Saregama India: Ready for the Future?

Saregama India Ltd

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(A) About Saregama India Ltd

Saregama India is a RP Sanjiv Goenka Group company. It is India’s oldest music label, youngest film studio and a multi-language TV content producer.

Company’s head quarter located in Kolkata and other offices which are in Mumbai, Chennai and Delhi.

Further, the Company is engaged in the business of recording and launching of “Movie Based & Non Movie based” songs, films and different TV serials.

Moreover, Saregama is India’s oldest music label. It has the largest library of intellectual property rights (130k+) related to songs,
film dialogues, background scores in its bouquet.

Moreover, the Company has its own production house with the name Yoodlee Films. This production house is focused on creating content for 3rd party digital platforms.

Moreover, Saregama retails a music-based audio player called Carvaan to target the 35+ year audiences.

Saregama, an oldest music label and youngest film production company in India.

(B) Journey Since Inception

Saregama India Ltd - Journey

(C) Board Members of Saregama India Ltd

(i) Dr Sanjiv Goenka (Chairman)

RP-Sanjiv Goenka is the current Chairman and Non Executive Director of the company. He is 60 Years old.

Further, Dr Goenka holds Graduation degree from the prestigious St Xavier’s College, Kolkata. He has expertise in Media, Strategy Planning and Governance.

Dr Sanjiv Goenka is the Chairman of the RP-Sanjiv Goenka Group since its inception in 2011. Dr Goenka is also Chairman of the Board of Governors of IIT, Kharagpur. He is a former President of AIMA.

Moreover, Mrs Preeti Goenka is the wife of Dr Sanjiv Goenka and Mrs Avarna Jain is the daughter of Dr. Sanjiv Goenka. Both are present on the Board of the Company.

During FY21, Mr Goenka drew sitting fee of Rs. 1,25,000 from the Company.

(ii) Mr Vikram Mehra (Managing Director)

Mr Vikram Mehra is the Present Managing Director of the company and has been with the company since October 2014.

Mr Mehra has been with the Saregama India Ltd since October 2014. Before joining Saregama, he served as Chief Marketing Officer and Chief Commercial Officer at Tata Sky. He has also done stints with Star TV, Tata Motors and TCS. Also, Vikram is a TAS (Tata Administrative Services) alumni.

He holds an MBA degree from IIM Lucknow and a B.Tech in Computer Science from IIT Roorkee

Mr Mehra has a very good experience because previous on rolls. He has expertise in Media, Strategy Planning and Governance. His deep understanding of the various aspects of digital media has helped in a growth momentum at Saregama by transforming the music label into a digital business.

He lead the launch of innovative physical device “Carvaan”.

During FY21, Mr Vikram Mehra received remuneration of Rs 6.42 Crore which is 1.45% of the Net Sales and 5.66% of the Net Profit for FY21.

(iii) Mrs Preeti Goenka (Non Executive Director)

Mrs Preeti Goenka is the Non Executive Director of the company. She’s Completed his schooling from Welhams Girls High School, Dehradun.

Moreover, Mrs Goenka studied Interior Designing at South Delhi Polytechnic to secure a diploma. She is skilled in Media, Business Strategy and Planning Governance.

A past President of the Ladies Study Group of Indian Chamber of Commerce Kolkata, currently she is an Executive Committee Member of the Birla Industrial & Technological Museum, Kolkata.

During FY21, Mrs Preeti Goenka drew sitting fee of Rs 1,00,000 from the Company.

(iv) Mrs Avarna Jain (Non-Executive Director)

Mrs. Avarna Jain is on the board as Non Executive Director of the company.

Mrs. Avarna Jain holds professional qualification of Bachelor of Arts in communication from the University of Pennsylvania

She is skilled in Media, Business Strategy and Planning Governance.

During FY21, Ms Avarna Jain drew sitting fee of Rs.1,00,000 from the Company.

D) Shareholding Pattern of Saregama India Ltd

Saregama India Ltd - Shareholding pattern

Here, Promoters and Promoters Group holds a good percent of total holding, which is 63.77% for the period ending Sep-21.

Saregama India ltd - public Shareholders
Saregama India ltd - Promoter Shareholders

(E) Business : How does Saregama India Ltd earn money?

The majority of the company’s revenue comes from the music licensing segment. The company monetizes existing IPs and keeps on building new IPs. Saregama doesn’t only have content in Hindi, but the company has a presence in other regional languages like Tamil, Bhojpuri, Punjabi, Gujarati, Telugu too

Further, the Company generates its revenues from the sale of contractually manufactured products, licensing of music rights and income from films and television serials including free commercial time.

