Earnings Call: Q1 2022

Jul 23, 2021

good day, and welcome to Saragama India Q1 FY 'twenty two Earnings Conference Call hosted by IKAI Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Vipin Dasewari from ICSA Securities. Thank you and over to you sir. Good afternoon everybody. On behalf of ICICI Securities, we welcome you to the Q1 FY 'twenty two results conference call of Paragama India Limited. From the management, we have Vikram Mehra, who is MD Mr. Bir Janda, who is Executive Director and Mr. Kumpat Kedia, who is from Industrial Relations. Without much ado, over to Vikram. Everyone, I wanted to confirm right now my voice is coming out loud and clear with you guys. Yes, sir. Okay, lovely. So the shadow of COVID-nineteen continues both on our daily life and the businesses that we people run. And all of us are finding various ways to work around this. The good part is that COVID has accelerated the digital adoption in our country by at least 4 to 5 years. Jewelry is still out, some people say, maybe accelerated end times, God only knows. But yes, I think it will be safe to say that it has accelerated the adoption by at least 4, 5, 6 years. And the companies like Sarigama are getting a great benefit out of it because the age group that was scared to adopt digital also started adopting digital in a big fashion. Sitting at home, they did not have much of an option. They were with their children or grandchildren who taught them how to use various digital apps, which means more and more people were consuming content digitally. And every time you consume content, some content owner ends up getting the benefit, whether it's a music guy or the film owner or a TV series owner. After a relatively solid financial year 2021 performance, we have started this year also on a very, very strong note. Quarter 1 revenue from operations grew around 37% in this quarter, and our PAT grew by 73% in this quarter. If I look at our income by another criteria, which we have started announcing from last year onwards, which is operating income before the content charge interest and depreciation, then at $42,000,000 it's almost double of what we people made in the corresponding quarter 1 last financial year. Do keep in mind this number doubled in financial 'twenty one over financial year 'twenty. I'm not committing to you guys that we're going to double for the entire financial year 'twenty 2022, but the quarter 1 has been a good solid quarter for us. Especially keeping in mind that Q1 over 7 years, I've been there at the helm of the company and I've been seeing this. Quarter 1 is typically the weakest quarter for us as a company. Our cash flows are based that way. A lot of our incomes actually come in quarter 3, quarter 4. Karma sale is more seasonal in nature, peaks in quarter 3. So keeping all those parameters, quarter 1 is our weakest of the 4 quarters. This year, a combination of some good performance plus some of the overflows have come in quarter 1 rather than coming in quarter 2, we have been able to increase the income substantially. In fact, if you remove the other income part and just look at revenue from operations, then our profitability in quarter 1 is comparable to quarter 4 of last year, which actually never happened before. The biggest revenue and profit spinner for us continues to be music licensing. That has been the trend for the last 3 years and this quarter is no different. We have grown on a quarter on quarter basis right now by the same 20% rate. I keep on maintaining this as on a short to medium term basis. I see no reason why a music licensing growth is going to come down. We people shared our intent to invest in new content, what, I think close to 2 years back. For the last couple of quarters, because films were not getting released, we started focusing more and more on Hindi original songs. These are non film songs. Quarter 1 saw the release of our biggest song so far. There's a song called Pani Pani that's of sung by India's biggest pop star, Dhat Shah. That got released in quarter 1. This song has the success of this song honestly has surprised us also. It has trended at the number one position across YouTube globally, all major music streaming applications and social media platforms. As I talk to you, there's a 6th week of that song going on. It is still there at the number 1 or the number 2 position almost everywhere. We also released it's not just one movie song, Wonder. We also released multiple songs in Bhojpuri, Tamil and Gujarati during this quarter plus more Hindi songs. What gives me a lot of comfort is that if I look at Gujarati language, for that matter, Gujhpurri language also, if we see the share of Saragama's new content, overall new content. So I'm not doing catalog to catalog mapping. We just got into Vujaski and Bhojpuri. So I saw the number right now, say, of the content that was released over the last 90 days in Gujarati and in Bhojpuri Bhushpuri by the entire industry versus Sarigama, our share on YouTube in these new two categories has already started exceeding 20%. Now that's very, very heartening news. I had indicated to you people as part of my past talks and presentations that our intent is to acquire 20% to 25% share of the new content coming out. The only places where we have been able to manage it aggressively were these two languages because rest of them are very film dependent, and we are already reaching that number that we didn't spoke about, not just in terms of amount of money spent, but also more importantly in terms of the consumer listenership of the newer content. We overall in this quarter released 50 6 songs across multiple languages. We also acquired the rights of some of the very big Bollywood, Tamil and Telugu films. Unfortunately, none of these films could get released at this time because of lockdown. Thetas are still shut in the Maharashtra territory in Delhi, because of which films are not getting released, but the deals are all locked with us. This also meant a good or the bad part that since none of the film music could get released and Bat.-Chat song was only a very big song that we were able to release during this quarter, it will may shoots were not happening. Our content charge continues to remain small, which is also I acknowledge it is also one of the reasons right now, but quarter 1 performance is looking good. But even at our charge for the quarter is 6.8 crores. And if I start comparing it with the corresponding number, because the right part to compare it is the Q1 number of last year, if I do that part, that number was only INR 3.4 crores. So it's not that we spent less money on content than last year's same quarter. But at 6.8 crores is still far lower than what we would have liked to spend had normalcy come back. Our focus on cash management continues. Post the dividend payout rate that happened, which was declared in March and April, and some of the content advances, our cash at the end of the quarter stands at INR 38 crores. Our digital licensing business is going very, very steady. And as more and more people start consuming content sitting at home and once they get in the habit of consuming content digital, we are realizing as markets are opening up, the content consumption is not coming down, it's going further up because more and more people call it export to digital consumption. Our licensing business is growing in sync with that. We people were during this quarter alone, if I'd share some of the names, Tickly and Lakshmi Bawam was released on Netflix, ended up using our content. Phone Booth got released, ended up using our content. Various brands like a Dream11 or an ITC or a Spotify ended up releasing their ads during this quarter, all of them in licensed music from Saragama. So every quarter, I share with you people names of newer people