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Saregama India Ltd
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Ladies and gentlemen, welcome to the Q4 FY '24 Results Conference Call of Saregama India Limited, hosted by Emkay Global Financial Services.
[Operator Instructions]
Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Pulkit Chawla from Emkay Global Financial Services. Thank you, and over to you, sir.
Thank you, Manuja. Good afternoon, everyone, and welcome to the Q4 FY '24 earnings call for Saregama. From the management, we have with us today, Mr. Vikram Mehra, Managing Director; Mr. Pankaj Chaturvedi, CFO, Mr. Saket Sah, 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.
Thanks, Pulkit. A very good afternoon to everybody. This quarter, there is Q4 for operating revenue of INR 263 crores and a PBT of INR 76 crores. This is a year-on-year growth of 29% revenue and 30% in PBT. So overall, a good quarter that we are happy about. I always start my call by reiterating a rather simplistic business strategy we follow at Saregama. Why do we exist? What is our day-to-day work? Our only agenda is to monetize what we own today and what we had procured yesterday in terms of IP. So monetize today than yesterday IP better and better, and the money we make from it create IP for tomorrow. So that not only today's profitability is secured by the profitability of the company and the relevance of the company secured for next 15, 20, 30, 40 years.
The IP creation is across audio and video includes music as well as film series and digital content. We monetize our IP primarily through IP licensing deals done with the third-party platforms. This also includes monetization of artists who are creating this IP. The earlier days, the only thing we used to do was to make music or movies.
Now we are saying artists were involved in making music and movies, start monetizing those artists also through brand endorsements and live events. Overall, it's all in the space of entertainment IP only. Let me start with the first vertical, music. This includes both licensing as well as artist management. While OTT revenue this year and this quarter was adversely affected by the platforms movement, 3 of the platforms movement to subscription business, which meant that the minimum guarantees we were getting from them on the free side went away. This degrowth was more than balanced by the revenue growth we people have seen in YouTube, courtesy on newer content and the artist management vertical. In the spirit of more transparency because it's a newer area, artist management, we have now started reporting artist management vertical separately from this quarter. so that you can get much more granularity on that part of the music business.
This quarter saw the music release of Diljit Dosanjh's Chamkila, an album which has done extremely well for us. Not only the album has done well, but also gave fresh support and boost to the earlier, the old Chamkila songs that were recorded in '80s and '90s. Ajay Devgn's Maidaan music was released. Article 370, music was released. Shankar and Ram Charan's Game Changer first song got released, Mohanlal's Malaikottai Vaaliban in Malayalam got released. We also saw the first song of Saregama's first Talent Maahi, which got released in this quarter. The song called Sorry has become a massive hit in the 14 to 22 age group of girls. In Bhojpuri, we released Superstar Pawan Singh's song called Arrah Ballia Chhapra, which trended for many, many weeks. And as always, Gujarati and Bengali, our songs have done very, very well.
Our lineup for the next 12 months is all in place, wherein we have some of the biggest film music of the year. This includes 3 Dharma production films including 1 with Alia called Jigra. There are 4 Jio Studios firms, including Stree 2 and Akshay Kumar's Sky Force. We have Surya's Tamil fantasy film Kanguva, Mammootty's Malayalam film Bazooka, Kannada Superstar, Sudeep Kiccha's film and Gippy's Punjabi film Shinda Shinda.
The latest one I'm happy to add, which we closed a deal just fortnight ago is this very widely anticipated movie called Kalki 2898 AD, which is a Prabhas, Deepika, Amitabh, Kamal Haasan starrer Telugu film primarily, but a multilingual film. we have procured the music of that too. This quarter, the charge-off on account to the new content has gone up to 37% year-on-year, something we are proud about. I'm very happy to share that for the first time our annual investment in new music content across Hindi Telugu, Tamil, Malayalam, Kannada, Bhojpuri, Gujarati, Punjabi, Marathi and Bengali language touched close to INR 200 crores this year. This is almost 80% jump over the money we spent on new music content in financial year '23.
So we mean when we say that we are investing for tomorrow. We are investing very heavy in newer content. We are using technology, data analytics, predictive modeling extensively to choose what content we people buy and it's bearing fruits. Something I've been sharing and let me share it for one more time. We are in a transitional state currently, where our new content expenses are going to go up in a steep fashion, resulting in incremental revenue just about managing the content charge-off. Over the period of next 18 to 24 months, this will stabilize.
After that, the content investment will go up only linearly, while the additional revenue that we have generated from the content we have procured over these last 36 months, they'll go up steeply, which means end result, the bottom line to grow much faster after another 18 to 24 months. With all this new content investment that people are doing, we maintain our payback period of 5 years. This is our internal benchmark and guidance we people work with and happy to share we are doing better than that. And remember, after these 5 years are over, we have another -- anything between 55 to 75 years left in front of us to keep on making money from that music.
