged off immediately when you release the content, whereas acquisition cost will get charged off pro rata based on when the content gets released. so if you simply divide by 38%, that will not give you the right number.
Okay. But this will incrementally keep going up over the quarters now because we have started spending on content as [indiscernible] plan?
Four to 5 quarters, you will see this number going up and then stabilizing.
The next question is from the line of [ Pratik Bandari ] from AART Ventures.
Yes. just wanted to understand as to where are we in terms of the revenue for Padhanisa? Have we started generating the revenue for that, the music app?
No, for Padhanisa, it's still right now in a soft launch phase. We are still refining and working on it. That's why there's neither marketing happening out there. There is revenue, but that revenue is more of a soft launch part. So the product, it will require another month or 2 before we start promoting the product.
Okay. And you also mentioned that for Pocket Aces, you have an intent to grow with a CAGR of 25%, and by this year-end, we shall be at a breakeven. So are we still on the same track?
Absolutely.
Our next question is from the line of [ Akhil Gulecha ] from Pkeday Family Office.
So you keep saying that we should look at music and artist management as one vertical, and we will do that going ahead, but we can't look at it this quarter because there was no artist management in quarter 1 of FY '24. So for a like-by-like comparison, we have to look at the music revenue and, it just feels like the music licensing revenue by itself, like excluding artist management, which is an inorganic acquisition. The music licensing revenue by itself has not really grown this quarter. So why is that happening?
So I've clarified it. I'll again repeat all these 3 things. You will -- in the -- when you're doing -- it's not an apple-to-apple comparison if you don't do artist management combination because artist management not only include the artists which are part of Pocket Aces, which is the inorganic acquisition. Artist management also includes the artists, which are Saregama artists, which was part of the revenue in the same quarter last year. That's one.
Second, this music revenue, what you are seeing includes Carvaan also, which has shown a decent decline during this quarter on a year-on-year basis. Issue number 2. So these both are more accounting issues right now than anything else. The third part also have to -- I said this in my opening statement, I'll repeat. Last year, 2 of the platforms which have now moved from free to pay were still free, and we had accounted for the revenue in the quarter. Those all the platforms in Q2 onwards completely moved behind the paywall and the revenues have come down dramatically. We saw the impact of that in Q2, Q3, Q4 FY '24, and as stated, has also been seen in quarter 1 of financial year '25. It's only from Q2 onwards, that impact will completely go away.
Okay. So it's largely because of the shift from free to paid. So you think for the next quarter, that should go away. So music licensing by itself should be on track for 25%, 30% growth.
From Q2 onwards, it's not even part of my denominator.
Okay. Okay. Understood.
Our next question is from the line of Divyanshu Mahawar from Dalal & Broacha Stock Broking Private Limited.
I just wanted to know a broad industry question that, if say, let all these platforms move behind a paid wall, so what impact do you see in the piracy? And is there any change in the payback period happens if all these platform moves to a pay subscription model?
Okay. So let me answer your first one. If tomorrow, we move everything and -- let's talk on markets like Bombay, Delhi and Kolkata and Chennai of the world. If you move everything to pay, where -- and somebody wants to say, okay, I don't want to listen to paid content. Neither do I want to go to YouTube, where will they go?
If you ask a random person today, they don't even know where to get pirated music any longer. So piracy in the larger towns literally has come to -- is dying on the music side. Smaller towns, it's still there, but it's a different kind of piracy whereby the local telecom guy or somebody side load some pirated music on to your phone. That is still existing, it's not dead yet.
But on the larger town, the piracy has come down. So we are reasonably confident that if we people move everybody from a free to a paid side, currently, you have about 185 million to 200 million monthly active users on the free side. Some of them -- they'll move to YouTube, some of them even do side loading. Our confidence, belief is that at least 50 million of those people in the first 12 to 18 months itself are going to move towards the paid side.
