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Saregama India Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Conference Call of Saregama India Limited hosted by ICICI Securities.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Bhupendra Tiwary from ICICI Securities Limited. Thank you, and over to you, sir.
Thank you, Michelle. So welcome, everyone. On behalf of ICICI Securities, we welcome you to the Q4 FY '23 and FY '23 Results Conference Call of Saregama India Limited. From the management, we have Mr. Vikram Mehra, who is the Managing Director; Mr. Pankaj Chaturvedi, who is the CFO; Mr. Saket Shah, who is Head of Investor Relations; and Mr. Pankaj Kedia, who's Vice President, Investor Relations.
So without much ado, I'll hand over to Vikram, who will give the opening remark, post which, we'll take the Q&A. Over to you, Vikram.
Hi, good evening, everyone. What an eventful year for us. 3 people see this impact of the digital evolution playing out along with our content play. So financial year '23 saw our operating revenues of INR 751 crores and a PAT of INR 189 crores, which basically means on a year-on-year basis, our revenue has grown up by 29%, while PAT has grown up by 24%.
In fact, what I'm more proud of that this is not a one-off journey. If you actually see a 7-year journey, which we have also shared in our corporate presentation, our revenue has been growing at 23% CAGR for the last 7 years now, while our profits have been growing at 59% CAGR.
As always requested all of you people, and I continue requesting, please look at our numbers always on an annual basis and not on a quarterly basis. Our business, unfortunately, cannot be analyzed on a quarterly basis. One, because of the seasonality that this plays a very important role here. Advertising revenues completely fluctuate depending on the seasonality; and second, the accounting treatment of our overflows. We book them whenever the overflows come in. And the nature of advertising and overflows is such that for us, quarter 3 is the biggest quarter, then quarter 2, then quarter 4 and then quarter 1. So whenever you are analyzing us, either do on a financial year basis or on a rolling 12-month basis.
Our growth has been great, but I am very confident that we have still just touched the tip of the iceberg. The digital consumption in our country is not going to stop. It's going up both in terms of more people coming into the bandwagon of buying a smartphone, and also people who have a smartphone consuming that much more content on their smartphone. Content can be anything. It can be audio, it can be video, it can even be gaming. But overall, as people get hooked on to this digital economy, they will end up consuming content connected to a company like Saregama.
We are also seeing more and more people are getting comfortable with the payment economy that sits behind digital. 5 years ago, nobody used to go out there and pay. Today's younger generation is getting more and more comfortable to pay for gaming. The good part is if you pay for gaming, you're going to be equally comfortable paying for other audio or video content, which, from our perspective, looks like a great future. We are both not just advertising-based revenue, but subscription-based revenue may all just kick in, improving the profitability of an IP-owning company like Saregama.
Remember, with technology platforms, fortunes change. For pure-play content IP company like us, our Lag Ja Gale song was a superhit 60 years ago also, 30 years ago also and today also one of top songs of the country. And that's the beauty of audio or video IP-owning companies.
Let me brief you on the status of our demerger scheme, which was approved by the shareholders. The current status is that our application for demerger was heard by NCLT on 28th of April. The pronouncement of the order is still pending. Awaiting the final order sanctioning the scheme, our financial results have been prepared without giving the effect of demerger. Once we get the order, the scheme will be effective, and necessary revisions are going to be made in the financials.
Let me start with the music piece. I think the biggest industry change that I have been talking for now couple of years have started rolling up, which is the movement of streaming platforms from being a free platform to a subscription-based platform. We saw 3 of our platforms during this year, raising their hands and saying and announcing formally that they want to move completely behind a paid wall, which means out of the 9 platforms, 6 platforms are going to be now behind the paid wall.
I have repeatedly explained this, that a song, which is heard by a paid subscriber, is commercially that much better for us than a song, which is heard by a free customer. Globally, if we look at it, we are seeing around 589 million people were paying for music subscription and listening to music that way. In fact, 67% of music industry revenue actually came from paid streaming. That number is very, very small in India. Just imagine if you are making this much amount of money, when paid subscription is yet to take off, what will happen once it takes off and the fines are now there.
There's only 3 platforms that are left right now having turned to pay. I'll again want that in the short run, it will create pressure on all of us. If people go behind the paid wall, you will see the monthly active user base falling in the short run. But on a short to medium-term basis, I see far more money being made by all stakeholders, including the IP owners like Saregama. And since we are sitting on the bulk of the music IP, I think we will have another biggest advantages you're going to see right now of subscription-based economy taking off.
The other thing that works really to our advantage is that we have a very strong catalog in the Southern part of the country, Malayalam, Tamil, Telugu, Kannada. We have seen traditionally, whenever paid subscription has taken off, it's led more by the South Indian state first, and then it starts moving more towards a North Indian states. Since we have a larger share of the South Indian language of content, we believe we'll have a big advantage as India starts moving towards subscription.
Our licensing revenue this year grew by more than 20% for fifth year in a row. And the big driver for this growth has been new content acquisition. The thing which almost sounds unbelievable to most people and at times even to us is that if I look at the financial year '23, 48% of our revenue actually came from music which has been released post 2000. People often call Saregama as a catalog company. I can hardly call it a catalog with close to one -- close to 50% of the revenues are actually flowing from 21st century music.
What makes us even more proud is not just the fact that we are picking up a lot of music in Telugu, Malayalam, Hindi, Bhojpuri, Gujarati, but the fact that we are picking up winners. We are not -- it's not about just picking up songs that are coming out. That's an easy thing. Anybody can do it. It's about being very, very stringent about the -- about how you go over picking up the music.
