Good day, and welcome to the Saregama India Limited Q2 FY23 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhupendra Tiwary from ICICI Securities. Thank you, and over to you, sir.
Thank you, Seema. On behalf of ICICI Securities, we welcome you to Q2 FY23 results conference call of Saregama India Limited. From the management, we have Mr. Vikram Mehra, who's MD, Mr. Pankaj Chaturvedi, who's the CFO, Mr. B.L. Chandak, Executive Director, Mr. Saket Shah, Head, Investor Relations, and Mr. Pankaj Kedia, Vice President, Investor Relations. We'll start with the opening comment by Vikram, post which we'll take the Q&A. Over to you, Vikram.
Thank you, and good evening, everyone. Quarter two of this financial year saw our operating revenue INR 189 crore and a PAT of INR 46 crore, which basically means 30% year-on-year increase in income and 36% year-on-year increase on PAT side. If I look at the data at a half yearly basis, then both revenue and PAT have grown by 43% on a year-on-year basis. Remember, this is in continuation with our last year's growth numbers of 31% in operating revenues and 35% in PAT. This is something, I've been saying quarter after quarter, year after year, that the growth story that we are on is there to stay, and there are reasons for it. The entire.
In our country right now, the growth in the digital consumption which is happening, both on account of new customers coming in and for the first time consuming audio or video and digital media, and then the existing customers, post-COVID, consuming that much more of content. These days it's almost impossible to find a person of any socioeconomic strata. Actually, if he or she is free even for 15 minutes, you will find it difficult to see those people not picking up their phone and watching something or hearing something. That's a reason why the digital consumption is going up in a substantial manner. With that in mind, I think Saregama's growth story is going to remain pretty stable in a medium to long term. I'm not even saying short to medium. That's a given.
Even on a medium to long term basis, the next 15, 20 years when you look at it, I think it's going to be India's growth story, and digital is what's going to be driving it, and we sit at the center of it being a core IP company. Technologies may come, technologies may go. Platforms may come, platforms may go. But the companies which hold large chunk of valuable IP will always remain pretty profitable, both from the top line and the bottom line perspective. The other advantage that we as a company have now is that we are not overdependent on any one revenue stream. There was a time eight to nine years ago where our entire revenue used to be dependent on just telecom, music and that also only telecom. We have come a long way from there, that we are not dependent...
We are making a decent amount of money, whether it's from music streaming apps or from video streaming apps or short format apps, television channels, films, TV series, digital series, live events. Even if there is a downturn happening on any one area, the other pillars still hold us pretty steady. That's why we are very, very bullish both on a stable nature of our revenue as well as bottom line. Our operating income before non-cash items, interest, and depreciation was INR 69.9 crore this quarter, which grew by 31% compared to the last year. The biggest highlight for the quarter was our music business, which showed its highest quarterly revenue ever at INR 150.9 crore. This is courtesy growth both on the music licensing side as well as our retail business, which is primarily Carvaan.
Let me start with music licensing, our core business, which again in this quarter has grown at a rate over 20%. It was the beginning of a big quarter for us because some of the regional language films that we had acquired have started coming out, and Q2 saw some of those films. Whether it was Chiranjeevi and Salman Khan starrer Telugu film Godfather or Punjabi superstar Diljit Dosanjh film, Babe Bhangra Paunde Ne, or in Hindi, Balki's film Chup, or Dhanush Tamil film, Naane Varuvean, or Kalyan Ram's Telugu film, Bimbisara, or Malayalam superstar Manju Warrier's film, Ayisha, again Hindi film Anurag Kashyap's Dobaaraa, and many more. In our presentation, we have shared a list of some of our high-profile films that we released.
Our strategy remains that we will not concentrate only in Hindi, but we will have take leadership position across all the major Indian languages. We also released many originals and recreations both in Hindi language and some of the other languages, including a new song from Anand Raaj Anand in Hindi. This is a very big quarter for our Bhojpuri music, where the Bhojpuri number one star, Pawan Singh, released his very, very big album or song for us called Laal Ghaghra. This, in fact, is the fastest Bhojpuri song to reach 50 million number on YouTube. We had an equally big hit right now coming from the other very big star of Bhojpuri, called Khesari Lal Yadav, called Bandhu Teen Dein, and this also was featuring out there in the top trending songs of the country.
Punjabi, we saw a super successful song from an artist called Satinder Sartaaj, while Bengali had songs from Anupam Roy and the Ushos of the world. I am taking only a select few names. These are all high-profile songs that did extremely well right now during the quarter for us. We also recently announced a strategic long-term tie-up with Arijit Singh, both for creating original songs as well as recreations across multiple languages. Our strategy of investing in new content is clearly paying off. It is giving us a greater leverage with all our partners because we are no longer the biggest catalog company now. We are also taking leadership position in new music, and we define new music as anything which is less than eighteen months old. Anything beyond that actually starts moving towards catalog.
With more and more of our songs coming out, the song selection done based on data analytics, which allows us to get the higher quality songs at hopefully better prices, which allows me to maintain the ROI position as well as allow us to get the market leadership position across languages, whether it's Bhojpuri or it's Gujarati or it's Malayalam or Telugu or hopefully very soon, Tamil and Hindi too. Many of you people have asked us about our INR 750 crore that we had raised through QIP last year. That money was used, apart from the issue expenses, only for Mango Music catalog, and that money is kept secure primarily looking at inorganic purchases.
Right now, our internal accruals are more than enough to take care of all the organic purchases that we people are doing. This money is invested in high quality debt funds and fixed deposits, so it's safe and secure. As committed to you, this money will be used only and only for music business of ours. Our reliance on data mining and using predictive models and reducing our dependence on individual or centralized individuals who in other corporates may end up taking decisions across music. In a company like ours, which is investing now in multiple languages, that kind of system does not work. We rely far more on data analytics and a decentralized decision-making process, helping us now move much swifter, much faster than anybody else and reducing the dependence on an individual based outcome.
