Ladies and gentlemen, good day and welcome to Saregama India Limited's Q3 FY 2022 earnings conference call hosted by ICICI Securities Limited. 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 presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I would now like to hand the conference over to Mr. Bhupendra Tiwary from ICICI Securities Limited. Thank you, and over to you, sir.
Thank you, Janice. Good evening, everyone. On behalf of ICICI Securities, we welcome you all to Q3 FY 2022 results conference call of Saregama India Limited. From the management, we have Mr. Vikram Mehra, who's MD, Mr. B.L. Chandak, who's an Executive Director, and Mr. Pankaj Kedia, who's Vice President, Investor Relations. We'll begin with the opening comment by Mr. Mehra, post which we'll take the question & answer. Over to you, Vikram. Thank you.
Thank you. Good evening to all of you guys. The way the digital revolution is changing India, along with that is the fortunes of the company Saregama are also changing. The more rapid digitization that happens in India, we will keep on riding on that digital wave or the digital revolution and hope to keep on growing both the revenue and the profitability of the company. We had a very good financial year 2021, and this year we have been further able to successfully build on it. Our nine months revenue from operations touched INR 400 crore as of Q3, which is a 26% growth over last year, which itself was decent. While our PBT has touched INR 140 crore, which is a 38% growth over last year.
A leaner company which is not making profit at the expense of declining revenue. We have been able to grow our revenue also very steady with a 26% growth while constantly improving on our profitability. If I come specifically to quarter three, our revenue from operations grew at a 12% while PBT was at 5%. Our quarterly numbers please, you have to always keep in mind right now that, on revenue side and often on profitability also, it's better to see a rolling twelve months or in this case, nine months for you to get a better idea. Because a big contributor to revenue for us is also the films business. Quarter three last year we had a movie called Comedy Couple that had got released.
This year all the schedules had gone a little haywire. The chances are that most of the revenue of films is gonna come in quarter four and quarter three became blank. Some amount of aberration keeps on happening right on a quarter-on-quarter basis. Better we watch and check the numbers right now on a rolling twelve-month basis. Our operating income before content charge, interest, and depreciation was INR 63 crore, which grew by 44% compared to the last year. Now, this is a very important metric for us as we people go ahead. As I've stated in the past, we will be constantly investing in new content which will have their charge off coming in. This metric actually just shows the impact of revenue and our profitability just before we take the content charge off.
This is something, even if the content investments keep on going up right now, this number should not move. It should constantly grow. As I said, we grew by 44%. The OIBDA number, if I see it as a percentage of revenue, was at 42% for this quarter. Now, we would love to get a pat on our back for such a great job, but I'll be honest here. Again, this is a quarterly aberration because no film got released during this quarter. Film is a lower margin game because we charge off the entire cost of the film. The film is a lower margin game for us. Hence the play of music licensing went up during the quarter, hence you're suddenly seeing the OIBDA number touching 42% of revenue. We
Our guidance to the market is that on an annual basis, this number should be hovering around between 32%-33%. That's a number that we stand by. The biggest profitability driver for us over the last many quarters have been music licensing, and this quarter was no different. We are on a path of 20% growth year-on-year, for now, that's over 12 quarters. Every quarter I'm coming out there and revalidating this fact. We released a lot of, if you see right now over last nine months, a lot of new content has started getting released from our side. I would have loved had the Hindi films and the Tamil films and Telugu films also started getting released in the market per se.
Unfortunately, we had a very short window during which some of the movies got released. We just managed to scrape through only one big movie of ours in Hindi called Bell Bottom. One big movie in Malayalam called Kurup, which is Dulquer Salmaan's movie, and a big Telugu movie called Shyam Singha Roy. We could manage only three movies before the lockdown once again come back and hit us. We had to rely for majority of the year right now on non-film music, and which has also helped because that has allowed us to sharpen our skills on the non-film side. Quarter one of the financial year is when we people had released a song called Paani Paani which became the biggest hit in India of 2021.
The good part is it was not a one-off success. We have been tasting success after that also in multiple languages, whether it's Tamil, Bhojpuri, Gujarati, Punjabi, Haryanvi, there is constant amount of supply that's coming out. Over 165 songs have been released during this quarter alone, and the content charge that we people have taken is INR 11.5 crore. This is INR 7 crore higher than on a year-on-year basis compared to the same quarter last year. The profitability, overall profitability in terms of PBT is going up in spite of the fact that we people are investing in more content and taking a charge off. And that's what's gonna happen.
If you do intelligent investments, then the returns also should start coming in sync with the charge off that you people are taking, and we should be able to balance it out. In licensing business that you're talking about, the big revenues that you know right now are the OTT streaming applications, YouTube, and the various kinds of licenses issued through brands and to TV channels, films. During this quarter, there were two new deals that we people have signed. One is with the short format app called Chingari, and then there is a Marathi app called Planet Marathi. Both of them were issued licenses for using our music in their respective apps.
A lot of new brands like, vivo and Amazon, Nestlé, Himalaya also ended up taking a license from us for using our music in their advertising. This growth of 20%+ is, as stated earlier, coming from a combination of industry growing around 11% odd and constant increase in our market share. Market share is going up only and only for the simple reason that we are investing more and more in newer content. Now that we people also have raised funds through our recently concluded QIP, we have a good, strong enough war chest for us to start expanding our new content appetite. You will see us in multiple languages going out there and picking up aggressively newer music that's coming out, both film and non-film. We will play smart.
We are not gonna pick up any content at any cost. The tools as a foundation this company has built over the last five to six years on technology, on data analytics, on predictive models, we plan to continue using that so that we invest in picking up to our best judgment the right content at the right pricing. You will not see us going out there and just for the heck of it, picking up content, go and pick it up. We are very, very wary that we know that we have to grow the revenue, and we will grow the revenue in a handsome fashion, but that will not come at the expense of profitability. We live, eat, sleep by the ROI metric here.
