Saregama India Limited (532163) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Saregama India Limited's Q3 FY '22 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] I would now like to hand the conference over to Mr. Bhupendra Tiwary from ICICI Securities Limited. Thank you, and over to you, sir.

Thank you, Janice. Good evening, everyone. On behalf of ICICI Securities, we welcome you all to Q3 FY '22 Results Conference Call of Saregama India Limited. From the management, we have Mr. Vikram Mehra, who's MD; Mr. BL Chandak, who is an Executive Director; and Mr. Pankaj Kedia, who's Vice President, Investor Relations. We will begin with Mr. Mehra, post which we'll take the question and answer. Over to you, Vikram. Thank you.

Thank you. Good evening to all of you guys. The way the digital revolution is changing India, along with that is the fortunes of the company Saregama are also changing. The more rapid digitization that happens in India, we will keep on riding on that digital wave or the digital revolution and hope to keep on growing both the revenue and the profitability of the company. We had a very good financial year '21. And this year, we have been further being able to successfully build on it. Our 9 months revenue from operations touched INR 400 crores as of Q3, which is a 26% growth over last year, which itself were decent, while our PBT has touched INR 140 crores, which is a 38% growth over last year. A leaner company which is not making profit at the expense of declining revenue, we have been able to grow our revenue also very steady with the 26% growth while constantly improving on our profitability. If I come specifically to quarter 3, our revenue from operations grew at 12%, while PBT was at [ 44%]. Our quarterly numbers, please you have to always keep in mind right now that on revenue side and often on profitability also it's better to see on rolling 12 months or, in this case, 9 months for you to get a better idea because like a big contributor to revenue for us is also the films business. Quarter 3 last year, we had a movie called Comedy Couple that has got released. This year, all the schedules had gone a little haywire. So the chances are that most of the revenue of sales is going to come in quarter 4 and quarter 3 became blank. So some amount of operation keeps on happening right on a quarter-on-quarter basis, better we watch and check the numbers right now on a rolling 12-month basis. Our operating income before content charge, interest and depreciation was INR 63 crores, which grew by 44% compared to the last year. Now this is a very important metric for us as we go ahead. As I have stated in the past, we will be constantly investing in new content, which will have their charge-off coming in. So this metric actually just shows the impact of revenue and our profitability just before we take the content charge-off. And this is something -- even if the content investments keeping going up right now, this number should not move. It should constantly grow. As I said, we grew by 44%. The [ OIB SCD ] number, if I see it as a percentage of revenue, was at 42% for this quarter. Now we will love to get a pat on our back for such a great job, but I'll be honest here, again, this is a quarterly aberration, because no film got released during this quarter. Film is a lower margin gain, because we charge off the entire cost of the film. The film is a lower margin gain for us. Hence, you are suddenly -- and hence the play of music licensing went up during the quarter. Hence you are leasing the OIB SCD number touching 42% of revenue. We -- our guidance to the market is that on an annual basis, this number should be hovering around between 32% to 33%. That's a number which is a number that we stand back. The biggest profitable driver for us over the last many quarters have been music licensing, and this quarter was no different. We are on a path of 20% growth year-on-year for now, what, over 12 quarters. Every quarter, I'm coming out and revalidating this fact. We released a lot of -- if you see right now over the last 9 months, a lot of new content has started getting released from our side. I would have loved had the Hindi films and the Tamil films and Telugu films also started getting released in the market per se. Unfortunately, with a very short window during which some of the movies got release, we just managed to [indiscernible] only one big movie of ours in Hindi called Bell Bottom. One big move in Malayalam called Kurup which is [indiscernible] and a Telugu movie called Shyam Singha Roy. So we could manage only 3 movies before the lockdown once again come back and hit us. So we had to rely for majority of the year right now on non-film music. And it still also helps because that allowed us to sharpen our skills on the non-film side. Our quarter 1 of the financial year when we people have released the song called Paani Paani which became the biggest hit in India of 2021. But the good part is it was not a one-off success. We have been testing set after that also in multiple languages, whether it's Tamil, Bhojpuri, Gujarati, Punjabi, Haryanvi, there is constant amount of supply that's coming out. Over 165 songs have been released during this quarter alone. And the content charge that we people have taken is INR 11.5 crores. This is INR 7 crores higher than on a year-on-year basis compared to the same quarter last year. So the overall profitability of the PBT is growing up in spite of the fact that the people are charged investing in more content and taking a charge off. And that's what's going to happen. If you do intelligent investments, then the returns also should start come in sync with the charge-off that people are taking, and we should be able to balance it out. In Licensing business that we're talking about, the big revenue that you know right now are the OTT streaming applications, YouTube and the various handle license issues through brands and to TV channels, films. During this quarter, there were 2 new deals that we will have signed. One is with the short format Apple Chingari, and then there is a Marathi app called Planet Marathi, both of them have issued licenses for using our music in their respective apps. A lot of new brands like Vivo and Amazon, Netflix, [ Himalaya ] also ended up taking a license from us for using our music in their advertising. This growth of 30% plus is, as stated earlier, is coming from a combination of industry growing around 11% odd and increase -- constant increase in our market share. And market share is coming -- going up only and only for the simple reason that we're investing more and more in new content. Now that we people also have raised funds through our recently concluded QIP, we have a good strong enough watches for us to start expanding our new content appetite. You will see us in multiple languages, going out there and picking up aggressively newer music that's coming out, both film and nonfilm. But we will play smart. We are not going to pick up any content at any cost. The tools have a foundation this company has built over the last 5 to 6 years on technology, on data analytics, on predictive models. We plan to continue using that so that we invest in picking up to our best judgment, the right content at the right pricing. You will not see us going out there and just for the heck of it taking our content, go and pick it up. We are very, very weary that we know that we have to grow the revenue and we will grow the revenue in a handsome some fashion, but that will not come at the expense of profitability. We live, eat, sleep by the ROI metric here. Content has been picked up with a clear understanding right now that content has to return -- give a good return on the investment. The only dampening news this quarter ended up being public performance. This is the revenue that we end up making every time there is a party happening or the shows that are happening, concerts that are happening where music is getting played. Large amount of this revenue actually comes in the last 10 days -- is generated in the last 10 days of December, around Christmas and New Year. And it typically hits our books on quarter 4. Now this will be the second consecutive year or maybe I'll say third consecutive year, whereby this revenue is going to get affected. Quarter 4 may not be getting the -- typically the bump that quarter 4 used to get because public performance revenues used to come. On the Carvaan side, even though for a majority period of quarter 3, there were no lockdowns and such, except maybe the last 7 days here and there. But the footfalls in the retail stores were still very low. I will call it a dance Diwali from that perspective. We didn't see too many walk-ins happening in the electronic stores. The fact there was a chip shortage happening, which resulted in some of the television brands not being stocked up fully, that also resulted in less footfall arriving at very good stores. In spite of that, we have been able to go out then and login 141,000 units of Carvaan sale, which is actually much better than quarter 2, but it's very similar to our performance in quarter 3 last year. All this, I might reiterate, is coming with 0 marketing spends and no push on distribution side from us, from Saregama. This is all based on consumer pull. We maintain -- continue maintaining a standard till the time of the entire impact of COVID doesn't go away and markets don't fully open up -- retail markets don't fully open up. We have no plans to invest on the marketing side or the distribution side of Carvaan. We will wait and watch with a very cautious approach towards this product. We commit that like last year, we will be able to get at least a breakeven, if not a very minor profit on Carvaan. During the quarter, there was no film release from the Yoodlee side or a series from the Yoodlee side. But the good part is that 2 of our web series are now very close to completion. The shoots are going on in full swing. Both of these series have already been licensed out. As we finish the shoot of the film and deliver the content, we should be able to recognize the revenue. This should be happening over the next 3 to 4 months. It may come in quarter 4, it may go to quarter 1 next financial year. On the television side, we maintained in terms of TRPs, all our programs ended on maintaining their respective leads and positions. So it was pretty stable from the rating perspective. From a revenue perspective, it was a good quarter, both because advertising revenue typically in quarter 3 is on the highest in the country. That's a time most brands advertise around Diwali Dussehra time. And we also had a positive impact both on the television side, the seconds that we people get right now from Sun TV whenever we give them a serial, we go and sell that FCD. So from that side as well as YouTube side, TV was able to go and see a good upswing during this quarter, and that's the reason that in spite of no film getting released, we will still be able to go out then, actually maintain our margins in the TV and the films business. So overall, a good quarter, a quarter that gives us a lot of satisfaction that we are on the right track. We are picking up the right music, and we are able to go out and monetize that music in a proper fashion. Similarly, our work on the films and TV side, we are on a very strong foundation and preparing this company for a big growth on both the [ Sun ] side in the days to come. Thank you, and happy to take your questions now.