who are coming on board and taking license from Saragama for using our music either in their brand ads or their films or their digital series. What this is doing? It's giving us this big kick in terms of our revenue growth. This 20% number of growth that we keep on talking about primarily comes out of the growth in the music industry, which is about 11% to 12%, an increase in our market share. The pie grows by 11%, 12%, the remaining comes out of our share going up. Why is the share going up? Two parts. The retro music popularity world over, various articles being written on this. The retro music is becoming in the digital world, the catalog music is getting more and more popular because it's very easily available at the click of a button. Earlier, it was difficult for me in the world of a cassette or a CD to go and suddenly listen to a Raj Kapoor song if I don't have the cassette. Today, when I'm sitting there on a Friday evening and I want to listen to pyaru I kraaru, it's very easy for me to just click a button and the music will start. So the retro music consumption is going up. And second, as we invest more and more in new content, we're already seeing in the Pojhpurri or Gujarati or Hindi side, our market share is going up. Last year, from Teshara onwards, as the retail network had started opening up, Karma's sale had started showing up immediately. Our product being part of a new category still is the kind of product where customer is demanding to touch and feel. So retail network is crucial to be successful with that product. It did well in the quarter 3 and the quarter 4 last year. March was a bad part once again when the lockdown started. Same trend continued in this quarter. Majority of the retail network was shut. So sales did take a beating. But if you ask me, in spite of over 2 months, the complete lockdown was there in the country in April May, we were still able to manage to sell 45,000 units of Karma. But the focus, as promised to you, quarter after quarter now, I think for 5 quarters, that we will not be doing any experiments with Carvana till the time the retail network is not fully open. Our entire focus is on controlling cost, both in terms of manpower and marketing, and it continues. Last year was a breakeven. And in this year also, I'm committing to it. Our worst case scenario will be a breakeven. We will obviously try right now. We can improve the performance a bit. Our focus on moving Karma from a standalone product to platform, this constant work that's going on there, we all do it on the back end side rather than doing on the front end because we don't believe even the product is looking very good, we don't think this is to grow marketing money to educate people about it. Once market opens up, that's the time we will start pushing the Karma, the platform business. On Yulee side, there is no new film that got licensed in this quarter, more of a phasing issue than anything else. Also since April, May lockdowns were there, we could not finish the shoots of some of our films. But according to me, the moment we start looking at the entire year basis, you really should see a better year this year compared to last year. Last year was also a breakeven year. This year, we should see growth both on the revenue side and hopefully on the profitability too. The good part is our one of our films called Color Bomb. We had licensed it to Hotstar and booked in our books in the Q4 of financial year 2021. Hochtter finally released the film. And if I look at the external data, which is released by Ormax, which are the most regarded as the best tracking agency in the country for digital, that data seems to be indicating that in the 1st week of collarbone release, which is 12th to 18th July, it is the most watched OTT content in India. There are very big Bollywood films that got released on Amazon around the same time. Still, color bomb in terms of viewership fared far higher than the big Bollywood films. Our TV part, I'm very happy to see that TV part, our shoots did not get affected. We found ways to change our story line so that the shoots could happen in bubbles. And we continue nonstop with the film production film on the TV production business. That's why our revenue has been very, very steady during the quarter. Also, ROJA, our program which was the number one program when COVID started, it's still maintaining to retain its number one position after 15 months, too. And at this moment, we developed 3 of our programs running on Sun TV. All three of them are also getting monetized on YouTube as well as on Facebook. Overall, if I may say, quarter 1, we are happy with the performance. Our core business of music remains steady and grew at 20%. Karma, in spite of the setback, was able to do some kind of a recovery in the month in the later part of the quarter when the retail networks opened up, And we believe the future quarters are going to be better. TV business was steady. Film, just an aberration. We didn't release any film, But the acclaim people have received for the film we release is very heartening. And we hope right now the remaining quarters are going to look even better than this. That will be all. Happy to take questions from you. Thank you very much. We will now begin the question and answer answer The first question is from the line of Amit from 2.2 Capital. Please go ahead. Hi. This is Savi. Hi, Vikram. So my question is on the royalty expense. So I just wanted to understand the way it is calculated and paid out, especially because I was looking at one of your competitors who is also listed, and they seem to have no royalty expense whatsoever. And you are I also ended up asking them this question, and they said that in our acquisition model, we don't have any future payouts to anyone. So I just wanted to understand whether this is different for different players or I thought it was standard. So I just wanted to understand more on the royalty. I think it's a very fair question. There are 2 parts to it. One, when HMB or the Gramophone Company of India, which is the erstwhile form of Farigama, The deals that were done in 70s 80s had a royalty component. At that time, music used to be sold on a royalty basis. There used to be no upfront payment. Then came an era of mid-90s to or more-90s, where the deals started getting happening here on outright buyouts and there were no royalty element connected to it. So from a pure royalty, no upfront payment, it became all upfront payment, no royalty payout. Our royalty payout for the older content is in the range of 10% to 15%. Then came the era of 2000s onwards. Now every Hindi deal that happens, every Bollywood music deal that happens here has got a royalty component to it. Those of the players who are just making money off catalog and are not acquiring any new content, obviously, may not have a large royalty payout. For us, our big here, when you see it, it's not just a catalog content. Lot of new content that we people are acquiring right now, there's a royalty component connected to it. So as this answer your question, will it be a situation right now where Farika if a new Sanjay Leel Banchali picture is coming out or some other movie is coming out, if I buy, do I have to pay royalty, can the other guy get away? Nobody can. That's the structure of the industry now. And is it still in the range of 10%? No, no. Now the royalty payouts are higher than that. So just related to this question, I was looking at the UK market and some other developed markets. I'm sure you're also following that there's a lot of backlash from the artists against labels and the platform because they believe they are not getting their fair share of revenues. So because of that, there is an expectation that contest that royalty payment will increase and it's already much higher than