(F) Business Segments of Saregama India Ltd

Company generates business from its core segment named (i) Music and (ii) Video

Saregama India Ltd - revenue Model

MUSIC SEGMENT

Saregama is India’s oldest music label with the largest library of intellectual property (IP) rights, which is currently 130k+. Music Segment can be understood in further two parts which are:

1) Licensing to third-party platforms
2) Retailing: directly through CARVAAN

1 a) Licensing to Music Streaming Platforms (OTT)

Saregama gets paid every time a customer listens to Saregama owned song on any OTT app. Saregama licenses its music to various OTT platforms for online streaming. This segment has seen ~40% YoY growth.

Also, Saregama’s music IP got used 85B times in FY21 across audio OTT platforms, Youtube, radio stations, TV channels,
Social Media etc.

1 b) Licensing to Broadcast Platforms – TV Channels, Brand Advertising

Saregama India Ltd Licenses its music to TV Channels. This music is for use in various TV serials, reality shows,
promotions, etc and also to Production houses for use in ads running on TV, Digital including Social
Media and Radio.

Moreover, Saregama has built a browser-based search functionality, using the song metadata, helping content creators find the best song fit for their situation.

1 c) Licensing to Video Streaming Platforms

Further, platforms like Netflix, Disney+ Hotstar, Amazon, MX Player etc are aggressively investing in Indian content. The reason for this is the rising popularity of video streaming in India.

Most of these new shows launched license Saregama owned music, for the global territory, thus creating a rapidly growing revenue stream for the company.

1 d) Licensing to Social Media Platforms – YouTube

Saregama’s Youtube channel gathers views. Eventually, YouTube generates advertising revenues on the views which are shared with Saregama.

This also applies to advertising running on 3rd party content that is using any of Saregama’s IP (song, lyrics, music
composition, dialogues) within the video.

1 e) Licensing to Societies

Saregama also licenses its music library to a collective body called PPL for Public Performance licensing. This society is responsible for issuing licenses for playing music in events, shows, parties held in public places and in commercial premises like hotels, pubs, shops, malls etc. Saregama gets a share of the revenue generated from the issue of these licenses.

2) Retailing: directly through CARVAAN

The product Carvaan was launched in 2017, it’s an audio player with inbuilt speakers and 5,000 preloaded songs, allowing consumers to listen to favorite music anytime without any ad breaks. The product also doubles up as a Bluetooth speaker and FM radio.

Saregama India Ltd - Carvaan

Company Retails its products under the Brand name “CARVAAN” through different Channels targeting different ages of audience.

On the other hand, Company launched its CARVAAN Music Player in year 2017, enabling unique features of preloaded 5000+ songs in the Carvaan helps the company to capture greater audience.

Moreover, Company’s Carvaan music player comes with different Languages such as Hindi, Punjabi, Bengali, Tamil, etc.

Further, under the “CARVAAN” Company had launched several models and with updated version. These are Carvaan Music Player, Carvaan Karaoke, Carvaan GO, Carvaan Mini, Carvaan Music bar and Carvaan Earphones.

The Carvaan Series of products are in the range of INR 2000 to INR 7000.

Additionally, Company sell Music card in the price range of Rs 600.

Video Segment of Saregama India Ltd

(i) Production of Film and webseries : Yoodlee Films

Saregama India Ltd - yoodlee Films

Yoodlee Films is Saregama India Ltd’s production house for creating content for 3rd party digital platforms

Under the Yoodlee Films banner, Company produces various films and webseries of different genres for 3rd party digital platforms.

With the next set of digital customers from coming from the smaller towns, the company want to focus more on regional cinema during the next few years.

(ii) Tamil Television Serials

Saregama India Ltd -  Roja Show

Saregama India Ltd is engaged in the business of providing TV Serial content for different channels.

Over the last 20 years, Saregama has created over 6k hours of content for Sun TV and at any given time broadcasts 3-4 serials creating around 15-16 hours of content per week.

Moreover, Company’s top serial Roja has been the No.1 Tamil program for months.

Publication : Open Magazine

Saregama India Ltd - open-magazine

Open Magazine was launched in April 2009. Presently, Open Magazine is a weekly current affairs and features magazine. Also, it is available as an e-Magazine to enhance its reach beyond boundaries.

Further, the magazine targets the top strata of society and highly intellectual readers and provides a platform to top brands to promote their products and services.