Though it's tempting to focus only on newer music, we understand our bread and butter also comes from our catalog music. There's a separate dedicated team whose only job is to maximize revenues from the older music that we people own, whether by creating versions of those songs or finding opportunities to promote those songs on short formats like Instagram, YouTube Shorts or TikTok outside India. Basis our last many year's track record, we are pretty confident that our catalog part of our music will continue growing at a minimum of 12% per annum. And as over the next maybe 18 to 24 months, we had OTT platforms start turning pay all throughout. That means the entire industry turns pay, the catalog music after that may start going up anything between 16% to 18%.
Let me jump to the newer vertical under music called Artist Management, wherein artist popular through our music IP release. And then we monetize these artists by booking them for live events, weddings and brand endorsements. And whatever money the artists make from these, we get a share of that. We currently have 123 artists under Pocket Aces cloud and 9 under Saregama Talent. As the investment in new content goes up, these artists are going to become bigger and bigger. We're finding various opportunities to plug in these artists even in the film music that we people are procuring. As we all know, the fastest vertical on -- of advertising that's growing in the country is digital advertising. And in this world of digital, this influencer and talent start holding huge power and becomes a big beneficiary. Thankfully, our vertical of cloud under Pocket Aces is a clear market leader, is the market leader, is perceived as a market leader in this entire influencer business. Not only this quarter saw the release of our first Talent, Maahi song.
Let me share another thing we are very proud of. We technically speaking on 1st April, actually, released a song called Useless Bhawra. This song is around 1 talent, which is from Saregama Talent. The girl comes from Saregama Talent. While the boy we are using right now is one of the influencers from Pockets Aces cloud called Arjun Deswal. Now this is a good example where Useless Bhawra is going to make money in its own right because a song has been doing well. While both the talents are becoming very, very popular. And as they become more popular, we will book them. We have locked those talent. We will book them for weddings and live events and end up making getting a share of whatever money these people make.
Net-net, with our stated goal of acquiring 25% to 30% of all new music, which is going to be released in India over the next few years, the music vertical, which is Licensing and Artist Management, we are very confident that, that should be able to double its revenue. That means around cross INR 1,000 crore number in the next 3 to 3.5 years. This number is -- this vertical is today close to INR 540 crores. And we are confident it should cross INR 1,000 crore in next 3, 3.5 years. And all the new content we are talking about, that people need to cross INR 1,000 crore number, we will be able to fund through our interim accruals and the QIP money.
Let me now shift to the video vertical, wherein we people make films under the brand name Yoodlee, primary regional content. Digital series we make under the brand name Dice, which is part of Pocket Aces. And we have a lot of D2C channels of us on Instagram and YouTube called FilterCopy, Nutshell. The explosion in the smartphone ownership and the cheap -- relatively cheaper data are the biggest drivers of this vertical. We believe advertising revenue, as I stated earlier, will keep on shifting from the conventional worlds of television, radio, print to the digital form. And anybody who controls eyeballs on digital part is going to make money handsomely. We are still in the earlier stages of building these verticals.
As we people go forward over the next 4 to 5 years, we are looking this vertical to grow at a CAGR of 25%.
Quarter 4 saw releases of 4 of our films, while 2 of our films, which are Malayalam, Anweshippin and Punjabi, Warning 2 did very, very well, and we people have made or in profits. Our biggest film, Malaikottai Vaaliban, which was a Malayalam film with Mohanlal, did not perform that well on the box office. But thankfully the adverse impact of the same was controlled because of our internal policy, the minimum 70% cost of this film has to be recovered through satellite and digital licensing even before the theatrical release. We have always maintained the stand that we are bullish on Video, but we are very, very strict about the financial policies, which allowed us to handle this less-than-expected box office performance from Malaikottai Vaaliban.
We had 3 more movies that were planned during the quarter, primarily Punjabi. We had to go out there and postpone the launch of these movies because that's the time where the farmer agitation was going on in Punjab and we thought that's a very, very poor timing. And after that, IPL and the political rallies have started. One of those movies has already got released now in this quarter called Shinda Shinda No Papa and is currently running out there in theaters. And if you guys read it on, you'll realize it's a big hit on the theater side.
The second movie, which is planned of quarter 4 is now going to get released in the month of June of this quarter 1. Quarter 4 also saw the release of our digital series Crushed Season 4 on Amazon Mini TV. Happy to share that FilterCopy, the biggest youth Instagram channel that we people own, actually touched 1.2 billion views in financial year '24. All this is great news because the advertising base is keeping -- becoming bigger and bigger. We maintain a stand that video is an integral part of Saregama's IP building strategy.
Tomorrow's customer will switch between audio and video in a seamless fashion, and we need strong libraries across both audio and video to give us negotiation powers with the platforms of tomorrow. It also helps that being present in video gives us an edge in the music business. Early days, but I'm happy to share that the ROI that we are managing from the music, which comes from our own movies is far higher than the ROI we manage from the music we are procuring from third-party film producers. It's obvious because third-party film producers keep their own massive margins on top of it. While when we make the music, we are getting literally on a cost basis, but on the ROI basis -- in the end as the strategy it's working for us. And it's for the same reason that every major competitor of ours has got a full-fledged films of video business vertical within their companies.