The investment that we people have made in data analytics, predictive modeling and the entire decentralized decision-taking process, where one person sitting in Bombay at the senior level and not taking the decisions. People who are locally based who and with KRIs in the back-end systems, which are very strong that we can control and evaluate what they are doing, they used to take the help of the data models, which have been created. They are taking the decisions, which net-net result is allowing us to pick winners and performance, which is far better than any of our competitors.
Why should you believe me what I'm saying? It's very easy to claim this. Please go out there and check out my corporate presentation this year. We have actually given data point after data point in each of the languages, showing that how our songs are scoring extremely well in all the major charts that are announced by all the streaming platforms and YouTube. So we have given examples of Spotify charts. We have given an example of YouTube numbers here. Have a look and you'll realize that our content selection is really clicking.
In fact, if I look at YouTube alone, 11 of our songs released in 2022 have already crossed 100 million views on our own channel. Forget that -- these are the same content creating more views right now on user-generated channels, which, in our case, are typically a ratio of 1:2. Our own channel, these songs have already crossed 100 million number. And this is only 2022 releases. I'm not even talking of our older releases. Kishore da and Rafi sahab music is not included here. This is the latest music you're talking about. There's Hindi sitting in there, there's Telugu sitting in out there, there's Bhojpuri sitting in there.
If you look at the subscriber base of all the channels that Saregama have and similarly for all our competition that we did not have the largest subscriber base on YouTube because we did not own too much of video content. In fact, all the content we own pre-2000 is primarily only audio. So we did not have too much of a play on the video side. Now that we are investing in the newer content, which comes along with the video, the subscriber growth rate, not the absolute numbers yet. But the growth rate that the subscriber base of all Saregama music channels vis-a-vis everybody else is complete aggregate number of music channels. We are growing at the fastest rate in the market.
Apart from the work that we people are doing on the way we select music, data analytics, predictive models, decentralized decision-making process, all that being won. I think the other big key is the partnerships we have been able to strike with all the major production houses. I have stated in the past, even while the QIP was being done, that time also, I was asked as a lot that why do we believe we have a chance to win. And I said one of the big reasons is the old partnerships we have with majority of the production houses. We people had procured music from the same production houses, and then maybe their grandfather or the parents of the current generation were working.
And we have been paying royalty to them for such a very, very long time. So there is an innate belief in the fairness with which Saregama deals with the market. What is the net result? Today whether it is Dharma, which is Karan Johar production house or Sanjay Leela Bhansali or Vidhu Vinod Chopra or Mythri which is the Pushpa Production House, all of those people are very, very comfortable now dealing with Saregama and have granted the music of their films to Saregama.
Again repeating, 48% of Saregama's revenue actually comes from music, which has been released after 2000, unbelievable even for us. This year saw us taking the leadership position in new content, and the criteria of leadership is view generated on YouTube through new content. We already are the #1 player right now in Telugu, Malayalam, Bhojpuri and Gujarati.
This year, as we people move for it right now, we plan to take leadership position also in Hindi and Tamil. With multiple big musical films getting released from our side, we believe right now the numbers will swell. If I look at quarter 1 alone this year, you are going to be seeing -- we already released the first song of a big Vijay Devarkonda and Samantha's movie called Kushi, the first song of Vicky Kaushal and Sara Ali Khan's Zara Hatke Zara Bachke been released 2 days ago. We are expecting songs of Ranveer Singh, Alia Butt, Karan Johar movie Rocky Aur Rani Ki Prem Kahani starting from the month of June.
Even if I look at the other languages, this year is going to see big releases, including Ajay Devgn's Maidan, Vicky Kaushal's other movie called Rola, Tamil superstar Suriya's 2 of the films are going to get released this year, music is the [indiscernible]. Malayalam superstar Mohan Lal's Malaikottai Vaaliban or Mammootty's Bazooka. There are big movies, all lined up, all scheduled dates. So you are going to think we're seeing big numbers.
Yes, obviously, there'll be an immediate impact of that on the financials, too, both on the revenue side and the cost side. For that matter, if I look at my quarter 1 this year of FY '24, our content cost may just be double of what we people paid last year, but you will start seeing the impact of that on the revenue also immediately. This is new content, and we talk a lot about new content.
But I also want to share with you right now the amazing work which has been happening on the catalog side. Now this is the older content we are talking about. We have shared this year in our corporate presentation, the revenue growth that we have seen over the last 4 years in all our catalog music bases the decade of their release.
Now why will people go out and listen to the older music? One, we are promoting that older music a lot on platforms, like Instagram and YouTube shots. We ensure many more influencers who are very active in this media end up using our songs in every reel that those people are creating. Many of them are paid, many are free, barter deals, all kind of work is going on, ensuring that the younger generation keeps on getting exposed to this older music.
But even bigger job, which is happening is, we are creating versions of this music, which make this older songs even more relevant to the younger crowd. Now whether it was a Mera Dil Yeh Pukare Aaja, now which became a huge phenomena from 7 months back or Nadiya Ke Paar song write, which is now a huge phenomenon going on, these are -- what these are LoFi version, strap mix version, acoustic versions or dance covers. This new edge content, which is based on the older content only, which we people are releasing, typically on a 0 upfront cost, we ask creator economy to create content for us only on a royalty-sharing basis. We typically end up giving 10% royalties to all these people, which is now resulting in some high-quality content coming to us and in large numbers.
We have also opened up a consumer scheme, whereby we are inviting every bathroom singer in this country to start sending their own versions of the big Saregama songs, retro songs. And all these are then uploaded on a special YouTube channel. And whatever money is made by us, we share 10% royalties with them. So suddenly, you have somebody sitting in a Meerut or a Jabalpur or Ujjain also, now getting a chance to sing Lag Jaa Gale or Mere Sapnon Ki Rani Kab Aayegi Tu.