[Operator Instructions] The first question is from the line of Sandeep Agarwal from [indiscernible] Investment.

Sir, why not you opt for buyback instead of dividend. And one side we are issuing QIP, other side higher dividend, we are paying and taxes paying. So why is this [ dichotomy ] is going on in our company? That is my first question.

This question, I will add to the Board. I don't think I'll be able to answer this question directly at this moment.

Okay. Okay. And sir, can you tell how much revenue we earn music license to Netflix, Amazon, FonePay, Vivo.

No label gives individual licenses. I might also give my competitive information to the market. So you are seeing the overall revenue growth. Overall, every quarter, we people do brand licensing and different brands come in.

Okay. And sir, our main earnings from music. Can you tell in future, film can overcome music this year, how many years it will happen?

Sir, I'm -- as a company at this juncture, we still believe music is far bigger. The films business is, because we have no intent to get into large budget Bollywood films, we will continue making films and series only on a pre-license basis primarily either being given to the digital platforms like Netflix and Hotstar and MX Players of the world or if we are making theatrical films, we'll do it only small budgeted regional cinema.

Okay. Okay. And sir, what price we bought music right of Rocky Aur Rani Ki Prem Kahani? Can you tell these figures? .

So that's competitive, sensitive information. I can't share that.

Okay. Okay. Okay. You are doing fantastic. All the best.

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

Yes, I'm from Alpna Enterprises. A. All right. Again, congratulations and hope you keep executing as well as you do. My question was on the Carvaan music bar with the sub-user. So just been sort of exploring the option to buy [indiscernible] it's been discounted by nearly 40%, 45%. I'm just wondering, is there a logic to it or is it strategic move that you have done? Can you just talk about that? .

No, no. So all I can tell you, that's a strategic part. The price -- that industry functions in that particular fashion only. You find all the music bars in that price category, you'll see this kind of discounting. So you build -- when you're doing a buildup on the pricing part itself, you already preplanned right now that this level of discounting will have to be done on the sticker price.

Perfect. So my -- the point I'm getting to, and I hope you're breaking even...