what it is in India. So India also, do you think similar kind of stuff will happen because now you No, fair enough point here. Structurally, we are different. In other parts of the market, the deals are between the label and the artist because there is no concept called film music. In India, majority of the deals are between the film producer and the label. And film producer has its own private deals going on with the artist if there is any. So when we pay royalties, we actually are not paying royalties to the artist on sound recording. We are paying to the film producer. So the structure is very, very different. But coming to the bigger question, in India, we have a very, very smooth working relationship going on there with the composer and the lyricist. All of us have formed a society called IPRF, and all of us sit on the Board of it. So I believe different countries are different in terms of structure. We have a stable working relationship going on here. So you mentioned about the movie paying to the producer, but for something like that Bhakshar deal, it would be paying directly to Bhakshar, right? So in that case But the majority of the content in India is film content. So right now, yes, on a Baqshad deal, I'm with you. But non film music in Hindi is still relatively small. The big stuff is all just wait for Bollywood to open up. We also have we have Akshay Kumar movie called Bell Bottom. We have Ajay Devgn movie called Medhaan. We have 2 of Sanjay Leela Panchali films. We have a Ranveer film with Shankar, we have an Ayushman Khurana film. So there are enough of our own film music that we people have acquired. And as theaters open up, all that music is going to come out. So this is just my concluding question. I get a feel that the overall share of the pie for the artist in India is significantly lower than say in developed markets. So in India, the platform, the label and the producers end up taking a significantly larger proportion of the total revenue pie as compared to say in the developed markets where the artists really make a lot of money. Is that true? This is not the forum for me to discuss this, please. It's wrong, but to discuss an industry issue in a Saragama investor call. I can take this question offline. Sure. Thank you for your Thank you. The next question is from the line of Amrit Shah from Stallion Asset Management. Please go ahead. Hi, Mr. Mehra Kumar, Sureshna, take care of numbers. I just had a couple of questions regarding the licensing revenue. I just wanted to understand the split between the fixed and the variable parts. So how much money do we get from post stream revenues, like from that kind of contracts? And what kind of revenues that we get from fixed kind of contracts? As you can just buy for convenience. Basically, our variable so I'll give you a very rough idea. Our biggest two sources of revenue will be the music streaming apps, which are all variable with a minimum guarantee. It's not a fixed fee. It's a variable with a minimum guarantee. And players like YouTube, these they form bulk of a revenue and this is all variable in nature. We may have a minimum guarantee to take care of our downside. Our upside is all sitting with us. Got it. Got it. And suppose, let's say, if there's any year that you did not produce any new music, what would be the growth of the old IP that you would If you see, Mike, the annual presentation, which is there, it's there on our website, we have shared some data there. We are seeing a steady increase in the catalog music consumption year on year, and it's not only Sarigama. You see any of the global guys, they all are saying the same thing. Because the catalog music is becoming so easily available, more and more people are accessing it with a greater ease. If I see any RD Burman song and we track it as a song by song level for 130,000 songs of ours, ours. That song would have done better in 2020 compared to 2019, better in 2019 compared to 2018, better than 2018 roughly to 2017. From 2015 onwards, we are seeing right now every song is making more money in the subsequent year than in the previous year. And this is all catalog I'm talking about here. Got it. Got it. So, Bhush, let's say we have signed up with Masha for Pani Pani or if you sign up for a large star for any of our songs for non film ending music, what will be the typical cost for the production? What will be the typical cost that you'll be paying? You are not seriously thinking I won't share these specifics on a song by song. I think it's unfair, right? It's competitive advantage, these issues. But your bigger thought is that and I've shared this in the past, any when we do content investment in any financial year, our internal policy is very, very clear about it. The total amount of money we people have spent on the content acquisition and marketing of it in a financial year on new content, we should be able to recover that entire thing within 5 years. No, no, no. I just wanted to understand what kind of ROICs we have for some of the large artists or larger songs, like for songs that you're producing, which this is, of course, gonna be an expensive song we are producing with, Bach'sha is producing it with Jacqueline. These will be extensive songs. So what could be a different ROIC for new kind of fronts? I'm telling you, my answer will be that the payback period right now of all content investment during our financial year is 5 years. I cannot please understand, I cannot get into specifics of a particular song or any expensive song or a cheap song. We obviously do a combination of flagship properties, smaller properties, film songs, non film songs, indie songs, regional songs and then come out with a structure to decide that what's the best way to go and invest content with a clear understanding that the payback period cannot go longer than 5 years. And the bulk of the payback comes from streaming, YouTube and doing other kind of license deals for that for those songs. Got it. Got it. And just one last question I had for you. How was our revenues from radio? I think so, we are having a discussion with the radio industry point, the royalty for the music industry. So Right now, we are in line with cases here in front of them. I will not be able to comment on radio at all. We are in court with them. Today, radio forms are very, very small part of our revenue streams. Okay. So they can move up potentially for a 5x, right, if that court case goes to? So, if anything, there's an upside. There's no downside because it's already very low. Radio has not been a substantial chunk of revenue for any of the music labels in India. Beyond that, because it's in court, won't be able to comment. Thank you. Next question is from the line of Divanshu Sampat from Y. S. Securities. Please go ahead. Hello, sir. Good afternoon. Hi. I had a few questions on both the divisions in Music Licensing as well as Caravan. So music licensing, we have invested about INR 17 crores INR 18 crores in terms of content in the past 2 years. And we've still been able to grow at about a healthy 20% pace. And I guess a lot of that is to do with the tie ups and the business development efforts that you have done. But if I remember correctly, in your previous call, you had mentioned that all the efficiencies have been brought in and now growth will largely be driven by new music that we acquired. So this is sort of a continuation with the previous participant also. So if we are not because of lack of availability, if you're not able to buy or reach a INR 100 crores sort of target, will we be able to manage the 20%, 25% envisage growth this year? So that is one. And secondly, if no major releases of Hindi film music happens, will our content charge be 17% to 18% or in the same range basically, is that a budget for the region where that