Put the stuff up, this scheme is about quantity also. They -- since they create the content, one, they get invested in that content and they listen to the content that much more on streaming applications. When they create their own version, they tell their friends, families, some of those versions break out, and everybody makes money out of it. What is the net-net impact? Imagine the music, which was created and released by us in '80s or '90s has also grown up by over 19% on revenue perspective in the financial year '23.
So this year were 19%, last year was single digit, but the fact of life is this is 40-, 50-year-old song that you're talking about. Last 4 years, every year, we have seen growth in the money that we are making even from our catalog. So while we keep on investing in newer content and keep this company ready for 2050, at the same time, we will not let go of any opportunity to make more money from the catalog.
One other part I want to inform you people is whenever we create a new version of a sing, take any song, Jumma Chumma, we create a new version of that song. The new song ends up getting a fresh copyright live. So the newer song becomes popular, that means you're keeping the older song alive through the new songs in that 60 years sound-recording copyright life that starts getting included. Publishing rights are anyway moving right now on a much longer basis.
So it is a win-win situation this entire endeavor of pushing more and more of the catalog music. And it's not happening by chance. Like we have a new content departments within the company. So there is a Bhojpuri team, which has separated our new content. Hindi is separate, Bengali is separate, Gujarati is separate, Tamil is separate, Telugu is separate. There are people in charge. Similarly, now we have a full-fledged catalog team whose only job is to create versions of their and find innovative ways to go out there and market it.
Financial year '23, also for, at the industry level, a big resolution of an old conflict that we were constantly happening -- having with these singers. Their association called ISRA has been on loggerheads with music labels about an old conflict. We have been thankfully been able to resolve it at the later part of the last financial year.
The good part now is that ISRA will not be reaching out to any of the customers now. These customers may be our digital customers or a hotel or a wedding, all these people were approached now earlier by music labels for the sound recording right and by IPRS for the publishing right, both ways, we were making money.
Now ISRA was also going in and asking money for the separate right, which was creating some amount of disturbance in the market. And more importantly, the 2 stakeholders have to work together who are working in conflict. Thankfully, with the blessing of Honorable Minister Piyush Goyal ji, we have been able to resolve this issue once and for all.
Now instead of a conflict, singers actually work with us. The deal is that they will be paid 25% of all the public performance revenue that we people create. What is public performance revenue? The money that we collect right now from a hotel or from an event or a function or a wedding or a concert. That money which we people were collecting, 25% of that money is now going to flow to singers. But singers in turn are going to work with us and ensure that the public performance's revenue overall goes up. So I'm -- if the initial couple months is anything to go by, we are already seeing that the royalty hit that we'll end up getting, because of this 25% of public performance revenue going to them, we'll be more than compensated by an increase in the public performance revenue.
Anyway, the short-term problem of this royalty payout has been that entire financial year '23 is royalty payout to singer got booked in quarter 4. One of the reasons why you will see quarter 4 margins looking a little lower compared to quarter 3, because the entire royalty payout for the 12 months has happened in a single quarter. But as we people go forward, the royalty payments are going to be happening on a quarterly basis.
The fear can be -- does this mean that the overall royalty payout that Saregama talks about, between 12% to 15%, does that go up? Good news is no. As a percentage also, the increase that we people will have because of the royalty payout to singer, more than gets compensated by the reduction in the royalties that we are paying for the newer content, because more and more of a newer content is coming on the regional side, which we people procure on a onetime payment basis and 0 royalties getting attributed to them.
So if you look at our numbers also, you will see that as a percentage, quarter 4 royalties have gone up as a percentage because of the onetime payment of all the 4 quarters hitting in a single quarter. But if you see it at an annual level, our royalty payout has actually come down as a percentage.
My last part, in music, it will be -- I'll be missing if I don't talk about the play of artificial intelligence. There are various views being taken on how AI is going to be affecting the industry. We don't want to -- we want to be ahead of the curve. We, for the last 12 months or so, have been building our own understanding and the knowledge bank on the world of AI. We are working with some of the leading institutions in this particular space and investing a lot internally on the relevant manpower for that spearhead of the curve.
We are actually, if you ask me, pretty excited about the value that AI will bring in to a content-creation company like us. It can help us with a huge database of forms that we people are sitting on, literally the golden catalog of music in this country. We are in a great position to allow the AI learning engine to learn on our staff and help us predict even better as to what kind of a music is going to be working in which genre.
We believe our investments, which were done in the data analytics, is what is helping us today have a better success rate than any other player in the market. And our investments, which are going in the area of artificial intelligence, are going to help us a lot in 2 to 3 years to come.
Carvaan, our retail business, Carvaan maintains as a growth trajectory during the year. We, on a unit basis, grew by 40%-odd, to touch a sale of 5.6 lakhs during the year compared to the 4 lakh sale that we did last year. That actually helped us write a very small positive margin this year.
But I think the more heartening part for us is that this is a fourth year in a row, there had been no marketing that's going on. And still, the brand is able to go and keep on growing up, purely basis is own consumer pull. Yes, the large contributor of the sales driver this year for Carvaan brand has been the Carvaan Mobile, which allowed us to grow at a lower price point, which also explains why the revenue growth in Carvaan is lower than the unit sales growth because Carvaan Mobile is coming at a lower price point. But overall, I think we are -- we maintain our positive outlook towards Carvaan numbers. We'll continue pushing Carvaan in the market here without putting any major marketing efforts behind it.