Yes, yes. Actually there is no unit getting sold right now of Carvaan where we're not in a positive margin. Why will we do it. So everything which is branded, Carvaan and a hardware unit going right now, every unit is an operating profit level.

The next question is from the line of [ Sahil ] from [ SS Capital.]

Sir, one question I have is when we look at your YouTube channel, there are roughly 5,000 videos we can find and we own 130,000 songs. So like why is that we only see 5,000 videos on YouTube channel ?

So I'm surprise right now. Which channel are you referring to? We have 25 different Saregama channels.

Actually, I added up all of them. If you add up, then it might be around 20,000, 30,000. It's not 130,000. But the main channel is the one we are referring to, the main channel [indiscernible].

I'll get back to you. So you're throwing specific numbers by the time, hopefully, the call end right now we'll have that data. But please keep in mind, for majority of the older content that we people have, we only have the audio rights. If you have been following our company, you realize that all the rights that used to be sold pre-2000 or pre-mid-90s in India, the industry structure was that music company used to get only the audio rights and the music video rights always used to go along with the film, and they were not given out there to the music label. . So whatever YouTube revenue you are seeing right now us making and we are one of the largest YouTube revenue makers in the country, is coming on the backup only audio.

I completely understand that. But in this case, let's say, you only have audio rights for a song, old song. Would we be able to put it up on YouTube at least? We might not have the video, but can we put up the audio?

We put up audio very often. What we do, we combine it into a playlist. So instead of putting one audio, then we combine 10 audios and put it there as a single video. That also amount of advertising revenue we can make because then the customer is being stuck on that particular video for a longer time. Are you getting it?

Yes, I think that helps. I would just say that maybe we should probably consider having the individual song in case someone wants to listen to just that one song. They might search the song by name and not find it, right? They will find a 50 minute video about that song.

Fair enough right now. So I'll be surprised if you know of any song owned by Saregama, which does not have an individual page. Do let me know. My understanding is that if we start going out the language rights also, almost all song parts have some form of a little bit of still images for video going in. But completely, your point is well taken, let me ask the team to have a look at the songs and see if we people have missed something.

The second question I have is, if we -- we know Carvaan sales and music streaming revenue for the last year. So we can make some rough estimates for like how the streaming revenue has been in these 3 quarters. And it seems to be roughly flat for the 3 quarters, like it's definitely 20%, 25% higher than last year. But quarter-on-quarter, it seems roughly flat. My question to you is, with these contracts that we have with these OTT apps, are they basically renewed once a year or like should we expect quarter [indiscernible] growth for the music streaming revenue?

You are making a lot of assumption conclusion based on your assumptions, which I can neither confirm nor deny. You will be able to see these numbers right now. At the end of the year, we are going to be declaring both licensing and Carvaan numbers separately as we do every year now. So that will answer your question. But please, whenever you're looking at revenues, look at it on an annual basis. Because contracts, you're right, are typically 1-year or 2-year contracts. And if over flows come in either all my contracts have minimum guarantee based contracts. So you recognize the minimum guarantee amount during the year and the contract is getting lower. That's the time you look at whatever overflows are coming. They get recognized at that time. That's a policy which is a bit positive from outside, we have been following all throughout. That's why there will be bumps here and there that you will find quarter-to-quarter. Check the number at the annual level, and I assure you right now, we have been growing at 20%.

The next question is from the line of Vikram Gautam from GS Investment.

It's a pleasure to go through your [indiscernible] and such a clarity you have and [indiscernible] also come that it's always -- and we look forward to it. And basically, I just wanted to know about the -- what is the progress on the paid service part? I believe that is a good trigger for revenue for the number of subscriber or still most of them are still would like to go in for the free route and what's the progress for us over there?

Unfortunately, that angle is a pain point for us and me in particular. But unfortunately, it's not in our hands. It's in the hands of our partners. The streaming platforms of the country, there are 9 streaming platforms in India, whom all we have licensed our music to. And they have to eventually move towards a paid economy. Today, also, we are not seeing that much of a push happening towards a paid economy. I was just checking on the global number, global streaming numbers, the total number of paid subscribers have now crossed 500 million. There are over 500 million -- 530-odd million subscribers from various streaming services. In India, this video streaming services numbers have also started picking up big time during COVID. I'm personally very hopeful, give it another year or 2, the market dynamics are going to ensure that streaming platforms will move towards a paid economy because otherwise, it's not a sustainable part. You can't sustain this business only on advertising. And paid apps happens right now, it's great news for the platforms also and it's even greater news for the content owner.

Okay. And this pandemic, it turned out to be a sort of a [ boom ] for our movie business in the sense that our competition film business has turned out very nicely, good public or whatever the movie they had produced. So how has been the progress for us in this front, maybe positive figure happening due to pandemic and people are sort of confined to homes.

I hate attaching anything saying right now pandemic was good. I think pandemic has been bad for anybody and everybody. But the fact of life is that because of pandemic, more people stayed at home. When they were staying at home, they consume more content, more on the music side and entertainment side. And the impact of which you are seeing. The numbers -- streaming numbers have gone up. YouTube view numbers have gone up, both from music as well as the video content. So the other change that happened is that a lot of people in their 50s and 60s and 70s who were very apprehensive about adopting to newer technologies to consume music, these are the people maybe living in its Jabalpur or [indiscernible], whose first reaction was "My son or daughter will come out there and put some music on my phone. I will listen only to that." They were not playing around with the streaming applications. When they were locked during COVID at their homes with their kids and grandkids, they got exposed to these apps and now they have started using the apps. And when a 60-year-old uses the app, he does not listen to the newer content, he or she ends up listening to Kishore Kumar and Mohammed Rafi . So that extent we had the big advantage coming in the space of music. On the film side, the bad news was that there were a lot of delays in terms of shoot. But the good news was that we from being just a 4-year-old company in the films and series space, and we have already put up what 17 films, have been licensed out in the last 4 years to various digital platforms. The film business has already become a profitable business without being depending too heavily on what happens in theater because our business is more platform-dependent business than a theater-driven business. So I think in the film business, you'll be happy at the end of quarter 4. The 2 of our [indiscernible] shot quarter 4, quarter 1, whenever the revenues get written. I'm very bullish that we will go ahead right now on the film and TV business without taking risk on big Bollywood films.