Content is being picked up with a clear understanding right now that content has to return, give a good return on the investment. The only dampening news this quarter ended up being public performance. This is the revenue that we end up making every time there is a party happening or these shows are happening, concerts are happening where music is getting played. Large amount of this revenue actually is generated in the last 10 days of December around Christmas and New Year, and it typically hits our books in quarter four. Now, this will be the second consecutive year, or maybe I'll say third consecutive year, whereby this revenue is going to get affected.
Quarter four may not be getting the typical bump that quarter four used to get because public performance revenue used to come. On the Carvaan side, even though for majority period of quarter three, there were no lockdowns as such, except maybe the last seven days here and there. The footfalls in the retail stores were still very low. I will call it a damp Diwali from that perspective. We didn't see too many walk-ins happening in the electronics stores. The fact there were a chip shortage happening, which resulted in some of the television brands not being stocked up fully, that also resulted in less footfalls arriving at the retail stores.
In spite of that, we have been able to go out there and log in 141,000 units of Carvaan sale, which is actually much better than quarter two, but is very similar to our performance in quarter three last year. All this, and we reiterate, is coming with zero marketing spends and no push on distribution side from us, from Saregama. This is all based on consumer pull. We can continue maintaining our stand that till the time the entire impact of COVID doesn't go away and markets don't fully open up, by markets, retail markets don't fully open up, we have no plans to invest on the marketing side or the distribution side of Carvaan. We'll wait and watch with a very cautious approach towards this product.
We commit that like last year, we will be able to get at least a breakeven, if not a very minor profit on Carvaan. During the quarter, there was no films released from the Yoodlee side or web series released from the Yoodlee side. But the good part is that two of our web series are now very close to completion. The shoots are going on in full swing. Both of these series have already been licensed out. As we finish the shoot of the film and deliver the content, we should be able to recognize the revenue. This should be happening over the next three to four months. It may come on quarter four, it may go to quarter one next financial year. On the television side, we maintained in terms of TRPs.
All our programs ended up maintaining their respective leads and positions. It was pretty stable from the rating perspective. From revenue perspective, it was a good quarter, both because advertising revenue typically in quarter three is on the highest in the country. That's a time most brands advertise around Diwali, Dussehra time. We also had a positive impact both on the television side. The seconds that we people get right now from Sun TV, whenever we give them a serial, they go and sell that as CD. From that side, as well as YouTube side, TV was able to go and see a good upswing during this quarter.
That's a reason that in spite of no film getting released, we were still able to go out there and at least maintain our margins in the TV and the films business. Overall, a good quarter. A quarter that gives us a lot of satisfaction that we are on the right track. We are picking up the right music, and we are able to go out there and monetize that music in a proper fashion. Similarly, our work on the films and series side, we are on a very strong foundation and preparing this company for a big growth on both these fronts right now in the days to come. Thank you, and happy to take your questions now.
Thank you very much. Ladies and gentlemen, we will now begin the question answer session. Anyone who wishes to ask a question may press star then 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. The first question is from the line of Ravi Naredi from Naredi Investment. Please go ahead.
Thank you for nice results. Here, Ravi Naredi. Sir, why not you opt for buyback instead of dividend? In one side we are issuing QIP, other side higher dividend we are paying and taxes paying. Why this dichotomy is going on in our company? That is my first question.
Sir, this question I will refer back to the board. I don't think I'll be able to answer this question directly at this moment.
Okay. Sir, can you tell how much revenue we earn from music licensing to Nestlé, Amazon, PhonePe, vivo?
Sir, no label gives individual licenses. I might as well give my competitive information to the market. You are seeing the overall revenue growth. Every quarter we people do brand licensing and different brands come in.
Okay. Sir, our main earnings from music. Can you tell in future film can overcome music in years, how many years it will happen?
No, sir. I am, as a company at this juncture, we still believe music is far bigger. The films business is because we have no intent to get into large budget Bollywood films. We will continue making films and series only on a pre-licensed basis, primarily either being given to the digital platforms like Netflix and Hotstar and MX Player of the world. If we are making theatrical films, we'll do it only small budgeted regional cinema.
Okay. Sir, at what price we bought music rights of Rocky Aur Rani Kii Prem Kahaani? Can you tell these figures?
Sir, that's commercially sensitive information. Can't share that.
Okay. Thank you, Vikram ji. You are doing fantastic. All the best.
Thank you, sir.
Thank you. The next question is from the line of Aditya Nahar from Alpna Enterprises . Please go ahead.
Yeah, I'm from Alpna Enterprises . Thanks, Vikram. I hope you're doing well. Your voice sounds slightly off today.
No, no. It's okay. Absolutely okay.
All right. Vikram, again, congratulations and hope you keep executing as well as you do. My question was on the Carvaan Musicbar with the subwoofer.
Yeah.
Just been sort of exploring the option to buy it, and I saw it's been discounted by nearly 40%-45%.
Right.
Just wondering, is there a logic to it or is there a strategic move that you have done or if you can just talk about that?
No, no. All I can tell you, that's a strategic part. The price, that industry functions in that particular fashion only.
Yeah.
You find all the music bars in that price category, you'll see this kind of discounting. When you're doing a build up on the pricing part itself, you already pre-plan it right now that this level of discounting will have to be done on the sticker price.
Perfect. The point I was getting to, and I hope you're agreeing even-
Yeah, yeah.
the point I'm making.
There is no unit getting sold right now of Carvaan where we're not in a positive margin. Why, why will we do it?
Absolutely.
Everything which is branded Carvaan and a hardware unit going right now, every unit is on operating profit level.
Great, Vikram. Thank you so much. That's all.
Thank you. The next question is from the line of Anika Mittal from Annual Research. Please go ahead. Yes, Anika Mittal, you may please go ahead with your question. Ma'am, your audio is not clearly audible. As there's no response from the current participant, we take the next question from the line of Sahil from Mesas Capital. Please go ahead.
Hi, sir. Can you hear me?
Yes, please.
Sir, one question I have is, when we look at your YouTube channel, there are roughly 5,000 videos we can find, and we own 130,000 songs. Like, why is it that we only see 5,000 videos on YouTube channel?
No. I'm surprised right now. Which channel are you referring to? We have 25 different Saregama channels.