Remember, it's not just a very small breakeven or a small contribution margin because of which we are in the world of Carvaan. Carvaan helps a lot on the catalog side. Now there's enough amount of data sitting out there with us, which is proved a causal effect relationship between the songs which are put in Carvaan and the songs which are growing at the fastest rate on the streaming platforms.
Let me clarify. When we say we put 5,000 -- put songs in a Carvaan, they are not our biggest 5,000 songs. There are 5,000 songs found in Hindi for the, what, 23,000-odd, 24,000-odd number is. From that, 5,000 songs have been picked up. So that they do justice to all the singers whose station has been created or all the composers whose station has been created within Carvaan. They are not necessarily a top 5,000 songs.
We saw data, which is very clearly saying whichever songs we are putting in Carvaan, actually on digital also grow the fastest. We were surprised by this. We did a lot of qualitative study here, and we came back to the conclusion now that at most homes when Carvaan is heard, the middle age and the older age people are not hearing Carvaan through earphones or headphones. They actually use it as a speaker and keep it on during the daytime. There is a lot of passive listening of those great older songs being done also by the younger age group.
Many of the songs are some are liked by that generation a lot because now, they are forced to listen to that. And they start growing a fascination and liking for those songs and end up consuming those songs that much more on streaming platforms. So Carvaan has playing this big role for us from catalog marketing perspective, too. That doesn't mean we'll ever allow Carvaan to get into losses. This world of Carvaan that we people are in will always be a breakeven or, hopefully, like we saw in this year, a small contribution margin coming from its side.
The films, series and events vertical touched the highest ever revenue this year. It crossed the number of INR 150 crores in financial year '23. Let me talk about each of these 3 verticals in detail.
Movie business, which has started around 5 to 6 years ago, has now started delivering steady profits. We have been able to establish our reputation in the market. We -- the volume that we people have right now allows us to get the cost optimization done. So both on the cost side, the volume is helping us on the revenue side since we have now an established reputation, we are able to go out there and ensure a decent margin for ourselves.
This was, in fact, the first year where the focus moved more on actual release of our theatrical films. We released 2 of our Malayalam films and 1 Punjabi film in the theater and got very good reaction.
This is also now -- I'm happy to share with you that one of our films called Agra, is an unreleased film, that actually got selected in the super prestigious Director Fortnight at Cannes this year. So my team is sitting out there in Cannes as is half of the Bollywood world, where the movie premier is going to be happening in the Director Fortnight. It's a very big thing. Very, very few movie end up getting right at the Cannes Director Fortnight level.
It just shows that the path that we people have chosen in terms of creating good quality commercial cinema is working out. We people plan to scale this business even further next year, but the basic principles remain the same. We are not going to be taking big risks. We will work only on those films, only on regional films where we can secure a large part of our revenue through digital and TV rights sale.
Coming to the web-series business. We finally after working for these many years, we're able to get a break in a web-series business, and we are successfully released 2 of our web-series, first web-series called Hunter with Suniel Shetty and the second web-series called United Kacche with Sunil Grover. Both of them were released on the digital platform this year.
As these were our first series releases, we were not able to get enough breaks on the series side. We have just put our best foot forward and which means that we will literally release these on a cost recovery model basis. We did not keep margins with ourselves because we wanted to show to the world that we can create high-quality content. We have -- I want to give you guys comfort, right, I mean not written losses here, but this is literally on a cost basis that these 2 series have been gone out.
We are very, very hopeful that for both these series, there's a high probability either we get a second season or looking at the series, somebody else may end up giving further number of series across to us. Such a good start, which has happened out there on the series business. In the long run, as the reputation starts building up in series business, too, we will very comfortably end up making a 15% margins.
The third vertical, which literally was given life in this financial year, was the events vertical. We did multiple concerts with Diljit Dosanjh at the global level. It's absolutely first time for us, India, U.S., Canada. And we also launched a musical IP called Disco Dancer, the musical.
Please keep in mind -- I've been saying this for the last 4 quarters now, please keep this in mind. Events business is where our films business or a new music business or a Carvaan business were 6 to 7 years back. We are in a stage right now, we are just establishing this business. There will be losses that will be written in the short term on this. But as we people go forward in a 12 to 18 months horizon, we will be able to go and start writing positive margins on it. And the leverage this gives us in our music business anyway, the icing on the cake.
But to give you guys comfort, I want to state something else also, too, which is an internal policy which we'll share with you now. While we continue to grow our films, series and events vertical, but we will be extremely cautious in our approach as we people take it forward. Our internal policy is very clear on it that the total capital allocation to films, series and events business will never exceed 18% of the capital deployed at any particular time in the company. Repeat series and events business will never exceed more than 18% of the total capital deployed by the company at any particular time. So there are various checks and balances, which are sitting in comfort. If you ever changing this capital allocation policy, we'll come back to you people. But at this juncture, we are very confident that we should be able to grow our -- this business vertical at over 25% year-on-year and write up profit. Since it's a profitable series, should get profitable as we people -- thankfully, series is not a lost thing. It's a cost-plus only. Events vertical the next 12 to 18 months will turn positive.
On the last part, which is the television serial world of us. We retired 2 of our super successful Tamil serials. Both of them had complete over 12-minute episodes each and replaced them with 2 new serials called Iniya and Ilakkiya, like it has become a norm here. All of serials end up getting -- becoming a slot leader from the word go. Both these serials are doing extremely well on Sun TV and leading their respective slots on the Tamil TV content side. And like always, we, people own the IP of all the serials we are creating for Sun TV, putting us in the unique position of being the only production out, which can go out and claim this.
So ladies and gentlemen, a great year for us on all the verticals of our music licensing, music retailing, fills, events and series. I'll be happy to take any questions from your side now.
[Operator Instructions]
We have the first question from the line of Bala Murali from [ Oman ] Investment Advisors.