Moreover, through Open Magazine, the company advertises products of different brands.

(F) Saregama India Ltd – Revenue Segments

(i) Product wise revenue breakup

Saregama India Ltd - Product wise Revenue  breakup

(ii) Revenue Segment

Saregama India Ltd - Revenue Segment

Saregama India Ltd, generates major revenue of 87% from Music segment, 12% from Film & TV serials and only 1% from its publications.

Further, the company once again started acquiring new film music of Hindi and Tamil films in 2017. Also, In FY21 Saregama India Ltd relied primarily on non-film music to grow its market share. The reason of the same was reduced release of Films during the year.

During FY21 the Company added audio & video rights of 162 new film and non-film songs, for global territory.

(iii) Saregama India Ltd: Geographical wise revenue

As per FY21, Company’s 76% revenue comes from India and 24% from outside India.

(G) Saregama India Ltd – Distribution Presence

Saregama has built its own pan-India distribution network across consumer electronic, mobile handset, gifting, car accessories, and e-commerce stores etc for retailing Carvaan.

Moreover, Saregama has adopted digital model like tech companies, for the distribution of various Song, Films, Web series etc.

At the year ending March-21, Company has a Distribution network of 30k+ retail outlets.

(H) Cost Structure of Saregama India Ltd

(i) Cost as % of Net Sales

Saregama India Ltd - Cost Structure

In FY21, Company has highest expense on Production Expense covering proportion of 25.96% of net sales.

Whereas Raw material Expense was 4.76% and selling and Distribution expense (Advertisement) was 8.48%.

(ii) Cost as % of Total Expenditure

Saregama India Ltd - Cost Structure

As per FY21, Company has 36.8% of Total Expenditure on the Production expense which consists 18.15% on Royalty expense.

(iii) Saregama India Ltd : Production and royalty expense

(J) Group structure of the Company

Saregama India Ltd - Subsidiaries and Joint Venture

Saregama India Ltd has 6 Subsidiaries including 4 with 100% ownership and 2 with 76.41% ownership each.

Additionally, the Company has a joint venture having 26% of ownership.

(K) Competitors of Saregama India Ltd

Saregama India Ltd - Peer Competitors

The top major labels in Music industry, include names like T Series, Zee Music Co., Sony Music and Yash Raj music, TIPS, Times Music, Aditya Music, Venus.

Saregama India Ltd has a competitive edge over its counterparts. We can understand it as with following few points:

  • Saregama is India’s oldest music label.
  • Also, Saregama has library 1.3+ lakhs of Songs Covering multiple Indian languages and genres. Interestingly, as per the management, to build 1.3 Lakhs songs a new company will take ~100 years.
  • Further, Tamil broadcasting market is highly competitive. Still, Saregama’s TV serial vertical has been producing immensely popular shows for 20 years now in the Tamil broadcasting market.
  • OTT segment in India is also highly competitive. To capture the growing video segment, Saregama decided in 2017 to launch into the promising business of Digital Films under the sub-brand, Yoodlee Films.
  • Moreover, in FY21 Yoodlee delivered 2 movies to Netflix (Axone and Chaman Bahar) and both trended at #1 on the platform. Saregama also delivered 1 movie to Disney Hotstar (Collar Bomb), 1 to Zee5 (Comedy Couple).

(L) Financial Parameter of Saregama India Ltd

Saregama India Ltd Financial Parameters

Company’s Net Sales grew at CAGR of 12% and PAT grew at CAGR of 72% from 2012 till 2021.

Over the years, Company’s PAT Margin increasing and Debt/equity Ratio Decreasing which is positive sign for the company. Saregama India Ltd has NIL debt. Although, it has Rs 1.10 Crore of lease liability as on March 31, 2021.

For FY21 the topline of Rs 441.96 Crore saw a decline of 15% YoY, due to 14% YoY decline in music revenues, which were largely impacted by Carvaan sales, which came in at 3,44,000 units in FY21, 54% decline YoY.

PAT came in at Rs 113.46 crore vs. Rs 43.49 crore due to better operating performance.

(M) Management Discussion & Concall Highlights

Company has proven track record of high content with tights budgeting film with large Number helps to reach more sales.

Further, in FY21, Saregama signed licensing deals with Facebook and short-format video sharing apps like Instagram, Josh, Triller etc to enhance Social Media Platform presence.

Further, Saregama India Ltd is focusing on improving its position as a pure play Content Company for video segment.