Many of the films whose music we have acquired will start getting released from the quarter four of this year, and may go to Q1, Q2 the next financial year. Some of the big films may be Karan Johar's next directorial film, Rocky Aur Rani Kii Prem Kahaani. There's another Dharma Productions film called Rohla. There's a Vicky Kaushal-Sara Ali Khan movie called Zara Hatke Zara Bachke. There's Vijay Deverakonda and Samantha's Telugu film called Kushi. There's Prithviraj Sukumaran, the Malayalam superstar, his next film, Kaapa, or the big star from Punjabi, Ammy Virk's next film, Oye Makhna. There are lots of these films that are coming out with music is sitting there with us. The regional language slate has already started coming out. Hindi hopefully should be out from Q4 onwards.
We will continue investing in all the languages and take leadership position across all. This quarter saw an upswing in the Carvaan numbers. We touched 156,000 sales compared to 103,000 sales in the same quarter last year. All the sales are coming through our customer pull. That's the power of the brand Carvaan that's still there in the market. The latest variant of Carvaan was Carvaan Mobile. This is a product that we had launched to get a lower price point for Carvaan. It actually replaced one of our existing similar product called Carvaan Go, which is now being phased out and is being replaced by Carvaan Mobile.
In the smaller towns, it's allowing us to get a Carvaan at INR 2,000 and INR 2,500 price point, which is lower than the price point of Carvaan Mini also. Please keep in mind while the increase in the revenue, the increase in the number of units sold is 50% odd compared to last year, the revenue increase is not that much because you have to sell 2.5 Carvaan Mobiles to become equivalent to literally close to one Carvaan. The average realization per unit sold has come down, but the overall revenue still has grown out there in a handsome fashion, though not as high as 50%. We have not been promoting or spending any marketing monies right now and above the line for Carvaan, and this strategy will continue even in Q3.
The interesting part is we have been stating all throughout that Carvaan helps a lot to become the marketing tool for retro catalog of ours among the younger age segment. We knew empirically right now that this is happening, all the research was telling us this. We recently also carried out an exercise to find out how the growth of the songs which have been retro songs, growth in terms of numbers on both streaming platforms and YouTube, growth of those songs which have been put in Carvaan versus those which have not been put.
We are seeing the songs which have been put out there in the Carvaan devices seem to be growing at a faster pace than some of the songs we have decided not to put there in Carvaan. Actual data is coming out and telling us that Carvaan is working out as a great marketing tool to help our music licensing business also. It was a slow quarter for Yoodlee, with no significant releases happening here, which is expected. Most of our releases, as stated in my last call also, will be Q3, Q4. Our TV series on Sun TV continue doing pretty well in terms of TRPs. We launched a new Tamil TV serial called Ilakkiya. This is the one which replaces one of our existing serial called Chandralekha, which had actually completed 2,300 episodes on Sun TV.
A, a program that we are extremely proud of, a partnership with Sun TV that we're very proud of. We hope right now that the newer serial that's come in will continue following the same successful path that Chandralekha had. It has opened to very decent TRPs, and we hope they will continue. We launched our new business vertical called Live Music and Events during the quarter one, wherein we had done concerts with Daler Mehndi in Canada and India. We continued with that in quarter two with six concerts with Daler Mehndi in U.S. Both in Canada and U.S., the concerts got more number of tickets sold than any of the other country artists have ever done in the recent times. We are very happy and proud of the way we have been able to pull off the live events business.
It is a very, very low margin business, and we are aware of it. We still believe it's an essential business for us, to protect our music licensing business because this gives us a great opportunities to build relationships, with our artists and promote the songs that we may be working with our artist on. Overall, a successful quarter two, but for us, when we look at it, we just see it as just another step in the journey that we people started a few years back, where quarter after quarter after quarter, we are solidifying our position both in revenue, on profitability side, on all the verticals of ours. That will be all from my side. Happy to take questions, please.
Thank you very much, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Savi Jain from 2Point2 Capital. Please go ahead.
Can you hear me?
Yes, please.
Yeah. I just wanted to ask you about, you know, how YouTube is trending because, you know, they came out with the results, and they saw a decline in ad revenues in a long time. Is that visible for us also? Is there some degrowth there or some-
Sorry, where is it.
-slowdown?
Where did you see degrowth in Saregama numbers? Sorry, you have lost me here.
No, not in Saregama numbers, but specifically YouTube.
No, no. Again, remember, the numbers for YouTube globally in India are very, very different. Nowhere else in the world right now are these corporate results as good as we people are showing in India, and which is resulting into YouTube numbers still being very, very steady as we people go forward, in our country. We have gone out there and shared our overall YouTube views numbers also. There is no degrowth that we are seeing here in our country. I don't know where have you got this impression.
No, but I'm not saying degrowth. Maybe a slowdown in growth. Is that visible?
Still going out showing you the revenue numbers, they're coming from somewhere. The biggest revenue contributors for all our labels are music streaming audio and music streaming video, which primarily means that the music OTT apps, YouTube and the Meta of the world. We are seeing pretty healthy numbers. Yes, July was a little bit of a pressure overall? It was. I think there have been very smart recoveries that have been made.
On the views, I see that there's a significant increase year-on-year. Is this more user-generated content, or is that what is driving lot of this growth?
No, no, remember, for us, it actually doesn't matter whether user-generated content or our own channel content, because we get paid almost equal amount of money. We are independent of that because you, when you say user-generated content, remember, there's a lot of people who will take a, or Gangubai's song, original Alia Bhatt song, and upload it on their channel. That is also user-generated content only because it's not uploaded on my channel. For us, it really doesn't matter whether it's coming from my channel or somebody else's channel. First, let me get that clarity out. Specific to your question, for Saregama, we are seeing over the last four quarters, our own channel numbers are growing at a much faster pace than the user-generated content.
If you study my YouTube, all the channels combined, we have multiple channels here in the YouTube space. For almost every language, there's a channel sitting in. If you see my views, and they're all in public domain, you can find it out. We are growing. Our views on official channels are growing faster than any other label. For the simple reason, it's not that there's anything magic happening. We are investing much more on newer content than anybody else is.
Yes, got it. Did we see a negative impact of the, you know, there was a period when there was no deal with Meta for some time? Did that have a negative impact in this quarter?
Sir, I cannot go back and comment on individual deals. The final numbers for the quarter are there in front of you, and I'm very sure you'll be proud of the numbers that we people have written both on the top line and bottom line.