Now on the paid side, let's understand how does the math work? Our deals with all the paid platforms is like this: whatever money they make from the customer, say they make INR 100 per month for the sake of simplicity. We will get, on an average 50% of that money as content pool at which [Foreign Language] platform made INR 100, INR 50, he is going to keep, INR 50 we'll give to the content guys, which will get divided equally across all the songs heard during the month.
If the person is a heavy listener, listens to a 100 songs in a month, still every song is now going to be worth INR 0.50. Today, on an average on the free side, we end up making close to INR 0.10. And you may go back and say, okay, he is not a INR 100 customer, he is a INR 50 customer, still we make INR 0.25.
So yes, the realization that all of us as an industry are going to make is going to improve significantly as we move towards paid side. All you need to do is to look at some of the global music labels to understand the impact of paid subscription on the financial health of the music labels.
And second question is, sir, that is are you looking that government is taking a step towards piracy issue? And how do you see this subscription movie going forward in coming years? Means, is it implementing on the ground level?
Government -- we at the industry body, which is called IMI, work very closely both with the state and the central government to bring down piracy. There is a very strong conviction at the government level to kill this concept of parity and get everything on the legitimate side, not just on the music, but even on the film side, if you start -- just check out the stories that are going -- coming out in media very often. Even judiciary is very proactively helping us out as content IP owners to help us control piracy and put the people who are indulging in it behind bars.
Other part, remember, the -- our biggest savior on top of it is technology. If I ask you, you or your family, how do you guys watch and listen to anything, even which video? Chances are it will be an app on your mobile phone or an app on your smart television. Very few people these days actually consume content through browser. In the app world, if we people find out which technology allows us to find out that an app is infringing on our content and giving our content without taking license, we find it out very fast. All we need is to reach out to Google or Apple and seek their help to throw that app out. And both of them are very proactive and helpful in this space.
The next question is from the line of Ravi Kumar Naredi from Naredi Investments.
Sir, operational costs, do you include content cost, contract manufacturing charges, cost of production of film. This cost at higher side, INR 68 crores in this quarter. So what is extraordinary expenditure?
We have the release of films. We have events. We have music also, which is on the higher side. So everything in revenue, which is on the higher side will have the operational cost involved.
Okay. And this segment revenue ended, video, by INR 46.53 crores revenue. So what is not able to gain anything material from this video, what is this?
So as I said, on the video side, we are still in the early stages. We have -- to give you comfort once again, on the capital allocation policy, there's a very strict guideline we all abide by, which is not more than 18% of the total capital allocated will ever go towards the films business segment of our films or series to video segment of ours.
Within that, we people are operating in -- we hope that in the next 12 to 18 months, we will reach a situation whereby we should be able to generate 8% to 10% margins out here and a much higher IRR because most of the times when we are working in this space, that capital has actually come from somewhere else, and we don't end up putting all the capital as our own capital. That's what the endeavor is on the video side, sir.
And sir, now we reached 70-plus films in our database. So what is your experience, which you want to share with us now? 70-plus films we are having in our database.
As we people go forward right now, future strategy remains that we will be investing only in regional cinema. We are not making direct to digital films. We make only regional films that can be taken to theater. The financial discipline is that 70% of the cost of production should get recovered before the release of the film by licensing the TV and the digital rights of the film.
The music that we end up getting out here right now is in music on which we have far better control and hence, we get higher ROI there, which are sitting out there on the music side. On the video -- on the serial side, we continue with our strategy at Pocket Aces that we will make content only once we have a pre-licensing or a pre-commissioning from any of the bigger digital platforms.
Right, right. And sir, lastly, Rocky Aur Rani Kii Prem Kahaani movie, we are -- anyone made and we have attached with that movie. Any such -- in future, we repeat the same performance?