It will be an endeavor constantly to explore various ways of growing the video business in an aggressive fashion, but with strictest financial discipline being in place. We have been talking about the video business now for 7 years. You people have seen there is no year in which you're going to see us going crazy on our numbers. We are happy to grow in a steady fashion and with utmost financial discipline. On live events side, we have been back to the drawing board and relooked at the entire strategy this year.
You are going to be seeing a completely different approach we've taken in the year to come, which is financial year '25. We have a few show of Diljit Dosanjh planned during the year. Also, our Disco Dancer has now got an exhibit in Australia this year. We are also planning shows of some of the Pocket Aces' talent. In fact, one of them called Viraj. With him, we have done many shows already in Mumbai and all of them are actually went houseful. As asked earlier, stated earlier to all of you, we need 1 more year to prove the live events model, failing which we are committed to taking tough decisions on this vertical.
Last quarter, I spoke to you guys about a music learning app that will teach music fans, how to sing or play instruments using artificial intelligence. It also helps promotions of the newer songs that we are releasing. We did the soft launch of that in April, and we'll continue refining this app over the next 2 to 3 months before we start pushing it. We have rolled out a new retail strategy for Carvaan, wherein we will be retailing it only from e-commerce and modern trade stores.
Over the next few months, we will completely get out of individual shops, which are the implications on the entire manpower structure also we have within the company. The net result of that this year was a flattish revenue on Carvaan with the breakeven, as we people get into financial year '25, the revenues of Carvaan are going to see a decline, but we should be able to touch a mid-level -- single-digit mid-level profitability on Carvaan during the year. If you look at financial year '25, then the good news is that the adverse impact of the 3 audio OTT platforms that turned pay have more or less got factored in, in financial year '24 itself. And the remaining part of that will fully get factored in the first quarter of the financial year '25. So from Q2 onwards, we will have -- everything will be part of the base, and we will be back to the old growth rates that we people saw in OTT an year back.
On YouTube, quarter 1 may see some pressure due to April, May -- April, May were completely dominated either by advertising happening on IPL or lot of political advertising going in wherein because of which the other brands took a back seat. So there was some impact, but we have reasons to believe that starting June, the YouTube revenues are going to be on track and with GDP growth looking as positive as it is, YouTube will also maintain a growth trajectory for the entire year. Our new music release calendar is very, very strong, and that gives us the confidence that we will manage our numbers. We also expect Artist management vertical to go stronger from what it is today.
Overall, at the company level, we expect revenue, company level revenue, excluding Carvaan to grow upwards of 30% in the financial year '25. I'm repeating my statement, overall at the company level, excluding Carvaan, we expect our revenues to grow at upwards of 30% during financial year '25. Over the next 3 years, we will be investing over INR 1,000 crores in new music content. This will contribute not only to the immediate growth, but also put the company on a long-term growth path. Overall, at the consolidated company level, we expect revenue excluding Carvaan to grow at a CAGR of 25% to 26% and PBT to double over the next 3 to 4 years. Both music and video verticals are going to contribute to that. We maintain our annual adjusted EBITDA guidance of 32% to 33%.
If we look at the global data, OTT audio and video streaming grew by 34% in financial year '23 with India showing the highest volume growth in terms of streams. And this is less than 200 million people today are streaming in India on OTT, and anything between [ 350 million to 400 million ] people are on YouTube. There's still a huge headroom left for growth. Now the next step is to monetize this consumption. It is happening on YouTube. It's bound to happen on the audio OTT platforms also. It has happened in every part of the world, it will happen here also. The price at which it will happen may be different from the price at which is happening in the U.S., but it's going to happen. With the price increases of some of the streaming platforms have started taking globally, and remember, we also have a play on each of these platforms, we are available on a Spotify or Apple or Amazon or a Deezer at a global level, we see a lot of benefit coming in as we go forward.
With our [ 238 million ] Internet footprint, cash reserve, professional managerial depth and investments in technology. Saregama will be able to guarantee earnings not just for the next 2 to 3 years, but also for the next 20 to 30 years. Thank you, and we'll be happy to take questions.
[Operator Instructions]
The first question is from the line of Swapnil from JM Financials.
Congratulations on a good set of numbers. So my first question is on the music licensing revenue side. You did mention that there was a significant improvement in YouTube side of revenues. I just wanted to get a sense if there was any impact of any overflows happening during the quarter that may have benefited as well? And if yes, would it be possible for you to quantify a few numbers?
Actually, overall, the numbers are on a steady basis. There's no one-off that has happened during the year.
Okay. And the second question is with respect to your 1Q guidance that you mentioned like YouTube revenues can be replaced because of few one-offs which are there. Is it possible that, that can get set off with some incremental revenues from one of the large music OTT platforms, which was not available for a few quarters earlier? And so those revenues coming back starting given that I can see the names...
Swapnil, I'm not putting a negative projection on Q1. In the spirit of transparency, I just mentioned that YouTube, April, May has been under some amount of pressure. I'm actually reasonably confident, YouTube on its own, June recovery should be very, very smart. There may be a lot more advertising that will start the moment the results get declared and IPL also gets over, results get declared. So the quarter should start looking better. Anyway, as I always maintain and I've been doing it for, I think, over 7 years, please look at us on a 12-month basis. please don't look at us on a quarter basis. And on a trail month basis, we are giving the guidance that Saregama's consolidated revenue, excluding Carvaan is going to grow upwards of 30%.