Yeah, of course. I just wanted to, you know if the numbers would have been even better if that deal was there for the full quarter. Also the YouTube Shorts deal that is not there in this quarter, right?
No, sir. YouTube Shorts deal was done as part of this quarter. They are also there.
Okay. Great. You know, numbers are looking superb. Hope will continue on this strategy.
Sir, we have been doing this for last many quarters with your blessing. Hopefully we will.
Thank you. Thank you.
Thank you.
Thank you, sir. We take the next question from the line of Aditya Narain from Edelweiss Securities. Please go ahead, sir.
Pankaj, Chandrakant, Saket, and Pankaj, there are many people to remember today on the call. First of all, Vikram, congrats on a great set of numbers.
Thank you.
Vikram, just on this Reels and Meta and YouTube sort of deal, I don't want to know the specifics, but were they at better terms than we had earlier? Was the deal
Sir, you are asking me. You have to read in between the lines. I cannot comment on specific deals.
No.
Yes, if we are showing growth coming in on a substantial fashion, it happens because the deals become better. Deals are becoming better not just because we are some special people. It's as simple as that. The quality of content we are bringing to the table, especially the newer content. It's the strength of that content.
All right. You're saying it's because of the strength of content you're in a better position to negotiate.
Yeah.
With larger players now. Okay.
It's the leadership position. See, we always were the kings of catalog.
Correct.
Right? We are the largest catalog in this country, but we had a weak position on newer content, and I've always accepted and acknowledged that till, what? 18 months ago. We built our position on catalog, and now we are building our position in a very aggressive fashion on new content. When we say we are getting leadership position on number one or number two across multiple languages, that is helping our negotiation position.
Sure. Perfect, Vikram Mehra. My second question is on Saregama Openstage. How is the response? I mean, if you can just talk about that or is it too soon?
It is too soon, and it's one of the multiple specific initiatives we people carry out. All this is a way to go back and make more money from catalog.
Right.
Saregama Openstage is nothing but people coming out there and contributing their derivatives, remixes, lo-fi, trap mixes, recreations, cover versions of our catalog music.
Right.
Whether it's Carvaan which is helping us promote it, whether it's playlisting which is helping us promote it, whether it's going to outside people and saying, why don't they send their own versions? All that is working towards promoting catalog. You see the final impact of that right now on the growth numbers.
Perfect. Just want to say congratulations on getting the RG deal. I'm sure it's a great deal for the future as well. My last question is for actually Pankaj, if possible, Vikram. Any update, Pankaj sir, on the timeline of the demerger, et cetera? If you could give us an indicative timeline.
Yeah, sure. In this quarter, we got the approvals from the stock exchanges, SEBI. Post that, we have filed our application with the NCLT Kolkata. It does take normally four to five months this whole process. It moves through various stages. We are hopeful, and we are pushing for getting the final order and the demerger complete by March 2023. That's going to be our endeavor.
All right. Thank you, Vikram. Thank you, Pankaj. Thank you so much and best of luck.
Thank you.
Thank you very much. We take the next question from the line of Mrs. Swapnil Potdukhe from JM Financial. Please go ahead, sir.
Yeah. Hi, Vikram. Congrats on a good set of numbers first of all.
Thank you.
Just wanted there are two, three questions. First one is a clarification, actually. You mentioned that some of the big budget content in 4Q or early next year. Will that by any chance mean that we are revising down our CapEx guidance for FY 2023?
No, we are not. We maintain 22%-25% growth in music business, music licensing business.
With respect to the investments guidance, which was around INR 220 CR-INR 230 CR probably, will there be lower investments there for this particular fiscal year?
At this juncture, we are not changing any of our guidance. What we need to do, even if some of our Hindi movies got delayed by a quarter, like Rocky Aur Rani Kii Prem Kahaani, our biggest movie was supposed to release in February. Because of the lead actress of the film is going through her pregnancy at this moment, so the movie had to get delayed. Now, that gap has to be plugged in by other content, which we are plugging in.
Okay, thanks for that clarification. Secondly, when I looked at your P&L, some of the cost items such as employee expenses, royalty expenses and other expenses, they seem to have grown at 20% quarter-on-quarter. Now, my earlier sense was that your top line, if it grows around 20-25%, the cost may not grow at the same rate. There will be some operating leverage play there, which would support our margin improvement, which, for some reason, has not happened. Any particular reasons you would want to call out?
Sir, which cost lines are you talking about?
Employee expenses, royalty expenses, and other expenses.
Sir, employee expenses? You're talking quarter two, right?
Yeah. Quarter two. Yeah.
Quarter two, compared to every other quarter, our appraisal system happens in quarter two, and all bonuses of the employees get given in quarter two. Quarter two always, for many years, you can go back and check it out. We'll have the highest employee expenses because bonus expenses get given at that time.
Okay.
If I look at it on an annual basis, the expenses that people are talking about right now, the employee expenses, we are actually over time being able to bring it down.
In fact, something just to add, our employee expenses as a percentage to revenue, because that is one of the parameters that even we watch very closely. They have come down to about 11% as compared to more than 13% in the same quarter last year. Absolute expense, yes, they will grow as the business grows. We are watching our margins very closely, and we have been able to improve cost as a percentage to revenue on this line.
Okay. Any particular reason for royalty and other expenses?
The royalty expenses are directly linked to revenue because royalty expense is the money that you end up paying for the older content that we are taking.
Mm-hmm.
which is sixties and seventies and eighties content, which are all royalty expenses. The more revenue we make, the percentage, the number doesn't change that much.
Okay.
The more money we make, the higher those expenses will be. They are in the range typically between 10%-15%.
Okay. What about other expenses?
Completely.
Sorry?
It's a purely variable expense, sir. If we make revenue, we pay royalty. If there's no revenue, there's no royalty.
No, no, I'm asking about other expenses, which have grown to INR 23.5 crore versus INR 19.7 crore last one full quarter. Last year same time it was INR 14.5 crore.
Let these guys comment right now.
As a percentage to revenue, Swapnil, it has not grown. We still let us clarify the same to you. Just give us a moment.
Sure.
You're talking the last line, other expenses?
Yeah.
Yes.