comes out every year? You asked me questions. Let me try to see if I can answer this. Our content budget is not a hard number that we are seeing we have to spend come what may. This is our intent to spend assuming there is enough content in the market. If tomorrow for whatever reason there is a lockdown happening in our country for 9 months, nothing is going to be shot. So even if we want to spend, we can't spend. So obviously, we are going to be constrained by the supply. Going by whatever we people have been able to do in the last 6 months, we are reasonably hopeful that we should be able to release a good amount of content in that remaining three quarters. Many of the songs have already been shot. It's just a question of releasing them. This is a non film song. Some of the films are already they're just waiting for Maharashtra and Delhi territory to open. If they release, the music is going to get out. The regional music is still being shot, and we are relieving that music out. So I have no idea right now whether we will be go back and invest the entire Kitty as such because there's no Kitty. We are saying of the music that gets released in the market, we will acquire 20% to 25% of The total music that comes in the market is very little, we will acquire 20% to 25% of that little music. Will we be able to go back and grow at 20% plus? Yes, a big what I'm confidently telling you here is market share wise, we will be able to go and keep the 10% that's coming because of market share increase, we will manage that. If the industry is closed down, which I found very doubtful, then it's a different issue, if everything gets locked for whatever reason. Looking at the current signs in the economy and whatever we are seeing right now on the entertainment overall growth rates, I see all likelihood that we should be able to touch the 20% growth number. Okay. Okay. And is there a strategy for us to remix or re release any of the songs that we already have as an effort to keep our content growing, which is maybe a strategy that you listed here has cited in a situation where the content acquisition becomes a challenge. Is that something that we are thinking of? Or it's not something that can really get the engine moving for us? See, typically what happens is I'm assuming you're talking about remixes and reinterpretations of old songs. Yes, yes. So they also need to be somebody needs to produce them, reimagine them, somebody needs to do a brand new video with them. So doing that is as simple or complicated as doing an original song. You with me? Okay. Yes, yes, yes. But at any time, we keep on doing this part that majority of our focus primarily is on new content because all the when you create new content, you not only get a new song, you get the rights to a new set of lyrics and a new music composition. When you do a remix, then basically it's a derivative of the rights that you anyway own. So there always has to be a balance between remixes and originals, originals both in terms of independent music and film music. And you will see from our side both coming out like they did last year. This year also, you will find a few remixes coming out from our side. Okay. Okay. And can you help me understand a bit between the dynamics between the music license revenues in India versus abroad? Because I mean even your international revenues have also been growing at a healthy pace and I assume that there would be a higher proportion of paid up subscribers abroad. So the revenue or the economics would be a bit more favorable. So can you throw some light on this in terms of how this you think this can play out? Will it be additional tie ups that will grow the revenues for us internationally? Or is it just higher simply just higher usage? For international, when we talk about, we are talking about Indians using or consuming Indian content, Indians living in America consuming Indian content on various apps and higher share of consumers there who are part of the paid economy. We anyway get benefit of that. I'm personally more bullish on that in India, you will slowly see the transition happening from an ad driven business or a free business to a subscription based business. Globally, the number of paid subscribers for music streaming have grown up right now from a policy 50,000,000 to 450,000,000 now. It's a large enough number. You have a very significant numbers even in places like China. I see no reason why in India over a 2 to 3 year horizon, most of the platforms are also should not move towards paid economy. When we people make our projection of 20% increase on our music licensing revenue, we don't factor in transition to a paid economy. If that happens, the growth can be far higher. No, sir. I understand that. Okay. Okay, fair enough. And if I may, I have a couple of questions regarding the Caravan side of the business also. Now, if you look at the price points, right, they vary between anywhere between 2,000 to 6,000. So as such, you are essentially targeting the relatively affluent part of the society. And to add to this, even your presentation also says that you're targeting people above the age of 35 and plus. Now I also follow that But I am and I'm guessing people because of the section of society you're targeting, they would generally be tech savvy having phones, earphones or maybe virus devices. So do you think that I mean, I'm guessing we are betting big on the platform aspect of Caravan to really take off and target these people. But I mean, what are your thoughts on people who already have using already are used to using their phones and wireless devices or Bluetooth speakers and those kind of things versus having it originally only as idea of gifting it for people who are technically finding it difficult to adapt to technology, which is basically the 50 or 60 plus age category? I'll take you one of my trips right now to Akanpur or Rojain or Repadayu and introduce you people, 2 people in the age group of 35 to 40 randomly. And you will realize that there is a lot of difference in a typical 40 year old living in Bombay, Delhi, Calcutta, Bangalore, Chennai to somebody living in Kanpur. We will typically the world that we you and I move in, a little more open to newer technologies. We are realizing that 35, 40 starts becoming the age in smaller towns where parents' first reaction to anything new is I can also assure you that of this entire 2,500,000 odd car loans that have been sold, practically each one of those people will have a smartphone in their hand, in their home, high probability may also have a smart TV with them. So what are who is buying KARVA? People have been buying Karma are the people who value convenience over control. They have all the devices in their life right now to control their life, to control the experience. But they are earning for that relaxed mood. And in the background, music is going on, without any onus on them to decide which song to hear next. My 21 year old son doesn't understand this philosophy. I think 15 years back, even I had a problem understanding this philosophy. With age, you start feeling right now convenience is more important than any kind of control which newer devices give us. That has been the mantra behind Carva. Carva is a product. That's also the mantra behind Carva, the platform. Whatever we have sold, we have sold basis this customer insight only. And we hope that it will hold us steady in the days to come. If for whatever reason we realize at any time that no customer has changed completely in our country, We will change our business strategy immediately. So, okay, I have one more follow-up question to this, but I'll just since you've brought it up, if I can ask right now. So is there a risk mitigation plan here in the sense, what is it that will happen that will lead us to