I want to know about this film side business, and how many films we are planning to raise in this financial year? And are there any films which are satellite rights are due and about to renew in this year?
The kind of films that we people will be releasing during they are listed in our corporate presentation. Our focus continues being Malayalam and Punjabi only. We are expecting anything between 6 to 8 of these films to release during the year. So all are in various stages of production at this moment.
All I can share with you philosophically, we work on films in a fashion right now that a majority of them get secured [indiscernible] TV right. I'm not be able to share specific data about which films' rights have been sold or not. Films business is a 52% margin after in that -- just first, and we hold on.
I'm sorry to interrupt. Also, there is a lot of background disturbance from your line, Mr. Murali. Mr. Murali? There is a lot of background disturbance, sir. We are not able to understand what you are speaking.
No, I haven't spoken anything. Okay. And sir, I'm asking about that already the content of films, which you have, any films satellite rights due in the current year or coming years, so that's what I'm asking.
Sir, the first set of movies that were put on the digital platform, all I can tell you right now, a couple of movies that came out of the digital platforms have now gone out there, and the rights are moved to the other digital platform. That's all I'm at a liberty to say. So the second round of monetization or some of our earlier films have just started, as you know, the TV rights, the deals typically happen for a much longer duration, they don't happen for short durations at all. So none of our movies have come out of that yet. Remember, my tip, the film business is only a 5-year-old business.
Yes. And lastly, on the margin side, what would be the projections for this current financial year? How much was an expect...
On to our adjusted EBITDA percentage of [ 33% to 36% ]. Don't look at this number on a quarterly basis. On an annual basis, adjusted EBITDA, we have been -- we have been stating this yielding a range of 32% to 33%, and we stick to that.
We have the next question from the line of Bhupendra Tiwary from ICICI Securities.
So I had 2 questions. The first one is on the kind of look -- the guidance part. I believe that we have actually given earlier, and I believe it should kind of prevail that we are looking at 20% to 25% growth in the licensing business going forward also.
Yes.
But the fact is that we have a strong content releases this year, new content releases this year. So does that change our stance on the guidance? I mean, of course, the long-term and medium-term kind of visibility is 20%, 25%. But does that change that course for FY '24?
No, actually, that's not right. Now we'll hold on to these numbers only. Please understand that where deals are also structured, you don't get the impact of a new content release overnight. If you are in a fixed fee deal with somebody, which happens with a short-format apps, TV channels, there you don't get the impact immediately. You will have to wait for the 1-year cycle to get over before you actually start seeing the upside on the revenue part.
On platforms like YouTube, you see the impact immediately. So we will hold on to this number of 22% to 25% only at this moment.
Okay. That's great. Now the second question is on -- you alluded to the fact that now 6 of the -- out of the 9 streaming platforms are -- have turned into paid format. And so just wanted to understand what is our kind of revenues? I understand it's low, but what's the kind of percentage there in terms of subscription part? And how much can it go over the next 3 to 5 years? I'm not talking about the 1 year, but what do you visualize it going forward if this is the trend going ahead? I mean...
I'll explain the maths to you again and you form a judgmental call. If it's a free customer of any OTT application, a streaming application, who is listening to the latest Arijit song on an app. On an average, we get paid 10 paisa on an average right now, the 9 platforms. Now suppose you are a paid customer of any of these platforms and suppose you paid INR 100 as your monthly charge to that platform, because you are a paid customer who does not want to listen to advertising. You come in, then the deals are this way, that whatever you have paid, which is INR 100, 50% of that money, on an average, 50% is going to be earmarked as what they call content pool. So at INR 100, INR 50 becomes content pool. This will be divided equally amongst all the songs that you heard during the month.
Average customer listens to 66 songs -- 64, 66 songs. Supposed you heard 100 songs in the month, that means every song will be worth 50 paisa. Now assume you're not -- India is not a INR 100 per month economy, India maybe the INR 50 per month economy, possible. In that case, every song becomes equal to 25 paisa.
Now you can do your maths, how big a jump is going to be as streaming services keep on moving towards pay. There will be pain in the very, very short run as people move from a free and a free -- because free-to-pay can only happen if you start turning off the tap of free. So [indiscernible] fall down and pay will start building up. But as I have shared in my corporate presentation, it is a very interesting graph, how the paid subscriber base globally has moved over the last 8 to 10 years. It shows a steady numbers in which paid starts moving up once our platforms decide that enough of free, we want to move towards pay.
The good news is in India, the piracy incidents in the larger towns have fallen dramatically. So the base streaming platforms in Bombay, Delhi, Calcutta, Bangalore or from the Jaipur and Ahmedabad, the world start saying, "I want to turn pay custom". And you come pay at a reasonable fee, anything between INR 50 to INR 100 per month, there will be a large number of people who will start moving towards a pay side.
Okay. Okay. I think that's a really fair point and in terms of margin, when we say about we'll maintain the EBITDA before content charge of 32%, right? You talked about...
Yes.
Yes. So now the thing is -- I understand. So I just wanted to clarify, I mean, so this year, we'll also see that -- those content charges, big content charge is also hitting into the balance sheet. I understand we look at the steady state without content charge how is the margins. But is it fair to assume that this year, while the revenue growth will also be reported kind of EBITDA might look lower because of the content charge, I mean...
Content charge comes below the adjusted EBITDA.
Yes, so I'm saying -- so that's why I'm saying. So I understand the EBITDA before content charge guidance, but below part this year might look -- I mean, because the content chart is hitting pretty high this year?
So -- see the whole partner is the incremental revenue given by the new content is lower than the charge-off connected to the new content, then you are absolutely right. So let's talk about absolute numbers, not percentages here.