Understood. Well understood, Vikram. And just a last question on your cost side. If I were to look at it from a Q-on-Q basis, some of your costs like A&P spends and other expenses, they have increased meaningfully. Any particular reason that you would like to call out why were this costs higher -- slightly higher?
You are saying why had advertising increased?
Yes. .
So if you buy more content, I've told you right now, we have invested more than close to INR 200 crores of newer content. That includes marketing money also. So every time a new song comes out, right, it needs more marketing. So content investment is not just money that we are giving to the film producer, but also the marketing money that are going on in it.
So will it be fair to say that your run rate of A&P was around INR 17 crores to INR 18 crores per quarter for a long period of time. Now it is INR 27 crores. So will it be fair to say that, that is the new run rate that one should work with? .
We need to look at a INR 1,000 crores investment over the next 3 years, this includes some money that we will be paying to the film producer or the production budgets plus marketing money that will go to back to promote these songs.
Okay. And just the last one on the other expenses. Because other expenses, if I recall correctly, there used to be a meaningful impact because of Carvaan. And Carvaan, I think, has not done well in this particular quarter. So any particular reason, still there is a decent delta Q-on-Q? .
I am asking Pankaj here...
So Swapnil, on the other expenses, we had mentioned earlier also, we had one contingent liability, which is now settled in. Yes, that was the charge-off taken in Q1. So on an overall year-on-year basis, you will see some increase in other expenses. Otherwise, no major one-offs over there. .
This is something personally I shared with all of you guys, right, in the Q1 of financial year '24.
The next question is from the line of Ankush Agrawal from Surge Capital.
So Vikram, broadly I wanted to understand a bit about this artist management side of things. So if like, we have qualified, what kind of revenue streams we are looking at over there? But qualitatively, how big of that business is currently in the overall music [ like 3 cycles ]? Is it like it is less than 10%? If you can guide a bit on that? And 3 years down the line when you're saying the music licensing plus artist management would be double. And at that time, would it become a larger proportion than what it is currently? Or do you expect a steady state it would stay range bound?
So, it is -- what you see in this quarter is not steady state, is going to become bigger than that. Is it going to take over the licensing part of the business? No, it's not. At the end of the day, artist management is a byproduct of the business of music licensing. Since we are -- and let me reiterate our philosophy, if we are releasing 6 songs in a particular language, we start wondering that why are we making the artist big and not getting a benefit out of it? Because as the song becomes a hit, it's not just a company that owns a song that makes more money, but the artist also become that much more popular. .
So hence, this part that if we can take a position on their artists, there's no additional investment I'm making on their artist. I was anyway doing the song with them. Only thing we are now making it preconditional to the artist that if you want to do a song with us, you will have to go and get to -- into a long-term agreement with us. And then see if we can make money from this person on the -- basis wedding and brand management.
Right. Got it. But directionally, would it be, let's say, 20%, 10% of overall pie, something like that...
Let's give it an year. Again, as I repeat to you right now, the good part about this is a byproduct. It does not take any major investments from our side. It's only the manpower which is sitting in there to manage these artists and that's it.
Yes. The reason I was asking this was that we know that music licensing is the most profitable part of the business, right? And here, say, events and weddings that we'll do with the artists, that might not generate the similar kind of long-term revenue or, say, the profitability that would be there. So just trying to understand that.
The overall company, which made guidance, please, let's stick to that, which is 32%, 33% on an adjusted EBITDA basis. The only thing which is left after adjusted EBITDA is the charge-off we are taking on new music. There's nothing else left. So everything else is before that, that will give you an idea. So with -- if I'm saying 30% growth on the overall basis, that doesn't mean we are reducing our guidance on adjusted EBITDA. So we can't afford to have a situation where an artist management vertical grows at a significant fashion, but generates no margin for us because then I can't hold on to 32%, 33% adjusted EBITDA guidance.
The next question is from the line of Lokesh Manik from Vallum Capital.
Yes. Vikram, my first question was more of a clarification. So going by the content charge for the year and your accounting policy that you have explained over the years, just a back of envelope calculation suggests a deal value, new music deal value coming close to somewhere around INR 150 crores. Would that be right or you would still stick at -- or should we take INR 200 crores, as mentioned by you for this year?
Stated INR 200 crores. So a lot depends on which quarter, what has got released. So keep that in mind because it's -- even the first year charge-off happens, right, uniformly over the full year. Marketing happens instantly -- So phasing has a very, very important role here. But that's why we decided that we will share with this time that how much have we actually invested during the year...
So the INR 200 crores, so that was -- so I should take INR 200 crores because I was under the impression there might be some INR 50 crores nonmusic addition content on some other verticals, from some other -- but that's not the case, right?
That's not the case. Like I shared, INR 200 crores, please, for everybody, I'm stating this. This INR 200 crores is music content that we people have invested across multiple languages.