Moreover, in FY21 One of the focus markets this year was Gujarati music, where the company has moved from bottom to top 3 position in just 12 months. Also, the other focus market was Bhojpuri, where company managed to cross 450M views on its YouTube channel in its first year itself.

Under Yoodlee films, currently company is producing different genre of Films and web-series. Moreover, the management expects Yoodlee Films to clock 100 crore revenues in three to five years.

Company identified that digital revolution in the economy act as positive impact for the music industry because of affordability in internet data.

The management expects Music Streaming Apps (OTT) to grow faster with increasing number of people staying at home due to government guidelines. The growth is driven by both increasing number of users (growth in smartphones) and higher usage (cheaper data).

Moreover, explosion of smartphone ownership significantly increased which resulted consuming of more content on the OTT platforms like YouTube, Disney+, Netflix etc.

Company plans to extend Carvaan from just preloaded music to platform supporting 3rd party music and podcast through streaming.

Indian Music Industry is expected to grow at a CAGR of 16.5% FY22 onwards for next 3-5 years

Financial Highlight

Saregama wants to take Market Leadership position in Indian Music.

In terms on new Content, the Company is Leader in Gujarati Music and 2nd largest player in Bhojpuri Music Industry.

Chandralekha has become the first Tamil serial to cross 2000 episodes. On the other hand , Company’s Roja, continues to be the No.1 Tamil serial in terms of TRPs.

Concall highlights Q2 FY2022:

In Q2FY22, Company sold 1,03,000 units of Carvaan against 45,000 in Q1 of FY22.

The management of Saregama India Ltd is in discussion mode to raise the funds for the expansion Music business.

Film Director Sanjaya Leela Bhansali’s 3 projects, Shankar’s movie of Ranveer Singh produced by Pen Studios and other such large budget projects are with Saregama India Ltd.

Industry is growing at 11% to 12% steadily and the Company is growing at more than 20%.

The management expects growth to be in the range of 22% – 25% (annual) on a short- to medium-term basis.

(N) Opportunities

(i) Fulfillment of the regional content demand

Recently, Company has launched Yoodlee Films which has enough Capacity to produce films and Webseries.

Further the company believes that the next big wave of consumption will come from the regional language content, and is investing heavily both in regional music and films & series.

If the Demand for regional or non-regional content rises, company easily tap the market easily because of greater experience and low budgeting on production.

(ii) Digital Revolution

The increasing penetration of online music streaming and digital content consumption have been key drivers of the company’s revenue growth.

Further, Saregama India Ltd is planning to acquire new music content rights across various languages and it raised around Rs. 750 crore through a qualified institutional placement (QIP) in November 2021 towards the same. These new acquisitions and the growth in online music streaming will support the growth in licensing income.

(O) Strength

(i) High-margin licensing business growth

Over the years, licensing income grew at a compound annual growth rate (CAGR) of around 20% to ~Rs. 284 crore in FY2021 from Rs. 139 crore in FY2017.

Despite the Covid-19 pandemic, the company’s licensing revenue grew by 20.2% in FY2021.

The growth was primarily driven by the significant increase in online music streaming/content consumption through better digital penetration, thus supporting SIL’s revenue and cash accruals.

(ii) Extensive experience in music industry

One of the country’s largest music recording and publishing companies, Saregama India Ltd has achieved several milestones. It has the largest music catalogue in India with more than 1.30 lakh songs across 18 different languages. Most of the company’s music is from the 1960s to 2000s.

However, the growing interest in retro music enables it to leverage its collection, given the limited availability of these rare songs.

(ii) A mixture of Good Profitability, capital structure and comfortable debt protection metrics

SIL’s financial performance remains comfortable with healthy PATM, which increased to 25.678% in FY21 (FY20: 8.34%) supported by the growth in high-margin licensing income the decline in advertisement expenses and low overall indebtedness, translating into strong debt coverage metrics.

The Company has NIL debt as on year ending 31-Mar-21.

(P) Challenges

(i) Music Piracy

In Music Industry, the revenue generation is dependent on the effective monetisation of the intellectual property rights owned by the Companies. Thus, the piracy of content through other media sources and the unauthorised use of proprietary and intellectual property rights result in a loss of revenue and significantly reduce the pricing power of the music companies.

(ii) Intense competition in Music Industry

There is intense competition in the music & television industry, which increases demand for the new and exclusive content, contributing to an increase in the cost for content acquisition. In recent years, several film production houses have established their own music publishing companies to market the music of the movies produced by them.

Drop us your query at – info@pawealth.in or Visit pawealth.in

References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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