Actually, I added up all of them. If you add up all of them, it might be around 20,000-30,000. It's not 130,000.
Okay.
The main channel is the one you're referring to. The main channel has 5,000.
I'll get back to you. Since you're throwing specific numbers, by the time hopefully the call ends right now, we'll have that data. Please keep in mind for majority of the older content that we have, we only have the audio rights. If you have been following our company, you'll realize that all the rights that used to be sold, pre-2000 or pre mid-1990s in India, the industry structure was that music company used to get only the audio rights, and the music video rights always used to go along with the film, and they were not given out there to the music labels. So whatever YouTube revenue you are seeing right now us making, and we are one of the largest YouTube revenue makers in the country, is coming on the back of only audio.
I completely understand that.
Yeah.
In this case, let's say we only have audio rights for a song, an old song. Would we be able to put it up on YouTube at least? We might not have the video, but can we put up audio?
No, we put up audio. Very often what we do, we combine it into a playlist. Instead of putting one audio, then we combine 10 audios and put it there as a single video. That also.
I see.
increase the amount of advertising revenue we can make because then the customer is being stuck on that particular video for a longer time. Are you clear now?
Okay. Yeah, I think that helps. I would just say that maybe we should probably consider having the individual songs in case someone wants to listen to just that one song.
I-
Like, they might search for that song by name and not find it, right? They will find a 50-minute video, but that's all.
Fair enough right now. I'll be surprised if you know of any song owned by Saregama which does not have an individual page. Do let me know. My understanding is that if we start going out there language-wise also, almost all songs of ours have some form of a, even if it is still images, the video going in. Completely your point well taken. Let me ask the team to have a look at it once again, if we people have missed something.
Yeah. Thank you so much. The second question I have is, if we, like, we know your Carvaan sales and music streaming revenue for the last year. Like, we can make some rough estimates for, like, how the streaming revenue has been in these three quarters. It seems to be roughly flat for the three quarters. Like, it's definitely 25% higher than last year, but quarter-on-quarter it seems roughly flat. My question to you is, with these contracts that we have with these OTT apps, are they basically renewed once a year, or, like, should we expect quarter-on-quarter growth for the music streaming revenue?
You are making a lot of conclusion based on your assumptions, which I can neither confirm nor deny. You will be able to see these numbers right now at the end of the year. We are gonna be declaring both licensing and Carvaan numbers separately as we do every year now. That will answer your question. Please, whenever you're looking at revenues, look at it on an annual basis because contracts, you're right, are typically one-year or two-year contracts. If overflows come in, all my contracts are minimum guarantee-based contracts. You recognize the minimum guarantee amount during the year when the contract is getting over. That's the time. Whatever overflows are coming, they get recognized at that time.
That's a policy, which is a conservative policy from our side we have been following all throughout. That's why there will be bumps here and there that you will find quarter to quarter. Check the number at the annual level, and I assure you right now we have been growing at 20%.
Thank you so much. Thanks.
Thank you. The next question is from the line of Vikram Gautam from GS Investment. Please go ahead.
Yes, sir. It's a pleasure to go through your con call and such clarity you have and eloquence also, Vikram, that, like always, we look forward to it. Basically just wanted to know about the what is your progress on the paid service part. I believe that is a good trigger for revenue or the number of subscriber, or still most of them would like to go in for the free route, and what's the progress for us over there?
Unfortunately, that angle is a pain point for us and me in particular. Unfortunately it's not in our hands. It's in the hands of our partners. The streaming platforms of the country. There are nine streaming platforms in India, whom all we have licensed our music to. They have to eventually move towards a paid economy. Today also, we are not seeing that much of a push happening towards a paid economy. I was just checking on the global number. Global streaming numbers, the total number of paid subscribers have now crossed 500 million. There are over 500 million, 530-odd million subscribers on various streaming services. In India, the video streaming services numbers have also started picking up big time during COVID. I am personally very hopeful.
Give it another year or two, the market dynamics are gonna ensure that streaming platforms will move towards a paid economy, because otherwise it's not a sustainable part. You can't sustain this business only on advertising. The day that happens right now, it's great news for the platforms also, and it's even greater news for the content owners.
Okay. This pandemic, has it turned out to be a sort of a boon for our movie business in the sense that, our competition film business has turned out very nicely and good policy, whatever the movie they had produced. How has been the progress for us in this front? Any positive things are happening due to pandemic, and people are sort of confined to home? Yeah.
See, I hate attaching anything to saying right now pandemic was good. I think pandemic has been bad for anybody and everybody. The fact of life is that, because of pandemic, more people stayed at home. When they were staying at home, they consumed more content, both on the music side and entertainment side, and that's the impact of which you are seeing. The numbers, streaming numbers have gone up, YouTube view numbers have gone up, both for music as well as the video content. The other change that happened is that a lot of people in their fifties and sixties and seventies who were very apprehensive about adapting to newer technologies to consume music.
These are the people maybe living in Jabalpur or Ujjain, whose first reaction was: "My son or daughter will come out there and put some music on my phone. I will listen only to that." They were not playing around with these streaming applications. When they were locked during COVID at their homes with their kids and grandkids, they got exposed to these apps and now they have started using the apps. When a 60-year-old uses the app, he does not listen to the newer content. He or she ends up listening to Kishore Kumar and Mohammed Rafi. To that extent we had the big advantage coming in the space of music. On the film side, the bad news was that there were a lot of delays in terms of shoots.
The good news was that we from being just a four-year-old company in the films and series space, and we have already put about 17 films have been licensed out in the last four years to various digital platforms. The film business has already become a profitable business without being dependent too heavily on what happens in theater, because our business is more platform-dependent business than a theater-driven business. I think in the film business, you'll be happy at the end of quarter four with two of our series getting shot quarter four, quarter one, whenever the reviews get written. I'm very bullish as we will go ahead right now on the films and series business without taking risk on big Bollywood films.
Okay. The "Paani Paani" was a big hit for us, thanks to Badshah and other things. Any other step we are taking for the single song by large brand singers like Badshah or Pawan Singh in Bhojpuri, or we are going in for sort of on our own and trying to nurture the new talent, and that has turned out to be quite a big hit?