decide, okay, maybe this is not going as per plan, we need to scale back or maybe close down? Is there a sales number that If you ask me right now, financial year 2021 was just a mitigation plan. We realized after the moment COVID hit us that we believe in the product, but this is not the time to go back and put the accelerator. The risks are very, very high. And we were able to manage our breakeven. And I'm still maintaining with this. This is in spite of us having a carry okay product ready. We are clear about it till the time we are very convinced that the retail market is fully open and customers are happy to step out of their home and touch and feel the product and buy it, you will not see us spending any big bucks on Karma. We will just keep on going steady. Worst case scenario, do a breakeven. Thank you. Investments. Please go ahead. The next question is from the line of Vivek Gautam from GS Investments. Please go ahead. Yes. First of all, I would like to congratulate you on the retro music popularity. For example, this Ludo movie has become synonymous with that song, O Beta G. So I just wanted to understand how big is this opportunity size for retro music in films, ads and Alexa also uses, I think, our music. How big is that opportunity size for us, sir? And you can tell something. It's very difficult for me to focus on size retro music aspect. Yes. Hello? Can you hear me? Yes, please. So music as a category is growing very rapidly. Then digital happened and the piracy destroyed the music industry completely. 2015 onwards, we are seeing globally a huge upswing happening on music. It's not just India alone. You should see the American market or the European market. Everywhere, there's a rapid growth coming in. And the reasons are very obvious. This time, the digital consumption is not browser based. Earlier, we all used to go to www.xyz.com to do anything. In that world, it was very difficult for content owners to control piracy done by rogue operators sitting outside India. If somebody had a was doing piracy sitting out of Afghanistan, sitting out of Africa, there is no way we could have controlled it. In today's time, in 2015 onwards, as Apple and Android based smartphones have become the way of life, more and more people consume content through apps. And in the world of apps, it's difficult to do piracy because Apple and Google are extremely strict that none of the apps sitting on their platform should encourage piracy. So every time we are able to find somebody going and consuming our content without rightfully taking license, we reach out to these platforms and they are very cooperative in ensuring that any app which is infringing will be pulled down. This is ensuring that all of us are getting bang for the buck for the IP that we people own. The primary reason why music based licensing revenue is going up substantially. And one question was about this. Congratulations I wanted to give for Sanjay Leelavansali, the master understanding of the music and its music is really for a very immortal for a long time. But are we paying very high cost and would it be lucrative for us after paying such high cost for the music, right? So again, Paul, I can give you a qualitative answer here that we let me okay, let me first give you a more structured part. How do we choose how much should we pay for any song? We have turned it into a part science. Every song which has been released in India in last 36 months across languages in which saragama plays, each of those songs enter our database. These are all competition songs. Behind every song, we know who was the director, who was the lyricist, who was the singer. We also know the performance of the firm on YouTube. Since we have so many data points, we are able to now build models, predictive models, which help us identify that when our producer comes to us and says, we are able to predict what will be the potential of those songs over the next 5 years. It is not perfect science, but it is going and predicting it based on the last 36 months' performance of each of the people who are involved in it. We combine it with listening session. So there are kids under the age of 30 in my company. As management, I don't get involved in that. Those kids go out there and listen to that music because the music is more targeted to younger people than people of my age. They listen to the music and they give their clear cut answer about their views on the song. We then combine the quantitative stuff which is thrown by the models with the qualitative part and then take a call how much should we be ready to go back and pay. We make our utmost attempt right now that vanity does not come into play. And we are also bound by the commitment we have made to Board and investors that a block of music bought in a year overall should have a payback period going in 5 years. If we are going to be buying music by paying obscene amount of money, we will not be able to live up to this. We are anyway writing off the cost of 48% of the year 1 itself. If we make silly decisions, it will start showing in our books immediately. Hopefully, this gives you comfort. Thank you, sir. Give up the good luck. Thank you. The next question is from the line of Naveen Naredi from Naveen Investments. Please go ahead. Hello, Vikram Thank you very much for a nice result. Fantastic in all the respect. Sir, how many songs we listen on YouTube, Facebook, Netflix, Spotify, Gaana? How we receive the revenue from advertisement or per song cost? P. Vijay Kumar:] Ahar, platform deals are different. If you are listening to the song on a Gaana or a Spotify, we get paid every time you listen to a song. It's a variable deal. So every time Sarigana will get paid. On YouTube, Sarigama will get paid right now by Gaana or Spotify or Amazon or Apple or Wink. If you are on YouTube and you listen to Asarigamaka song on YouTube, then YouTube will share 55% of the advertising revenue that they make by showing you the ad. Okay. If you are going to StarPlus and watching or a phony and watching a reality show in which Sarigama music is getting used, for that, the channels typically pay us a fixed fee, and this fee gets renegotiated every 1 or 2 years. Okay, okay, okay. And if Google or Dream11 is using a song in an ad of theirs, they get they pay us depending on what is the extent of usage of a song, for how many days the ad will run and will it run only on television or also on digital medium, will it run only in India or outside India too. Okay. Okay. And so this Dana or Spotify, how much pay will you disclose this? Yes, we do give you a broad idea. On an average, all our deals are that we will get paid on average 10 paisa every time somebody listens to a song. Also, if you are a paid subscriber of Spotify or Agana, we get a share of your subscription charge. Okay. And all of this is governed by A downside is protected by a minimum guarantee that they give us. Okay. Yes, minimum guarantee is there in film industries. That is there. Okay. Because labels are able to get minimum guarantees from everywhere. Okay. And sir, secondly, YUGELY movie, first movie when we release, I think the 3 years has been passed. Is it so? That the licensing of the first movie 3 years are just about to pass now. Just passed. So after 3 years, the film will again come to us or 5 years after? Sir, it depends right now. Some of our deals are for 4 years, some are 5, some are 11, some are 3. So but you are right. Principally, every time the licensing deal gets over, we get the movie back and then it's up to us who we license it the second time. The good part is that the cost has been written off in the year 1 itself. So whatever money this movie makes in the 2nd round will straight move to the bottom line. So, Vikram Dibets, I would like to know any film if you the right has been lapsed and again we have recently or given the right to another person, how much money we received. Okay, okay, okay, okay. So right, definitely, sir, now it is about to complete 3 years, but if it is in Sir, my tele deal right now of the movie is a 4 year movie deal. So let Dead Cat get over some of these deals that we did in 2019, some movies are 3 years. So within a year or 2, you will start seeing numbers coming in. And for a more important part is courtesy the good performance of those movies, we are getting many more movie deals and series deals now from these big cast. Right, right, right. I have said it in my last quarter call, I'll maintain this, that we see Yudhly reaching a triple digit revenue number in next 2 to 3 years. Right, right, right. Or this year, how much movie we have planned to release in 31st March 'twenty two up to? Sir, is there COVID if I can complete that? Right, right. No, no, no. Definitely, definitely, we understand you are doing very hard work and intelligent work. So working is quite different and talking on phone call is a different thing. So just you are doing fantastic. I knew it. And I am fortunate enough, I am the shareholder of Sarigama since long and getting a very good return also. So all the best, sir, and all the carry on, sir. Thank you. The next question is from the line of Patrick Mendoza from Tusk Investments. Please go ahead. Hi, Vikram. Congratulations on a great set of numbers. Thank you. The first question I had, Vikram, is on the film revenue model. Typically, do these films that you license to say OTTs presently in the current scenario, do they have MRGs? Or is there some variable component just like music streaming based on the number of Flat fees. There's no upside. Okay. Secondly, Vikram, any concrete plans of reorganizing the publishing business because recently group company also had 2 other publications. So if this could be reorganized with that? At this moment, can I tell you anything about it right now? No. We people are looking at very, very closely and cheerlessly. The Chairman, Mr. Goenka himself is personally involved in it. So we are looking at it. That's all I can say at this moment. We are fully aware of the feedback from all the investors on that particular topic. And we hopefully will come back to you guys shortly. Okay. And Vikram, I just saw that there's another song that's getting released by Deeprak. So are these the new artists that you're signing, are these going to be exclusive with Saragama or they are free to be with other labels as well? Remember, we as I talked to you, we don't find artists. We work with everybody in the market. We are not into artist management. That vertical doesn't exist in Sarigama today. So when you see our numbers also, you'll never see any revenue against artist. Our endeavor is that to work with every artist in the market, whom server is doing pretty well, go and work with them and do some experiments with budding artists. But we don't sign up the artist. Okay. Yes, just on this just a continuation of this where you said that you think of working with, say, new age artists and experimenting. Recently we saw this there was this Canadian artist called Teshir, and his Jalebi VV song which got viral that then went to UMG. So do we have a mechanism in place to keep finding, say, these viral tracks and maybe try and work with them to get the rights of those songs? Absolutely. And you will find right now there are multiple of these things which are there in our country with 1,300,000,000 people. And on entertainment side, we're extremely creative bunch of people as we as Indians. So you have a lot of talent here. So we are constantly working and trying to work with these people and see that how do we launch and do music with them, not just limited to Hindi but across multiple languages because that's what gives us an edge over every competitor in the market today, that we are the only ones which have a multilingual presence in the country. So yes, short answer to your question is yes. Okay. Thank you. Thanks a lot, Vikram. Thank you. The next question is from the line of Ankush Agrawal from DPI Research. Please go ahead. Hi, Vikram. Thank you for taking my question. Firstly, if you can give some color on what kind of split do we have in terms of revenue from say sound recording rights and publishing rights, some broad breakup is significant. We don't disclose sound recording versus publishing rights, breakup, because both the rights are sitting with a single company unlike some of our global counterparts, these rights are different companies. Yes. So the intention was to understand what kind of profitability is right there because on the publishing right, I think we have to share 25% with the composites and 25% with the businesses wherein the ASO starting. So I think The good part of it is that majority of the revenues made by our company were coming out of sound recording. The publishing rights was something on which there were a lot of disputes going on in the entire music industry. It's only in 2017 that everybody came together, which is the publisher, in this case, Sarigama, where we are both the sound recording owner as well as the publisher. So we come to Sarigama, all the composers and lyricists, we came together, created a society called IPRS under the chairmanship of Jawitza. And we are now seeing that society slowly increasing its revenue. In fact, 2019 was a very good year, and they also got blocked under this entire COVID path for last 1.5 years. Are we bullish? I think personally, I am very bullish that the publishing revenues in the days to come in India are going to go up substantially. They will be collected by IPRS and 50% of whatever they collect comes to us because we are the owners of the rights. So there are huge potential upside in future. We don't put a number to it. As and when the numbers start coming in, right, you will start seeing that hopefully they will push the growth higher than the proposed 20%. Right, right. Actually my second question was on IPRS itself. I mean, you have mentioned in your annual report for last 2 years that you see it's untapped market till now. So what has actually changed over here? Like why was this right was not getting I mean, FX201, why were we not getting revenues out of it till 2017 or now? So until 2012, there was still lack of clarity on this right. There was a copyright amendment act in 2012 that was passed, which very clearly specified that whenever you consume a song, you need to pay these were 2 distinct rights and you need to pay rights and you need to pay for both. After that, there were a lot of back and forth happening in the industry itself here that how should the monies be collected. There's a lot of back and forth that happened. Finally, the good part is that the industry came together in 2012. All the 3 stakeholders, publisher owners, composers and lyricists, and then started working together. It took us a year right now to get the society moving. We had a great year and then COVID happened. But it's COVID is just a matter of time. As the impact of COVID starts wearing off and life goes back to normalcy, you will see publishing rights valuation going up. Okay. And just one clarification, OERF, in any public event, the entire right is about publishing rights, and there's no part angled of recording rights, right? No. Whenever there is a public event going in, if there is recorded music being played, then they need to clear both sound recording rights and publishing rights. Okay. So suppose you are doing a public event, you have a party of yours happening in a 5 star hotel and you start playing the bachar pani pani, you need to get your public performance sound recording rights cleared by a society called PPL and then you also need to get your publishing rights cleared by IPRS. But there is a live show going on where there is no recorded music, only live, then you only need to clear your rights from IPRF. Got it. Got it. That was very helpful. Just one last one. Can you tell me how much is total industry spends on new music, specifically the Bollywood? Sorry, I could not get you. How much is total annual spend on the new Bollywood music every year? So the number I can share with you, our understanding is that the total investment in new content across languages, across INR550 to INR 600 crores. INR550 to INR 600 crores. Okay, got it. That was very helpful. Thank you. The next question is from the line of Karshab Zaveri from MK Investment Just one question from my side. If I look at last 2 years FY 2020 and FY 2021, because the content generation as well as acquisition was on slightly slower side, we could see significant positive up swing on the operating as well as free cash flows. In fact, we sort of paid out fairly hefty dividend also in FY 'twenty one. Let's say, in a non COVID normalized year, when the content origination as well as acquisition goes back in full swing, what could be the impact on the cash flows and consequently our dividend paying policy? So I'll not be able to we will continue to be a dividend I'll comment anything beyond that. But on the first part, your understanding that the profitability of the last year was governed a lot by low content investment is partly true. And I've said it in my last quarter call that when we were declaring a profitability of PBT around 150 crores, there was a component of in that INR 150 crores of the fact that we did not invest enough in new content because we're not possible to do it. And secondly, we had one off income also that happened last year. But even then, the number should have been there in the range of INR 110 crores to INR 120 crores of profitability. So is that a number which is a sustainable number with the newer content investments coming in? Yes. As we will go forward, 2 things that are clear. 1, the entire investment in new content has to come out of the cash that will be generated by the music business. We have a very clear cut commitment given to the Board that we will not be raising debt to pick to do content purchases. Is there an inorganic purchase that we need to do Inorganic, does it mean a celebrity from somebody else? Sorry, come again? When you say inorganic, it's like acquiring library from somebody else. You're picking up some other music label. So that's just difficult to anticipate. But on a song by song or a movie by movie, entire thing is going to be funded by our internal accruals. Also keep in mind, we people take a charge of 48% of what we people if you're acquiring a movie worth a crore, chances are 80 lakhs will be towards content, 20 lakhs will be towards marketing. Of this entire crore, 48% is charged off to our books in year 1 itself. Sorry, could you repeat those numbers on marketing and? So roughly 80% of our spends typically are going towards content acquisition and 20% of the commitment towards the market know that content. Okay. Okay. Say your film is costing our crore, chances are that the 80 lakh has gone to the content owner as an advance, 20 lakh has gone out their commitment from outside on marketing of the music. At Kitty, 48% gets charged off in the year 1 itself. Of the total 100? Of the total 100. Okay. The remaining gets charged off over the next 5 years, the 6 year period. And we are giving you a commitment here is that whatever VP will acquire will have a payback period of 5 years. So there may be a little bit of a phasing issue in the 1st few months. Right. It's like it so happened that we acquired the content, but the revenues for that right now because we our deals get renegotiated every year or 2 year. So they may be a quarter or 2 quarter trailing issue. But overall, you will see the revenues flowing in sync or going up in the new content investment. Right. And just so you can get it technically a bit more clear, then in that case, even if you let's say, you were charging like you said, the charging to the P and L might be in a phased manner. But if I look at your cash ROC, that should reflect your IRR or let's say payback period, which you are very confident about? All I can say, listen, I'll take this offline with you. But yes, we need to keep these two parameters in mind right now that we charge it off over 6 years. Office quality is a charge off in year 1, while we expect to recover the cost both of the entire crore, which is both content cost and marketing cost over a period of 5 years, Point number 1. Point number 2, the entire funding will be done through internal cash accruals. Sure, sure, sure. We're not going to spend more than what we believe Sure, sure, sure. That's it from my side, sir. Thank you so much. Thank you. The next question is from the line of Rajesh Kothari from Alpacas. Please go ahead. Good evening, sir. When you're buying the music rights or even if you are entering into an agreement. So what is the competition intensity? And globally, for example, the Sonys of the world and UMTs of the world, the themselves are so big. So what kind of trends you are seeing from the competition perspective, the key competitors and how aggressive they are? That's my first question. So see, there's I'm saying right now we should never dismiss competition. And there is and we are not the number one player in the market. We are the number 2 player in the market. So there's clearly a formidable competitor sitting in. Where we differentiate ourselves vis a vis our competitors is our ability to market music. As a company which, 1, run by professionals, 2nd has got very high quality marketing talent, Also curtsy karma, we are the only music label who got a retail business, and best of the marketing talent actually sits in on the retail side and not on the B2B side. We are able to attract that talent and keep it in our system. This is of great value to our movie producer because most movie producers consider music that they release before the film to be the biggest promotion tactic for their movie. So they want to work with people who are very, very marketing savvy. This is really helping us out. 2nd, Sarigama has a very long track record of being very particular about the royalty payments. Our payments are always right and done timely, which is also helping us a lot in many producers coming to us and saying that they want to work with us. So for example, the Sonys of the world or for example, say YouTube, do you think they can also compete you? I'm not talking about their traditional number one competitor. I'm talking about the new age competitor. Do you think they also compete or they do not compete at all? So again, the entry barriers in our industry are huge. You can tomorrow, technically speaking, start a label of your own. But remember the sheer size, when you acquire the music of 1 film, you get on an average 4 to 5 songs. If you go out there and have deals going with 100 different producers, which is a Herculean task for anyone, then you get 500 songs in a year. You do it for a decade, you get 5,000 songs. You do it for 50 years at a time, then you get only 25,000 songs. Saragam is sitting at 130,000 songs. The other 1 or 2 big guys are also sitting at large libraries. Just because of the sheer size we people have, we are able to market our content much better and we are able to get better deals from our partners. So for a newer guy to compete in the long run is difficult. You may have a song being released on YouTube here and there, which did well. But a sustained basis to develop business around it is a difficult task. And not globally also, music industry, this is the advantage that the players have that the entry barriers are massive. So basically, they generally typically, they do not comment, am I right? I mean, sorry, my knowledge is limited in this industry. So say for example, whether YouTube actually competes with you at any point of time normally or players like that? See, none of the partners create content. So there is a clear cut distinction. We don't get into their space. We are not launching a Spotify or a Gaana or a YouTube or a Netflix equivalent. We are pure play content IT company, while most of these guys are pure play platforms. So you will not find music being created by any of these guys. Understood. And so my second question is in the opening remark, I don't know, correct me if I'm wrong. You mentioned something that normally Q1 is weak, but this time it is strong because of preponement of revenue from 2Q to 1Q. I didn't understand that statement. Can you clarify, please? No, no, no. You have to get again half part of my statement. My statement was quarter 1 anyway was pretty steady this time for us and it was also held. We have a concept for over flows. So I spoke to you about our various OTT deals, which are minimum guarantee based deals. Our policy is that if there is an overflow coming on those minimum guarantees, it is booked only when it actually comes. We don't book revenue in advance unless the revenue is hitting us. So it so happens here that typically our overflows come in Q2, Q3. One of the overflows has come in quarter 1 this time. Okay. But that can happen even in 2Q, right, for some other days, I mean. So that's with no normal part of your business, right? I mean, it can overflow anytime. It's a saving issue. What happens, some partners still go into Q2, some part of that has come out there in Q1. Understood. Understood. Great, sir. I will take the question offline. Thank you, sir. Our principal has been right on the content side to get to be more and more open about the our declaration, where you can understand our numbers better. Sure, sure. No worries. Great, sir. Thank you. Wish you all the best. Thank you. The next question is from the line of Vivek Gautam from GS Investments. Please go ahead. Yes. Could we just highlight the progress India is making regarding 2 factors? Number 1 is the paid subscribers for music in different channels and number 2, the increased litigation and cost for in India, if you report some IP violation like in China, it's almost 94%. How much is it in India? And how much is it looking like in future? Thank you. Let me put the second part first. Overall, we work with Government of India closely on the piracy issue. And I can tell you both across films and music, we are seeing a fall in the incidents of piracy in India. And is it any magic? It's just 2 principles that stay at play here. One, it's becoming so much more easier for a customer to get access to legal music today, for that matter, even legal films. You can go to a Gaana or a Saavan or a Vink or a Spotify and legally hear music. So why will you go out and indulge in piracy? 2nd, it's difficult even if you want to indulge in piracy, it's difficult to get access to pirated content because most people don't use browser any longer. They go to apps and apps are not able to go and push pirated content. Same thing which I said in my initial statement. This is what is helping rates or piracy coming down in our country. Is it still very high? Still very high. But the good news is that it is falling down. Also, we are seeing judiciary now getting very, very active and now acknowledging that the IP piracy is as good or bad as stealing right now somebody's physical products. There are a lot of livelihoods which are dependent on IP. And if somebody is right, is getting stolen and other person is taking advantage of it, proper legal action should be taken. So which is helping overall IP getting its place under the sun. The first part that you asked me about subscription, this is my personal view. I think Indian customer may be ready to pay at a if the pricing is right. But most of the platforms which are there in OTT are still a little more keen on building their valuations than building their bottom lines. And if the focus is on valuation, then you push more and more on monthly active users, which means you need to put your content free rather than do it on a paid basis. Eventually, all of the people are going to fall in place. All the international guys who will come in India, their focus is always paid. I see every reason to believe right now they will keep on pushing their paddle on the paid side. And a lot of Indian guys may just follow suit. Is it a very large number today? No, it's not. Do we expect this number to grow up substantially? Yes, we do. If that number grows up substantially, will we benefit a lot? Yes, we will benefit a lot. And judiciary comment of yours because our quotes are more similar to Tariq than Tariq culture. So how effective have been there? Hello? Yes, please. Could not get your question. That's are famous for Sadiq by Sadiq, famous by Sanhedrahel because judiciary is basically keeps on postponing that region actually. I just wanted to understand how effective they have been for us. All I can say is there is a So 20, 25 years back, Gaani ki Chori was never considered as a Chori. Now judiciary is coming out there to the rescue of the IP owners. The various treaties India have signed with very global treaties they have signed are also putting pressure that the IP has to be protected. And we are seeing the benefits flowing to every IP owner across audio and video. Thank you, sir. Thank you. Thank you. That was the last question. I would now like to hand the conference over to the management for closing comments. Thank you, guys. Long evening we had. So we people are happy about the way company has performed in the quarter 1. And we maintain a bullish stand as we people go to the remaining 3 quarters of the year. Music Licensing, our projections have been 22% to 25% growth on a short to medium term basis, and we stick to those numbers. There's no change. We will keep on continuing with our investments in new content, Hindi film, Tamil film, Telugu film, Hindi non film, Pushpuri non film, Gujarati non film, Punjabi non film and couple of other regional languages non film. We believe as market start opening up quarter 2, hopefully quarter 3, you will see some of the bigger film releases out and many of those next bunch of big releases, especially the musicals are all the charigama. So we see a big upside coming through that. We continue with our cautious approach on Karma Till the time the markets are not fully open up and customers can't go freely, we will keep on controlling our costs, both on the manpower and the marketing side. Focus is going to be on margins and not on revenue. Films, our previous position continues. Our focus is going to be, 1, on doing sale on making movies on a pre commitment basis. This 2nd, we will focus a lot on making web series, and you will see us announcing our first web series shortly. And third, there will be focus going on the regional side. Regional language based music film series is an overarching theme on which we people are working on. We want to invest out there heavily because we believe the next bunch of customers on the digital side are going to come from the smaller markets, and they are going to be much more comfortable consuming content in their language than necessarily India alone. So there will be a lot of focus while we are not going to take our eye off main mainstream Bollywood. So overall, hopefully, in quarter 2, we'll come back to you guys with an equally positive news. Thank you. Thank you. On behalf of ICF's authorities, that concludes this conference. Thank you everyone for joining us and you may now disconnect your lines. Thank you. Bye.