Just for your information as this juncture, along with Rocky Rani, there was one more movie called Zara Hatke Zara Bachke. Zara Hatke Zara Bachke has done even better than Rocky and Rani in a relative sense because it was a cheaper movie. And Bad Newz, which is the movie just got released, this is the first time that any -- apart from -- there's another movie, which was a competitor movie last year. Apart from that, this is the first movie whose song has remained a #1 position, both on Spotify and YouTube for 29 days globally. So you're not -- yes, our performance may not be Rocky Rani because it's better than Rocky Rani. We are very proud of Rocky Rani and Bad Newz is also Dharma only. So you will continue seeing good selection of very big movies, more importantly, movies whose music has a lot of potential to go out and survive. Kalki is another very good example. Kalki has done a very big in theater -- the biggest movie of the year. And the music was ours and music has also done very well.
Right, right, right. And you are doing Vikram ji very hard work. We wish all the best, sir.
Sir, hard work -- I keep on repeating this, and I want to say to everyone, listen, we have an option to look at only a short-term profit strategy versus preparing this company for 20, 30 years down the line. We are very clear, while we keep an eye on today's profit, but actually, we are preparing this company for tomorrow.
The next question is from the line of Rohan Advant from Prad Capital.
Sir, I've understood your guidance up to the adjusted EBITDA level. We don't have the content charging cost, which was [ INR 86 crores ] in FY '24. Can you broadly guide us on based on the acquisition that you plan in this year, what would that content charging cost be in FY '25?
So the content charge will be pretty high in FY '25 because the total amount of content investment we are doing in FY '25 is going to be 50% higher than what we did in FY '24. So that's a straight that we have a large enough impact coming on content charge-off.
So at those PBT level, do you expect to grow in FY '25?
Sir, the growth will be there, but the growth is going to be much lower than the growth which is coming in revenue because the charge-off is just about going to -- in the -- I said this earlier also, as we are starting this process of doing large investments in content, for the next 18 months or so, that is 6 quarters or so, you will have the situation whereby the revenue will grow at a steep enough pace, PBT is not going to grow at the same pace, but -- after that, PBT growth is going to become much faster.
we are confident that on a 3-year -- between 3 and 3.5 years, we should be able to double the PBT that we wrote in financial year '24.
Got it. And sir, secondly, on the paid versus free. If you look at Jio and Wynk, which are owned by telecom operators, where they bundle their offering, do you think they're ever going to get -- turn paid?
Sir, you said in Jio and Wynk case, what? I'm not clear about...
They're owned by telecom operators, right, which where they would be bundling their services with other offerings, right? So I mean, does it make sense for them, I'd say, unlike a Spotify, like does it make even sense for them to turn paid or they are likely to remain free forever from a customer's perspective because it's bundled with some other services?
They are paying -- so the question is, are they ready to go back and keep on incurring large losses on this particular app. There may be other things that they can bundle, content is not cheap. So I am reasonably confident that all these concerned people are smart businessman. Also remember, when you are streaming a song, the amount of data consumption that happens is not very high, it's not video. It's audio at the end of the day.
So the benefit they may end up getting to -- on the data consumption side is there, but it's limited. So I'd like to believe that the telecom-led OTT platforms are also going to make move and you are looking at around an 18 months to 24 months maximum, all the -- the 3 big platforms also moving behind the paywall. There is already a lot more work happening in this space than it used to happen on the earlier -- a year back. And we are seeing that impact coming out there on the subscription revenue. The base is very small. So the percentage of growth look very, very big, but for me [Foreign Language], it's that stage, I'm very confident that we'll have a large subscription fee growing there.
The next question is from the line of [ Govindarajan ] from [ CSIM ].
Sorry to interrupt you, sir. I request you to use the handset please, we are unable to hear you.
Yes, can you hear me now?
Yes. Yes. .
My question, I mean, this has been asked many times on this call on the Music segment. See, we have 3 subsegments in music, the licensing to OTTs, the artist management and Carvaan. The artist management is a relatively new one. Last year, you did INR 20 crores, of which INR 13 crores in the fourth quarter. It's very hard for us to make any sense of how this year is going to be? If it suddenly comes into revenue base, and we have no idea of what the seasonality of the business is, how much of the growth from music, you've guided 25% growth. But would it all come from artist management because it's a very, very different margin profile. And I think that's the reason people are asking again and again, right? That licensing is a very high-margin business. Artist management is mid. You're seeing single digits, Carvaan is probably breakeven...