Okay. And the Paani Paani was a big hit for us, thanks to Badshah and other [indiscernible]. So any other steps we are taking for the single song by large brand singers like Badshah or [indiscernible] in Bhojpuri or we are going in for those -- on our own and trying to nurture the new talent, and that has turned out to be quite a bit.

At this moment, as I talked to you, we are betting and working with the top talent and not nurturing our own. We are not trying to make anybody big. We're just going out there with the biggest names and working out with them. First, we are investing in film music in a huge fashion. So Karan Johars next movie is Rocky Aur Rani Ki Prem Kahani is with us. Sanjay Leela Bhansalis next movie Gangubai is with us, his next to next film Baiju Bawra is also visiting with us. Ranvir Singhs next movie with South Indias top Director called Shankar, that movies is with us. [ Ishan Katana ] movie is with us. Vicky Kaushals next movie is with us. So we are investing a lot on the film music content in Hindi, also in Telugu, Malayalam and [ Canon ]. On the nonfilm side, we are working with all the A category stars that you have right now in the space who are working in the nonmusic film space. As we go forward, we are very keen to start artist management business also within Saregama, whereby we can identify young talent, nurture them and then the talent works for a limited period of time exclusively with us. That's a business we are looking at. Right now, music is being done with all the A category stars in the market. Paani Paani is the most visible because Paani Paani is the #1 song, is kind of only one song is the #1. But if I start looking at the top 20 songs of the year, right now, we have multiple songs in there.

Okay. And any acquisition plan, sir, [indiscernible]

So we are -- one of the reasons why we people have raised funds also was to constantly look at strategic acquisitions, whether of catalog or of companies in the space of music or related to music. The moment something is ready, we'll let you know.

Keep up the good work.

The next question is from the line of [ Sandeep Mehrotra ] from as [indiscernible] Investment.

Thanks Vikram, great set of numbers. Just 2 questions. I think this year, like -- I mean, this is more of observation. I just noticed that you guys were really up there on the whole Instagram game with respect to, let's say, recreating [indiscernible] and then also getting those 2 stars on the video. So like in continuation to this, do you also see other platforms becoming serious contenders on this trend? .

When you say other platforms becoming serious, you mean -- I'm not clear about your question.

So while I understand, I mean, obviously, I use Instagram. So that's how I got to know it. So I'm guessing like -- are the other platforms also almost at par when it comes to the usage of our catalog or they are also strategically important? .

They are right now. We have licensed our content to -- not just to Instagram. It's licensed with Josh, Moj, ShareChat and [indiscernible]. If you go to -- these are relatively newer platforms compared to Instagram. But they are moving very, very fast. Some of these platforms have got a huge pool in the other regional language side, maybe not necessarily Hindi and English. Without taking one of them is very big on Bhojpuri, Gujarati or the South Indian languages, and we are very, very active. So there are dedicated teams within the system for each of the platforms.

Got it. And Vikram, another question just in continuation to what Sahil was mentioning earlier. So like, for example, I own the physical compact disk of [indiscernible] , which was earlier with SMB and now with Saregama. But for some reason, I was not able to find it on Spotify. So is there any way, let's say, we can reach out to someone in your team to help us like maybe a digital comment on this one? .

Not on Spotify will be shocking for me if that happens. Please immediately write to us. See, on YouTube, there is still a chance because some of the audio, which is very, very old and there is no video connected to it, we may not have created a slate based video for that song. On Spotify or Gaana or the Saavns of the world, the entire catalog is put up. So if you know anything, I think you are connected with Deepak right?

Yes. I had tweeted this out. So I will again probably write an e-mail to you and into Deepak. And then...

You can e-mail to us. If there is something which is missing and nobody in my system have noticed that, then anyway, I'm going to pull up my own system too on every song needs to be there.

The next question is from the line of [ Richa Jain ] from [indiscernible]

Sir, I just wanted to understand some kind of unit economics about having paid subscriber versus the ad-based model. What kind of EBITDA margins per unit realization typically we get there in these 2 models. If you could just help me understand that.

So I'll help you on a very broad level here. On a free side, typically, we get paid 10 paise per stream. So every time you hear a Lag Jaa Gale on any of these [ platforms ] on an average, we get paid 10 paise The stream is worth 10 paise. Now let's look at the paid model. once again, typically, our deal on all the paid subscription is that whatever platform gets, we get 50% of that, it's going to be treated as content pool, which will be discussed across all the songs heard by that subscriber during the month. So suppose, for simple math, you are a Gaana, Saavn subscriber, you pay them INR 100. On an average, content pool will become 50 bucks. If you are a very heavy user of the app, suppose you hear a 100 songs in a month, that means every song stream is now worth 50 paise. I assume you did not come in INR 100, you came at a discounted pack. So even if you come at INR 50 also, then also you are talking of 25 paise per stream compared to a 10 for free. So the upside potential is massive at the moment you start moving towards a paid economy.