Yeah. These are some of the expenses, you know, as we have grown our volumes on Karma, there are some expenses which are incurred upfront on the logistics side. That is contributing to the increase in other expense. Even if you look at on a QOQ basis, it's around 12%-13%, which is in line with our top line growth.
Right.
See, Swapnil, let me put it this way. Philosophically, for a couple of years, you will see expenses moving at a similar pace as revenue. Once we pass that hump in a step function basis, where then you will see that the growth in expenses will slow down, compared to the growth in the revenue side. Initially, to get the engine moving from stationary to the first and the second gear requires some amount of fuel consumption.
Okay. Got it.
Just as content. That engine was not there. Hence you will see expenses and revenue moving in a similar direction. You will over time, right now, you will end up getting advantage on the margin side. I'm not saying long run, I'm talking about short to medium run.
Right. Very clear. Just a last question, you know, from my side. I would like to understand your events business. How big is it right now? What are your plans for the business over the next one or two years? Are we burning, you know, any cash right now, in the near term we will end up, you know, spending some amount on this?
No, the individual events right now is combined with the films and television, so I can't give you events individual numbers. Events is a concept, is a low margin business. I've stated in the past also that once the business gets stable, it will be a 5%-10% margin business. It's an essential business to manage my music business. If I'm in the newer content game right now, to differentiate myself vis-a-vis other guys and to build relationships with the artists, being in this business is very advantageous part. We are and we will not be burning cash here.
Right. Yep. Those were my questions, Sir Vikram. Thanks a lot for answering. Yeah.
Thank you very much, sir. We take the next question from the line of Mr. Nikhil Modiyani from Valiant Investments. Please go ahead, sir.
Good afternoon, everyone. Vikram Ji, I just wanted a confirmation from what you told the earlier speaker. The event revenue is not part of the music licensing revenue, right?
No, sir. It's part of this juncture we're combining with the films and TV business.
Okay. All right. Thank you, sir. One more thing. Would it be possible for you to give us a break-up between revenue from catalog and new music?
No, sir. That becomes very confidential information.
No, sir. Maybe not for this quarter.
Yes, sure.
for the current financial year, maybe for the last financial year or previous financial years.
Sir, I think the closest we can get to you on giving an answer to you, if you look at my last corporate presentation, it very clearly shows how much revenue do we make from which decade of music. You will see, if you see the same presentation two years ago, majority of our revenue was coming from 20th century music. Now, as last year, 40% of my revenue was coming from 21st century music. In 21st century, majority of the investment is the last three, four years only. That will give you a perspective.
Mm-hmm. No, because as investors, we want to track how are we doing on, you know, getting our paybacks. This number will be really helpful.
That is an extremely confidential and competitively sensitive information. Because if I give you that, all the information and the cost anyway, you can have an idea, you have a revenue also sitting in, then when I go out there and do my negotiations with the outside people, what am I left with?
I understand. All right, sir. Thank you, thank you very much for your time.
Thank you very much. We take the next question from the line of Mr. Priyanka Sarkar from Family Ananta Capital. Please go ahead, sir.
Thanks. Hi, Vikram. Hope I'm audible. Vikram, just one on the YouTube Shorts business. Obviously, it must be growing at a phenomenal pace. What I wanted to understand is that is there a minimum number of seconds that it has to play for us to get a revenue share?
Sir, on YouTube Shorts?
Yes. Yes, please.
For short-form apps, YouTube Shorts and ShareChat, globally they pay a fixed fee. It's not a variable model yet. None of these guys have been able to crack a variable model yet. I expect that to happen in the next couple of years. At this juncture, they work on a payment model, which as a content owner renegotiates literally with most guys every year. On YouTube, it's a variable model, which is a more evolved model now. On YouTube, every time an ad gets presented, whether it's at the beginning of the song or it's an overlay that comes on the song, the middle of the song, if there is an ad that is presented we get 50%.
Okay. Okay, got it. Vikram, the second question I wanted to ask is about this cash balance. It's about INR 930 crores of cash, and it's been a year since you raised the capital. Is there like more deals as such available over the last 12 months that you could acquire new catalogs or how is that? It's been a year, right? Just wondering on that front, please.
That's it at the end of the day, we are constantly debating between picking up and doing a utilization of that capital which is lying there with us and also getting a catalog at a multiple that starts making logical sense. Some of the places we reached a position right now, but we could not close the deal because we didn't find the valuation to be right quality. In some of the cases, we didn't like the paperwork, which was behind that, the catalog owner. We are in conversations, but the reality is at this moment, we only have one deal. I'll be honest with you. Just because we collected money, we don't want to go out there and blow the cash by buying catalogs at arm's length.
We want it to come at a multiple that makes logical sense.
Okay. Fair enough. Full marks on capital allocation in that case, I believe. Thank you.
Thank you, sir. We take the next question from the line of Nitin Sharma from MC Pro Research. Please go ahead, sir.
Thanks a lot. Congrats on a good set of numbers. A couple of questions, if I may. First of all, can you help us understand what caused the surge in the other current liability this quarter? It's I think up INR 100 crore or so.
Yeah, these are, you know, our discussions that happen on all the licensing deals. We do get revenue in advance on the licensing deals. However, our accounting happens on an accrual basis spread over the deal period. It is purely of that nature. It is not a liability in a sense wherein it needs to be repaid. These are all income received in advances.
Understood. Secondly, is it a valid assessment that if I, let's just say, your Carvaan sales are on average, if I pick 4K for this quarter, it seems that prices have gone up recently. It is contributing around 30%-35% of the revenue. Correct or wrong?
We give the breakup of the music licensing and Carvaan business on an annual basis. At the end of Q4, we will share the numbers once again.
I'm arriving at a pure music licensing business has seen some bit of slowdown sequentially.
Sir, I am telling you, going on record emphatically saying it has not.
Okay. Understood. Lastly, one question just to understand, you mentioned on the previous question that there were some Carvaan logistics-related costs. Has it also affected the segment margin for the music business? It has come down slightly.
Sir, when you're saying it has come down, you're talking on a percentage basis?
Around the 3 percentage point, the segment margin.
Because the Carvaan business is not a break-even business even now, it's for us.
Okay. Okay.
Very, I mean, in this quarter, very low margin business, but typically fluctuates between a breakeven to a low margin business. If you look at an aggregate level, the percentages will always look low if the Carvaan numbers start looking shaping up.