At this moment, as I talk to you, we are betting and working with the top talent and not nurturing our own. We are not trying to make anybody big. We are just going out there with the biggest names and working out with them. First, we are investing in film music in a huge fashion. Karan Johar's next movie is "Rocky Aur Rani Kii Prem Kahaani" is with us. Sanjay Leela Bhansali's next movie, "Gangubai" is with us. His next to next film, "Baiju Bawra" is also with us. Ranveer Singh's next movie, with South India's top director called Shankar, that movie is with us. Ishaan Khatter's next movie is with us. Vicky Kaushal's next movie is with us. We are investing a lot on the film music content in Hindi, also in Telugu, Malayalam and Tamil.
On the non-film side, we are working with all the A category stars that you have right now in the space who are working in the non-filmy music space. As we go forward, we are very keen to start artist management business also within Saregama, whereby we can identify young talent, nurture them, and then the talent works for a limited period of time exclusively with us. That's a business we are looking at. Right now, music is being done with all the A category stars in the market. "Paani Paani" is the most visible because "Paani Paani" is the number one song. You can have only one song as a number one song. If I start looking at the top 20 songs of the year right now, we have multiple songs in that list.
Okay. Any acquisition plans, sir, in office?
Sir, one of the reasons why we people have raised funds also was to constantly look at strategic acquisitions, whether of catalog or of companies, in the space of music or related to music. The moment something is ready, we'll let you know.
Thank you, sir. Keep up the good work.
Thank you, sir.
Thank you. The next question is from the line of Saket Mehrotra from Tusk Investments. Please go ahead.
Hi, Saket from the rate side of numbers. Just two questions. I think this year, like, I mean, this is more of an observation. I just noticed that you guys were really up there on the whole Instagram game with respect to, let's say, you know, recreating "Koi Sehri Babu " and then also getting those two stars on the video. Like, in continuation to this, do you also see other platforms becoming serious contenders on this trend?
Sorry, when you say other platforms becoming serious, you mean, I'm not clear about your question.
While I understand, you know, I mean, obviously I use Instagram, so that's how I got to know it. I'm guessing like, are the other platforms also almost at par when it comes to the usage of our catalog or they are also strategically important?
They are right now. We have licensed our content to, not just to Instagram. It's licensed to Josh, Moj, ShareChat, Hipi and now Chingari. These are relatively newer platforms compared to Instagram, but they are moving very fast. Some of these platforms have got a huge pull on the regional language side, maybe not necessarily in Hindi and English. Without taking names, one of them is very big on Bhojpuri, or very big in Gujarati or the South Indian languages, and we are very active. There are dedicated teams within the system for each of these platforms.
Got it. Vikram, another question just in continuation to what Sahil was mentioning earlier. Like for example, I own the physical compact disc of Cassini Visit, which was earlier with HMV and now with Saregama, but for some reason I was not able to find it on Spotify. Is there any way, let's say, you know, we can reach out to someone in your team to help us get maybe a digital format of this song?
See, not there on Spotify will be shocking for me if that happens. Please immediately write to us because, see, on YouTube there is still a chance because some of the audio which is very, very old and there's no video connected to it, there we may not have created a slate-based video for that song. On Spotify or Gaana's or the Saavn's of the world, that entire catalog is put up. If you know of anything, I think you are connected to Deepak, right?
Yeah, I know, I had tweeted this out, so, I will again probably write an email to you and to Deepak.
Yes.
Yeah.
It would be great if to us, if there is something which is missing and nobody in my system has noticed it, then anyway I'm gonna pull up my own system too, on
Yeah, yeah.
Every song has to be there.
Please. Thanks a lot, Vikram.
Thank you.
That's it from my side. Yeah.
Thank you. The next question is from the line of Swechha Jain from ANS Wealth. Please go ahead.
Hi, sir. Thanks for giving this opportunity. I just wanted to understand some kind of, you know, unit economics about, you know, having paid subscriber versus the ad-based model. You know, what kind of, you know, EBITDA margins or per unit realization typically we get there in these two models, if you could just help me understand that.
I'll help you very on a very broad level here. On a free side, typically, we get paid INR 0.10 per stream. Every time you hear a Lag Ja Gale on any of these platforms. On an average we get paid INR 0.10. The stream is worth INR 0.10.
Okay.
Now let's look at the paid model. Once again, typically our deal on all the paid subscription is that whatever platform gets, we get 60% of that is going to be treated as content pool, which will be distributed-
Okay.
Across all the songs heard by that subscriber during the month. Suppose for simple math, you are a Gaana, JioSaavn subscriber. You pay them INR 100. On average, content pool will become INR 50. If you are a very heavy user of the app, and suppose you hear 100 songs in a month, that means every song stream is now worth INR 0.50. Now, assume you did not come at INR 100, you came at a discounted pack. Even if you come at INR 50 pack also, then also you are talking of INR 0.25 per stream compared to a INR 0.10 for free. The upside potential is massive, the moment you start moving towards a paid economy.
Okay. What I understand is 50% is what we make, right?
Whatever customer has paid.
Yeah.
The platform will earmark 50% of that amount under content pool.
Okay.
If whatever number of songs the customer is hearing, if all songs that he hears right now of Saregama only, the entire money will come across to me.
Okay. Understood. Right. If I'm spending that entire INR 50 on only listening to Saregama songs on that platform-
Yeah.
We get the entire INR 50, right?
Yes. Yes.
Understood. Okay. Thank you so much.
Thank you. The next question is from the line of Arpit Shah from Shailen Asset Management. Please go ahead.
Yeah, hi. I just wanted to understand what would be our capital allocation after we have raised the QIP money, where are we looking to deploy the cash? The growth that we have been targeting for the next three years, 25%-30%, that is all organic or it includes inorganic part as well?