Okay. So what I understand is 50% is what we make, right?

So whatever customer has paid, the platform will make -- will earmark 50% of that amount under content pool. What the number of songs are customers are hearing, if all songs that he hears right now are Saregama only, the entire [indiscernible]

Okay. Okay. Understood. Understood. Right, right. So if I'm spending the entire 50 bucks only listening to Saregama songs on that platform, can be the entire 50 bucks, right? Understood. Understood. Okay. Okay.

The next question is from the line of Arpit Shah from Stallion Asset Management.

I just wanted to understand what would be our capital allocation after we are ones where are you looking to look for the cash. And the growth of jet have been targeting for the next 3 year, 25% to 30%. That is all organic or it includes inorganic market?

Okay. So the entire fund raise that has happened, the INR 750 crores is only for music business. Those funds are not going to be used right for our films or our Carvaan business. Those -- the other businesses are well capitalized and they will be able to manage to run on their own or the revenue or the funds that they will be accruing on their own. So this is dedicated only for music business. And our projection of 25% to 30% revenue growth that we are giving is a combination of both organic new content purchase as well as some inorganic purchases happening.

Organic means music related, right?

It may be -- yes, it may be music label. It may be an allied business that you're talking about like artist management. So anything which is in the space of music, and we are not going to go outside the world of music as this revenue -- this capital allocation is concerned.

I just wanted to understand on the Carvaan part. We are currently not investing in any marketing money now. So it sounds while it is launched, like what are your intentions? What are we trying to do with [indiscernible] you not trying to go [indiscernible]

Sound bar products were ready before COVID hit us. We were ready with the product, and we did not know what to do. And we put it on hold. So there were no point holding that much amount of stock sitting out there with us and waiting for the markets to become okay. So we waited for some time and finally decided that we'll go and launch it without any marketing support. It's not that we have a large supply. The inventory of Carvaan is very, very lean at this moment. We are not sitting on large supplies and whatever we have right now is just moving on and shown in the market. Had I known about COVID, I don't think I would have gone off ahead right now and launched because the product was ready.

Got it. Just wanted to know, you mentioned about talent management, like what are you trying to do within talent management..

Sorry, in-between what?

The talent management business. You just mentioned something about talent management.

Okay, this is the artist management part. In artist management, our intent is that we identify a younger talent in multiple languages. So discover new talent, then nurture the talent by giving them breaks in big music videos that are done by Saregama, make that talent big, and then monetize on that talent. So that every time the talent goes there for singing in a shaadi or a corporate function or does an Instagram post or does a ribbon cutting, we get a commission out of it. This vertical will help us in 2 ways. One is to defend our core business called music, so that we always have artists who are working with us; and second, can create an altogether new revenue stream for us as we go forward. Because anyway, we people have the requirement to launch a lot of non-film music videos on a regular basis, why not sign up that talent on the roster of Saregama. .

The next question is from the line of Nitin Sharma from Moneycontrol.

I have a quick question. Just want to understand what is the typical investment in a web series? What kind of target returns that are in mind when you need to make such series. And further, what is the typical time line to recover that investment and how it's settlement?

Okay. So I'll give you a broad answer to this. The web series budgets vary a lot right now, depending on which platform is it going and how big an actor you're getting into the web series. Our model -- Saregama model of web series is clear. We start spending money on a web series only after securing a licensing deal. We don't make the series and go and try to license it to our platform. We pre-license it and then only start spending money. In that sense, the risk is close to not being there unless there's a cost overrun happens on our side, which have not happened till date on any any project of Saregama. Coming through, once a web series is going to be released, the entire cost of the series is going to be charged off during that year itself. We don't capitalize anything on a web series or films. The moment we get the first digital revenue, we write off the entire cost. And we people are working and after writing of the entire cost, we are looking at 15% to 20% margin. While the IP stays with us for a long-term monetization capability.

Okay. And just one more question, if I can squeeze in. Where do you see your top line growth in the next 12 months? And what is the potential margin expansion if you can talk about it?

So I'll answer it 2 ways. See, my problem, I'm not going to give you a number on the overall growth because Carvaan, a very cautious approach. I can't project. On music licensing and the films business, we are looking at 25% to 30% growth in the next year. And as our margins is concerned, our guidances are operating income before content cost, interest and depreciation, that number should be hovering between 32%, 33%.

The next question is from the line of [ Anika Mittal ] from Anvil Research.

Once again, thanks for these numbers. It is making us more and more [indiscernible] and looking at Saregama as one of the best investment opportunities from long-term perspective. So thanks for that, Vikram. Please, I'm just taking a step back and then thinking when you think about this regional music right. See, basically, I am from South, okay? So there is one niche area, which is on Carnatic music right, there are multiple artists, and there is a huge demand on sales on this Carnatic music and stuff. Are we doing -- trying to do anything on those areas as well, Vikram?

See, I'll be upfront with you. We did a lot of investments on the Karnatik and the Hindustani side, July 2018. Unfortunately, the returns on that investment are not that high. We people try to monetize it through YouTube, through streaming applications, having somehow dedicated a Carvaan variants around it, not being able to get large returns. It doesn't mean that we will stop investing, but it's not the area which is taking the most aggressive investments from our side any longer.

Great. Okay. And anything on -- specifically on regional stuff that you are looking in terms of acquisition. I think we spoke about it during this call on December as well, right, during December.