But if the revenue matches, and our endeavor will be right now to go back and at least do a revenue matching kind of a part. But the deala is not going to be this way or that way. Delta is not going to be very massive. It will be a very marginal delta here and there. So we are not going to come and tell you right now that our PBT has fallen down just because we took a massive charge.
Got it. Got it. One last question, if I can just squeeze in. This is regarding -- so we haven't utilized large, in fact, almost most of the part of the things that we raised at QIP. What are the kind of acquisition? Are there acquisitions or the kind of content thing that we are looking to kind of spend on for the money that we raised?
Yes. So we are very, very aggressively -- look first, let me acknowledge it, that we have not been able to pick catalogs, primarily because they were coming at a valuation which are not making sense. We believe right now that were not value-accretive. Just because we had the money did not mean we should go and pick up catalogs at any price at which they were available. In fact, there are very few -- in fact, there's no catalog deal that has happened anywhere in the market, apart from the 1 single deal that we people had done.
We are also not revising the model. Earlier, our entire thought process was that we will check, go and pick up catalog. Now we are also looking at that can we pick up minority stakes, moving to an absolute majority in regional music companies, allowing the labels -- regional label to run with the company for next 2, 3, 5 years. So we come at a minority now, we held them out and then pick up the majority or our absolute number right now the next 3 to 5 years. So that's another model we people are looking at, and I am hopeful that we should be able to go back and strike deals. But one thing I again assuring you, just because the money is sitting with us, we are not going to pick up catalog at bizarre prices.
The next question is from the line of Dhruv Rathod from Solidarity Investment Managers.
Actually, I had a few questions. As the telecom companies focus on the ARPU growth, right, and they will be taking mobile data prices up, so do you see that impacting our music label business if audio or video streaming would drop?
This -- again, you're asking me to do crystal ball gazing. All -- if you ask a pure financial part right now, how can I tell you right now that if the prices go doubles tomorrow, which I see very unlikely, but the people -- the consumption will not come down -- looks that consumption should come down. But I'm going to counter it with the cultural change that you're seeing in the country.
If, for 5 minutes, I go out there and tell you that I want to pause this call, almost 70% to 80% of everybody on this phone call right now is going to take out their mobile phone. Even if nobody has sent them a WhatsApp, they will still take out the mobile phone, and they will try to kill their time by watching something, if nothing else then an Instagram feed.
We, as Indians, don't know what to do even with 2 minutes of free with us, apart from taking out phone and consuming something. And it's not just the upper side of the society. Next time, you go for a morning walk or an evening walk, please look into every autowala or taxiwala who is waiting there. You will find them on their phones, and they're not gaming. They're watching video or just listening to music.
In that kind of a world right now looks very unlikely that just because content -- the data rates go up marginally, that the consumption is going to fall down in a dramatic fashion. That's my belief. Also you just see what's happening on the television part and another very good indicator. There are 22 million connected televisions, which are active on a monthly basis now. I wouldn't -- I'm an ex Tata Sky person. I would have never imagined that connected television is going to become a way of life for people like us. So that's the upper side of the society. The lower side of the to continue watching everything on their mobile phone. So a 10%, 20%, 30% increase in the data rates, I don't think it's going to impact the content consumption at all.
Got it. And the second question was around as like we know interest rates have been rising globally and startups are seeing challenges in raising equity funding at that point. So are we seeing any slowdown in YouTube ad revenues because of this?
Actually, that's a funny part. We saw a slowdown last year for 2 quarters, which was the start-up revenues were coming down, but they got more than compensated by the FMCG increase, durable increase and services increase. So we wouldn't have been able to write right now this over 23% increase in our music licensing revenue, if YouTube numbers have fallen down. Remember, we are very dependent on advertising, so YouTube revenue, which is for music. And even my TV serial business is dependent on advertising, we have not seen a slowdown, honestly. Only start-up money is not there.
Okay. Lastly, what is the share of music label revenues from YouTube in FY '23?
We don't give vertical-wise. But if I look at all the 3 verticals of digital, which is streaming -- music streaming, video streaming and short format app, they together for us are anything between 70% to 75%.
[Operator Instructions]
The next question is from the line of CA, Garvit Goyal from Invest Research.
Am I audible?
Yes, please.
Okay. So my first question is on the capital allocation side. Our ROCE fell to 14% now versus 18% last year. And second thing is our CFO EBITDA, almost fell to 39% as compared to our average ratio of 70% for the last 5 years. That growth that we did in FY '23 is coming at the cost of ROCE and cash realization.
Further, if I exclude the profit on sale of investment in the mutual fund, our PAT has only grown by 12% as against our sale growth of 29%. So the point here is, despite having a significant presence in industry and good management experience, why we are not able to utilize the capital in an efficient manner. Similar thing that we have yet to decide with what to do with that [indiscernible] fundraise that even after 1.5 years. So it means we raised it to add some value for the shareholders. And since last 1.5 years, we did not make any material announcement.
Means, I'm not understanding if actually there was a plan at that time. There should have been some progress on that, like I think it's wrong for shareholders, company raising funds. I think that we don't want to note the opportunity? And those opportunities didn't appear even after 1.5 years. So please throw some light on exactly what is happening and where we are actually lacking, particularly focusing on that QIP utilization and this film segment as well, that is, I think, ultimately [ retaliating ] our bottom line.
So I'm not going to -- I repeated this and Bhupendra asked me the same question. I'm not going to run away from the fact that we have not bought -- apart from 1 catalog, we have not been able to buy any other music catalog out in the market because they were coming at multiples that would have gone out there and hurt the shareholder valuation right now for Saregama as a company. It did not make sense to pay those kind of multiples.