Okay. The entire fundraise that has happened of INR 750 crore is only and only for music business. Those funds are not going to be used, right, for our films or our Carvaan business. The other businesses are well capitalized, and they will be able to manage to run on their own or the funds that they will be accruing on their own. This is dedicated only for music business. Our projection of 25%-30% revenue growth that we are giving is a combination of both, organic new content purchase as well as some inorganic purchases happening.
Inorganic, you mean the music label, right?
It may be, yes, it may be music label, it may be an allied business that you're talking about, like artist management. Anything which is in the space of music, and we are not gonna go outside this world of music as for this revenue, this capital allocation is concerned.
Just wanted to understand on the Carvaan part. We are currently not investing any marketing money for that.
Yeah. Yeah.
Soundbar that we have launched, like what are our intentions there? What are we trying to do with the Soundbar? Because we're not trying to invest a lot of money in Saregama and everything.
Soundbar as a product was ready before COVID hit us. We were ready with the product and we did not know what to do. We put it on hold. There was no point holding that much amount of stock sitting out there with us, and waiting for our markets to become okay. We waited for some time, then finally decided that we'll go out there and launch it without any marketing support. It's not that we have a large supply. The inventory of Carvaan is very, very lean at this moment. We are not sitting on large supplies, and whatever we have right now, it's just moving on its own in the market.
Got it.
If you ask me, had I known about COVID, I don't think I would have gone outside right now and launched.
Of course.
Bas. It was a product that was ready.
Got it. Just wanted to know, you mentioned about talent management. Like, what are you trying to do other than talent management?
Sorry, in between what?
In talent management. You just mentioned something about talent management.
Talent management. Okay. This is the artist management part. In artist management, our intent is that we identify younger talent in multiple languages. So discover your talent, then nurture the talent by giving them breaks in big music videos that are done by Saregama, make that talent big, and then monetize on that talent so that every time the talent goes there for singing in a Shadi or a corporate function or does an Instagram post or does a ribbon cutting, we get a commission out of it. This vertical will help us in two ways. One, is to defend our core business called music, so that we always have artists who are working with us. Second, can create an altogether new revenue stream for us as we people go forward.
Because anyway, we people have the requirement to launch a lot of non-film music videos on a regular basis. Why not sign up that talent on the roster of Saregama?
Got it. Thanks. Thank you.
Thank you. The next question is from the line of Nitin Sharma from Moneycontrol. Please go ahead.
Yeah, hi. Thanks for letting me in. I have a quick question. Just want to understand, what is the typical investment in a web series, what kind of target returns that are in mind when you choose to, make a series? And further, what is the typical timeline to recover that investment and how it's recognized?
Okay. I'll give you broad answer to this. The web series budgets vary a lot right now, depending on which platform is it going and how big an actor you are getting into that web series. Our model, Saregama's model of web series is clear. We start spending money on a web series only after securing a licensing deal. We don't make the series and then go and try to license it to the platform. We pre-license it and then only start spending money. In that sense, the risk is close to nothing there, unless there's a cost overrun happens on our side, which has not happened till date on any project of Saregama. Coming to once a web series is going to be released, the entire cost of the series is going to be charged off during that year itself.
We don't capitalize anything on a web series or films. The moment we get the first digital revenue, we write off the entire cost. After writing off the entire cost, we are looking at 15%-20% margin, while the IP stays with us for a long-term monetization ability.
Okay. Just one more question, if I can squeeze in. Where do you see your top line growth in the next 12 months? What is the potential margin expansion, if you can talk about it?
Yeah. I'll answer in two ways. See, my problem, I'm not going to give you a number on the overall growth because we are following a very cautious approach, I can't project. On music licensing and the films business, we are looking at 25%-30% growth in the next year. As for margins is concerned, our guidance is our operating income before content cost, interest and depreciation, that number should be hovering between 32%-33%.
All right. Thanks, sir.
Thank you.
Thank you. The next question is from the line of Anika Mittal from Anvil Research. Please go ahead.
Hello, am I audible?
Yes, please.
Yeah. Hi. Once again, thanks for these numbers. It is making us more and more inviting and looking at Saregama as one of the best investment opportunities from long-term perspective. Thanks for that, Vikram. I'm just taking a step back and then thinking like when you think about this regional music, right? See, basically, I am from south, okay? There is one niche area which is on Carnatic music, right? Where there are multiple artists and there is a huge demand on southern side on this Carnatic music and stuff. Are we trying to do anything on those areas as well, Vikram?
See, I'll be upfront with you. We did a lot of investments on the Carnatic and the Hindustani side, till I think 2018. Unfortunately, the returns on that investments are not that high. We people try to monetize it through YouTube, through streaming applications, even having somehow dedicated Carvaan variants around it. We've not been able to get large returns. That doesn't mean that we will not stop investing, but it's not the area which is taking the most aggressive investment from our side any longer.
Great. Okay. Thanks, Vikram. Anything on, specifically on regional stuff that you are looking in terms of acquisition? I think we spoke about it during this call on December as well, right? During December. There are. Yeah.
On new content with regional, we are very, very aggressive. In Malayalam, we have picked up Kurup, which is Dulquer Salmaan movie. The music was with us. We have a Prithviraj Sukumaran movie coming in. We have a Tovino Thomas movie coming in. We have Baadshah movie coming in. The music is all sitting out there with us. Of the two series that I spoke about, one of them is a Malayalam series that we're putting up on the digital platform, and which has got the biggest stars from Malayalam featuring in it. In Telugu, we just released a Nani film. We have got a Mahesh Babu film which is coming up. In Tamil, we have just announced that we have picked up the music of a Suriya film, Dhanush film, three, four Prabhu Deva films.
Punjab ke andar we picked up Ammy Virk and Amrinder Gill ki films ka music. You are gonna find us getting very, very active on the regional side.
Okay.
For each of the language, there are dedicated setups within the company which look after content acquisition, marketing and monetization, and these are all managed by language experts.
Okay. One final question, Vikram. On this tie-up with OEMs on any new automobile that is coming on road, right? You said that you are actively working on those lines as well. Is there any update that you want to share?