On new content in regional, they are very, very aggressive. So in Malayalam, we have picked up a crew, which are [indiscernible] movie with music by [indiscernible] . We have a [indiscernible] coming in. We have a [indiscernible] movie coming in. We have [indiscernible] movie coming in. The music is all sitting out there with us. Of the 2 series that I spoke about, 1 of them is the Malayalam series that we will putting up on the digital platform and which has got the biggest start from Malayalam unit. In Telugu, we just leave a [indiscernible] film. We have got a Mahesh Babu film which is coming up. In Tamil, we have just announced that we will be picked up the music of the Surya film, Dhanush film, 3 4 Prabhu Deva films. Punjab [Foreign Language] we picked up Ammy Virk and Amrinder [Foreign Language] films music. So you are going to find us getting very, very active on the regional side. But each of the language that are dedicated setups within the company, which look after content acquisition, marketing and monetization and these are all managed by language experts.

Okay. Okay. And one final question, Vikram, on this tie-up with OEMs on any new automobile that is coming on road, right? So you said that you are actively working on those lines as well. So is there any update that you want to say?

As I said last time, we have had this dialogue multiple times with the car manufacturer. We are still finding right now getting a car itself in the typical parts it's 7 months and 8 months of waiting period, but we all have gone slow on that dialogue, and nothing has materialized till now for various reasons, either it's financially not making sense or the amount of changes they want from our side, that does not make sense. So it's an ongoing thing. I have nothing new to share on that front.

The next question is from the line of Aman Vij from Astute Investment.

My first question is on the volume and pricing growth. So when we talk about 11% industry growth, and we are targeting 25%, 30% overall revenue growth in music stream. So if you can roughly give what kind of volume and pricing growth are we seeing in the industry as well as for us?

That's all revenue. See, there's not a hardware unit I can [ audit] . At the end of the year, some of the revenue cannot be linked directly to the number of streams or a number of YouTube views. So you have to take this as revenue growth. In Music business alone, Carvaan is not part of this.

No, no, no. I'm not talking about Carvaan sir. Say, for example, every year, industry is growing at 11% revenue.

Revenue?

Yes, revenue. Like revenue will always have 2 parts. One is the overall pricing growth that the people are seeing. For example, say, if earlier because of our inventory we were getting 9 paise per stream. Now we are getting 10 paise per stream. So there is always this pricing growth also, which we would be seeing every year or every second year.

Fair enough. Let me try answering your question. We always have been able to manage a 10 paisa pricing. We have the few labels to maintain that pricing from the world [indiscernible]. We are seeing growth that will come out of more consumption happening rather than 10 paise moving up or down. And there's more growth is going to come in because more people in India are jumping into the digital bandwagon. And once they come here, they get their smartphones. After they consume some of the other apps, they end up joining and downloading the music streaming apps. The new customer coming in, and the customer who has the app is now listening to more songs. I'll share with you my favorite story that always happens, is when I was younger and we people use to have free time. I remember going out there waiting for meetings and had to go and meet a client, I use set at a reception, either read a newspaper or daydream. Now nobody daydreams. Anybody who's free for 2 minutes also, just except the phone starts doing something. So the amount of time the people are spending on a mobile phone is going through the roof and it will go up. We may say it's good or bad, doesn't matter. That's the reality of a culture. We all have stuck to our phones. More value of traveling to the office and going home. I'm 5 minutes stuck anywhere. My phone comes out. That means that much more consumption is going to be happening. So more people jumping on the bandwagon, and they're spending more time on this device called mobile phone, which means great news for us. Either they will listen to a song, we get paid, or they will watch up some videos from there, there my song will be coming out there. Somebody is using my song in the background, then also I get paid or they'll be worth seeing an ad where my song is coming in, then I get paid or they will be watching a series on Netflix, which maybe my series and we get paid or if may be somebody else series but my song is running in the background, we get paid.

Sir, broadly, when we say we are present on all the 9 streaming apps and all those things. So irrespective of how many -- how much of our content is there on the app or maybe irrespective of the size of the streaming company, broadly, I'm not talking about exact numbers. That 10 paise per stream remains intact. It's not sometimes it will be 15, sometimes it will be 7 and the average is 10?

I can't get that specific, but it's -- the rate remains fixed during the period of the contract if that's your question.

But if, say 2 year revision of contracts, then there should be a pricing escalation also, if I'm not mistaken.

I'll leave it right now to the commercial negotiation part. At this juncture, we believe that the 10 paise price is the price that's going to hold for us.

Sure, sir. My second question is on the OTT streams and YouTube streams numbers. So YouTube stream number has grown quite well for us from 1 billion for quarter 3. If I go back, say, 8 quarters back to now 3 billion. We are crossing 3.4 billion, 3.3 billion. Same for OTT streams, if you can give a number. Because the last number we have is for like say it's like 1 year back number when the streaming number was 1.7 billion roughly. So has that number also grown like YouTube seems or if the growth is much lower at some [indiscernible]

Right now, first, let me correct on YouTube. Now from this quarter onwards, we are giving account of all streams, not just the streams coming on my channel, but also streams that are coming from user-generated content where my song is getting used and Saregama gets paid for it. And that is 32 billion per quarter and not 3 billion. If you see my latest presentation, which has been uploaded, because the data you're referring to is only my own channel, not including [indiscernible] which we get paid. YouTube growth in the country has got phenomenal, because that's -- this is on the first apps people go out there and download. But streaming numbers also have grown in a very, very significant fashion. In fact, I'll just quote industry level numbers here. I'm not coming to Saregama. The understanding is the seeming maybe growing it in terms of numbers, maybe growing at 30% to 40% year-on-year.