The negotiation position becomes at times a little difficult when the other party knows that you are under pressure to go and utilize your funds. They think they can get away with higher prices and did not make financial sense to us. So I acknowledge it, accepted that we have not been able to deploy funds at the rate that we would have liked to do that. However tempting it may be for us, we will not utilize these funds for any vertical apart from music. These funds were not picked up for my retail business or films business or events business, which are all getting funded right now out of the internal accruals itself.
We will keep the funds and look at various aspects on the music side alone. Saying how do I use this funds in ways in which it can help the music business to grow, I'm reasonably hopeful -- unless the deal is done, it's not done, but I'm reasonably hopeful this year you will see right now under the new structure that we are ready to work with, whereby we are ready to come as a minority player and then give a chance to the owner of that company to build value for the value in that company and then buy out the entire absolute majority. Under those models, we should have some successful deals happening this year.
Understood, sir. And on product mix side. So basically, our product mix is changing, like filming -- publication contributed approximately 18% to our revenues in FY '22. Now it is, I think, 23% around. So -- but this segment is cumulatively doing only 2% to 3% of whatever revenue they are generating. So my question is, is it going to be in the same way for us going forward? Or are we going to improve it because if the situation doesn't change, then we will see further decline in our ROP.
Sir, again, the part is first, publishing business already has been announced right now, being demerged out of the company. So I did speak about it in my opening comments that we are just awaiting the final go ahead from NCLT and the publishing business gets demerged as part of the demerged entity. So that will not be there with us.
Regarding the other 2 businesses, see the nature of the business, not all business is going to be like music business, but we want to be there in other businesses also because they are symbiotic businesses to music business. Our films business will remain a 15% to 20% margin business. But the good part is, we are not allocating more than 18% of our total capital out here at any particular time to the films business. The majority of our money will get allocated only to the music business, which is the highest margin business.
So can't we consider demerging this film segment as well, like you -- we were the...
It adds a lot of value to our music business. It's not just us who has got a films business. All our competitors, if you check out all the other music labels that are there. I don't want to take their names. But if you look at who are the top 3 or 4 music labels in the country, all of them got a film business. It gives you a huge edge in the music business if you also control the business.
Understood, sir. And, sir, you mentioned huge [indiscernible] are coming at the end of this particular year. And incremental revenue is also likely to match that growth [indiscernible]. So overall, this year, likely to be EPS accretive for the shareholders? Or we can say [indiscernible].
The only part I can go back and tell you right now -- I'm not going to comment on that one. The only future numbers that we are giving here is music licensing revenue should grow anything between 22% to 25%. Films, series, events business will be growing around 25% during the year. Events business will remain under pressure, but the quantum is not going to be that big. Carvaan business will remain between a breakeven to a very, very small margin business. Our adjusted EBITDA for the company should be anything between 30% to 33%.
Okay, sir. Understood. And last one is, like, basically, we did a QIP. And it seems that amount was invested in quarterly mutual funds. So these are the debt-oriented mutual funds or equity-oriented?
Debt only, please, our biggest criteria is to secure the capital.
The next question is from the line of Ravi Kumar Naredi from Naredi Investments Private Limited.
Again, good result. Sir, my question and my concern is that when we raise through fund from QIP, our market cap is not rising. Please use this fund so fast, so we may get the suitable return from that investment.
Done, Sir. That's my biggest KRI also. [Foreign Language]. That's very wrong in a short-term way...
[Foreign Language].
A couple of things that we're looking at right now, the valuations just went through the roof at that particular time and was not making sense for us to go back. In fact, they get a whole part is that can go out there and pick something up at a multiple right now, which is slightly lower than mine or be in a position to increase the revenue that much, that I can make more money out of it, [Foreign Language] shareholder accrete the value accretive, otherwise sense [Foreign Language]. But you will see progress happening on that. If you ask me what's the only thing that keeps me awake at night, this is the one.
No problem, sir. And what is the policy to charge content cost from profit and loss account quarterly basis or the yearly basis?
On a monthly basis.
Monthly basis?
[indiscernible] quarterly, yes...
How much cost do we charge?
So what is there right now is that the entire amortization of charging-off is happening over a period of 10 years, marketing gets charged off immediately 100% in year 1 itself. In fact, in the month 1 itself, while the content cost gets charged off over a period of 10 years with a -- and it's not a straight line. We take the biggest hit right now in year 1 and then year 2 and then it's a flat straight line. What I'll ask right now, I'll ask Pankaj to send you the entire charge-off structure. And on the films, we are charging of the entire cost of the film in year 1 itself.
Right, right, right. And sir, [indiscernible] rises too much. Can I get the bifurcation more than 6-month outlook did figure?
So we will share this information...
No problem. No problem. No problem.
At this juncture, there is no reason to believe for us that there is anything where provisions of bad debts are going to be happening.
Okay. No problem then. And sir, this last point, to what cost of music write -- music writer cost is rising too much due to high competition. So how we are dealing with this situation? And what is in your mind because you are extraordinary intelligent, so you might be thinking how we...
[Foreign Language].
No, no, I knew, sir. I knew, sir.
Competitors will hear it tomorrow. So I can't tell you how am I managing it, but the financial results are showing -- we are -- there is a number at this juncture you can go back and see at any time, even as I'm talking to you. On YouTube, if you go out there and see all India-trending charts on YouTube. YouTube publishes this on a daily basis. Top 30 songs in the country -- trending top 30 songs in the country at any time between 7 to 9. Right now sitting on 7 [ zone ]. They were 9 songs. So we are picking up content. That content is clicking in a very big fashion here and we are still maintaining our profitability.