Understood. Super helpful. Thank you.
I'm telling you this, and you will see the numbers when they come out in Q4 and we release the numbers, that the music growth numbers are not slowing down. In fact, they are steady. That's why I'm ready to maintain our prediction of 22%-25% growth annual basis. I'm not changing that numbers out. Neither is the Avech going out there and making any change in our projections on the margin side.
Understood. Thanks a lot. All the best.
Thank you very much. We take the next question from the line of Mr. Ankush Agrawal from Surge Capital. Please go ahead, sir.
Thanks for taking my question. Vikram, firstly, I want to understand, like in terms of, say, if you are spending, say, INR 100 on new content, what would be the broad range of amount that would be going towards, you know, royalty-based deal versus a fixed fee deal? A broad range would suffice.
That break-up I can't give you at this moment. What I can tell you.
Sure.
Is that if there's an INR 100 rupee deal, on average INR 80 bucks go towards content and INR 20 bucks go towards.
Oh, that is understandable. What I'm trying to say is that if you are spending INR 100, you know, probably half of the new deals that you are making are fixed fee deals and half of the new deals that you are making are royalty-based deals.
The moment I tell you, telling you how much am I spending on Hindi films and how much I spending on others, I can't give that breakup, sir, unfortunately. Because the only thing where you're looking at royalty-based deal is Hindi films.
Okay. Rest everything you're saying is fixed fee deal.
Yeah.
Right. Again, on this, royalty level, so like you have mentioned that earlier, that the older content is 10%-15% kind of royalty. Would it be possible to share what would be the higher range of the new deals? Because you have already mentioned that the new deals have a higher level of royalty versus the 10%-15%.
Just to touch on Hindi film side, royalty that we people have to, if I give you the highest possible number, then everybody is going to come to me and start telling me to give that percentage to them also.
Yeah.
Can't share that information. What I'm telling you is that we believe on an aggregate basis when we look at.
Right.
Catalog and newer music, this number should not change that substantially because lot of our music is going to be not paying royalty because it's a fixed fee. Somewhere we are paying royalty. The overall at the business level between-
Right.
catalog, Hindi film new music, non-Hindi film new music overall, we still will remain in this 10%-15% range as we go forward.
Okay. This 10%-15% is including the revenue from the fixed fee deal as well, right?
Yes.
The denominator is the full-
Look, I understand information. Once a film producer knows what is my higher rate, they all want the higher rate.
No, I can understand. The explanation that you gave makes sense. Another thing, Vikram, over here, if I look at your presentation on the content charge, we mentioned that we don't include the royalty which is paid after the minimum upfront amount is recouped. I was wondering, why don't we include the subsequent royalty into that? Because, you know, in the end it is the content charge that you're showing only includes, you know, the royalty upfront amount and not the royalty that you are paying after the recoupment of advance. It doesn't give a good understanding of what is the actual content charge.
Because now it's fine because we don't have a lot of royalty, but I think given the kind of spending that we are requiring, couple of years down the line, the royalty component that would be hitting the other expense and not the content charge would be substantial.
Your understanding may be that we will pay them INR X crore upfront.
Right. Right.
Plus INR 90 crore of marketing.
Right.
The music becomes ours. We start recouping this X plus Y.
Right.
On top of that, typically there is a hurdle rate which is put.
Mm-hmm.
Once we have recovered X plus Y plus the hurdle rate, then we start paying royalties to them.
Yeah.
The royalty part right now then starts and will start but for all the movies where we have fully recouped the initial money that we had paid and the marketing and royalty and the hurdle rate, those expenses are going into royalty expenses.
Yeah, that is understandable. What I was suggesting is that in the end it is a cost attached to a content, right? If we include that in the content charge, it would give a better understanding. That was just a suggestion, but either way. Lastly, Vikram, one thing I want to understand, if I look at a quarterly royalty number, it's about 50-odd crores, right? If I reverse calculate based on, you know, what you have mentioned that, the royalty expense is somewhere around 15-odd%. That comes around 100 crores of revenue, right? Which is broadly the entire cost we have, on our, the entire revenue that we have on the license side, broadly.
The thing is not adding up because if you say the older content is 10%-15% kind of royalty, and I assume that is the major part of royalties, and then there's the current one, that would be indicating that, you know, entire revenue on the licensing front is coming through that kind of music, right, which has a royalty attached to it. Not sure, like, I put it on the right sense, but it's not adding up, the number.
I'll just take this question, Pankaj, this side.
Yeah.
Probably the way you are calculating has too much of approximation. The number of music licensing revenue that probably you are calculating, so that number is a mix of many parameters. One thing you keep in mind, royalty expense, Carvaan also has a royalty expense.
Oh, okay.
Keep that in mind. That's a big assumption, because the way you are doing the calculation. You are assuming the entire royalty expense is net of music licensing. Even in Carvaan there is music sitting in, I have to pay royalties there.
Oh, okay.
That will vary. Yeah.
Yeah. Got it. That was important. Got it. That was very helpful. Thank you.
Thank you, sir. We take the next question from the line of Mr. Varun Arora from Safe Enterprise. Please go ahead, sir.
Hello.
Mr. Varun? Yes, sir. You may go ahead with your question.
Yeah. Hi, thanks for the opportunity. Vikram Mehra, my question is regarding OIBDA margins. You know, at the beginning of the year, you had indicated 33% margins. You know, if I look at last two quarters, we've been doing 38%, 37%. Just wanted to check, I mean, you know, are we sticking to that? And what's the reason for that, you know, lower guidance? You know, what will be the moving parts, you know, which will kind of drive this margin?
Sir, right now, I'll still stick to a 32%-33% OIBDA margin number. I know the last two quarters we have done better than that. For this year, I continue with that number. Let's have the chat at the end of quarter four, sir.
Right. What will be the moving parts here, Vikram? I mean, the reason you want to stick to this guidance, is it because of?