As I said last time, we have had this dialog multiple times with the car manufacturers. We are still finding the right time getting a car itself is a difficult part with seven months and eight months ka waiting period. We all have gone slow in that dialog, and nothing has materialized till now for various reasons. Either it's financially not making sense or the amount of changes they want from our side, that does not make sense. It's an ongoing thing. I have nothing new to share on that front.
Okay. Okay, that's it from my side. Thanks. Thanks, Vikram. Yeah.
Thank you. The next question is from the line of Aman Vij from Astute Investment . Please go ahead.
Yeah. Good evening, sir. My first question is on the volume and pricing growth. When we talk about 11% industry growth and we are targeting 25%-30% overall revenue growth in music streaming. If you can roughly give what kind of volume and pricing growth are we seeing in the industry as well as for us?
This is all revenue. See, this is not a hardware unit I can offer. At the end of the day, some of the revenue cannot be linked directly to the number of streams or the number of YouTube views. You have to take this as revenue growth. In music business alone, Carvaan is not part of this.
No, no, I'm not talking about Karma, sir. I am, say, for example, every year, industry is growing at 11%.
By revenue.
Yeah, revenue. Revenue will always have two parts. One is the overall pricing growth that the people are seeing. For example, say if earlier because of our inventory we were getting INR 0.09 per stream, now we are getting INR 0.10 per stream. There is always this pricing growth also which we would be seeing every year or every second year.
Fair enough. Let me try answering your question. We always have been able to manage INR 0.10 pricing. We are one of the few labels who maintain that pricing from the word go.
We are seeing growth that will come out of more consumption happening rather than 10 paise moving up or down. There's more growth is going to come in because more people in India are jumping onto the digital bandwagon, and once they come here, they get their smartphones. After they consume some of the other apps, they end up joining and downloading the music streaming apps. New customer coming in, and the customer who has the app is now listening to more songs. I'll share with you my favorite story that always happens is when I was younger and we people used to have free time. I remember going out there waiting for meetings and if I had to go and meet a client, I used to sit at the reception, either read a newspaper or daydream. Now nobody daydreams.
Anybody who's free for two minutes also just picks up the phone and starts doing something. The amount of time we people are spending on a mobile phone is going through the roof, and it will go up. We may say it's good or bad, doesn't matter. That's the reality of a culture. We all are stuck to our phones. More while you're traveling to the office and going home, and five minutes stuck anywhere, my phone comes out. That means that much more consumption is gonna be happening. More people jumping on the bandwagon, and they're spending more time on this device called mobile phone, which means great news for us.
Either they will listen to a song, we get paid, or they will watch some video somewhere where my song may be coming out there in the somebody is using my song in the background, then also I get paid. Or they'll be seeing an ad where my song is coming in, then I get paid. Or they will be watching a series on Netflix, which may be my series, then we get paid. Or it may be somebody else's series, but my song is running in the background, we get paid.
Yes, sir. Broadly, when we say we are present on all the nine streaming apps and all those things. Irrespective of how many, how much of our content is there on the app, or maybe irrespective of the size of the streaming company, broadly, I'm not talking about exact number, that INR 0.10 per stream remains INR 0.10. It's not. Sometimes it will be INR 0.15, sometimes it will be INR 0.07, and the average is INR 0.10.
Sir, I can't get that specific, but the rate remains fixed during the period of the contract, if that's your question.
With, say, two-year revision of contract, there should be a pricing escalation also, if I'm not mistaken.
I'll leave it right now to the commercial negotiation part. At this juncture, we believe that the INR 0.10 price is the price that's gonna hold for us.
Sure, sir. My second question is on the OTT streams and YouTube streams numbers. YouTube streams number has grown quite well for us from 1 billion per quarter stream. If I go back, say eight quarters back, to now 3 billion, we are crossing 3.4, 3.3 billion. Same for OTT streams, if you can give a number, because the last number we have is for, say, it's like 1 year back number when the streaming number was 1.7 billion, roughly. Has that number also grown like YouTube streams or it's the growth is much lower as compared to growth in YouTube?
Right now, firstly, let me correct on YouTube. Now, from this quarter onwards, we are giving a count of all streams, not just the streams coming on my channel, but also streams that are coming from user-generated content where my song is getting used and Saregama gets paid for it. That number is 32 billion per quarter, and not 3 billion. If you see my latest presentation which has been uploaded, because the data you're referring to is only my own channel, now I'm including every-
which we get paid. YouTube growth in the country has been phenomenal because this is one of the first apps people go out there and download. Streaming numbers also have grown in a very, very significant fashion. In fact, I'll just quote industry level numbers here, not connected to Saregama. The understanding is that the streaming may be growing at, in terms of numbers, 30%-40% year-on-year.
We are seeing growth on both sides, YouTube streams as well as our OTT streams.
Yeah. Otherwise.
Healthy growth.
Otherwise the industry wouldn't have grown. These are the only two triggers that are growing the industry today.
Sure, sir. This INR 32 billion number we used to give earlier, YouTube streaming, OTT streaming, which was like INR 2 billion, INR 3 billion number each.
Right.
If you can give a rough breakup of the broader segments. I'm not going each and every detail.
Since we've done this, OTT numbers were going out and were creating some amount of issues with the platforms also and was hurting our competitive parity and that's the reason it was getting used in every commercial negotiation, then we decided we'll not publish that. I can assure you it's growing in a very healthy fashion, otherwise I won't be able to write a 20% increase in revenue year-on-year. YouTube from this quarter onwards right now we have taken a call that we will give the full number rather than giving only channel number. Whether it's my channel or it's user-generated content, or if the user-generated content is using an IP which belongs to me and Saregama is the party that will get the commercial benefit out of it, we include that also.
Sure, sir. Final question is on the Yoodlee Films part. Sir, we have talked about our vision three four years back, and it seems to be doing well. We have done like 17 odd films in the last three four years. When do we see the next level of scaling of like doing 10 films a year or 15 films a year, that level of scaling so that we can reach that INR 100 crore number, which we have talked about?
