Saregama India Limited (532163) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Saregama India Limited Q1 FY '21 Results Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhupendra Tiwary of ICICI Securities Limited. Thank you, and over to you, sir.

Good afternoon, everybody. On behalf of ICICI Securities, we are pleased to invite you to -- welcome you to the Q1 FY '21 conference call of Saregama India Limited. The management is represented by Mr. Vikram Mehra, who's MD; Mr. Vineet Garg, who's CFO; and Mr. BL Chandak, who's Executive Director. Now I'll hand over to Vikram. Over to you, Vikram.

Hi. Good evening, everyone. A quarter like never before, condition like never before. But in spite of all the tough environment that we people have faced, like every other company, the good news is that we have been able to grow our profits this quarter. Although our top line came down because of Carvaan retail not happening and we not being able to shoot episodes for our TV serials on Sun TV, our PAT at INR 15.76 crore at a consolidated level, but a decent growth over a loss of INR 1.24 crore same quarter last year. And even compared to quarter 4, we improved our PAT numbers by INR 1 crore or so. As much as profits is a great news to us right now, what makes us very, very happy is to see how music and films have grown in popularity and usage during this quarter. So April was a tough month when there was an immediate knee-jerk reaction coming from consumers. And we could see that the streaming numbers, YouTube numbers, everything were going down. But eventually from May onwards, we have seen a rapid growth coming in these numbers. And both films and music have done very well for us. With consumers sitting at home, primarily during the April, May, June time frame, most companies have suffered due to lockdown because lockdown means lower consumption of their products. But by virtue of the fact that we people -- Saregama, by virtue of the fact that we own content IP, we have been able to do much better in this quarter compared to other companies. Because if you are sitting at home, you're doing something. And what are you doing? You're either listening to music or watching lots of content on digital platforms. Both ways right now, it means you will end up consuming the Saregama content. What we clearly saw this time that more people consumed content and they consumed for longer duration per day compared to the previous quarters, which means more and more of music and films and TV serials got consumed in this quarter. Our big initiative right now, apart from driving profits, at the beginning of this quarter, since COVID had already hit in March, our management team was very clear about the fact that we have to preserve cash and we need to do everything possible right now so that our cash reserves go up to take care of any eventuality. This meant that we had to improve our collections and our spending had to come down dramatically. I'm happy to say, not only during this quarter have we repaid debt of INR 6.1 crore, not only have we taken care of all our SAR issues, which I'll talk about after this, but we've also reduced our working capital by INR 35.6 crore which means we are ending our quarter at a consolidated level with a INR 45 crore cash with us. By all benchmark, I think this goes a long way to show you right now that how particular we were during this period on cash management. The long issue which has been there, which has come from all the investors, has been the issue of stock appreciation rights or SAR. I'm happy to announce right now that 100% of the SARs have been canceled right now. So there is no concept of SAR any longer in the company. Everything has been converted into ESOPs. Because of accounting policies, we had taken the hit of INR 1.3 crore in this quarter on account of SARs moving out to ESOP and there's another write-off that we will have to take on the range of around INR 1 crore over the next 3 quarters. But this is the end of the chapter of SAR as far as Saregama is concerned. So overall, a great quarter, but do keep in mind, the cost elements in this quarter was kind of a one-off because the content cost this quarter was practically zero. We have not gone out there and procured any high-profile content this quarter because production had come to a standstill. This is not something right now which is going to get repeated in the quarters to come. The revenue lines will keep on improving as we keep on moving from the second -- the first quarter to second to third, but there will be a content cost that will also start coming in to prepare the company for future. Let me get into the detail part. We have been mentioning this right now for, I think, on multiple calls, that the biggest growth driver that we see within the company is the music licensing business. We were a content IP company. We continue being a content IP company. Everything else right now is a way to ensure that we monetize our IP better, but our focus always has been to build IP and monetize IP. As the digital consumption is going up globally, more people are consuming content today right now through streaming platforms, whether it's video streaming, audio streaming or social media or video sharing sites. As more and more people consume content on that, higher is our content consumption, which means our revenue straightaway starts going up. The good thing, which has happened over the last 3 years, is that the popularity of Carvaan, which is an altogether different business that we've started out here, has helped a lot in bringing attention and focus back onto retro music. Retro music is suddenly realized, once again, courtesy the work on Carvaan, as a very cool thing to go back in here. Let's take an example of -- there was a series that got recently launched on Disney Hotstar called Aarya, which is Sushmita Sen series. If you see that there are 32 instances of Saregama music getting used in that program. In fact, the lead song of that entire series, which is very, very popular, is Bade Achhe Lagte Hain. All this is a proof right now that retro is again becoming very, very cool. This is a work we have done earnestly over the last few years, and Carvaan has helped us a lot. Our licensing deal which Spotify and Facebook finally got operational this quarter. So you're seeing the revenue impact of that also. We overall now have our licensing done to 45 different music streaming applications in India and abroad, almost all leading television channels in India, all the popular video sharing apps. Whether it's YouTube or it's Facebook or it's Instagram or it's TikTok, our deals are there everywhere. And our content is being used by primarily all big video OTT apps. So Netflix has a lot of series that uses our content. Amazon, Hotstar, ALTBalaji, almost all of them, the programming that they carry ends up using our songs somewhere in their films and series. The only part of the licensing business, which got affected immediately, was public performance revenues. With no parties happening, no functions happening, clearly that business stream is taking a hit. There was no impact on this quarter because Q1 typically is not the quarter in which we end up getting revenues from our societies for public performance. But in the long run, if the current problem of corona continues right now, you will have an impact on the public performance revenue. Thankfully, for us, that's not a very big share of our overall licensing revenue. We had taken this call around 4 years back to ensure that every piece of content that we own is fully digitized and we put rich metadata behind it. We continued with this exercise right now. In this quarter, released another 11,000 songs. That means our catalog has gone up by 10% in a single quarter. These are old retro songs of ours right now, which we always owned, which -- whose digitization work has got over right now, which makes our library richer by 10%. We also are constantly investing in newer content. The interesting fact, which I've also shared in our annual report, is that 30% of the total revenue that we make out of music licensing, 30% of that, comes from the music that we people have acquired in the 21st century. Only 70% now comes from the music that was acquired in the 20th century. So while we are doing a great job right now monetizing our retro content, our investment strategy of investing in newer content seems to be paying off. We are also now planning to continue with this. You will see us investing heavily in regional content as we go forward. All the data that we people have, consumer research done by us, and the data which is coming out there from the TV channels, publication business, movie business, indicates that there's an upsurge in the entertainment consumption in regional languages. So you have that much more Bhojpuri, Gujarati, Bengali, Tamil, Telugu content getting consumed. We are aggressively going ahead and making -- creating content or acquiring content in many of these regional languages of India. This goes hand-in-hand, obviously, with the Hindi and Tamil film music content, which, clearly, in this year, is going to take a backseat because we don't see too many of films getting released. But suddenly, even the movies that were getting released this year and the movies whose music we had bought and of the next year all are going to get released in financial year '21-'22. So the entire cost may get loaded next year. But the good part is the revenue will also come in next year. This year, the focus will continue on Gujarati, Tamil, Bhojpuri, Punjabi music, non-filmy music, being invested into by us. We, in this quarter, also ended up releasing a lot of cover versions of our songs, some original music. The strategy was very, very clear. The content investment was close to zero. All these deals, we people, convinced the artists sitting at home to create music from the comfort of his/her home and the only investment from our side was marketing and not on content. And that has helped us a lot. Our overall YouTube base has gone up. Our following on all the video sharing apps like Instagram, Facebook, TikTok, everywhere we saw an upsurge in the number of followers for Saregama. As we continue up our journey right now of investing more and more in content, because that's a key part as we go ahead, we people are now -- have relooked at our content charging methodology. And let me spend a minute right now explaining to you what's happening here. Till now, the content within the company was bought in 2 different fashions and the charging dependent on the acquisition structure of content. So the film music typically gets acquired on the basis of a perpetual royalty and in advance. So if I am buying a music of a film X, I may end up paying right now INR 1 crore advance and may get into a royalty deal of X percent. So the way it works is, once I recover the entire advance I've given and the revenues cross the hurdle rate, then we people end up paying the producer in perpetuity an X percent royalty. These kind of deals, the way they worked, was that the marketing cost was charged off immediately. On the -- marketing cost is typically 20%. So if I'm paying INR 100 for a movie, typically INR 20 goes towards marketing and INR 80 goes to the producer. So INR 20 were charged off immediately and the INR 80 were getting charged off over a period of 4 years. The music that we were buying outright means where there was no royalty, you just -- we were doing only a onetime payment. This is typically the non-filmy music. In that case, we had been charging it off over a period of 10 years. Since majority of our content cost for all filmy music, so the majority was sitting on 4 years and the 10-year part were not coming in action in a very big fashion. Now we are -- and in both cases, as I said, marketing costs were always getting charged off in the years -- in the year 1 itself. So all this, we are debating on the INR 80 of the cost. INR 20 of marketing gets charged off immediately. So filmy case, INR 80 was getting charged off over 4 years, non-filmy case over 10 years. This is how Saregama had been charging off its content cost over the last 1 decade or so maybe. We are now saying that since we will be investing so heavily, in non-film music also, we decided, as a management team, that this discretionary part we want to take it away. That depending on [Technical Difficulty] deal is structured to have a charging method between 4 to 10 years was bringing some kind of an acquisition-based bias. So to ensure right now that the content team is not at all influenced by how the -- what the acquisition deal structure is, we are now standardizing that irrespective of how the content is bought, the marketing cost will continue to be charged off right now in the year 1 itself, while the remaining cost, which is INR 80, will be charged off over a period of 6 years. 35% of that 80% (sic) [ INR 80 ] right now gets charged off in year 1 and remaining over 5 years. So in [Foreign Language] if I may say right now, including the marketing cost, if I'm buying things for INR 100, INR 48 will get charged off in year 1 and remaining gets charged off over the 5 -- next 5 years. This will be applicable only on content that we have acquired or will be acquiring post 1st April 2020. In this quarter, there has been literally no impact on account of this change in accounting policy because we had acquired hardly no content in this quarter. But as we go forward, there will be an impact. Since there will be a large amount of non-filmy music also that will be bought, we believe right now this impact will hopefully neutralize each other. But the key part is acquisition structure is no longer going to be dependent on what the charging methodology is going to be. Now the second part, which is Carvaan. This has been a very quiet quarter for Carvaan. The sales have been shut primarily because the retail network was closed for entire month of April and May. Even e-commerce were shut for the majority of the quarter. And even when it started right now, it was doing delivery in select PIN codes only. We actually started selling -- or restarted the selling process of Carvaan only mid of June onwards. We sold around 15,000 units only during this period. The focus, as I had mentioned after the -- during the March investor call, was to reduce our manpower cost and marketing cost dramatically during this quarter, and I'm happy to say that we were able to manage this. We cut down on manpower a lot during this period. And above the line marketing was brought down to literally zero. The only marketing expenses that continued were the work that we are doing with the various agencies. So you have PR agency, you have media buying agencies, creative agencies. These are more on the retainer basis. So you don't throw them out on a month-on-month basis. But all the discretionary part which -- of marketing was taken off. As we look at future now, we realize that even if there's a vaccine coming in for COVID-19, you will see the elderly staying at home for at least next 12 to 18 months period. People above the age of 60 are in general being recommended by government and by all agencies to play safe and stay at home. Remember staying at home is not an easy task. People who have stayed at home for 4 months have realized that the boredom starts killing you. There's always a fight right now for the television set because children are also at home these days. So we believe there will be an upsurge for a product like Carvaan, which allows people above the age of 60 which are stuck at home to go and entertain themselves without being dependent on anybody else. Irrespective of that, our focus that I had committed earlier remains that we will not be doing any marketing push this year. The entire sale of Carvaan will be dependent on the natural pull that comes out because it's just too scary to do any -- carry out any marketing campaigns. So that if the next set of lockdown comes in 15 days, we don't want our money to get wasted. So this year, our strategy in Carvaan is relied completely on natural consumer pull, contain -- bring your cost structure down to the minimal out here and wait for the things to stabilize. Hopefully, by next year, things will stabilize, and that's the time we go back in terms of aggressively pushing Carvaan. But the key part, which we have solidified during this quarter also, is that transition, which is happening, from Carvaan, the product, which used to give onetime margin, to Carvaan, the platform, which is targeted at middle age people of India, people above the age of 35 and 40, giving them not just music but podcast, we are -- and which we believe will be able to generate advertising revenue for us in a period of 18 to 24 months. So the good part of that time will be that not only will we make money when we sell Carvaan, we should also be able to generate advertising or maybe subscription revenue from a large base of consumers who will be having next-generation Carvaan, which we'll call Carvaan, the platform. The shoot of serials for Sun TV had come to a complete halt during these 90 days. We had hardly 4 or 5 episodes that we were able to -- new episodes that we were able to put during this period. Did it hurt us financially? Yes, it did. It hurt us both from the top line and bottom line perspective because no new content could be put up. We had a bunch of people right now who were there with us on the payrolls of the company not contributing. But the good part is this period of 3 months allowed us to start monetizing the existing IP of our Tamil serials better. We always have been telling you right now that we have 6,000 hours of content IP sitting on Tamil serials. And this was one of these quarters right now where we were able to go back and sweat this IP. So a couple of deals happened right now for 2 of our serials where people have bought either remake rights or dubbing rights of a serial for Telugu content. We started pushing our older episodes of these serials aggressively on YouTube. And now we are realizing some of the episodes are crossing 2 million number. That means additional source of revenue started coming in for us from the older episodes of older serials. We believe right now, and as the year progresses and the new episodes keep on coming back, this learning of how to go back and make money from the older episodes will come on very handy for us. As for Yoodlee is concerned right now, it was a great quarter. Two of our films got released on Netflix, Chaman Bahaar and Axone. Both these films trended in the top 10 list of Netflix. In fact, Chaman Bahaar was #1 for a week or so and Axone went to #2 in the trending list. What it's doing? Overall, now we people have licensed out 13 films between Netflix and Hotstar over a period of less than 3 years. We are the only studio in this country which can boast of these kind of numbers, that 13 new films which have been produced in over the last 3 years have already been licensed out, which is helping us build our reputation nicely as a production house, which understands the digital audience better than the other production house which understand the theatrical audience. We are very, very confident this year we should be able to get 1 or 2 web series production mandate also, which means Yoodlee should hopefully become bigger and bigger. Overall, all I -- what I can say right now it has been a good quarter for us from the bottom line perspective. Licensing was very, very solid. Carvaan -- films were very, very solid. Carvaan and TV serials, because the market was shut, could not do much, but we ensured through prudent cost management and growing our revenues and licensing that overall this quarter went very, very well. Thank you, ladies and gentlemen.

[Operator Instructions] The first question is from the line of Aditya Nahar from Alpna Enterprises.

Just wanted to comment on your disclosures for the quarter. I hope you continues to publish the balance sheet and the cash flow every quarter. You've set a pretty good standard. My question, Vikram, is about shooting permissions. I believe that some movies have been allowed to start shooting in Bombay itself.

Yes.

When do you think that we can get back to 40%, 50%, 60% schedule for our movies?

For us right now, we started shoots of 2 of our films and our Tamil serials in the month of July. Our Tamil serials -- the first 8 episodes are already out and have been -- 8 episodes will get broadcasted today. So their life has come back to normalcy for both our serials. Our films -- our first film, we already completed the first schedule. We are moving to the second schedule. So at this juncture, everything is business as usual for us in the month of July.

[Operator Instructions] The next question is from the line of Ravi Naredi from Naredi Investment.

So you are basically living in Mumbai or Kolkata?

Mumbai.

Okay. Okay. But take care because there is so much corona in Mumbai and Kolkata both the cities. So hope you will take care percent.

Yes, sir. Thank you.

Where we'll take the company in next 2 years, where three, movie, Carvaan or something else?

Sir, I think I've maintained this stand also outright now. We are basically a content IP company. And a content IP means that we are into audio, we are into video, both long format and short format. So you will see us progressing more and more in both these directions. They are very, very connected areas to each other. They're not very different areas, music or films or TV series. So what we are very clear, we will not be -- we are not getting into launching our Netflix equivalent app or a Gaana or a Saavn equivalent applications. We have no intentions of doing that. We will remain a pure-play content IP company. The only other area right now that we people are looking at for a direct -- and this is going to be a B2B business. The only area we want to get into directly with the consumer is the Carvaan, the platform. Carvaan has got positioned very well over the last 3 years as the most convenient way of accessing entertainment by people who are middle age or old. And we want to further cement on that positioning of the product. So our focus remains very, very simple outright. In the world of entertainment, we are content IP company, do B2B, don't get into B2C. On the hardware platform right now, try to extend Carvaan from being a stand-alone product to a platform. There's no other area we are getting ourselves into.

That is true, Vikramji. But in Carvaan, we are not getting much margin and much profit. We are getting main margin from the music. So what is that you're planning to explore the music for the company?

Sir, let me again repeat out here is, remember, Saregama was not into the retail business for the longest time. In fact, the name Saregama itself was not a very well recognized name. So when you say Carvaan was not making the money, it was not making the money because like any other new product it needed basic amount of marketing investment to go in, in the initial years, and that's all that has happened. It's only the last year when we started -- we're trying to make Carvaan big right now. So the initial upfront marketing investments were there. My experience of 25 years across, and I have launched multiple products across multiple categories. Every category seems to recourse and plays out. You, in the beginning, invest in building the brand recognition and in the later years will start reaping the dividends for that. I don't think Carvaan story is going to be any different from that. And remember, for the first 2 years, Carvaan was completely self-sustainable, making money on its own. And you will see the same story coming back on Carvaan. So I'm not worried on the Carvaan front. Regarding the music part is concerned, we are very clear that music -- the IP creation is our mainstay. We are a debt-free company. We are generating enough amount of cash at this juncture right now to constantly invest in films and music and TV series. Our focus is clear. We are into IP content. We don't do content right now where the IP does not stay with us. We're not a services company.

Right. Vikram, you -- definitely Carvaan -- you have made the [ steadily fast ] in last 3 years as I'm a shareholder and I'm always telling in AGM in Kolkata and looking after your working and in every con call I try to contact you. So everything you have made fantastic. That is no problem at all. But can you tell in Facebook or some Jio or something is going on? How much revenue can generate for company?

Sir, I can't get into specifics of every deal. The music licensing business in the past has grown up to 25% year-on-year. This year, our projection was anything between 15% to 20%. Quarter 1 has been exceptional, but I will continue with the guidance of 15% to 20% increase in our licensing business on a medium- to long-term basis.

The next question is from the line of [ Govind Chellapa from Torero Capital ].

I had a few questions. First, in your annual report, you mentioned that for your entire library you not only have the master record with you, you also are the publishers for those songs. Is that true of all the new rights that you're acquiring?

Yes. In fact, it's true practical of every right that we have. Of the entire library, 120,000, it will be -- this right is there in 99.99% of the cases.

And that's true of the new music you're acquiring now as well?

Absolutely.

Okay. And currently, of the licensing revenues, how much would be because of master record and how much would be...

I can't get into -- this is market-sensitive -- competition-sensitive information. I can't get into that right now. But what I can say in very mature markets in India nowhere there, publishing revenue starts -- after a point starts beating them after revenue. As the copyright laws in our country right now keep on strengthening, you will see publishing revenues going up steeper and steeper.

Okay. My second question is, again, last year, most of the growth in licensing revenues was in the international markets. Like I mean in the segmental where you talk about revenues from India and international, all the growth in licensing seems to be from international. Is that an accounting issue? I mean, why is that the case?

The majority of the revenue is going back in India, some of the deals. So some of the deals are structured in a fashion right now that one of our subsidiaries ends up doing that deal, which is the U.K. deal. But revenue is all from -- primarily from India. The good part with 1.3 billion population is there are enough Indians outside India, too. But the bulk is from India, sir.

Okay. Lastly, related -- question related to what the previous person asked on Carvaan. The last 2 quarters numbers make it very clear that you make -- you see that the licensing is extraordinarily profitable, but Carvaan is extraordinarily loss-making. I mean that seems to be the conclusion...

Sorry, sir. I correct right now. Carvaan is not extraordinary loss-making. I think that's a serious amount of exaggeration we people are doing out here. Carvaan, in the last year and especially right on last quarter -- and please correct me right now, tell me the books of any of the electronic-based companies, everybody is going to go through the same issue. If the retail network is shut, you don't go back and kill your infrastructure overnight. This is an exceptional situation that has happened. Carvaan, for the longest time last year until the first 3 quarters, was a 25% gross margin product. We ended up taking a hit right now of 2% on our gross margin only in January, February, March because I can't shut warehouses overnight right now just because [Technical Difficulty]. On a sustained basis right now, Carvaan is not -- at this junction, not a great profit-making product for us. Carvaan is not a loss-making product either out here. And Carvaan is a long-term future to turn it into a platform.

Sir, I understand that. My question was actually a little different. Obviously, you are in the investment phase. So I understand if it's not too profitable. But if you see the -- in the current quarter when volumes of Carvaan have collapsed, the overall music profitability actually exploded. I know -- that's what I'm trying to say that when Carvaan volumes fall your overall margins go up because Carvaan is not profitable. But that aside, over a 2-, 3-year period, when do you think you will make profitability in Carvaan, which is more than cost of capital? I mean, when do we get out of that investment phase?

2 years, in fact, right now, Carvaan was in profit. It's only the last year right now that Carvaan has seen a loss. And I don't know whether I'm going to use last year right now as a benchmark. It's primarily the last quarter where things went completely topsy-turvy for all of us -- from February onwards, in fact. So Carvaan is not -- contrary to the popular perception right now, Carvaan is not a loss-making proposition. And we believe right now, if we can successfully harness the equity of brand Carvaan -- and remember, brand Carvaan is the only different -- premium differentiated music brand in this country. If you check out the music streaming app, you can't differentiate one app from the other. Carvaan is the only product -- and this is coming out from a lot of brand consulting studies. Carvaan is regarded as a only unique product in the music category, especially talking to people above the age of 40, and that's the time people have money in their pocket. We want to effectively transition that equity from being a stand-alone product to a hardware-based platform, which can generate advertising and subscription revenue also for us without subsidizing the cost of hardware.

Okay. Fair enough. And finally, last year, you had mentioned that you would be investing INR 200 crores over 3 years for new music right acquisition. Does that still stand?

Yes, it very much stands.

The next question is from the line of Chandraprakash from Tata Mutual Fund.

I had a question on the scalability of the music licensing income segment. In the sense that you mentioned now you've captured almost all platforms. Everywhere you've signed a deal. So you've seen good growth in licensing revenue over the last few years because of that, maybe this year as well. Incrementally, how does this scale up? Is it more because of it will -- the organic growth of consumption of music will grow, and hence, that will grow? Or are there any steps that the company can take to increase the growth over a period of time?

Sir, please understand right now majority of the growth for last 4 years, we're growing at above the rate of 25% in spite of telecom revenue going away. And it's actually not coming out of more partners onboard. It's coming out of more users coming in. So more users are getting into the digital foray and they're listening to more songs per day per user. And we are still at a very, very -- music industry is just, what, anything between INR 1,200 crores to INR 1,400 crores industry. It has a potential to very easily start touching a INR 10,000 crores industry. And then there are allied benefits that are coming in. The more digital series starts coming up, more of -- we watch Netflix and Hotstar. The programming that runs out their, TV serials or films, they end up using retro music or music per se right now, and we get royalty every time our music gets used anywhere. So we believe, as this junction, I am maintaining my stand that we should be able -- in a long run basis, should be able to continue growing licensing at a 25% number. We don't see any issue coming in there. It's not even scrap the tip of the iceberg here. Global data is validating that right now. If you see Universal numbers or Sony Music numbers, everywhere we're realizing out here is that music is seeing a huge amount of upsurge everywhere. Piracy rates have just fallen down from 79% to -- from late 80s to late 70s percent right now. There's still a big way to go.

And so -- but the deals with, let's say, entity like Facebook or Spotify, do that give you an indication? I mean the numbers...

Numbers are going up everywhere. Remember, our revenues are not going up. These are not fixed fee deals. Majority of my deals are variable deals. Say if the revenue is going -- if more users are using, consuming my content right now, my revenue keeps on going up, which is the biggest driver for our revenues going up year-on-year. I'm showing this percentage growth in spite of caller ringback tone going away. Till 4 years back, caller ringback tone was, what, 60% of our revenue, if I remember my numbers, which has become zero now and still the numbers are going up. Because actual usage is going up. World over, music had seen a high and then take -- took a huge beating because of the issues of piracy. Now with streaming apps coming in, they have given a completely new rise. Streaming app now -- remember, the more the number of replacements keep on coming right now for video-sharing apps like TikTok, more number of licenses are going to be issued by us.

Okay. And during Q1, did we have any music -- new music release in India?

From the film perspective, no, because no film got released during this quarter. But have we released? We have released a lot of non-film songs during this time. And we have released remix versions also of our songs. So that's why our numbers haven't come down. It's only that the filmy music was not there.

Vikram, can I ask 1 more question till the time there is...

Please.

Yes. So you mentioned that FY '22 you may have a bunch of movie releases, music releases, hence the cost will probably come there. So how many movies of that nature would be probably seen FY '22?

It's too early right now for me to give you. All I can tell you that many of the movies that were actually supposed to be released in 2021 whose music was bought in '19-'20, in fact, but they were supposed to release in 2021, now it looks like will get released in '21-'22. And the movies whose deal were always supposed to release in '21-'22 will also get released. Now I have -- at this juncture, people have announced their release dates of their movies, but we don't know whether they will hold on to those dates or not. We are completely dependent on when will Bollywood get enough window for the movie release. All we have done right now is to reduce our dependence on film music and keep on investing heavily on non-film also, especially regional languages, so that we have newer content which is going out at all times.

And this difference -- what kind of difference would be there between a regional movie music release and a Hindi Bollywood movie release, from a cost perspective for you?

From the cost perspective, Bollywood is far more expensive, but it also gives you revenues which are in the same multiples. So the risk factor and the returns factor are a little steeper in the case of Bollywood. So what we are doing on the regional side, the only area where we're playing in film music is Tamil because we understand that area pretty well. All other languages we are playing in the non-film category, which is relatively lower risk, lower return and untapped areas.

And would you have a breakup between that INR 200 crore number between regional and...

We have internally. I'll -- the moment my buyer knows what budget am I working with, our negotiation power goes for a toss completely.

The next question is from the line of Yash Modi from ICICI Securities.

Congratulations on a great set of numbers. I had just a couple of questions. One, if I look at your music revenue of roughly around INR 69 crores, INR 70 crores this quarter and I subtract, say, around 15,000 Carvaan, actually INR 4 crores, INR 65 crores. So on a run rate basis, that gives me a number of INR 260 crores, which is like a 10% increase on a INR 238 crore number that you reported last year. So part of it you have actually explained because the OTT number of streaming and all that happened in April you said were down. So could you help us understand what was probably the exit run rate, say, in the month of June for this IP business to understand what kind of -- and what portion of -- and Facebook and Spotify contributed from June onwards or prior to that?

Sir, only part I can answer directly is that Facebook and Spotify contributed from this quarter onwards. The other thing I can clarify to you right now that typically, in our business, taking quarter numbers and multiplying by 4 typically doesn't work, because there are a lot depends right now that when are the deals coming up for renewals. And there are some like monies that come from public performances, external society, radio stations. They are booked only in the quarter in which they are coming, and they don't come equally in all 4 quarters. So the treatment becomes a bit different. I maintain my number right now that the licensing revenue should be growing this year between 15% to 20%.

Okay. And secondly, on this film and TV series part of it, you said most of the -- like the entire quarter Roja and the other Tamil serial was not onboard, and we were still able to do INR 4 crores, INR 5 crores of revenue. So is it fair to assume this was all due to the reruns of TV serials that you played on YouTube or would it include something else as well?

The revenue that you are seeing right now primarily of the 2 movies that were released in this quarter, Chaman Bahaar and Axone. TV serials literally gave us nothing this quarter.

The next question is from the line of V.P. Rajesh from Banyan Capital.

Trying to understand the films business. And by the way, congratulations on making 13 movies and selling it to the OTT platforms. So what has been the experience in terms of the profitability of these movies?

Rajesh, just want to clarify. Our model doesn't allow us -- we don't sell. We only license. So IP is always retained by us only. And these deals are typically, depending on the valuation, anything between 3 to 10 years. Clearly, any movie which is given for 10 years, it's given right now at a decent enough margins. The 3 are -- you were asking of my experience. From the first movie that we people licensed out called Ajji to now our valuations have changed completely. We were the youngest studio in town, and nobody was taking us seriously, neither the buyers, nor the investors. Everybody had this question right now, why are we getting into the film business? I think we people have been able to prove right now that we can work on very, very tight budgets and schedules and produce quality products at a price that makes sense. And at that pricing, it becomes easier to go back and recover and make some money. The good part for us, the way movie business functions right now, earlier we were giving all the rights to a single platform. Now we are carving out rights. So when we license it out to any digital platform, we give them only the digital rights. Sometimes only exclusive in India. International, we still retain the rights right now to do nonexclusive deals. We retain TV rights. We retain music rights. We retain airline rights. Then the rights are maybe for 3-year or 4-year period. That means a renewal will again get us money. Some of the movies right now making good amount of money for some of the music of that films which literally came to us on a free of cost basis. So overall, the first year of the films business was a lost year for us. Last year was a profit -- thin profit but profit. And we see this trend continuing for us. As the reputation becomes bigger, it's no longer a cost-plus model. It's about what you can get for the product that you have made. And in the current scenario, where more and more people -- producers are releasing their movies to digital platforms and the number of movies getting released in theater are going to come down, we believe we are in a very strong position because for a big movie studio to make films in the budgets that we people are making is a very difficult task. I've often shared this in Yoodlee Films, which is a movie brand of our. Nobody flies business class. Only the big actors get flight tickets. Otherwise people travel by trains. Nobody gets vanity vans out here. The upfront monies that we people pay them -- to them is relatively on the lower side. Our every movie has got shot within 23 days. Every movie has been within budget. This is a very different mindset from the mindset of a big Bollywood studio, which makes things at a large scale and not necessarily on a very tight budget. And if Netflix and Hotstars and Amazons of the world and ALTBalajis and Eros -- the appetite for content is going to go up that much more that people like us who can make good movies at tight budgets may be in a very good position. And the fact that 2 of our movies are trending in #1 and #2 position in the month of May and June, I think, is a reflection of that.

Sure. That's very helpful. Just a follow-up on that. When you are getting these deals done, whether it is 3 years or 5 years, are you booking the entire revenue upfront? Or are you also amortizing the revenue over that period?

So we actually book the entire revenue upfront and entire cost upfront.

Okay. Okay. Understood. And then in terms of your cost, it has come down dramatically from INR 125 crores to INR 58 crores. And obviously, it is because the operation of [Technical Difficulty]

Sorry. We can't hear you. Your call is dropping.

I'm sorry. Is it better now?

Yes. Yes.

Yes. Sorry about that. So my question was your cost has come down dramatically from INR 125 crores to INR 58 crores this quarter. And obviously, that's because the operations were at suboptimal level. As you ramp those back up, what is the expected cost over the next 3 quarters?

So this is actually because of the Carvaan numbers didn't happen that way. So the costs include -- overall cost includes the Carvaan product cost as well. So if Carvaan sale is dropped substantially in numbers, the cost accordingly get dropped.

So let me answer it this way right now. On the Carvaan case, the cost has come down dramatically, but still some elements of the cost was fixed in nature, like warehousing. So that cost had to continue. So as we go further in the quarters right now, according to me, if anything cost to revenue ratio should improve a bit. But on the music licensing business, we got all the revenues without investing anything in content, which is a very short-term way of thinking. So as we go forward right now, the cost in the music licensing business will go up compared to the current quarter. Have I answered your business question directionally?

Yes. Directionally, yes. But see, if we look at your, let's say, last year Q1, right, INR 125 crores, it has 3 components: your music licensing cost, your Carvaan cost and your operational cost. So what I'm trying to understand is, let's say, you're saying the first 2 buckets were almost 0 in the current quarter. The question, therefore, is that as you ramp up your music business or as you ramp up your Carvaan business, what is the likely cost going to be? That's what I'm trying to get a handle on. And I do recognize that at least Carvaan will be more variable in nature. But if you can just directionally give some sense of what the cost will look like.

So I think you have partly answered your question, if I see in that way. The Carvaan cost -- if you see my top line has dropped and equally in the same ratio my cost has also dropped. So Carvaan has the revenue and Carvaan has the cost. So both neither revenue is there, nor cost is there. So as the Carvaan revenue will come, proportionately cost will also come in. I think the important point what Vikram has explained that we have not purchased any content in quarter 1. So additionally, we going to have the cost of content also. If you compare with the last year versus this year, the fundamental difference is going to be last year we have a substantial size of the marketing costs we have on the Carvaan, which we didn't have right now, and we have -- I think we explained. We are not planning to have any sizable marketing cost for Carvaan in this financial year. This financial year, we want Carvaan to be sold based on the pull from the market rather than the push.

So what was the Carvaan marketing costs in the Q1 last year?

See substantial -- when we book as a marketing costs right now, there are movie marketing, music marketing and Carvaan marketing costs that gets booked under a single head. It was a substantial enough number. That was the time we were most bullish and the economy hadn't started showing a downturn yet. But can we -- I may not be in a position to go and answer the specific you're asking me. If I can give you a directional answer, I'll be happy to. So...

Sure.

So if you see my profit and loss account which we have printed, my quarter 1 marketing cost was INR 31 crores which has dropped to INR 6 crores now. So that kind of drop in numbers we are looking.

[Operator Instructions] The next question is from the line of Jaideep Merchant from Janak Securities.

Vikram, thank you for the disclosures of the -- on the disclosures and the cash flow and balance sheet for the quarter. I have 2 questions. One, in terms of royalty, the royalty expense is about INR 13-odd crores. As a percentage of sales, it's much more than last year. So do we understand that the royalty on non-Carvaan constitutes majority of the royalty?

Yes. So the royalty on non-Carvaan is higher than that of Carvaan because in the case of Carvaan the royalty rate is not applicable on the entire revenue valuation of Carvaan but a part of it.

Okay. Secondly, you have also entered into -- we read that you have signed up Akshay Kumar movie. And -- does this mean that now we are looking at bigger budget kind of movies going ahead in the future?

Jaideep, all I can say right now the valuation of that movie will not be very different from that of the Total Dhamaal or Ek Ladki Ko Dekha Toh Aisa Laga. So just to put -- give some comfort there. But if you ask me, are we looking at bigger budgets? Yes, we are looking at bigger budget films. We understand right now that take the company to the next level and start getting into a clear leadership position right now on newer content also, we'll have to play that game. And a reputation at this junction amongst the movie producers is quite well in intention out there, where most of the movie producers are more than happy to go back and work -- partner with us.

Okay. And lastly, the margin on the music revenues is now reflecting your licensing business. Is there any scope of further increasing it?

See there are both ways functions right now is we see revenues going up, but we also, for the long time right now, we have not invested too much in content. So we do want to go a little more aggressive on the content investment side. That's the only area in which money is going to get spent. The good part is that the manpower cost and everything else right now, all the other cost structures, don't need to go up as we -- as the revenue goes up, but the content cost will go up.

The next question is from the line of Priyankar Sarkar from HSBC Global Asset Management.

A quick question. It's more of a bookkeeping question. In terms of the inventory, which is there, which is of INR 86 crores, all of that would be on music or will there be any movie inventory also be part of that?

Yes. So it will -- it includes movie, unreleased TV serials and Carvaan, all 3.

Okay. But bulk of it would be music, right, I assume?

Bulk of it will be Carvaan. Not part of inventory.

Okay. Yes, the other thing is the cash which has increased because we have done very well on the working capital front. So that will actually reverse, right, more or less once things start picking up?

It will not reverse completely, but yes, some of the cash will be utilized to -- in purchase the content.

Okay. Fair enough. And my last question is that this other content -- this other app which has been bought by the group, not by the company, that Editorji. Is there any possibility of that getting squeezed into Saregama from the group point of view?

That's being picked up by one of the privately held RPSG group companies, and that has nothing to do with Saregama.

The next question is from the line of Apurva Shah from PhillipCapital.

Sir, first question is on the movies library. So we have -- I think, 13 movies are available on Netflix and Hotstar. So how much money we have spent on making of those movies? And second thing on same part is, how does the economics work? So as I believe it's like on a licensing work, so do you have typical time frame within 3 years or 5 years whatever money we have invested that will be retained in terms of the license revenue from the platform and for rest of the year we will be getting the free money in terms of the royalty or maybe whatever form it may be?

Your first part I'll not be in a liberty to go back and tell you exactly how much have we spent on the films business. I can give you the answer broadly. First year, there was a minor loss we had incurred because our policy is the moment a first digital deal happens we book the entire cost of the film in that year. So if I go back and take a movie and do a deal -- a 3-year deal with Netflix, I will book the entire cost of the movie in that year and also the deal value with Netflix. Whatever money I make from the film in the subsequent way straight away flows to my bottom line. Are you clear about that?

Yes, sir. That's clear.

Okay. Now the second part you're asking, the business model. So that's how it functions here. What we people -- movie by movie, we are also evolving here is, we are more and more doing deals where the digital rights on an exclusive basis for India are given to somebody, along with nonexclusive international rights, which gives us a play to go and also license these movies to other partners on either TVOD basis or SVOD basis. We always retain the music rights. We retain the airline rights. We retain the festival rights, remake rights. And after 3 years, all the -- 3 or 5 years, all the rights come back to us. There are some deals which have happened for a longer duration. In those kind of deals, we ensure right now that there is a decent profit we make upfront. And there also the music rights are retained by us.

Okay. Fair point. And sir, second question is on -- in some of the questions you mentioned, we will be spending INR 200 crores on the acquisition of music only. So is there any particular budget in mind what we will be spending on making of movies or maybe web series? And for web series, in particular, if at all, we get that take order to make a web series, will we need to make investment or that will be back-to-back arrangement?

If you are making series, we will do it only if we have a preorder. Also on films, what we are doing, increasingly, we are moving to preorder basis, so that the risk elements are coming down. In the first year, everything was done by us and then we sold. As we go forward and our reputation becomes more cemented in the market, we are able to get orders from people. So if -- I'm assuming your question is what is the level of risk involved. There is still risk because we will be making a couple of movies on our own. But more and more of the work happening on films and series is on preorder basis.

Okay. So, sir, question was also on risk and maybe the total investment per se at the company level for next 3 years. So INR 200 crores is for music and what will be other incremental investment apart from music? Is that clear, sir?

On the movie part right now, I can go back and say most -- now the movie business primarily started funding for itself.

So I think if you see the movie business, the investment remain in the working capital and the small amount of debtors that we have. So investment, we are not expecting to go up substantially as we go forward. It may get invested for some time. And as the movie get released or licensed to person, those get converted into cash. So it's not going to be any sizable investment.

It's more a working capital investment than anything.

Yes. It's more a working capital investment than anything.

And that's a conscious call we have taken because whenever we're doing a movie on a preorder basis we also take advances.

The next question is from the line of [ Ankit Gupta from Bamboo Capital ].

Sir, just wanted to understand your philosophy on music acquisition. The last 2 years, we have been spending quite a bit on acquiring new music rights for the future growth of the company. With Carvaan sales now coming down significantly and we were utilizing a decent portion of Carvaan's profit for acquiring new music rights. So how does that alter our strategy on new content acquisition? And secondly, post the COVID and shift towards OTT, especially for new movie releases, have we seen some change in the pricing of new content music rights?

You said lots of things, and I'll start correcting some of the things right now. You said, we have spent a lot of money on acquiring new film music in the last few years. Actually, the number is not very high. And we are very clear right now. The new music market -- acquisition market is roughly around INR 400-crore-odd per year. And we want to have a minimum 20% play in that. In '19-'20 and '18-'19, we were nowhere close to that. And that was an intentional cost because Saregama was getting back into film music acquisition after a long time. And it was a commitment to both promoters and investors that we will take it slow so that our policies and processes are in place and our methodology of recovering cost is fully established. Now that we have been able to prove that even with small investments we can go back and increase our revenues substantially, we will like to go back and increase our investments in new film music. Second part, you said right now that the Carvaan profits were allowing us to invest in music. No, music was always making money on its own. And...

Yes. It was making money. But yes, the profits generated from that were also pulling our investments in acquiring new music.

No, actually, music, on its own, were making enough money. That is more than -- last 3 years is all I'm talking about here. It was more than enough taking care of the investment that we are making on music. Carvaan -- money was Carvaan's money. So the way we see right now going forward, Carvaan has taken a temporary dip right now because retail networks are shut. We need to read it correctly here. This is not a fact that -- even if as a consumer you want to buy a Carvaan tomorrow you can't buy because shops are not open in most parts of the country. So as the retail network starts opening up, you will see right now traction going back to Carvaan. It's just that to play safe this year we have decided right now that even if the Carvaan sales numbers come down, we will not take a risk by pushing doing any promotions. No marketing or promotion is going to happen this year. That's what the Carvaan part is. If you see my quarter's numbers, and where the Carvaan sale is practically negligible, the licensing business on its own is generating enough amount of cash that we can go back and invest in film music -- film and non-film music.

Sure. And we had -- a few quarters back, we had informed investors that we'll be making good investments in acquiring new music content. So does it alter any -- does the current situation alter our plans for that?

No, we will continue -- see current situation, if anything, right now is increasing the consumption of content. There are more people sitting at home. And when you're sitting at home, you consume more music and more movies. In the month of April, there was a -- when for the first time people settled at their home, we saw the numbers going down substantially right now of people consuming content. By April end when people have settled in the new reality that now they may have to work from home, the consumption has gone up, both on the audio -- music streaming applications as well as video sharing apps. So we see this number going forward which makes us in a better position to monetize both our retro content as well as the new content we're going to go back and acquire. Have we had any new movie music deal has been closed right now? No. Even the -- what Jaideep was asking me about Bell Bottom, Akshay's movie, the deal has got announced right now. The deal was agreed from 5 months back, even before COVID-19. Right now, no movie production house is announcing any new movie. So no deals are getting struck. Once normalcy comes back, we will obviously take care of the fact that the valuation that we are going to be paying for a movie's music will be dependent on whether the movie is getting released in theater or not. If a movie is not getting released in theater, there will be clauses in our agreements which will be protecting us.

Sure. Sure. Sure. And secondly, on the Carvaan side, we -- prior to this -- prior to Q4, we were hitting a quarterly run rate of 200,000 to 250,000 units per quarter. So from the current situation in hand, when do you think we'll get back to those numbers?

Sir, it's very difficult for me to, at this juncture, project that. It completely depends on retail network. We get enough amount of anecdotally consumer feelers that they want to know more about the products, but they want to touch and feel the product before they buy it. Please do remember Carvaan is still just a 2.5-year marketing story. 3 years to launch, but we started talking about it only 2.5 years back. Not everybody has actually touched or seen the product. They want to see the product for which retail network has to open. There is uncertainty. And in this uncertainty, I can't give you a clear projection numbers. All I can assure you is we will not do any marketing promotions till the time there's 100% clarity right now that markets are going to remain open, which means this year -- financial year may get ruled out completely.

Sure. And Carvaan has -- earlier you had said that it has been a pretty good gifting product. And Q3 and Q4 have contributed -- the festive season has contributed in a big way to our Carvaan sales. So do you think at least some of the sales would -- we would be able to recoup in Q3 and Q4 of this year?

We are hoping right now that some amount of sales will happen on its own. If we people can manage a decent percentage of sale compared to the last year and with literally no investments going in, in terms of building the brand any longer, I think this financial year, Carvaan is not going to make money, but hopefully, Carvaan won't even lose money.

The next question is from the line of [ Manoj Shah from Lax Curve Investments ].

My question is with respect to Carvaan. Are you getting this manufactured in India? Or you are getting it imported from China or any other country?

Sir, right now, it's a mix of China and India, but we are increasing our numbers of production from India only. And we're looking on more vendors to replace our manufacturers from China right now in the short run.

So as of now, the mix is what in favor of China?

As of last year, the mix was in favor of China, but we are ramping up our Indian product -- manufacturer also.

Okay. But it may have any cost implication as well? What's your initial -- because we know the difference between a domestic manufacturer...

Yes, sir. Cost is coming out to almost same.

The next question is from the line of [ Rushabh Garg ] from Counter Cyclical Investments.

Sir, I'm seeing in your investor presentation that your music licensing revenue in the past 3 year has increased by around 60%. And sir, last year, it has increased by 22%. Sir, whereas if we look to our competitor, which is Tips Industries, in the last 3 years their music licensing revenue has tripled from INR 32 crores to INR 98 crores, whereas we have grown only by 60% during this period. And also, sir, our -- their music licensing revenue is INR 98 crore and ours is INR 240 crores, even though our music library consists of around 1.2 lakh songs and they have only 25,000 songs. And sir, I understand that our songs are more superhit songs as compared to...

Let me interrupt out here. It will be wrong on my part to do a comparison with Tips. To best of my knowledge, the data which is there includes their films revenue also and not just their music revenue because they're also a film production company. So it will be a little wrong on my part to comment on it. I can just talk about Saregama. The music industry, according to IMI, which is regarded as the Indian Music Industry's only central body, where all the music companies go back and submit their revenue. If you check out their report right now, and there's no Carvaan element out there, it's pure share music. According to them, Indian Music Industry is growing at 11%. So our 22%, 23% growth right now by a company, I like to believe, is decent because that's double of the industry growth.

Sir, and this INR 238 crores music licensing revenue, sir, is there any cost associated with this or this is pure basically operating profit?

Sir, there is cost and royalties that need to be paid to the producers whose music we have taken. There is a basic sales and marketing costs which remains involved in that. But yes -- and if we buy any new music, that cost starts getting loaded onto it.

Sir but the new music -- you will capitalize that cost. So it is not a revenue expenditure per se.

Yes, right now, because even in the new capitalization, 48% of the cost of the new music will get charged off in the first year itself.

Okay, sir. Sir, so except for purchase of new music, out of this INR 238 crore roughly, sir, will our operating profit be INR 200 crore?

I can't comment just like that. All I can tell you right now, there are royalties to be paid. So even the music that we acquired in 1960s and '70s and '80s, we still pay royalties in a very religious fashion out there to all the movie producers. We take our responsibility very seriously there. Then there is the basic sales and administrative costs right now. Every time a big artist's birthday is coming, we go back and invest in promoting that because every time we promote an artist his music gets heard that much more. If you see these promotions that keep on happening right now on every birthdays and all that part of 50th or 100th anniversary or somebody there are costs associated in keeping the music alive. But yes, you're right. The margins are very, very decent on this -- on the music licensing business. Even if we load the cost of the new content, still, the margins are very healthy.

Sir, so any idea, sir, that you can give us like the operating margins would be like...

Look at my numbers right now, this year, because -- this quarter, because there's very little Carvaan. I don't think you need to ask me any question. Things become very obvious. Just look at the segmental revenue and you'll get an idea.

The next question is from the line of Yash Modi from ICICI Securities.

2 follow-up questions. Just wanted to understand what has like -- I have been observing on these Amazons, the Flipkarts of the world, the traction that Carvaan is getting. So is it fair to assume that in this lockdown period, we have opened up this channel because earlier you said because of the brand building activity which was touch and feel product. Now with more and more people knowing the brand, you have seen traction building up in the e-com space. Is that a fair assumption to make?

Literally, whatever sales we people are doing right now primarily is all coming from e-commerce only. But still the numbers are not that big right now because not everybody who is interested in it has actually seen a Carvaan. The total number of units, if I remember fairly is 2 million plus. The numbers are not that huge that everybody has seen a Carvaan in a neighbor's home or a friend's home. So lots of people keep on requesting us and we keep on getting on, an average right now, 100 to 200 mails on a daily basis requesting us if we can arrange demo on -- because people want it but they want to first touch and feel it. But as -- there are initiatives we are carrying out, and I'll be happy to discuss this at the end of this quarter -- second quarter's call, which to facilitate demonstration of the product in consumer's home. There are still all those issues right now that to go to somebody's home also, societies are not allowing people to go. So there are all kinds of delivery issues, demonstration issues we people are suffering on. Containment zones, many of the delivery companies cannot -- they don't deliver. They have gone back and blacklisted those PIN codes itself. So things were very bad in April, May. They started opening up in June. July was better than June. Hopefully, as we move towards the festival season and if God willing, we find a vaccine, things should go back and improve.

Secondly, on these Facebook numbers, I was just looking at the likes that your page has, and it is absolutely exploded in the last 1 month. There are like close to around 16 lakh likes right now on the Facebook page. So in the previous calls, you've told us like for the music OTT platforms, every time your song plays, you get a variable amount, say a INR 0.10 fee. So is that something that, obviously, I'm not asking you details of the Facebook deal, but is that something we have to assume goes with Facebook as well or is that something different?

Sorry. I didn't get your question. You're saying how did the number of followers on Facebook page...

No, no. I'm saying, is there a variable component like what happens in music OTT apps, when somebody plays your song say on a Gaana.com...

We can't comment on that. You're getting into the specific Facebook deal. I'll be violating right now the confidentiality arrangements. But yes, now that we are in a partnership with Facebook, we are constantly working with them right now to increase the engagement levels of Facebook users with Saregama content. The way we have always worked out there with YouTube, we're doing a similar work with Facebook and Instagram.

Okay. Okay. And sir, second -- just 1 last question, if I just chip in. As you said about the regional music -- acquiring regional music and all, I was again doing some analytics on your YouTube platforms and I saw that the YouTube Bhojpuri channel with just around 33, 34 videos, you've just exploded. It has got like 5 lakh, 6 lakh likes and ranking of the pages are also going up. So how do you monetize this YouTube base? Like now with the YouTube likes going up so much, so what is it? Like how are you planning to monetize this? Because there are now so many channels now that you said that the Tamil TV series also you keep on rerunning them on YouTube and those are also getting 2 million likes. Like I saw some of the Roja episodes...

Let me thank you from my heart that you're following us that religiously. A lot of work goes out there in increasing these follower bases that you're talking about. Thank you. How do we make money on YouTube? Every time an ad is presented by YouTube on any of the videos whose ownership is sitting with Saregama, they share the advertising revenue in a 55% to 45% ratio. As the content owner, we get 55% and YouTube keeps 45%. This is public knowledge, so I can share it, is how we make our money. Also, what happens if you are releasing a song -- a Bhojpuri song on YouTube, not only we make advertising from YouTube but if the song becomes popular in YouTube, then people may end up listening to it on a Gaana also and Saavn also later. Then we make money from that place, too. We use YouTube and Facebook not only as a revenue-generating tool but also as a marketing tool.

Okay. On a lighter note, sir, if a song is playing and before that you play the Carvaan ad, is that free of cost or is that charged?

That's my time, so that's free of cost.

The next question is from the line of Aditya Nahar from Alpna Enterprises.

Vikram, just swinging back to something which I missed earlier. Given the circumstances, is it possible for you to look at some inorganic opportunities in terms of acquiring smaller labels or smaller houses which are facing some generational challenges and some cash flow issues? Are you actively looking or working towards this front?

Yes, we are looking. And you know of anybody, please reach out to us.

The next question is from the line of Ravi Naredi from Naredi Investment.

One thing is still in doubt. What is the modus operandi of making the movie? How you start the budget, story, when you sell it, when we receive the payment? If you give some brief summary, it will be helpful for every investor, I think.

This topic I get interviewed on this very often. It may bore lots of other people, but I'll tell you. The model that we people follow right now is that movies don't fail. Their budgets fail. So that's the key principle with which this business unit or movies have been built in Saregama. Second part, we believe that movie business is no different from any other business if the basic management principles of cost can be managed and second, if individual vanity can be kept out of it completely. So as a policy, the only person who gets an entry in Saregama on a movie project is a writer. Nobody else can reach out to us saying they want to make a movie. We don't entertain it. Only if you have got a script idea is Saregama going to entertain you. No script can come to managing director's position or films business head position. Every script that comes in, the first page is torn. Then it's handed over to script readers. We have 17 script readers in the company. They are not told whose script it is right now. They are given a quantitative scale. They evaluate every script that comes to them right now on a quantitative scale and they mark it out. If the marks given by 2 people is higher than the benchmark we have, it goes to the script head. Then it goes to films head. Then it comes to me. Everybody has the right to veto. Nobody in the company has a right to green light a film. What that does is that the individual choices that I like a particular kind of film goes out of the window because every film has to -- script has to start at the bottom. I may like romantic comedies a lot right now, doesn't matter because the script will never reach me only if the people down the line have completely vetoed it. It is aligned giving a much greater variety of it -- of movies and taking our individual biases out. Second part, we people -- the writer who is coming in, we end up promising -- we people line produce our films. So every film, the entire cost, we are not like in any other studio which buys ready films. We make our films. So we have shot 13 films. That means we have -- in last 3 years, we have benchmarked on every cost item because 13x that cost item has come back and hit us in a period of 32 months. It allows me to go back and benchmark and negotiate my prices better than anybody else in the market. The third part, the only area we give complete freedom to our writer is the cast selection. I'm a big believer that just because I'm a managing director of the company does not give me -- make me special enough to go back and decide which hero, heroine are going to do better. We keep ourselves completely out of it. We don't decide the cast of the film. We decide the script. We decide the cost structures along with the writer. The casting is left to the writer and director. Our experience tells us the moment you remove the vanity of us, of the management team right now, you end up getting better products. The other very interesting thing we people do right now that every -- on the budget of every film we decide shot-wise budget. So film is broken into shots. Every shot -- the amount of hours that will be given and the costs associated with it is agreed on before the first shot is taken. The money that is disbursed on the set of a film is managed by Ernst & Young who are our cost accountant on the film project. The Saregama team does not have the rights to disburse cash. The director does not have the right to disburse cash. This way, we can keep a very tight cost control. And more importantly, MIS reaches us at Bombay level on a daily basis to know if there are any cost overruns happening. Other areas right now, which we keep our cost under control, is there's no need once again for the managing director or the films head to start traveling to film shoots. I don't know what value will I add if I go to a film shoot apart from showing off my seniority. So I keep myself compete out of it. It helps. Because every time senior people end up traveling, 5-star hotels, the flight tickets and then they will waste everybody's time. We are very, very particular about this. In lot of my films, in fact, cast has stayed at dormitories and not even at hotels to keep our cost structures down. We never shoot on sets. We do everything right now real-life locations, gives us more authenticity, keeps our budgets down. We don't do dubbing. We do everything on live sync, again keeps our budgets down, gives us more authenticity. As the film is getting ready right now, other part is we don't allow any film to exceed 120 minutes. There's a clear cut -- because we are targeting younger crowd, we know if the film start going to 2.5 hours, a Bollywood hero may be able to carry it. These films can't do it. So we keep it 120 minutes which also helps me to keep my cost structure down. When we are doing the right sales, we never go back and give up our IP. IP is always retained by us. We do only licensing deals. So that in the long run as the library becomes bigger and bigger, we are talking about 13 movies. Hopefully, we will, in next 3 years, be able to sit on 40, 50 movie library that give us in a very good position to negotiate. When the renewals of these movies will come in, we'll be in a far better position to negotiate by doing a big bulk deal or a slate deal. Ravi, am I giving you some idea?

Yes, yes, yes. 100% hopeful idea. But when you sell the first time movie, when they get completed?

So both happens right now. Initially, when we were making the movies, we were selling the movies only when they were fully ready because the studios wanted to watch the movie before they bought it -- platform. Now as we -- in '19-'20, there were multiple movies right now where people have preordered. They bought the movie at the script level itself because our reputation at -- especially after Hamid won National Award, our reputation had become stronger that people were trusting our production ability. So more and more we are now pitching movies to people at the script stage itself.

Okay. Okay. And one small thing. Whatever cost we are incurring we get in the sale of the movie?

I can just tell you right now our internal principle, our worst performing movie also has to recover 75% of the cost. We, as a company, don't believe that one movie -- one hit movie can recover the cost of 9 flops. We believe every movie should be in a position to at least recover its own cost. We are lucky enough right now. In financial year '19-'20, the movies made profits.

As there are no further questions, I would now like to hand the conference to the management for closing comments.

Okay. So we maintain a bullish stand right now in light of the COVID-19. As more and more people stay at home, we see more and more content getting consumed. And whether it's -- they hearing our music through streaming applications where Saregama content is available or watching a web series on a Hotstar or a Netflix or an Amazon, everywhere Saregama music is getting integrated right now. Or they're watching a film -- 13 of our films are already on. Or watching TV serials on YouTube, the entire 6,000 hours of content of us is sitting in there. We believe right now we are in a very, very good position to ride on the stay-at-home wave. The profits that you're seeing right now we may not be able to have the same position of no content investment in quarter 2 or quarter 3 or quarter 4. But the top line we believe right now we'll be in a position to maintain this. We will continue with our investment as I said right now heavily in non-film music this year and film music as film production starts again from next year onwards. We will follow a very cautious approach on Carvaan. No marketing spends are going to be happening this year. We will rely only on the natural pull. Our focus is to move Carvaan from a product to a platform. So you will see more and more podcasts coming out there as part of Carvaan, and we will keep on increasing the usage of those podcasts. We -- our internal target is that in the 18 to 24 months we should start having enough number of people using podcast on Carvaan, so that an advertising model can start getting built on top of this. On films, our focus will continue being on a presold films and if we can get a presold series. Hopefully, something will happen pretty soon. On TV, the shoots have restarted. We put up our first episode on Sun TV on 27th of July of both Roja and Chandralekha, our 2 serials. We have lost 3 months, but hopefully right now we should be able to somehow try to find ways to make up right now for the lost time over the next 9 months. So overall guys, we remain quite bullish in light of COVID-19. Let's not treat our first quarter as a role model and start multiplying it by 3 because content investments are going to be happening in the days to come. Overall being a content IP company, we are in a good position as more and more people stay at home. Thank you.

Thank you. On behalf of ICICI Securities, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.