I have a much better control right now going and sitting in on the music licensing part. The moment you are looking at the events business, which at this juncture, being in the first six months, is going to be a very, very low margin business. If I suddenly end up having a large event coming in of INR 20 crore, INR 30 crore, INR 40 crore, that if it has to come down to 2%, 3%, 4% margins suddenly changes my entire mix. That's the reason. Had it been only music business, I wouldn't have had this issue. I would have given you higher projections. Because the events business is a relatively newer and uncertain business on which we don't have full control. Second, the films business is growing in a very, very aggressive fashion. A lot depends.
Film business is a 15%-20% margin business. I don't know exactly what releases will finally happen in Q3 and Q4, so I will continue maintaining a 32%-33% path. It's just a mix game and nothing else.
Sure. Second question is, Vikram, regarding the content acquisition costs. Now I understand like, you know, during the pandemic, there was no content which was coming out. Now, I mean, last few quarters, I mean, you know, would you say that, you know, I mean, we can kind of look at last few quarters number as the base on which, you know, our content acquisition cost should kind of, you know, come going forward since, I mean, last few quarters are more normalized quarters in terms of content coming out.
Sorry, sir, I'm not clear about your question. Are you saying that our content will go up?
No. I mean, during the pandemic, there were no movies which were coming out, so naturally we were not acquiring new content. Right?
Yeah.
Last few quarters, we've seen like movies are coming out, you know. You are acquiring content. I'm saying, the base that we have seen in last two quarters, the content acquisition costs that we've seen in last 2 quarters. Now, would you say that we've reached like the normalized levels? Obviously, they're much higher compared to last year levels. You know, the number that we are seeing in Q2 and Q1, that's the more normalized content acquisition cost that we should see going forward.
No, sir, it will go up because the bigger films, which are the Hindi films, Our Hindi films haven't started coming out. We started acquiring bigger Hindi films more from the early stage of this year, just immediately after QIP. Hindi films, there is typically a lag from the time the music, basic agreement happens. Because music is something which gets finalized first in most of the films, before anything else gets finalized. Star cast finalize hota hai, phir gaane banne shuru ho jaate hai, that's the time we come in. We get involved in it. It is a lag of 12-18 months. You will be finding the bigger Hindi movies coming from quarter four or quarter one onwards. The numbers will be a little higher.
For you, the better part to look at it is our earlier guidance we had given that the new content coming out in the market is in the space around INR 800 crores. Our aim is to pick up anything close to 30% of that content, roughly, which gives you a number of what worth content are we gonna pick up. We've also given the guide on what our charging policy is. Marketing cost gets charged off immediately. The rest of the cost is getting charged off at 15% year one, 10% year two, blah, blah. That will give you a very decent idea of where the year will end.
Got it. That's it. Thank you so much.
Thank you, sir.
Thank you very much, sir. We take the next question from the line of Mr. Devanshu Sampat from YES Securities. Please go ahead, sir.
Yeah. Hello, sir. Good evening. A few questions. Your artist management business, can this take up a sizable chunk of your investment going forward?
No, sir. Artist management business actually requires very, very low investment. Because when you go and sign an artist, what you're doing right now primarily is investing in his songs, which anyway we need to invest as part of our music business. I always see artist management part as an offshoot or a byproduct of a core business of music licensing. It ain't going to be taking large investment, and neither is it going to become game changer in terms of increasing our revenues or profitability. It's one of those very essential things that you need to protect your core business of licensing.
Just to understand what all is involved here. If you are signing a new artist, like the marketing cost and the video shoot and everything that happens is something that will essentially be done by a label, right?
Sir, that I anyway need right now. I instead of going to this artist, I may have gone to somebody else in the market, paid him or her large amount of money for them to do an original song for us. We are saying rather than investing in somebody else's artist, pick up a talent that you believe in right now, start investing in that artist. It's literally an SPV. Any licensing company was doing it, part of our business was doing it for last couple of years. We are just saying if you are doing it, might as well sign up an artist and do it with them so that at least there's a chance that if the artist becomes big, there's some additional money we can make off them.
Got it. Okay, another question to do with something you mentioned in your opening comments, right? You spoke about our data analytics capabilities and stuff. Is it possible you can help with understanding, you know, the share of new users and their streaming contribution and how they are growing versus, you know, existing users or who have been around, say, for like a year or so, and what is their contribution and what is that growth coming from them?
Please understand, the data that I have and analytics I run right now is at the song level, not at the user level, because I don't own the user. Users are owned by Spotify, Gaana, and Saavn of the world.
Okay.
What we get on a daily basis is data about how every song of mine consumption is happening across every platform. On YouTube, I know every competitor's, every song daily numbers. We've invested in technology to start tracking that. That is all giving me very rich data about my own content and outside people's content. What I don't know is whether it's you streaming it or is it Vikram Mehra who is streaming it. That data we rely on our partners.
Got it. You'll get the mix between a paid subscriber versus
Yes. I get a clear understanding that these number of streams came from paid subscribers versus these many numbers streams per song came from free subscribers. That data we have.
Can you give a sense on what it is right now?
Sir, it is still a free world.
Okay.
The paid numbers are still very, very slow. I've said this, and I keep on venturing my neck out here and saying, you give it another 18-24 months and you will see India moving towards a paid economy. It's happening on video OTT platforms in India. We all were laughing that the numbers are not very big for video OTT. Month after month, the position is improving. People are moving from their cable and DTH platforms to video OTT platforms. We are seeing on the audio OTT, everywhere else in the world, the numbers are pretty decent, as they get close to 525-540 million paid subscribers globally. I see the same thing happening in India. It's just a matter of time now.
Okay. Sure, sir. Another question, just to understand how this works, right? If there's suppose, you know, a person who was very famous on YouTube, for example, for a dance channel, but they use your music. How will the split work over here?
Sir, anybody who's using any part of our song, whether it's the original song or the lyrics of the song or the music composition. You take Lag Ja Gale's song. The composition is the same, but you change the lyrics. All those IPs are owned by us. If you create any content using this on any social media platform, then Saregama has the right either to strike it down or what we typically do is to ensure right now that all the advertising money that's gonna flow on that new video that you have created actually flows through Saregama.