So we are seeing growth on both sides. YouTube streams as well as our OTT growth.

Yes. Otherwise, industry wouldn't have grown. These are the only 2 triggers that are going in the industry today.

Sure, sir. And this 32 billion number, we used to give earlier YouTube streaming, OTT streaming, which was up like 2 billion, 3 billion number each. If you can give a rough breakup of the broader segment. I'm not going on each and everything.

But you on this OTT numbers were going out and were creating some amount of issues with the platforms also and was hurting our competitive part, and that's the reason it was getting used in every commercial negotiation, then we decided we will not publish that. But I can assure you it's growing in a very healthy fashion. Otherwise, I won't be able to guide a 20% increase in revenue year-on-year. And YouTube, from this quarter onwards right now, we have taken a call that we will give the full number rather than giving only channel care number. So whether it's by channel or it's user-generated content or if the user generated content is using an IP which belongs to me and Saregama is the party that will get the commercial benefit out of it, we include that also.

Sure, sir. Final question is on the [indiscernible] part. So sir, we have -- we have talked about our vision 3, 4 years back, and it seems to be doing well. We have done like 17-odd films in the last 3, 4 years. But when do we see the next level of scaling of like doing 10 films a year or 15 films a year. That level of scaling so that we can be a INR 100 crore number, which you have talked about.

No, it's clear right now. So let's talk about INR 100 crore number. Let's not talk about number of films we'll do to get that. Because what happens when you do a series, one series is the time we've given into 4 or 5 films. The number that you're talking about right now is a number which is there in the close vicinity. It's not a bizarre number that you're throwing at me. Couple of years, we should be able to go back and reach that number.

The next question is from the line of [indiscernible] from Paladin Capital.

I'm sorry, I'm a little bit new to the business. So I just wanted a clarification on a couple of points that you've talked about. One is you mentioned that it's not -- the contracts do renew on an annual basis, the music contract. Is there a particular quarter in which these take place? And could you explain the overflow concept that you mentioned earlier? .

So let me explain the overflow concept first to you. suppose I have a deal with the platform x whereby the broad contours of the deal are that every time my song is heard by a free customer, I get paid 10 paise. And with a paid customer, say, 50% of the money that the customer is paying is going to be a massive content pool and we get a share of that 50% basis how many songs of Saregama were heard. Now all these people are variable ways in which we make money, we protect ourselves by commanding a minimum guarantee to protect us on any potential downside that may happen in the future. The actuals are higher, we end up getting overflows. Very basic concept of [indiscernible] overflow happening here. In terms of which quarter, it depends deal by deal by deal, actually, that -- which deal -- because every time we people are getting an overflow, we are ensuring that the next deal can the minimum guarantee goes up by that much amount. So then the growth has to be even bigger right now for an overflow to come in. It varies a lot for us. This overflow concept.

Okay. And when you're so confident about the growth being 20% higher, is that -- and you mentioned that the pricing you expect to remain at 10 paise for the free streamer. . So the growth ultimately will only come from more streams per song going forward. And that's why your forecasting the growth at [indiscernible]

I think 2 parts right now why I'm sounding confident that from 20% earlier, we used to give a guidance of 20%. Now we think 25% to 30% [indiscernible] since then is earlier numbers were completely primarily projected on the fact that the industry was also growing and more people were coming in. And since we are able to monetize our content better than many of the smaller labels, hence we are getting a larger proportion of that revenue that the company was making from the customer. But the biggest change, which has now happened is that with the funds that we people have raised, we are now in a position that we can invest aggressively in new content. And platforms are primarily the toy in this country of the younger people. You will find more 20-year-olds and 25-year-olds right now using these digital apps compared to the middle age and older people. And we -- and the newer younger people right now obviously want to hear the latest music much more than music, which is 20 years old. We did not have a big play in that space. We are now having a -- as we're going ahead right now, our play is going to become more and more significant, which is a market share fight, and we believe we will be able to grab enough amount of share from all our competitors. We're already showing in our numbers that we are grabbing share now from our competitors, which gives us the confidence that we will be able to grow the revenue at 25, 30. While the industry is not going to change. Industry will remain 11%.

Okay. That's very clear. So you will be taking share in terms of the new content -- in terms of content that's more relevant to the younger audiences. And the number of streams is growing. And I guess, over a period of time, which may be a longer period of time, the mix will change from free to paid streamers..

So that isn't altogether free to paid, I never factor in any of our projections. The jury is still out [Foreign Language], I am very bullish on it. And I confess this in every meeting, I'm bullish on it. There are a lot of people in the industry who are not. I believe there is no way but to go to a paid site, but time will tell. Our projections are 25% to 30% growth in revenue are not based on when paid. This is assuming industry remains the way it is.

Right. And the revenues could show up in a lumpy fashion, as you mentioned, when the overflow take place and all of that, that could shop in a particular quarter.

So if you are looking at it right now, my request will be please check it out on an annual basis. it's easier that way. It's not that you'll ever have a right now that in 1 quarter, music it's growing by 5% on the quarter growing by 40%. Not going to happen. But a little bit aberration keeps on happening. On a rolling 12-month basis right now, we are committing to 25% to 30% growth.

Okay. And one very basic question. And you mentioned that it's been hard to monetize physical performances. But how does any company, including yourself, how do you monetize private events?

Private events?

Yes. So somebody is playing your song at a wedding, for example or some private location, how does that -- do you make money on that? .