Understood. Understood. Vikram, my second question was on Pocket Aces. So this vertical, you are expecting a 25% CAGR going forward. This would be after taking in benefit of synergies of Saregama or prior to the acquisition, they were independently growing at this rate?
So the synergies of Saregama are going to be there. I think the bigger driver of synergies is Saregama is the cost management. Pockets Aces, when we people acquired was a loss-making unit, marginal losses only. As we people go forward, we have promised you that this year, financial year '25, we will ensure that it turns breakeven or a very small profit at Pocket Aces level. And that's primarily getting driven right now out of the synergies with Saregama. Lot of cost structure that those guys are having right now, we are removing them because they can just ride on our infrastructure expenses.
Okay. So the synergies are on the cost side, not on the top line. Top line, they were growing any which ways 20%, 25%?
Yes.
The next question is from the line of Pulkit Chawla from Emkay Global Financial Service.
Congratulations on a good set of numbers. So Vikram, you were obviously highlighting that you'll be able to ramp up the content acquisition as such. Now so would you be looking to ramp up the number of songs? Or are you looking to, let's say, ramp up more expensive song as such? Or would you probably get into more digital music wherein the past, you've highlighted that ROIs have been better?
Pulkit, myself will go out there and give this information in my competitor's office -- it's too much of a granular data. I'll give you one of the holistic answers. Yes, we will do a little bit of everything. When you buy music, you obviously take some funds on more expensive premium content coming from artists who are very well established. And you -- at the same time, we keep on investing in the newer artists. The risk-reward patterns are very, very different in both these situations. You are investing in the premium guys, the risk is relatively lower because they already have a large fan club going on out there with them. But they come expensive, so the return profile also in that way.
And you are working with absolutely fresh artists, the risks are massive. But if any of them clicks, right, the returns can also be massive. So obviously, it's a balance of the 2. It's balance of film music and non-film music. It's a bench of Hindi, Tamil, Telugu, Malayalam on one side, and Gujarati, Bhojpuri, Haryanvi, Odia, Chhattisgarhi kind of languages on the other side?
Right. Fair enough. And my second question is, how does the performance of music typically vary -- if you're comparing, let's say, theatrical release compared to a direct OTT release? Where I'm coming from is just trying to understand if, let's say, Chamkila was a theatrical release, how would have music done differently as compared to when it's today released directly on Netflix? .
Let me put it this way. Any firm which are going direct to digital, the cost at which we acquired the music is also dramatically lower. In fact, in most of our contracts, we have the stipulation that a movie if it at the end movement decides not to go to theatrical, and theatrical definition is there, how many minimum theaters in which movie should get released, so they decide not to go to theater and go to OTT, what kind of a reduction are we going to get on the pricing.
So we are protecting and covering ourselves through that. At the same time, we are realizing that -- it's not that a movie which is going directly to digital, the music does not do well at all. Chamkila is a good enough example. Now it's a theoretical thing for me to answer to you that had it gone to theater, had it done far better? I suspect it would have. But then the cost at which I would have got the music also would have been that much higher.
The next question is from the line of Ankit Babel from Subhkam Ventures.
Two questions from my side. First is, you guided for a 30% plus kind of a revenue growth, excluding Carvaan. I just wanted to confirm, is it fair to assume a 30% plus growth in your pure music licensing revenue also in FY '25?
In that's range, yes. Yes.
Because you had guided for doubling your revenue in next 3 years, right, so which translates to 24%, 25% CAGR. So -- and in first year, you are doing the 30% plus so what's...
First year, step up, as I said, the content investments are also going up in a step-up function. As we people go forward beyond 2 years, then they will start growing in a linear fashion, right, because we don't have any intent to grow -- to acquire more than 25% to 30% of all the newer content that's coming in as of now. And hence, the nature on a 3-year basis, we are talking of the growth pattern that you're talking about here. But immediate year, there is a 30% growth, excluding Carvaan.
Okay. That's great. So how much content investment you mentioned you'll be doing in FY '25, including marketing and everything?
Next 3 years, INR 1,000 crores .
Next 3 years, INR 1,000 crores. Okay. Okay. And sir, what is the break? Can you please provide the breakup of your intangible assets of INR 513 crores, which you have mentioned in the balance sheet? Last year, it was just INR 114 crores. So there is an increase of INR 400 crores. I understand a part of it would be because of Pocket Aces. But can you just give me the incremental breakup, the breakup of the incremental number of INR 400 crores?
Yes, sir, broadly, I will tell you, goodwill is in excess of INR 300 crores. This has come on account of the acquisition of Pocket Aces. Since it's a committed acquisition, we need to value the entire acquisition and accordingly account for in the balance sheet. There is also a corresponding liability and financial liability, you will see an increase, which is for the balance 48% stake acquisition. So primarily, that is the reason for the spike. Otherwise, the increase in intangible is only on account of the songs that we acquire.
So incremental INR 400 crores, out of that INR 300 crores is goodwill and INR 100 crores is the songs?
It's the music assets, yes.
The next question is from the line of Aashish Upganlawar from InvesQ.
Yes. So your comments are pretty helpful in terms of understanding where the business is going, and it's pretty commendable the way you guys are investing in content. Just a clarification, you said that EBITDA margins, you are comfortable, I mean, looking at maybe 31%, 32%. Below that, what remains is the depreciation item, which given the step-up in investment would also increase by step actually. So is it possible to give some clarity on how much it would increase? I suppose we amortize a lot in the first year out of whatever is spent. So just a bit of a clarification would help us.
So our guidance there is that our profitability at the PBT level is going to double in the next 3, 3.5 years.
Yes. So any annualized basis, is it possible? I mean INR 300 crores, we are investing, I think, 36% you amortized in the first year, split into marketing...
I think we are very open and transparent the amount of data we are sharing. So I'll hold on to our 3-year guidance here that it's INR 1,000 crore music content investment we people are doing. Our revenues at the consolidated level, all verticals combined, excluding Carvaan, we are looking at 25%, 26% growth rate as we people go forward on a 3- to 5-year basis. And our PBT is going to double over the next 3, 3.5 years. That's my long-term guidance. And 30% to 33% adjusted EBITDA on a short term, which is for financial year '25, we are saying our company's revenue, excluding Carvaan, should grow upwards of 30%.
The next question is from the line of [ Pradeep Rawat ] from Yogya Capital.
Sir, I have 1 question. Prior to 2020, our EBITDA margins used to be 10% to 12% and then it rolled north of 30%. So can you mention any reason for that?
It's doing far better than what we used to do earlier. The music industry itself has started shaping up far better. We have started investing in the newer content in a much more aggressive fashion. If you see our investments -- and in fact, I'll say, pre-2019, we hardly used to make any investments at that time. So overall, we are doing well and expect to get a pat on our back from you.
Yes. So with respect to debt, currently we don't have any debt. And in 2021 we issued capital, was INR 500 crores or INR 700 crores, I think so. So why aren't we taking debt? And why are we diluting equity?
So this -- we are not -- at this juncture -- we are a debt-free company...
There is a very small working capital in [indiscernible].
So the question is this is a call that we people have taken in 2021, when we raised the QIP part as we people sit right now, I have mentioned this that the INR 1,000 crores music investment that we will be making over the next 3 years will be funded completely through internal accruals and QIP money.
The next question is from the line of Ravi Naredi from Naredi Investment Private Limited.
Vikram ji, first, congratulation and best wishes for next 5 years, appointment as MD. I must say, in last few years, we saw you were working, and in last 10 years, Saregama top line rises from INR 200 crores to INR 800 crores, while bottom line from INR 6 crores to INR 200 crores in your able guidance. so fantastic results you had given, and we wish all the best. Sir, if [ Gen G ], for songs and maybe movies new trend started in U.S.A., just I was reading one news. So are you aware of this trend? And how it will change our business model?
Sir, can you -- I didn't get your question. .
Sir, Gen G, for songs and movies, new trend started in U.S. where people are liking, again, record that we play on the HMV, like this. And they are buying these cassettes -- buying this records instead of listening music on this our -- other channel. So is it -- you are aware of this?
Sir, I'm not very clear about your question. Are you talking about the music listing, which is happening now in the U.S. on Vinyls and LPs?
Yes, yes, Gen G. That is called Gen G.
So we already -- if you please check it out, and we have already released 9 different LPs, and we are there, in fact, doing far better for us in U.S. than in India because very few people in India have LP players with them. In U.S., they are making a decent amount of money. In fact, I'll say, in some of the markets, even more than Carvaan for us.
Okay. Okay. Okay. So as I was curious how it will impact our company, but you have already issued...
Sir, as a company, we are consciously checking out what all is happening in the various part of the world. From an America, which is always ahead on the digital side, to a Japan, which is far ahead on the physical side, to artificial intelligence in terms of predictive modeling and generating part. We, as a company, take a lot of pride in the fact that we are not just a bunch of creative people here, but we are a bunch of tech people who were also in the world of creativity.
Right, right, right. Sir, in first few years, whatever movies we made, I am telling about 5 years back or 7 years back, any film we have sold again the right when first right is completed, and any money we have received?
Yes, many of those movies which came out of the first -- in fact, not many have come out because 7 years haven't crossed. The couple that have come out right now, came out of 1 platform already licensed to the second platform.
And how much money we received, can you tell -- the amount?
If you also remember or if I remind you, at that time, the movies that we were making were these INR 1 and INR 2 crore movies -- the strategy of the films has changed completely from how we started in 2017. So are they making -- they are giving up -- on the ROI basis, the movies have done very well for us. But whatever money they are making has to be seen in the light of that they are INR 1 crore or INR 2 crore movies. But they're all making -- they all have gone out there to the second round. The 3 movies that have come out, they are all on the next platform.
And last year, what percentage do you think ship to paid versus free consumption?
This is on audio?
Yes, yes, yes.
I'll answer this question in a different fashion and something I'm very happy about now is, for Saregama, the amount of money we are making, we made this year from paid subscription in India. So we make a lot of money right now from paid subscription of Spotify America or an Apple America. I'm not using that. I'm saying subscription money that the platforms made in India. And they shared our percentage of that across with us. That number has grown by over 40% in financial year '24 compared to 23, and it has now started touching double digits in crores. You see -- and this is on the top 3 guys are still not paid in India, Spotify, Airtel and Saawan have turned pay yet. Only the other guys are paid.