Okay. The incentive for the person owning the channel would probably be some other way of, you know,
What happens, a lot of artists end up using a huge catalog of ours to make fresh versions of it, so that they get popularity. If they get popularity, they become big right now on the live circuit. Easiest part if you're a new singer is to go out there and take up, sing a Badshah ka Pani Pani or Kishore Kumar ka Mere Sapnon Ki Rani Kab Aayegi Tu. Because the cut-through is much faster, people already know the song. You go out there, you do a version of that song, you put it on YouTube, Saregama makes all advertising money, but the artist becomes big and then gets maybe at a small stage, a chance right now to perform in a restaurant. If the artist becomes even bigger, they may perform at a shaadi.
At which point do you start making money from their live performances?
That's what we were lacking till now. Now we are saying other than somebody else doing it, let our own artist do it, and then I'll get a share of that, too. That's where we are moving.
Sure. Just last question, any update on the land bank that is sitting on our books in terms of value unlocking or monetization?
Whenever there's any development out there, all I can tell you, it does not take any investment from our side for the longest time now. If there are any developments, we'll inform you people.
I understand. I mean, in terms of market value, it seems like a pretty sizable chunk. Just, I was just wondering from that angle.
It's value to be unlocked someday, sir. It's only good news whenever it comes.
Okay. That's it from my side. Wishing you all the very best. Thank you.
Thank you.
Thank you very much, sir. We take the next question from the line of Kishan Amarchand from Polar Ventures LLP. Please go ahead, sir.
Congratulations on good set of numbers. I have two questions basically. Am I loud and clear?
Yes, please.
Just wanted to know, in the de-merger company that will happen, the segmental revenue shows music, film, television and event and publication. What all will go into that de-merger company out of these three?
It is going to be on the non-core business of Saregama that gets moved out, which means the non-exclusive distribution of our retail, the publication side, as well as some of the investments which are non-core to Saregama. They get to the new resultant company. They move on.
Does that mean non-core would mean the real estate part as well will go into that?
No, no. Non-core means publication side that I just mentioned to you.
Okay.
Yeah, some of the investments that we were holding, but not the real estate.
Okay. The second question is, when this what do you say, the Carvaan that you have launched, the newer version of the Carvaan, that is the mobile version, is that going to be more margin accretive than the earlier Carvaan version, which was what do you say, radio kind of a business, radio kind of a Carvaan?
Sir, the margin percentage is similar across all the Carvaan variants, from the Radio Carvaan to Carvaan Mini to Carvaan Mobile or Musicbar. That's something we are very particular about.
Mm-hmm.
The cost of license, a Carvaan gets sold at INR 6,000, while Carvaan Mobile is between INR 2,000 and INR 2,500, so the absolute margins are lower. What it allows us to do is to ensure that it goes deeper into the smaller towns.
Mm-hmm.
Which really helps us sell more Carvaan. We are clearly seeing, as I mentioned earlier, as Carvaan, our Carvaan Mobile reaches homes of people start listening to the music which is stored there. Those older songs again become top of mind, and then often people, other members of the family end up consuming the content on YouTube and OTT also.
This Carvaan that you are making will also go to the demerger company?
No, sir. The Carvaan remains out there as part of Saregama. The demerger company will have a non-exclusive right to sell that Carvaan on digital platforms.
Okay.
The core business within Carvaan, within Saregama.
Okay. Is Carvaan a profitable business or is it still a burning cash endeavor?
No, sir. I think I've been stating this after financial year 2020. In 2020, we had lost money on Carvaan. That's the only year we ever lost money on Carvaan. After that, Carvaan during COVID time was the break-even business, and that's a commitment we keep on making. It will remain between break-even to a very thin margin. For us, we have hoped that the overall numbers will improve and the margin percentage will improve. The most important part is it works as literally free marketing for the music licensing business in a very big fashion.
Okay. Thank you. Thank you.
Thank you very much, sir. We take the next question from the line of Ankita Mittal from Nivesh. Please go ahead, sir.
Hello. Good evening, sir.
Hi.
Sir, what are the risks do we see in near term or midterm for our business? Like any kind of cyber risk to our IP properties and all this stuff, sir?
Sir, actually, the great thing about IP is even if you steal my song, the ownership still sits with me. There is, in that sense, it's not a physical product. We are stealing it.
Yeah. Actually, I was not asking in that way. I was asking from way of hacking and all this stuff, like hacking of YouTube channels and all this stuff, sir.
Sir, the good part also.
What are the internal measures we are taking on in that way?
When you say its ownership cannot be stolen. What can be stolen is can you listen to a song of Saregama without Saregama getting paid for it. That's the risk, right?
Okay. Yes, sir.
Now, the good part is, ever since the world after 2015 onwards has moved closer to the app world than the browser world. What do I mean by that?
Mm-hmm.
Up till 15, 16 also, many of us used to consume content on our laptops and desktops. We are seeing 14, 15 is the watershed mark. There are far greater population of the world which now consumes content only on their phones, and not through by typing www dot something. Now, the good part about app world is that it's controlled primarily by two companies, Google and Apple. If there is any app sitting on a Google store or an Apple store which is infringing our content, we take the help of Google and Apple to throw that app out of the store, which is allowing us to control piracy to a great extent. We may still have piracy happening in the smaller towns, whereby consumers go to the panwala shops and may ask side loading of some of the songs onto their mobile phones.
We believe the way this problem has gone away from Bombay, Delhi, Bangalore, Calcuttas of the world, eventually it will get eradicated from the entire country.
Understood, sir. Sir, one more thing. You were talking about some big movies getting delayed from quarter four to quarter one next year. You are also saying the other content will set off the same. That content, will that be big to set off the same, sir?
sir, it may not be exactly match. It's very difficult to match up Karan Johar's Rocky Aur Rani Kii Prem Kahaani.
Right.
There's no director of this stature in this country, unfortunately. He's the only one. We have to do, but we have to go out there and keep on maintaining our market share and increase our revenues. We are finding it may not be film music, it may be non-film music. The recent tie-up we have done with Arijit Singh, we will ensure right now that at least one Arijit song keeps on coming, comes on in quarter four, and we promote it and make it big.
Understood, sir. That's from my side, sir. Congratulations to you and your team, sir.
Thank you. Thank you.
Thank you, sir. We take the next question from the line of Himani Shah from Alchemy. Please go ahead.
Hi, can you hear me?
Yes, Himani.
Hi, Vikram. Congratulations on the great set of numbers.
Thank you.