Margin profile of the music vertical at the gross margin level is not going to change.
Yes. But I mean, we would still -- it will still be useful if you tell us, a, how music licensing -- pure music licensing grew in the first quarter. And how you expect that to grow in the full year?
So it will be unfair on my part to start getting into a quarter part. On an annual basis, it's not just the artist management vertical, right? Our artist management vertical always will be a very small subset of the music licensing. I can do artist management vertical only in non-film music. Non-film music itself is a small vertical. Film music, which is a lion's share of my music business today right now, there's no concept of artist management because I can't plug in my own artist there. So majority will continue coming out there from the pure licensing business alone.
Carvaan will degrow. So on an overall basis, the margin profile is not going to change here. You are looking at between licensing and artist management, the combined number growing at 26% year-on-year. Unfortunately beyond that, it's just too much of detailing, I can't put that out in the market yet. You will start seeing right now these numbers panning out. I'm also maintaining our guidance of adjusted EBITDA at 32% to 33%. I'm not changing that at all.
Okay. One small clarification, you did INR 16 crores of revenue from artist management in the first quarter. Will the quarterly run rate broadly be similar or is there a lot of seasonality?
No. In artist management, there is not that much a seasonality. There is -- so Q3, Q4 will be higher, but the seasonality -- because it's not directly only advertising-dependent, seasonality is far less out here than compared to the hardcore music business where -- platforms where we get a share of advertising money is completely seasonal in nature.
The next question is from the line of Jyoti Singh from Arihant Capital Markets Limited.
My question, sir, on the edited song side that now a lot of influencers and brands are using the song for the promotion on YouTube as well as on the Meta, edited version. So how we realize the revenue of that song?
Ma'am, 2 things. One, if a brand is using our music to promote any commercial interest of theirs, they have to take a separate license. Over the last 3 to 5 years, we have invested a lot in technology, which allows us to track that on any of the social media platforms, if anybody is using a music or a derivative of that music, which means even if using in your voice, Husn Tera Tauba Tauba of Bad Newz and you put out, our system will be able to catch it. And we pull down that post of the brand immediately and then pursue them legally to go out there and take a license from us. .
Okay. And sir, last one more question. A lot of blockbuster movies are there in FY '25 and also recovery in Hollywood. So we are expecting a better year for Saregama?
Ma'am -- we have never grown our top line by 30% year-on-year. This year, we have already projected a 30% growth year-on-year. So we are building it -- as I said right now, we will be -- our revenue is going to grow significantly. The profits we are going to make right now, we will ensure that we invest those profits in picking up newer and newer successful and popular content. So that it's not just 1-year growth story, but it's a multiyear growth story.
Ladies and gentlemen, we'll take this as the last question. I now hand the conference over to the management for closing comments.
Thank you. I'll just reiterate, please always look our numbers on a 12-month basis. We have started an ambitious journey to start investing in new content in a very aggressive fashion. Many of you will recollect Saregama had not invested and/or picked up any new content in the first 18, 20 years of this century. This journey started only 4, 5 years ago where we came back into new music.
We want to ensure that today, if we are making a lot of profits is because we invested in contents of 60s, 70s, 80s, 90s and we'll repeat that. So that we are in 2040 or 2050, we are still the #1 company. Secondly, subscription in music side is coming, subscription on video side is going to become even more prominent as it happened in every other part of the world. That's the time that the people who have got the highest quality IP content, whether on the audio side or the video side, they are the people who're going to benefit a lot.
We will continue our journey right now of building and growing this company at an astronomical rate whilst also keeping an eye that the profits need to be maintained. There will be first 12 to 18 months, where profits may not grow at the pace at which top line is growing. But post that, profits will start growing at the same pace and eventually start exceeding the rate at which revenue is growing.
Thank you, and we expect all help and support and your blessings on this. Thank you.
Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.