No, no. It's clear right now. Let's talk about the 100 crore number. Let's not talk about the number of films we'll do to get that. Because what happens when you do a series, one series at times will be given into four or five films. The number that you're talking about right now is a number which is there in the close vicinity. It's not a bizarre number that you're throwing at me. A couple of years, we should be able to go back and reach that number.
Okay. Thank you.
Thank you. The next question is from the line of Suhrid Deorah from Paladin Capital. Please go ahead.
Hi. Good afternoon. Thank you for taking my question. I'm sorry I'm a little bit new to the business, so I just wanted a clarification on a couple of points which you talked about. One is you mentioned that, it's not, you know, the contract you renew on an annual basis, the music contract. Is there a particular quarter in which these take place? And could you explain the overflow concept that you mentioned earlier?
Let me explain the overflow concept first to you. Suppose I have a deal with a platform X, whereby the broad contours of the deal are that every time my song is heard by a free customer, I get paid 10 paise. And if it's a paid customer, say 50% of the money that the customer is paying is going to be earmarked as content pool, and we get a share of that 50% basis how many songs of Saregama were heard. Now all these, because the variable ways in which we make money, we protect ourselves by commanding a minimum guarantee to protect us from any potential downside that may happen in future.
If the actuals are higher, we end up getting overflows, which very basic concept of MG overflow happening here. In terms of which quarter, it depends. It depends deal by deal actually that, which deal, because every time we people are getting an overflow, we are ensuring that the next deal the minimum guarantee goes up by as much amount. Then the growth has to be even bigger right now for an overflow to come in. It varies a lot, for us, this overflow concept.
Okay. When you're so confident about the growth being 20% and higher, is that and you mentioned that the pricing you expect to remain at INR 0.10 for the free streamers. The growth ultimately will only come from more streams per song going forward, and that's what you're forecasting to grow at least 10%.
I think two parts right now why I'm sounding confident that from 20% now, earlier we used to give a guidance of 20%, now we think 25%-30%. We have raised our guidance there. Earlier numbers were completely primarily projected on the fact that the industry was also growing and more people were coming in. Since we are able to monetize our content better than many of the smaller labels, hence we are getting a larger proportion of that.
Revenue that the company was making from the customer. The bigger change which has now happened is that with the funds that we people have raised, we are now in a position that we can invest aggressively in new content. These platforms are primarily the OTT, abhi bhi [Foreign language] in this country of younger people. You will find more 20-year-olds and 25-year-olds right now using these digital apps compared to the middle-aged and older people. The newer, younger people right now obviously want to hear the latest music much more than music, which is 20 years old. We did not have a big play in that space. We are now having a signi...
As we're going ahead right now, our play that is going to become more and more significant, which is a market share fight, and we believe we will be able to grab enough amount of share from all our competitors. We're already showing in our numbers that we are grabbing share now from our competitors, which gives us the confidence that we will be able to grow the revenue at 25%, while the industry is not gonna change, industry will remain 11%.
Okay, that's very clear. You will be taking share in terms of the new content, in terms of content that's more relevant to the younger audiences and the number of streams is growing. I guess over a period of time, which may be a longer period of time, the mix will change from free to paid streamers.
That is an altogether free to paid. I never factor in any of our projections.
Okay.
The jury's still out. I am very bullish on it, and I confess this in every meeting bullish on it. There are a lot of people in the industry who are not. I believe there is no way but to go towards paid side, but time will tell. Our projections of 25%-30% growth in revenue are not based on going paid. This is assuming industry remains the way it is.
Right. The revenues could show up in a lumpy fashion, as you mentioned, when the overflows take place and all of that could show up in a particular quarter.
If you are looking at it right now, my request will be please check us out on an annual basis. It's easier that way. It's not that if you ever have it right now that in one quarter music is growing by 5%, another quarter is growing by 40%. Not gonna happen. A little bit aberration keeps on happening. On a rolling twelve-month basis right now, we are committing to 25%-30% growth.
Okay, thanks. One very basic question. I know you mentioned that, it's been hard to monetize physical performances, but how does any company, including yourself, how do you monetize private events?
Private events?
Yeah. Somebody's playing your song at a wedding, for example, or, you know, some private location. Do you make money on that?
Yes, we do. Let's take wedding out for a moment here. Whether you are having your 50th birthday, you are having your kid's birthday, 25th marriage anniversary, all those events we end up monetizing. What we have done, rather than each of these companies doing it themselves, all the music labels have come together and created a society called PPL, whose mandate is to go out there, work with various hotels, work with various event organizers and ensure right now that every time they're doing an event, they end up clearing the license first. They collect the money and that money gets distributed across to all of us.
Okay. Got it. Thank you. Thanks very much.
Thank you. The next question is from the line of Dipen Parekh from Cirrus Capital. Please go ahead.
Hi, I hope you can hear me.
Yes, please.
All right. I have two questions. One is more of a maintenance or bookkeeping question, and the other one, which is a little more strategic. The first one is, you recently raised money from in a pref, and naturally you are running a heavy treasury as we speak. Okay? What is the internal decision that has been taken on deploying this money? Where is it parked?
We people are following an extremely conservative approach out there to ensure that the assets, the capital is well protected. It's a combination of fixed deposits and debt funds.
That's it. You're not carrying any equity on your books at all?
Not through this. We have some of our group investments that are sitting out here, but they have been there from legacy reasons. This fund, the funds that we have deployed, the INR 750 crore that we have collected, they are parked only in these two places.
I can actually look this up from your annual report, but what is the legacy holding that you have or exposure to your group companies?
We people, I will share that with you. We have shares of CESC. We have something on Phillips Carbon Black.
Okay, we'll figure that out. Right. That's mostly legacy, right?
That's gone. It's not a question of it. It's very, very old.
In your stated financials, the Other Comprehensive Income bit relates to the debt fund exposures, the adjustments on the debt fund exposures and nothing else.
Sorry. Come again. Right now I'll ask my colleague to answer this one.
Yeah. You have another comprehensive income line which changes, and it's pretty significant in material every quarter for the last two, three quarters. I'm assuming that it's mostly got to do with your debt fund exposures and nothing else.
No, these are basically related to those, these investment in group companies. Yeah.
In the group companies. Okay. We'll have to fish that out. Okay. I'll figure that out. You're basically marking them up and down with the market.
Yes. These are mark-to-market. Yes.
These are equity exposures.
Yes. Yes.
Do you have a top of mind number on what this equity exposure would be as at 31st December?
Just give me a minute.
Yeah. If you can throw a number there, and meanwhile I'll ask my strategic question, if Vikram will permit me.
This is INR 136 crore.
INR 136 crores. Okay. It's not too scary. In any case, these are good solid companies. Would be probably Phillips Carbon and CESC, right? Mostly.
Yes. These are, yeah, CESC, RPSG Ventures.
Okay. Right. Now the strategic bit, sir, if I may ask.
Yes.
You're sitting on cash, which is a great thing to be in a market where a whole lot of new content is getting created. How do I know that you won't overpay for it in some of your minimum guarantees that you give out? What is the early evidence here or what is the rule book here? What's your right to win here?
See the rule book out here is the structure in which we people work. All the content that is picked up during our financial year. We are committed to the board that the payback period of that has to be five years. It cannot be longer than five years. It has taken us four years to convince our own board from 2017 to 2021 by proving them year after year after year by doing smaller investments in new content and showing them that we have a performance track record which is better than five years and we are sticking to our promise. Based on that only we finally got a go ahead from board to go and make larger investments. Both these things are gonna go hand in hand. We need to invest in newer content to manage our top line growth.
Of course.
While we are doing it, we are sticking to a payback period of five years and OIBDA number right now of 30%-33%.
Again, it's like, you know, you're like an investment manager, that you are taking a call on and hoping that something will pay back for itself in less than five years. Like any manager, you can go right and you can go wrong. Is that fair?
Fair enough. Right now it's the way you are doing your homework before you make an investment.
Exactly. Exactly.
In a similar fashion right now, we have done the same part on the world of music.
Yeah. Yes.
There's a lot of focus on data mining and predictive modeling. To share with you every song which is there in India is part of our system and we track basis of which we now have-
You're getting a lot of data now. Yes.
There's a lot of data, and we have hired a top data scientist within our system. These are the guys who used to run. Earlier, when I used to work at Tata Sky, they used to run the entire data analytics for me at Tata Sky. That entire team is sitting in here, and they are the guys who are mining the data and building predictive models, which if you are a film producer, you come to me and say, "This is my movie and this is the song and singer, lyricist and composer and actor and choreographer. Our model based on the last three years' performances of these artists is able to throw a good understanding about what is the probability of success.
Having said that, showbiz is a lot like stock markets. You never know what will work and what will bomb.
I don't know whether I can agree completely. Now, this is a little more scientific. Second, this is then combined with the listening session of the song done only by people under the age of 30 in my company. Anybody above the age of 30 is not given the allowed to decide which song to pick up or not, including me. It's the under age, under thirty kids who listen to the music and then that's a qualitative feedback that comes out, whether the song is gonna work or song is not gonna work. You are working on the past track record, past means immediate past track records.
Yeah.
Of all the artists who are involved in it on a mathematical basis, combining it with the listening test that is happening here, and then you go ahead. Is it a risk-free? I'm sure nothing is risk-free.
Right. No, this is very inspiring. That last bit you said about people under 30, that's a great thing you're doing. Great. Awesome. Thanks very much.
Let me expand this. I don't think just because I'm the Managing Director of the company, I may have the greatest ear for music. I know how to run a business. At the age of 50, if I say I know what a 21-year-old wants, I'm sure my son is the first one who will go back and say that, "Dad has gone bananas.
Absolutely.
It's a reality. It's younger people's music should be tested and should be checked by younger people, not by us.
I think that's a fabulous thing for you to say. Thanks very much. This is very inspiring, sir.
Thank you.
Thank you. The next question is from the line of Varun Shivram from Balaram Advisors. Please go ahead. Sir, you may please go ahead with your question. Mr. Varun Shivram, your line is unmuted. Please go ahead with your question. As there's no response from the current participant, we'll take the next question from line of Tanul from SF Capital. Please go ahead.
Hi, sir. I had just a couple of more questions. One thing is, if at all possible, could you start sharing some quantitative numbers on like how much of our revenue comes from subscriptions and how much of it comes from the free or the ad paying customers? Even if not on a quarterly basis, annual basis, that would be really helpful in tracking how that thesis is playing out. You know, concretely, are people shifting and how that is reflecting in our financials. It's more of a suggestion. If you can maybe share an answer here also, it would be wonderful.
No, that will be difficult. What I can tell you is on the music side, music streaming side, there's no comparison. It's only and only advertising today. Very little subscription is going in. On a separate chat later, I can tell you my views as to why subscription are not picking up, and I don't think it's got much to do with the customer.
No, essentially, just to understand better, if at all you might be able to share, like why is it difficult to share with us, in terms of the breakup?
Our subscription and advertising breakup right now we will not be in a position to share. These are all sensitive information, and we don't want to go out there and give that out. Every label has a different kind of a deal going on. We don't want to put all that information in the public domain. Whenever we believe that subscription income is becoming not even significant, even minimally significant, we will come back to you and share the good news with you guys.
Okay. Yeah, that's all I had. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for closing comments.
Thank you everyone. One long call. I'm happy right now with the amount of interest that all of you guys are showing in our company. I'll just repeat our guidance. We believe that the music business as we people go over the next three to five years should be growing between 25%-30% year-on-year. The films and series business, we believe that business should also start growing between 20%-25% year-on-year. That's an increase compared to what we used to say earlier. We are seeing the foundation becoming more and more stronger out here in that business.
On the profitability, our guidance remain that operating income before content interest and depreciation should remain between 32%-33% of the revenue from operations as we go ahead. Our big focus is going to be new music content investments. As the market starts opening up and movies start getting released, you will see much more of Saregama coming from all sides. We will while we people keep on striving to grow our revenue between 25%-30%, have our eye always on the profitability of the company. Hopefully, with your help and blessings, the company grows stronger from here. Thank you. Bye-bye.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.