Most of my questions are actually answered. Just one question is, on the artist management side, can we say that Diljit, and since you're making like, you know, a signing agreement with Arijit Singh for new content, that they're also guys that we would be managing on the artist management side?
No. No, no. We are not. Both the case of Diljit and Arijit, we are doing specific projects with them, which are long-term projects, but we are not managing those artists. Our endeavor at this juncture on artist management is to work with newer artists.
Okay. Any names, Vikram, that you can likely-
Himani, at the right time, I'll go back and disclose it. We have identified, we are working on the individual. At that right time, we will announce.
Okay. Okay, got it. Thank you and congratulations again.
Thank you, Himani.
Thank you. We take the next question from the line of Mr. Ravi Naredi from Naredi Investments. Please go ahead, sir.
Ravi ji, I'm waiting for you.
Vikram ji, I am patiently listening to you and listening to the answers really up to mark. Sir, how much money we have debited towards content charges in quarter two and H1? Sir, I can tell you the total content charge in quarter two is INR 17 crore.
Okay.
On the H1 basis is.
Thirty-four.
INR 34 crore.
Thank you. As we are bigger in music and main revenue earnings are, we may say our bread and butter comes from music. Can you tell in long run, say three to five years, film will be also substantial part of earnings?
Yes, sir. We believe film business will continue growing now at a 25% year-on-year. Music business has a huge head start. Last year, films and TV INR 100 crore versus far bigger. We see films and series also becoming substantial in the days to come.
Right. Sir, how 5G help our business?
How?
5G.
Anything that allows consumption to go up.
Mm-hmm.
Anything that gets them closer to their phone means we have better scene going on. Now, 5G, there's another very interesting phenomenon happening in the country. Earlier TV channels were supposed to be used only for DTH and TV sets. On TV sets, we used to watch only DTH and cable TV channels.
Right.
How many of us have started watching our Netflix and Amazon and Hotstar on those TVs?
Right. Right.
Strangest part is that, it seemed for many of the platforms like YouTube, the fastest growing segment now is the smart television.
Right. Right.
Because people have started consuming that also on their television sets.
Right.
Which means content owners like us who have got a large library sitting now on YouTube's of the world will now get one more avenue where the 70-year-old dadi and nani who are sitting at their home phone TV. 5G is going to enable all this because the speeds are going to be that good that it can power a 42-inch or a 55-inch television.
Right. Definitely. Yes.
Entertainment Limited. If you go out there for a walk anytime, you will realize every auto wala, taxi wala which is parked on the road is glued onto their phone.
Right.
You travel Bombay trains, anybody who's standing is listening to music. People are sitting and watching something on their phone.
Right.
We don't know what daydreaming is. We are constantly glued to a device to consume content.
Right. Right.
Which is great news for IP owners like us.
We may assume there will be tailwind for longer time in our business.
I'm very clear about this. People think music industry is very small in our country itself. We've got a very long way to go. It's the entire problem of piracy which had killed us earlier and got our industry to their knees. Now with piracy going away, companies like us investing heavy in technology to control it, I think we have serious tailwinds behind us. One thing we all are agreeing is next 10, 20 years belongs to our country.
Okay.
There will be money coming in, better devices, better laws protecting right now IP. If you see judiciary is constantly taking judgments in favor of IP owners.
Right.
They take very seriously IP infringement in today's time and age. We don't have to wait for five years to get a judgment. We get judgments fast enough. Judiciary has also realized that the large investments happen on IP. IP is also soft power with which India can go out and influence things at a global level. If America could do it with Hollywood movies, we can do a lot of good with Bollywood and music. I think everything at this juncture is falling in the right place. Companies who are investing in data science, technology and new content, I think are gonna do pretty well.
Can we say in the next 10-20 years, not for India, even our company will grow too much, right?
Sir, I have no doubts about that.
Okay, okay.
I have put my bet on it.
Yes, yes.
If any company which is investing correctly and is doing other things are equally important, sir. In today's time and age, you cannot just say those days are coming. People have to invest in data science in a big fashion. Now we are reaching a stage where we can go back and say scene by scene of a movie, where do people lose interest and can we change that? What are the kind of scenes that do well? Same thing we are doing with music. Every second of the song that goes out, we start tracking the performance of the song as it plays, which are the places where people drop out and what is it that is resulting for people to drop out so that the next set of songs can be better.
People who invest in all that part, I think this is a good story waiting.
Definitely. Really, you had given a very elaborate answer and everything. It's just all the best to you and your team and company because it is our company too. Thank you very much, sir.
Thank you, Ravi Naredi.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Thank you, everyone. Thank you for this patient listening. I'm often asked right now that is the best part of the journey already over? We keep on reiterating this, that all you have seen is that music industry, which is literally a barren land, has started showing some offshoots now of growth. There's a full tree that needs to get planted, both on the music side, and I have the same piece on the video side. As a company, we will continue investing on IP, and we believe in the days to come, where more and more people start watching content on smartphones. They watch more content per day than what we are watching at this juncture. The IP has got a very long story waiting to unwind.
We maintain, as we go forward, our bullish stance on music licensing, 20%-25% growth year-on-year on a short to medium run basis. We continue with our content investments on film side on Hindi, Tamil, Telugu, Malayalam, Punjabi to Bengali, and on the non-film side on Hindi, Bhojpuri, Gujarati, and some other languages, including devotional in a big fashion. We continue with a cautious approach on Carvaan. Carvaan is a great marketing tool for a music licensing business. We understand the power of it, but we will always ensure that Carvaan is break even or a lower margin. We believe in the days to come, even the margin percentages can go back to those 2019 times.
Our films and series and television business right now, we expect it to grow between 20%-25% on a year-on-year basis with a 15% margin there. Events business will build up slowly, but it will always remain right now low margin business, which is a crucial business to have as part of our armory, because one, it gives us a shield if ever advertising business takes a hit because we have another source of revenue coming in where customer pays for these services directly and also is very, very crucial for our music licensing business. Overall, we are happy with quarter two, and we remain a bullish stance on the entertainment industry and Saregama's future, both from the top line and the bottom line perspective in the days to come.
Thank you, and look forward to talking to you guys at the end of Q3.
Thank you. On behalf of ICICI Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect.