Saregama India Limited (532163) Earnings Call Transcript & Summary

Good afternoon, everyone. On behalf of ICICI Securities, we welcome you to the Q3 FY '21 Results Conference Call of Saregama India Limited. From the management, we have Mr. Vikram Mehra, who is Managing Director; Mr. Vineet Garg, who is CFO; and Mr. B. L. Chandak, who is the Executive Director. We'll begin with opening comments by the management followed by the Q&A session. So over to you, Vikram.

Thank you. Very good afternoon to all of you people. Last 9 months have been tough, COVID hit our country very, very hard. But the good news is, we are slowly coming out of it. Most industries are now showing growth, and I'm genuinely hoping right now that our story should be similar to our cricket team story. We were beaten very, very badly in the first match and the first quarter of the financial year. There were a lot of bruises and pains during this path. But just like the ticket team, hopefully, we will all come out winner in the end because most companies have become leaner, courtesy of the COVID crisis has worked, I think, more efficiently. And overall, I think as an industry, we'll come out stronger, eventually. As I've been maintaining in all my quarterly calls, India's primary story is the digitization story. With this 1.3 billion people with the second largest smartphone population in the world, it's one of the cheapest data that you can find anywhere. The one of the weakest out-of-home entertainment infrastructure compared to any other developed country. All these are perfect recipe for people consuming more and more of their entertainment, edutainment, education all sitting in the comfort of their home, which is all very big triggers right now for digitization, and COVID has further accelerated this trend. You are now seeing more and more people consuming content on their smartphones, on their tablets at the time of their choice and the content of their choice. With the biggest library in India across -- IP library in India across music, films and television series, all fully digitized with very rich metadata sitting behind it; a very robust data engine that we have built, which is allowing us to do high-end data analytics about which song of ours is working, which part of the song of ours is working, creating predictive models for us, I think Saregama is in a very, very good position to take advantage of this peak fast-moving digitization phenomena, and that seems to be showing in our results, too. INR 41 crore PBT for quarter 2. Just remember, this number was only INR 14 crore last year. On a 9-month basis, our PBT crossed the number of INR 100 crore. We did INR 101 crore. This, if you compare with the last financial year, where the entire year PBT was sitting at INR 60 crore. Last year was not a good benchmark because quarter 4 was really bad, which overall had dampened the numbers. But what I'm very happy about is after being beaten in quarter 4 very badly in the last financial year because of COVID, we people tightened up our -- all the cost structure brutally. We found newer ways to put our content out. And from Q1 onwards, quarter-on-quarter, we seem to be doing -- showing very, very good growth, both in terms of now top line and bottom line, more importantly, bottom line. Our focus on cash management has continued. The company right now, we believe it, that that's the most important thing on which we people need to keep our finger. Combination of improving our collections from all our partners and reducing unpostponing expenses. Also, it's been only to note right now that one of our biggest expenses always remains content. When we buy music of new films with no films getting released over the last 9 months, that entire expense has got postponed to either the quarter 4 of this financial year or most likely the next financial year. But that's the reality, which has helped us. The net-net, we were a debt company last year. We are not only debt-free. We overall have a cash surplus of close to INR 150 crores: cash, fixed deposits. So that's a float that we people -- our free cash flow that we are sitting on, which is close to INR 150 crores. Something that we, as a management team, are also extremely proud of. Let's get into a little more detail right now about our results in this financial year. The primary driver for this 24% growth that we have seen right now in this quarter compared to the previous quarter is coming on account of higher Carvaan sales compared to the previous quarter and much higher revenue from the TV and the film segment. These 2 were still taking a beating in the quarter 1 and quarter 2. Both these segments are slowly now becoming -- come out in a steady state and supporting both top line and bottom line. Let me get into the first segment, which is music. 18 months back, we had announced plans that we will invest heavily in new music. Why were we doing it right? Because we -- one, we realized that the younger segment listens to newer music more than the older music. And more importantly, we wanted to keep this company relevant 30 years on the line also, so the people who are 18-year-old when they become 40, 45, they still find the music of Saregama extremely -- something that they can relate to. Unfortunately, COVID has had happened and had put all these plans off ours in cold storage because no film releases could happen. In spite of the fact that we had blocked and bought the music of some of these films, the entire release of the music has got pushed by anyhow. This has resulted into much lower content cost and a much lower marketing cost this year. Is it sustainable? No. As management team, we very strongly recommend that this is not a sustainable phenomenon. What we have shown you with this year's growth that if -- that how efficient the system is that if the content cost is not coming in, system can go back and throw very, very strong profitability. We want to use the profitability and keep on investing in newer content. So you will see us spending more and more on content and the marketing cost for that content in the next 12 to 15 months. As film production starts, we will start acquiring large amount of Bollywood films music. We are currently invested in 4 big Bollywood films, 8 Tamil films. We are in very advanced stages to close deals on some other large Bollywood films. Another track we have been maintaining all throughout is that we believe in music, the large growth may come not only from Bollywood but in regional content. That's a trend we have seen across all digital consumption in India and we follow that very, very closely. This is the digital television, video content, even the print part. You are seeing large amount of growth happening from the regional -- in regional languages. So we also have been investing heavy Tamil, Bhojpuri, Gujarati and Punjabi over the last 12 months. We have, in fact, at this juncture, released songs in the last 6 months with every leading Bhojpuri singer. So all the 8 cast out there, all of them are now working with us and releasing music with us. Same is the situation on Gujarati side, all the A listers out there are now working with Saregama, some of them, in fact, on an exclusive basis. What it's helping us do? These guys have got large fan base on the digital media as we keep on releasing more and more songs of our -- our presence also on social media becomes that much bigger and we get a lot of traction for their music. The Bhojpuri channel, let me share this one stat with you. We launched our Bhojpuri YouTube channel in February of 2020, and then March happened and then with everything was put on hold in terms of new releases. But still, with the work that we have done over the last 6 months, our Bhojpuri channel already clocked 300 million views in 10 -- in 9 months period. So I'm pretty happy right now with the way our regional catalog is shaping up. Our biggest revenue driver continues to be digital licensing of our music, which is growing very, very steadily in sync with the way digital consumption is going up in our country. So whether it's music streaming applications, whether it's Gana, it's Airtel Wynk or Spotify or Apple or Google all of them are consuming our -- are using our music. The short video apps: Sharechat, Moj, Instagram, Reels, you name it, all of them are using our music at this moment. A lot of newer shows which are getting released on Netflix or Amazon or Hotstar, they are incorporating our music. In fact, 2 of the big movies that got released in the quarter, one was Ludo, which got released on Netflix, had our song. Then another movie called -- got released right now on ZEE5 called Khaali Peeli, which also was using Saregama songs. So these are older songs of ours which get incorporated in the movies and we end up getting license fees. In this quarter, the quarter which has gone by, we also had brands like Google, Lux, Dabur Chavanprash and KitKat, which released their ads in the October to December time frame using Saregama IP. Our music or our lyrics were being used by these guys in their ads. What it's resulting into? It's resulting into our licensing revenue growing in a very steady fashion. It's a combination of the industry growth. Industry is growing anything between 11% to 12% year-on-year, and we expect something similar happening. And second is our market share growth. Market share is growing. So there's an industry growth factor of 11% to 12%. And there's another 10% to 12% you're looking at right now, which is our market share growth coming on account of more and more people listening to retro music, retro music becoming very, very popular. And second is our investment in newer content. A question often which is asked to me is why suddenly -- why do we claim retro music is becoming popular? Checkout TV serials today? Checkout digital latest series that are coming out there, you will see retro music being incorporated everywhere. I'll give a lot of credit to our own team and the changing taste of this country. But the biggest credit, we always know right now goes through this product phenomenon called Carvaan. Carvaan has suddenly made the retro music fashionable, cool in our country. More and more producers are rising up to the occasion right now saying that, "Listen, let's look at retro music, maybe there's something big." Let me give you a example of Ludo. The song, which has done very, very well in Ludo is a song which actually originally was picturized on -- in the movie Albela on Bhagwan Dada. Many of you guys won't even know that Bhagwan Dada goes to an era right now, which is -- before Dilip Kumar also. So it's that era of music, which suddenly was introduced by people in Ludo. And if you go to any video-sharing app today, from an Instagram to a Trell to a Josh to a Moj, everywhere you'll find younger people uploading their videos using the song that was there in Ludo. So overall, retro is becoming popular. Carvaan has played a very, very big role in making retro so much cooler. What are we doing on Carvaan? In -- during this quarter, the Carvaan sales finally started showing right now the upward trend. We have done a 15,000 in Q1, 81,000 in Q2 and around 130,000 is the number -- 138,000 is a number that we people ended up doing for Carvaan in Q3. So yes, we took a beating; yes, our numbers are lower than the numbers that were there last year, I'm not running away from it. But please keep in mind that it's showing a steady increase back up. It's literally working with minimal or closer to 0 marketing. We are not spending anything there. Third, though retail networks have opened, the footfalls and the shops are still very, very low. People are still very rarely going out there to shop just like that to pick up white goods. In the view of all that, the fact that we are doing 138,000 numbers right now in the October to December time frame gives us lot of hope and confidence about the future of Carvaan. We people -- though, I'll again maintain this part very firmly that our road map for Carvaan -- the immediate road map for the next couple of quarters is, we will keep on controlling our expenses. We are relying only on customer pull to come and ask for Carvaan rather than generate demand by doing large marketing expenses. Till that time as a team, we are not fully comfortable that the markets have become completely okay. The problems of COVID are completely gone away, which it is at least 6 to 9 months away. We will not be spending marketing money behind Carvaan. We will rely only and only on consumer demand. But the great part is that demand is picking up. During this quarter, we launched 2 of our new Carvaan variants. One is a product, which is targeted at young kids, kids in the age group of 3 to 9, 3 to 10 years, called Carvaan Mini Kids. It has got nursery rhymes in English and Hindi, stories for children in English and Hindi and the mantras from -- including the Gayatri Mantra. This product, not too surprisingly, are met with great success. We are seeing a lot of traction in spite of 0 marketing from our side. There are parents who are very weary of the children sitting at home and constantly being glued onto TV screens or mobile screens, they are finding this product pretty handy. This product is especially very close to our heart. Because it was conceptualized during lockdown, seeing the feedback that we are getting from children. The content was finally recorded and packaged during lockdown. We got it manufactured during lockdown, and we put it out in the market. This entire thing is a lockdown phenomena, which also tells you right now, the speed at which we are able to turn around our products, including the hardware products. The second product we people launched at this time was Carvaan Karaoke. Like in any high-end product, we always launched with minimal volumes to go out there and see the initial market reaction. It has been launched at a pricing of close to INR 20,000. The initial feedback has been very, very positive. What is also doing is keeping the brand Carvaan alive in the market without spending any money on the marketing side. We are -- something I said last time also, we believe that even vaccine is still a few months away, where the full rollout happens and everybody gets it. Even elderly are going to be even more cautious in the days to come. We believe in more and more people sitting at home. Carvaan on its own will keep on growing right now on an organic fashion. So we can rely on pull rather than spending any money on marketing in the short run. Our attempts to move Carvaan from a onetime-margin product to an ongoing revenue based platform is on. We are pushing more and more of Carvaan 2.0, which supports a WiFi-based return path, which allows us to give content to -- newer content to you every day, content that changes every day allowing us in future, in next 18 to 24 months, once the population of these Carvaan are enough in the market, we will open up advertising also on the back of these podcast. Podcast is doing 2 things, keeping, one, is allowing me to talk to the younger people. These podcasts can be from Bhagavad Gita on demand and learning from Bhagavad Gita to whiskey appreciation classes or wine appreciation classes to how parenting can be done by single parents. There are a variety of topics on which content is coming in on all the content that we people are acquiring is on variable basis so that we don't end up spending any of this content. As and when we make advertising revenue, we will share it with the content owner. After the lockdown restrictions were removed sometime in June, July time frame, we were allowed to shoot. We, as a production house -- and we are very proud. We, as a production house, were the first guys to hit the market. Both on the television side, where we are making TV serials for Sun TV as well as on the film side. So let me talk about the film side. In the month of July, we start -- we got an approval for a film, and we started shoot of the film in the month of July and in October that film was released on ZEE5, called Comedy Couple. This is the speed at which things are moving in the -- in Saregama at this moment. So we -- from the time of script is conceptualized to getting okay from our partners to redoing the production, post-production and release, it took a duration of 3, 3.5 months. We also completed the shoot of our Marathi film Zombivli compare. Its post-production is going on, and we are very, very bullish that as theaters start opening up, maybe in the first or the second quarter, next financial year, we'll release that film. Then COVID happened, one of the letdowns was that our serial Roja was faring at the #1 position across India on Tamil channels in terms of TRP. Our fear was that with the lockdown happening and no fresh episodes getting short, will we lose the #1 position? It was an unfounded fear because the moment the new FFO started going up, we were back into the #1 position. Roja continues to be the #1 rated Tamil program. We have now released Roja and the second serial of our Chandralekha, not only on -- it goes on Sun. It's also available now on YouTube, and we are now releasing it even on Facebook. So that's the advantage of IP. Once you have IP, you cannot only monetize it on its first medium but there are multiple other ways in which you can keep on monetizing IP. I had informed you guys in my last quarterly call that some of our Tamil serials, Telugu dubbing rights had been taken by people. Some people want Telugu remake rights of that. Plus, so that's one way to make money. Second way to make many here is that to put these serials and programs on the YouTubes and the Facebooks of the world and start generating revenue out of that. We were also given the mandates to launch third program of ours on Sun TV during the quarter 3. Once again, a program which were pitched during lockdown, conceptualized during lockdown. We got our go ahead from Sun TV during lockdown. And we ensured that we were able to launch the program in quarter 3. The program is already called Anbe Vaa, the program is already clocking 7-plus ratings in terms of TRPs. The quarter 1 and the quarter 2 had seen losses from -- on -- in the films and the television segment, primarily on account of the fact that we were not able to shoot anything. Since we were not shooting anything in the first quarter and the first month of the second quarter, we were not able to put anything up on the television channel and hence not able to generate revenues. The moment that problem has gone away, as you can see, since then television segment is back in the positive side. Overall, if I sum it up, all 4 verticals of the company seem to be faring reasonably strong. All 4 of them are strong enough to take care of their own. Music segment is doing very, very good and as digitalization keeps on increasing, we believe the revenue possibility from the music segment is going to go up. And there's a long-term play, all of you guys who are following the international circuit. What happened right now on the -- some of the bigger artists who have sold their publishing rights or sound recording rights in the Americas -- on the American side, if you follow then you'd realize that the value of music IP is going through the roof. All the global companies, valuation is also going up a lot right now because IP is getting more valuable. With digitization, more and more people are finding legitimate way to consume music. So we see a very bullish trend in front of us on music front. Carvaan, we will continue with our current trend of controlling costs. Carvaan will not be a loss leader. Carvaan will breakeven at the worst or turn a very marginal profit. But right now, our part is, Carvaan will at least do a breakeven till the time COVID-19 issue is not completely wiped out. Films and television will remain on the positive side only as we will go forward. That's all. We'll open it to Q&A, please.

[Operator Instructions] The first question is from the line of Dhwanil Desai from Turtle Capital.

Congratulations for a fantastic set of numbers. So 3 questions. The first one is, we've been talking about that we are not acquiring new film music because no production is happening and we did not have enough see through in the first 2, 3 quarters. But any number that you can put in terms of the total budget that we are allocating for the acquisition in next 12 to 15 months? That would be good.

My problem is the moment my numbers go out as to what budget we are looking out, our negotiation power with the film producers goes for a toss. Once they realize that we are sitting on these kind of budgets, it becomes a little difficult to negotiate. But what I can tell you is that a commitment we have been making for last 2 years on the music side, we will spend only the money that we -- music segment is generating. We are a debt-free company. We will remain a debt-free company. Our -- other way I can answer your question is that we are looking at acquiring at least 20% of the newer content in terms of cost and in terms of the number of songs that are released, is the aim that we have for the going forward 12 months.

Okay. Okay. That helps. Second question, Vikram, is on Carvaan. So I think you know we started with one variant and then we went into regional languages and then multiple variants. So I think I don't have account at the top of my head, but we must... [Technical Difficulty] of Carvaan. My question is that, I mean, it's good to see that we are trying to address so many different sections of society. But isn't it in one sense striking our bandwidth in terms of scaling up a very focused segment to the next level? If you can share your thoughts on that.

So I kind of disagree with you because remember, for -- as a company, what is the effort. The effort was putting up the first Carvaan. After the Carvaan is there -- and we are the owner of the music. All we need to do is to replace Hindi by Tamil and replace Tamil by Punjabi or Punjabi by Bengali or Bengali by Marathi, and that new variant comes out. Similarly, if you got over Carvaan Mini, the content is all sitting out there. Whether -- it's the very similar concept to what CDs used to be there or cassettes used to be there at one time. You get your Carvaan's done, after that, what music are you putting on right now is not such a complicated job. And we are realizing that if we are selling in Tamil Nadu, it makes much more sense to put music, which is connected to what Tamilians are going to relate to rather than trying to sell Hindi music there. Are you with me?

Yes, yes, yes.

So our incremental efforts are not very high. I do not want to give you that comfort here. Also, the way the structure of Carvaan is done, it's very easy for us that if a particular -- suppose, one language Carvaan is not moving, for us, to change it to other language and put it in the other market is a very easy job. So we never get stuck with SKUs that are not moving.

Okay. Okay. And how about marketing purchase, I mean, because you must have to allocate separate marketing budget for different variants, right? So will it stretch with things?

Both the things, firstly, this year, we have not done only marketing. Earlier also, we used to market only the mother brand. Like, Carvaan Minis, we have never marketed. We market only the big flagship Carvaan Hindi. And everything else was moving right now, which when people come back and say, [Foreign Language]. And there is a product which is sitting there. We don't do individual-level-variant marketing. It's always the mother brand which is marketed when it was being marketed.

Okay. And the last one from my side. So if I'm looking at the streaming platforms like Spotify, they are at kind of -- they started as a music company, but they are repositioning themselves as a audio streaming companies. They are acquiring lot of podcast kind of -- to ensure that the content on that platform is very diverse. And now when streaming companies do that and your customer or listener have a limited time frame with them, which is available for listening, are we thinking in terms of repositioning ourselves, acquiring more or podcast or doing syndication for Indie music or getting into international music? How do we think about kind of expanding our horizon on this?

It's a very fair question. We recognize the fact that we will not be able to continue for next 20 years, fighting for customer's attention on streaming app platforms only through retro music. That's why this large focus that we need to build our catalog with the music, which talks to today's generation. A 18-year-old or 22-year-old the kind of music they listen to, we should also produce that music. That's where our investment is on film music. We are doing a lot of Hindi Indie music, what you will call independent, we call it as Hindi original music. There are similarly lot of independent or original music in Bhojpuri, Gujarati, Punjabi, Tamil and now Telugu. So there are large investments going in. But as a company, we are -- there are boundaries we are drawing. We are not getting into international music. We want to play to our strengths rather than to our weakness. International music consumption is very little in India. It's still primarily Indian music that does much better. We have a 1.3 billion population to play around with. This is our strength because we are sitting on the largest catalog of this music. It makes sense to strengthen our strength because nobody else can challenge us there. Are we investing in podcast? Yes, we currently have -- we have started podcast on Carvaan. We are currently are sitting on 289 podcasts that we people are creating. That's an area we are seriously looking at, obviously, the focus is more on music-based podcasts, but we are looking at other podcasts, too.

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

Congratulations for a good set of numbers. Vikram, on the Carvaan part, if you can explain, we are seeing pretty good traction in the sales number this quarter. And as you have been highlighting, the sales have been without any significant marketing expense. So how do you see the sales panning out over the next few quarters given the quarter-on-quarter improvement that we have seen over the past 3 quarters? And also, if you can tell us how has been the online sales for the product since a lot of shift has happened in the buying pattern of people post-COVID? So how has that channel picked up and our strategy for that channel going forward?

So let me try to answer the last part first. Yes, the share of digital sales has gone up for us also substantially. More and more people are buying online. And remember, digital sales -- for a company like ours has to be looked in 2 ways. One, what is Saregama selling on digital? We sell through Amazon, we sell through Flipkart. We sell through Paytm. There are 11 different partners of our through which we are selling. And we are also selling from saregama.com. That numbers I'm completely on top of it. But our small retailer, he's got a shop maybe in Amritsar. That retailer of mine, I have given it to him right now to sell it right now from a shop, he may also be selling digitally. So if I combine his numbers also to it, which I will not come to know directly, then the sale of digital is very, very high. Obviously, digital lends us also to lot of creative work because you can do a lot of work on the social media to promote your product, talking to the digital audience without incurring high expenses of TV advertising or newspaper advertising. So a lot of focus from our side is moving on promoting these products digitally and selling them also digitally. You asked me what is the projection we have for Carvaan going forward. See, there's so much of uncertainty at this juncture sitting in. All I'm going to go back and commit to you is Carvaan will be a breakeven product. I'm not going to project Carvaan is going to be making money in the next 12 -- 3 to 6 months, Carvaan will be a breakeven or a very, very marginal profit number. Are we happy with the 138,000 number? No. We people are used to 250,000, 260,000 per quarter number. We are not at all happy with 138,000 number. But to increase the number, it's very tempting to start doing marketing campaigns which generate demand, create awareness. We don't want to do that at this stage.

Sure. Any numbers at which you'll start generating profit in this, in the Carvaan?

See Carvaan for the first 2 years always made profit. Carvaan started incurring a loss only in the year 3 because of the Q4 fiasco. Carvaan always generated profit. Out of the 3 years, Carvaan has been existent in the first year and the second year was a profit-making year. And I see no reason right now, going forward, why will it be any different.

Sure. Sure. And secondly, on the budget for new music acquisition, since FY '20 has almost -- we haven't spent anything on new music, significantly on new music attribution and we had a budget of, let's say, INR 200 crores to be spent towards FY '20 to FY '22. So we are still sticking to that budget? Or will there be any increase or decrease in that?

So principally, we are sticking to that budget. A lot is going to be in the hands of which when market opens up. We are still with our fingers crossed and seeing when will theaters genuinely open up. They were opened up in Tamil Nadu to full occupancy with this latest film called Master that has got released. We are seeing when do Hindi theaters open up in the Hindi heartland with full occupancy because that's a time big film producers will start releasing their films. Only then we'll get music in our hand. So our intent is there very clearly to grab at least 20% of the new music, and we've entered the next financial year with that intent. Hopefully, with films getting released, we'll be able to fulfill that intent. Nothing has changed.

Sure. Sure. And just last question from my side on the Yoodlee if you can tell us how that business is shaping up for next year? How many movies and tie-ups that we are planning? Any further details on Yoodlee?

So on Yoodlee, see, the only thing I can tell you on Yoodlee, Yoodlee year 1 was a loss-making proposition, year 2 was a breakeven, year 3 was a marginal profit. Yoodlee is now -- in a consistent fashion is going to remain profitable only initial years because we had no reputation in the market. When we were going and licensing our films, there was a pressure building up on our -- negotiation position was not in our favor. With our firm trending on Netflix, film after film has performed very, very well on these platforms. Our ability to get that right price for the quality of content that we are producing is getting established, which is helping the margins of this business. Also remember, as we people go forward, the first round of films that were licensed, the ones that were licensed for 3 years or 4 years, which have been fully written off in our books now. I want to come back and fresh licensing is going to be happening. All that will start adding up. We are projecting right now anything between 14% to 16% top line growth on Yoodlee part of the business year-on-year.

Sure, sure. So basically, both top line and margins should increase primarily because of increasing bargaining power as well as the new license renews for the old movie that we had.

And the other part -- sorry, you missed this point, that you will see in financial -- next financial year, we people also getting into the world of series rather than limiting ourselves only in films, all digital. We are not getting into Hindi TV serials ever. This is, rather than launch one big film, can you do a big series with 6 episodes and each of the episodes literally equivalent to a film.

Sure. But any success for getting some licensing deal over there?

We will announce it at the right time. Very hopeful.

[Operator Instructions] The next question is from the line of [ Manvardhan Ved ] from Laurel Investment.

Congratulations on a great set of numbers. I missed the earlier part of the call. So this might have been addressed then, but still just to -- so I just wanted your views on the judgment that came in from the IPAB and since that is an issue that we've been pursuing for a while. So maybe if you could shed some light on that?

All -- I'm at liberty to say that radio used to pay us basis 2% of their top line. That's a payment that used to happen to the music industry. [ IPath ] has come out with a judgment here about what will radio be paying and at what rate it has been paying. There's already some litigation from radio side, which has happened there, they've initiated something. So I think, at this juncture, it's too early to say which way is going to go back and move. I can't comment beyond that because it is still being fought in courts.

Okay. So are we going to get paid on the new sort of rates that have been announced? Or are we still getting paid by the radio companies on the older rates? Or have we negotiated?

So the judgment came out the last year of the previous financial year -- our previous calendar year. In the last few days, they just have been more of legal cases being filed by various parties, not Saregama, but by various parties. So there is still lack of clarity there as to what rate is going to be applicable and for what all rights will the radio be paying? All I can tell you right now, the numbers, if anything, will be better, not worse than what we were getting paid earlier.

Okay. And approximately by how much better?

I'll not be able to comment on that at this moment.

Okay. One more sort of question that I had in mind and this is post listening to your commentary only that since we are assuming a 20-year self life of the music that we have and given the pace of content addition, do you think even 20 years, hence, we'll have enough content to cater to, I mean, the audience that we intend to cater to?

Why do you think we will not? Sorry, I'm not able to understand your assumption basis which you are posing this question.

You're sitting on 130,000 songs right now. My sense is that we're not adding more than what, 2,000, 3,000 songs a year anymore...

But then remember how many songs we had released. So let's talk only of Bollywood for a moment and not any other piece of content. You are talking of 200 big films coming in a year, right? GL A category. I'll even stretch it to B and C category also, let's make it 500 films in a year, 750 films in a year. 750 films even with 4 songs is only 3,000 songs. That's all that's coming out in a year from the Bollywood side, rest of the stuff is on the original side. So I'm not -- if you're saying right now that is there a gap which is sitting in Saregama catalog for the last decade? I'm not running away from it. Yes, there is a gap only on the Hindi film side. We never stopped investing in Tamil side or the other regional languages. Only thing we were not investing was Bollywood music over the last decade. That gap is there. We are just ensuring right now that gap is not going to be there. Previous to those 10 years is gone. Going forward, right now, we will be a substantial player in all the new music that gets created in the country. And with our financial results, we have the wherewithal to do it.

Fair enough. And for this new music that we are acquiring, we still are expecting ROEs in excess of 30%, 35%?

I'll put it the other way. I've worked on a payback period of 5 years for all the music content that we will invest in. Remember, the shelf life of songs in terms of rights is 60 years minimum. We people for the music that we people acquired in 70s and 80s, that music is still generating substantial amount of revenue for us.

The next question is from the line of Hardik Jain from White Stone Financial.

Congratulations for a great result. Sir, just adding on the previous speaker's question. So if I'm correct, so large part of our library has a shelf life of, say, 20 years now. So I think the previous speaker was trying to ask this and even I want to ask this, that even if we want to, say, gather 20% of song -- market share of the songs. So in next 10 or 20 years, we'll be gathering around 10,000 to 12,000 songs. And whereas major part of our existing library will come towards the end of the license period. So the library, the license library will -- the number of songs will shrink at the end of the 20 years?

We will not right now. Remember, the -- so there are a lot of statements you made I want to clarify that. First, remember, around 33% or 34% of Saregama's catalog belongs with the 21st century, not to the 20th century. So you're -- that's 1 doubt I want to clarify. I don't know what you mean by shelf life for 20 years. I don't know what is the meaning of that?

So my understanding is that whatever rights that we acquire, the license or we can charge or we can generate the revenue from that for the 60 years from the day we purchased the license? Is my understanding right, first of all?

60 years, see.

6-0.

So there are 2 cases -- there are 2 sources of revenue that a song makes. One is called a master recording, which is 60 years from the time the song was released. Other are called publishing rights, 60 years from the death of the person who wrote the song or composed the song. These are the 2 rights on which we -- that we people monetize. These are the rights we buy when I say we are buying the music of a film. So from the -- whichever -- you still have the entire music which is sitting from 1960 onwards. Everything is still sitting out there with us from master recording. The moment comes to publishing rights; even if the song has become 60 years old, if the writer of that song was alive till 1990, we still have 60 years from that time onwards.

Okay. So you can use the lyrics and maybe redo the song?

Yes. Yes, absolutely. You got it right.

Okay. And sir -- and how much money do we have any budget in mind? How much money we want to spend on new content acquisition?

I'm not -- I answered this question, I think, last to last speaker also. 20% -- our aim is that minimum 20% share of the new content getting created in India this year should be belonging to us.

Okay. And sir, is there any -- because we spent around INR 78 crores last year on advertising in 9 months, which was only INR 25 crores this 9 months. So is there any amount that we have in mind how much we want to spend on advertising every year?

See understand right now, so when you look at advertising, you need -- there are 3 numbers which are hidden under the word advertising. The advertising on Carvaan, which is a very clear stated part. Second is when we acquire a content of a film, like, we have acquired content of a movie called Bell Bottom. This belongs to Akshay Kumar [Foreign Language] movie that's going to come out. As part of the deal, we pay some amount of money to the producer that we book as content cost. And we have to guarantee an X amount of money to market the film and the music. So it's under marketing. So as less content gets released, there's no corresponding marketing also getting done because both of them are part of our contractual obligations. Third is the some amount of marketing that we do for retro content. Somebody's birthday, somebody's anniversary just to ensure right now that the retro stars and their music is all still their top of mind for people, which continued happening even at this time. Fourth is, every time we're releasing a film of ours, maybe it's going even on a digital platform, we still do some amount of publicity, small budgets, but these are the various hedges that are sitting under advertising.

Right. I understood. And last question, sir. So this content cost, whatever we spend on acquisition, it will be like written off in the P&L or we'll capitalize it?

We people are amortizing it over...

6 years.

We are amortizing it over 6 years. On the music, the marketing cost of music gets written off in the same year. The content gets -- cost gets amortized over 6 years. Overall, if I combine on a rough basis space, we have spent INR 100 on acquiring a film music. Chances are INR 80, INR 85 will be content, INR 15 to INR 20 will be marketing. Marketing is written off immediately. Content cost gets amortized over 6 years. Overall, 45%...

48% in first year.

48% of that -- is getting written off in year 1.

The next question is from the line of [ Jaykar Vyas from Vyas Ventures. ]

Congratulations on excellent numbers, and I think you have been doing well in all the aspects of the business. Just wanted to know the number on the growth of music licensing revenue for this quarter and what would be the guidance for this year?

So we will give you the licensing revenue. We declared on an annual basis and not declaring on a quarterly basis.

No, I just want the growth number year-on-year.

We people have been projecting right now. This year will be 18% to 20%. So it looks like we may beat that. In general, music licensing, our guidance is anything between 22% to 25%.

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

Vikram, you have done magic this year -- this 3 quarter. Definitely, we were looking for this result since last 3 years and you have done it. Sir, why you made the joining of this con call and AGM Max difficult for a retail investor?

I have no idea.

So many hurdles are there. So many things are -- have to be gone through. I couldn't attend last your con call and last AGM because hurdles are there. So why you making such things complicated?

Raviji, that's not the intent. We are in the market right now. I'd like to put my story in front of everybody who ready to hear my story.

Definitely.

Still I make it complicated. Sir, do me a favor sir. Vineet, who is our CFO, if you can just drop in a mail to him, explain to him what are complications we are facing, so the next time onwards we'll take care of everything.

I personally came to attend the AGM in Kolkata 2 times. And this time, you have made so complicated, who is the CFO, you ask him to make this easy for the retail investor.

That's the intent, sir. [Foreign Language]

Definitely, I knew because I am shareholders, you are company since last many years. And I'm watching this, Vikram is so fantastic person, but I don't think why you make so complicated.

We will take care of it. My apologies, if that's happening. I'll ensure right now, Vineet and you talk, and we will resolve all these issues.

Definitely, my all questions has been answered, so I'm not asking any questions.

The next question is from the line of Dhwanil Desai from Turtle Capital.

Vikram, just one clarification. So on this IPAB order, so there is one press release from one of the leading radio station who is having a 30%, 35% market share. Their royalty costs will be lesser by INR 5 crore to INR 5.5 crore. While we are saying that, if anything, it will be better. So there seems some contradiction. So is it largely because they may be acquiring or using less content? Is that the logical explanation for this?

Sir, I'm unfortunately not in a position to answer your question. All I can tell you in today's numbers of ours, radio is an insignificant part. Now till the time courts don't clarify what the final position is, it's difficult for me to comment on it. I understand which station you're talking about and I also have a feeling why they are telling you their costs are going to come down. I'm not in a liberty to talk about that in a public forum. All I can give you the comfort is for Saregama radio today is insignificant. Any delta or 20% here or 30% up, down is hardly going to make a difference.

The next question is from the line of Ashwin from Samatva Investments.

I just have one question. And firstly, congrats on very strong numbers. I just have one question on the royalty expenses. So if you see in the last -- if you compare last year numbers to this year numbers, while the streaming revenues have gone up and the royalty expenses has been coming down. So how should we understand the expenses going ahead?

I'm not clear about your question. Can you go a little slow and ask again, please?

So while in the last 1 year, while the top line has grown and the streaming revenues have increased, the royalty expense has come down in absolute terms. Royalty, the royalty expense?

Yes, yes, yes.

So how should we think about this royalty expense going ahead?

So see, in royalty, the content cost is also sitting in. So if you are not buying new content, [Foreign Language] we hardly bought any content. That's a point that other speakers have asked me. We -- this year is a combination of we people doing very good on efficiency but also postponing all our expenses because there were no music getting released. Hence, you see the royalty, what is sitting in royalty low. That number will go up. We are investing in new content. Our intent is very, very clear. We want to invest in new content, aggressively.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.

Thank you, everyone. When we -- people have been looking right now at Saregama, there are 2 different fronts on which we have been attacking. Increasing the efficiency in the system and investing in newer content. Increasing efficiency is all about ensuring that we are able to monetize what we own better and at a lower cost structure. I think we have been done -- doing a pretty decent job. And this year, performance is in a way a testament to the fact that our systems and processes are that strong and are not individual dependent any longer that they, if turned, can go back and give these kind of profits back, but -- which has been a great story for us in the financial year 2021, and hopefully, we'll continue in the quarter 4 also. But the second part is an equally important part, which we have not done because of COVID, which is invest enough in newer content to prepare the company to increase its revenue right in a multifold fashion in a short-term basis and prepare the company for future for the next 30 years also. So this year, unfortunately or fortunately, the efficiency gave us benefits, the investment did not happen, so numbers are looking very, very good. Going forward, what we assure you that the efficiency part is going to remain as robust. This is not a one-off thing. We have been maintaining our guidance on music licensing growing between 22% to 25%, and I maintain that. Carvaan will remain, right now, at least a breakeven number, if not positive, as we go forward. But we will continue with a cautious approach on Carvaan. We will -- and the third, the films business will be growing anything between 14% to 17% year-on-year. So that part will remain in a very steady fashion while we keep on investing heavily in newer content with a clear-cut eye on the commitment we have made to you by maximum 5-year payback period. Hopefully, future is going to be even brighter than this. Thanks a lot. Bye-bye.

Thank you. On behalf of ICICI Securities Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.