If I include YouTube revenue also because YouTube also has a paid service, that is growing in a very significant fashion. So the paid economy has already started showing signs of growth. I hold my guidance that over the next 18 to 24 months, subscription business is really going to take off, which is going to add to our overall profitability.
The next question is from the line of [ Swechha Jain ] from Whitestone Financial Advisors.
Okay. Sir, first of all, I would like to understand your content cost write-off policy. I know you mentioned in the previous calls, but I'm kind of a bit confused. What I understand is we don't charge off in the same quarter, right? We write it off over 3 years. Am I correct?
So I'll just repeat. We've said this earlier. Our life of content is 10 years, the new content. However, the charge-off is front loaded. As we have said earlier, the marketing gets charged off immediately. And the content acquisition cost is distributed as 20 -- 20%, 15% and remaining equally over the next 8 years. So that's the content charging policy.
Okay. Okay. Okay. Okay. And sir, just one more clarification. I think in an answer to a previous participant's question, you were mentioning about content cost of INR 200 crores and INR 100 crores for music. So just wanted to understand, this INR 200 crores calculation that came up, was it pertaining into FY '24?
So the INR 200 crore odd is what we have spent on new music in financial year '24. Not anything is going to get charged off in financial year '24. Our charge-off depends on the timing on when did the music get released. If there was a marketing that happened behind the song, in gets charged off fully and marketing is typically 20% of the cost of a song. So that gets charged off immediately under the marketing side. While the remaining 80% gets charged off in a phased fashion, front loaded, but that even the first year will get charged off over 12 months. So in financial year '24, when you see my charge-off, it will also a charge-off of what we procured in '21 and '22 and '23 also, while -- and a portion of what we people have procured in '24.
Yes. Okay. Okay. And sir, would you be able to give me the revenue breakup for FY '24 in terms of revenue from, obviously, the Music, then the Yoodlee platform, the Artist Management and Carvaan?
If you see our results right now, there is a segmental reporting which is sitting there. You can get it. So if you want, I'll share with you right now. So we people -- let me go out there and give you the annual numbers -- so Music, which is Licensing and Artist Management, made INR 544 crores in financial year '24; this is Licensing and Artist Management. Carvaan business ended up making INR 130 crores odd. Video business made INR 116 crores. And Events was 13 crores.
Okay. Okay. And sir, just 1 more question. The INR 1,000 crores that we plan to spend over 3 years. What I understand is that completely is going to be for the music, not on the video business, right?
The part is a separate thing, and it's managed right now through its own accruals. On music, we are spending INR 1,000 crores.
Okay. And how much percentage would be in FY '25? I know you said this over 3 years. I just want to understand -- is it going to be more in FY '25? Or it's going to be evenly spread across 3 years?
It is something -- I can't. See, the more granular we share, the numbers become difficult and we are into a negotiation part with somebody from whom we are acquiring content to whom or people we are licensing content. Directionally, it INR 1,000 crores, and we have spent upwards of INR 200 crores in this year.
Understood. Understood. Sir, just last question regarding a strategy for Pocket Aces. How exactly do you think it's going to sync well with our business? I mean what are we actually thinking about it from a 3-year or 4-year perspective? So if you could just throw some light around this acquisition, sir.
On the -- there's some macro fact right now, we believe that the GDP will continue growing right now upwards of 6%, which means the advertising business is going to grow in a substantial fashion because to sustain that kind of a GDP growth, far more consumption needs to happen, consumption gives rise to advertising and the vertical which has showing the maximum traction under advertising is digital advertising. So this way we are arriving at that digital advertising is another huge growth factor, and you can refer to any of the projections made by various consulting companies, they're all arriving at the same conclusion, assuming that the GDP is going to grow. If we look at digital advertising, digital advertising chases eyeballs. As a consumer yourself, when you are on YouTube or on Instagram, what do you, or on Facebook, you either go and follow an individual or you follow a channel. So channel may be an entity that entity may be a FilterCopy, that entity may be a Star or a Sony also. Or you follow an individual, which may be Rj Karishma or it may be Amitabh Bachchan. That's people -- that's what people do. We, through Pocket Aces want to control both these. Our attempt is between Pocket Aces and Saregama to control more and more eyeballs that are going out there on the AVOD platforms and ensure then that the advertising money that will follow, these eyeballs, we get a lion's share of that.
That's a business idea right now, this entire acquisition of Pocket Aces. Pocket Aces has got 2 big areas going in here. They have -- they are the biggest influencer management company in India, digital influencer management company in India, which means more and more advertisers are now reaching out to us. and saying, can I use your influencer? The moment they come to us for influencer, we also pitched to them that why not use also a song of Saregama in whatever the influencer is saying about your brand. So both sides are able to go and make some revenue from it.
Then we also own channels like FilterCopy, Gobble, Nutshell. They've got -- if you follow it on Instagram, they've got a large amount of follower base on Instagram and YouTube. So we tell the brand that I will give you the influencer, I will give you the song, and I will put it on my channel so that you don't need to spend money promoting this message of yours because in any ad, you need to make the ad and then spend -- first spend money on making the ad and then you spend money right now in disseminating the ad. We can offer them everything together as a combination of Saregama and Pocket Aces. This is the direction we people are moving.
There are already brands who are now liking this proposition of ours. Because when I'm offering 3 things together, along with the capability also to make the video for them if needed be, it makes their lives simpler and they're able to do it at a much lower price point. And we people benefit across all parts of Saregama. So digital advertising is growing in a big fashion. And we together at the consolidated level wants to have a lion's share of that.
Okay. Okay. So just a clarification. The growth guidance that you gave, a CAGR of 25% to 30% over 3 years, so what I understand, would that take into account the paid economy, which we feel is going to really go up this way or that...
When we people are giving you this growth guidance at this moment, we are saying this is independent of full subscription taking off. If the audio subscription starts taking off, you can add a few more percentages to this.
The next question is from the line of in [ Akhil Gulecha ] from [indiscernible] Family Office.
And first of all, congratulations on great Q4 results. So there was this EY report which suggested in 2023, there are around 70 lakh paying subscribers of music in India, excluding YouTube Premium. What do you think is our estimate of the number of paying subscribers today for OTT music? And how do you see this number growing in the next 2, 3 years? Are there any trends that you're noticing?
So I have already seen the only data point I can -- first, the numbers that you're talking about right now, they are a combination of subscribers and bundled propositions because bundling is also a common thing done by the telecom operators. And 2 of the OTT platforms are run by telecom operations, whereby they bundle up paid subscription along with the data packages that they are giving.
So just for you to get a better flavor of what these numbers are. I've already told you right now that for Saregama, in financial year '24, the money that we made from paid subscribers, non-YouTube paid subscribers, India operations grew by over 40%. So we are extremely bullish on subscription. We believe in the next 18 to 24 months, the entire economy may be moving to a subscription. Globally, there are around 650 million people who are paying for music subscription today.
This is in spite of some of the platforms taking a serious hike over the last 30 to 60 days. But music has got that kind of stickiness that people are ready to go there and pay. This is going to be eventually happen in India also. It happened in -- first between cable and DTH. Then it started happening on the video OTT side. And it's going to happen on the audio OTT side.
Now the jury is out how many people are going to be taking the paid subscription. There are not -- if I go by affordability factor, some of the numbers I can throw at you is there are some 125 million people between digital cable and DTH today. That tells you some indication of what -- how many people are ready to pay for some form of entertainment. There are anything between 90 million to 100 million people who are on some form of a video OTT app today. So that's a range of numbers we people are playing on. Whether it will happen at INR 50 per month, INR 75 per month, INR 100 per month, it's still up for debate. The number of subscribers that we can manage within 3 years of everybody turning pay. I believe the number of subscribers can be anything between 50 million to 75 million. Price point can be anything between INR 50 to INR 100. That's a range in which we are playing. The way our deal structures are whatever the platform makes from a customer -- paid customer, on an average, 50% of that money is distributed amongst the content owners.
Okay. Understood. That's really helpful. So can you give us some idea? I know you can't give the exact numbers, but some rough idea of how much of a music label revenue today is coming from paid subscription versus MGs or free ad-supported revenue model?
All I can go back and say that the subscription part is still on a pretty low side. It's not a high side. It's just that he's showing one of the highest growth rates. .
Okay, understood. And second question is around the content cost. So I understand that you're writing off 50% of our content cost in the first 2 years. So are we recovering the same amount through revenues in the first 2 years because it has been...
Right now, my profitability would have taken a beating this year. .
Okay. So because it has been over 2 years since we've done the QIP. So we have much have some data around, okay, whatever the content we are investing in, how is the ROE, how are we recovering? So you are recovering more than the 50% of the content cost in the first 2 years itself, right? .
Yes. I have stated this, our internal policy is the payback period of 5 years. If I go by the last 4-year performance of us, we are doing better than that. I still consider that to be a beginner's luck. So I'll maintain my payback guidance for 5 years, but we are doing better.
Thank you. Due to time constraint, that will be the last question for the day. I now hand the conference over to Mr. Vikram Mehra for closing comments. Over to you, sir.
So once again, thanks a lot for your patience. I've already given my guidance as we people go forward. We believe that Indian economy is on a very, very strong path. Both advertising and subscription part of the businesses will keep on getting stronger. And when the customer is paying directly through subscription or indirectly on advertising, we want to get a lion's share of that, and we will get it both from the music as well as on the video side. we will not hesitate in investing and taking -- heavily and taking bold decisions while being extremely strong on the financial discipline.
We repeat our guidance that our financial year '25 consolidated revenue excluding Carvaan should be growing upwards of 30%. Our adjusted EBITDA guidance remains at 32% to 33%. On a 3- to 5-year horizon, we are looking at revenue, excluding Carvaan growing at 25%, 26% odd, while our profitability to double in 3, 3.5 years. Thank you, and look forward to your support.
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.