The next question is from the line of Bala Murali from [ Oman ] Investment Advisors.
So I have one doubt regarding this paid streaming platform. So you call that few platforms, most of them are become paid and one which you are spending...
Can't hear you. You need to go a little slow and louder. Can't hear you.
Yes. Regarding this platform, so you told that most of the platforms in which our songs are streaming are become a paid subscription, the one which you are pending...
Sir, first, most is the very dangerous word to use. You still have the -- you have 3 of the platforms that announced that they're turning pay. 2 of them have turned pay, third is shown the intent to turn pay, but the top 3 platforms are still on the free side. This will be the platform number 4, 5 and 6. So the top 3 platforms are still offering free service. Now please ask me your question.
Okay. That's all. I got clarity on that. And one more thing regarding this Mango Music acquisition, I observed that still songs are playing on the channel. That monetization is coming to Saregama or that monetization -- some part of the monetization will go to Mango Music also?
All I can tell you right now, the songs that we people have gone out there and picked up from their site, if the IP belongs to us, often, we allow the song to stay out there on somebody else's YouTube channel also, and we claim it 100%. This happens very often. From -- I can't respond to Mango specific to you. But if the IP belongs to us, YouTube ensures right now 100% of the advertising flows to us.
The next question is from the line of [ Devanshu Sampat ] from Avendus Wealth.
A few questions. So can you just give a sense of how the valuation of music content and label has changed over the last 1, 1.5 years, right? Because I mean, situation is very different when we raise money. So has the situation eased a bit, which is why we are okay to deploy a little bit to minority stake? Or it's still [indiscernible].
So sorry, I'm not clear about your question is. How are the rights of new music, right?
No, no. I'm saying the valuations of all these labels and music content that you are not comfortable with right now to deploy money.
Yes. So more than easing out, see the moment there's a structural change that we are ready to do, where we are telling the label that you may be selling it -- you may believe right now you're selling at a lower price now, but you have a chance to use these funds to make your company big and sell the majority of the stake, maybe at a much better valuation later. That model is something that a lot of people are appreciating and understanding. So I'd like to believe that some of the people will agree. This is just a catalog part.
There are all kinds of companies which are there on the music side, where we can go out there and get into an acquisition deal, which will help overall the space of this music world for us. There is content acquisition and there is content marketing. Both the parts are very, very important. And increasingly, we are seeing a large amount of content acquisition money that actually going towards the marketing side. So we are looking at all the possibilities now. We're just widening the scope. The only conditions that we people work on, it has to be connected to the world of music for us; and second, it has to be shareholder value accretive.
Okay. Okay. And can you give me a sense of how maybe your top 5 or top 10 songs, as you -- the new songs obviously, I believe would be adding to your top line every year. So is there like a very high concentration that happens, especially with the new songs that come up? Is there some...
Sir, all I can tell you right now is what -- our new songs are doing very, very well, and you can check out my corporate presentation where we have actually shared raw data there.
I've seen that, but you've given like a 2-decade gap over. I'm talking about something specific like which early people are listening to in the last -- say, what's released in the last 3, 6 months or something like that sort of.
But those songs that I've shared there -- so are you asking me the actual revenue? Or are you asking me which songs have done well?
No, I'm asking you the revenue that comes from the top 10...
Sir, I mean this market right now, if I start sharing every song revenue that I'm making, how will I survive and do my business dealing there.
Okay. Okay. So that specifically...
Second, I am telling you now that what percentage of my overall revenue is coming from new content not shared with you. How is my catalog growing by which you can arrive, how my new content is growing, you have got that number also. I'm giving you how many new songs I release and how many of those songs are sitting in the top chart of the country, which is Spotify chart. So I've given you lots of information at this juncture for you to form an opinion of the quality of music that we people are hearing.
Sure, sure, sir. Sir, last question. Do you have any sense on the growth of the user base? How will this change post the streaming platforms once they start charging? Once you move to that paid model, do you have any sense? Can you give a sense of how the numbers have changed?
So I can just -- I got a guess right now on the profile of the customers. Obviously, the urban customer and a slightly better off and more educated customer is going to -- is moving to the pay subscription faster. You have people in their 20s who move to pay subscription faster than people in their teens or people in their 40s. You have South Indian states that move to pay subscription faster than you have the North Indian states.
So that level of broad definitions are there. But overall, we know when that switch happens from somebody allowing all the content available to a freely versus saying, listen, you need to pay, there will be an immediate drop that happens and then it starts building up once again. The platform that have taken a call that are moving towards a pay are going through that kind of a transitional journey.
Ladies and gentlemen, this would be the last question for today, which is from the line of Shubham Ajmera from SOIC Ventures LLP.
Sir, I just wanted to know about the potential impact on our business in the event of any streaming platform facing financial difficulties or going bankrupt because of these changes or something like since they are moving to the fully paid subscription model now?
Sir, remember this, the customer is still there. Customer -- if a particular platform goes out there and shut shops or is in financial distress is not able to go out and invest, whatever the reason may be, the customer will not stop listening to music. They will move to whichever platform is offering it. So you -- we went through this part right now last financial year. There are a couple of platforms were having issues right now in terms of going then payable and not having the money, blah, blah, blah. You've not seen the revenues falling down. The fall if a customer does not get a favorite song. We just released up Vicky Kaushal song sung by Arijit 2 days ago. And that song has already started clocking right now numbers in lakhs a daily basis. If you're not going to -- if the customer does not get it in 1 platform, he'll kill that platform, go to the second platform.
So we don't see too much of stress happening out here if a couple of platforms shutdown.
Is there any other question?
Thank you. As that was the last question for today, with that, we conclude today's conference call. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.