Yes, we do. For -- so let's say [indiscernible] for a moment here. Any -- you are having your 50th birthday, you are having kids birthday, marriage anniversary, all those events we end up monetizing. So what we have done, rather than each of the companies doing it themselves, all the music labels have come together and created a society called PPL who will mandate to go out there, work with various hotels, work with various event organizers and ensure right now that every time they're doing and even they end up clearing the license first. . They collect the money, and that money gets distributed across to all of us.

The next question is from the line of [indiscernible] from [indiscernible].

All right. So I have 2 questions. One is more of maintenance or bookkeeping question and the other one, which is a little more strategic. So the first one is you've recently raised money from -- in the press. And naturally, you are running a heavy treasury as we speak. . Okay. So what is the internal decision that has been taken on deploying this money? Where is it at? .

We people are following an extremely conservative approach out there to ensure that the assets, the capital, is well protected. It's a combination of fixed deposits and debt funds.

That's it. You're not carrying any equity on your books at all?

Not through this. We have some of our group investments that are sitting out here, but they have been there from legacy reasons. But this fund -- the funds that we have deployed, the INR 750 crores that we have collected, they are part only in these 2 places.

So I can actually look this up from your annual report, but what is the legacy holding that you have or exposure to your group companies? .

So we people -- I will share that with you. We have shares of CSC. We are coming on Carbon Black...

Okay. We'll figure that out, right. So that's mostly legacy, right?

It's not a question of...

And in your stated financials, the other comprehensive income bit relates to the debt fund exposures, the adjustments on the debt fund exposures and nothing else.

Sorry, come again, right now. I'll ask my colleague to answer this now.

So you have another comprehensive income line, which changes -- and it's pretty significant in material every quarter for the last 2, 3 quarters. So I'm assuming that it's mostly got to do with your debt fund exposures and nothing else.

No, these are basically related to the investment in group companies.

In the group companies. Okay. So we'll have to fish that out. Okay. So I'll figure that out. So you're basically marking them up and down with the market.

Yes, these are mark-to-market, yes.

And these are equity exposures?

Yes, yes.

Do you have a top-of-mind number on what this equity exposure would be as of 31st December?

Just give me a minute.

Yes. So if you could throw a number there and I'll ask my strategic question, if Vikram will comment back.

This is INR 136 crores.

INR 136 crores. Okay. So it's not too scary. In any case, these are good solid companies, would be probably Phillips Carbon and CESC, right, mostly? .

Yes. These are CESC, RPS [indiscernible]

Okay. Right. Now the strategic bit, sir, if I may ask. So you're sitting on cash, which is a great thing to be in a market where a whole lot of new content is getting created. . How do I know that you won't overpay for it in some of your minimum guarantees that you give out? What is the early evidence here? Or what is the rule book here? What's your right to win here? .

The rule book out here is the structure in which we people work. Any -- all the content that has picked up during our financial year, we are committed to the board that the payback period of that has to be 5 years. It cannot be longer than 5 years. It has taken us 4 years to convince our own board, from 2017 till 2021. By proving them year after year after year, by doing smaller investments in new content and showing them that we have a performance track record, which is better than 5 years and we are sticking to our promise. Based on that only, we finally got to go ahead from board to go and make larger investments. So both these things are going to go hand in hand. We need to invest in newer content to manage our top line course. But while we are doing it, we are sticking to a payback period of 5 years and [ ICD ] number right now of 32% to 33%.

Again, it's like you're like an investment manager that you are taking a call on and hoping that something will pay back for itself in less than 5 years. And like any manager, you can go right and you can go wrong. Is that fair?

Fair enough, right. The way you are doing your homework before you make...

Exactly. Exactly.

Or fashion right now, we have done the same part in the world of music. So there's a chance on data mining and predictive modeling. To share with you every song, which is there in India as part of our system and we track basis of which we now.

Are you getting a lot of data now.

We did a lot of data, and we have hired our top data scientists within our system. These are the guys who used to run for -- earlier when I used to work at [ Tata Sky ], they used to run the entire data analytics for me at [ Tata Sky ]. That entire team is sitting in here and they are the guys who are mining the data and building predictive models which, if you are a film producer, you come to me and say, this is my movie and this is the songs and singer and lyricist and composer and actor and choreographer our model based on the last 3 year performances of these artists is able to throw good understanding about what is the probability of success.

And having said that, showbiz is a lot like stock markets. You never know what will work and what will not.

I can't agree completely. Now this is a little more scientific second. This is then combined with the listening session of the song done only by people under the age of 30 in my company. Anybody above the age of 30 has not given the allowed to decide which song to pick up but not including me. It's under 30 kids who listen to the music and then catch little feedback that comes out whether the song is going to work or song not going to work. . So you're working on the past track record of part immediate past track records of all the artists who are involved in it on a mathematical basis, combining it with the listening test that is happening here and then you -- But is it a risk free, I'm sure, nothing is risk free.

Right, right. No, this is very inspiring, that last bit you said about people under 30, that's a great thing you're doing. Great.

Let me expand this right. I don't think just because on the Managing face of the company, I may not have the greatest ear for music. I know that not business. But at the age of 50, if I say I know what a 21-year old wants, I'm sure my son is the first one who will go back and say that dad has gone bananas. It's a reality, it's younger people's music should be tested and should be checked by younger people, not by us.

I think that's a fabulous thing for you to say. Thanks very much. This is a very inspiring, sir.

The next question is from the line of [ Sahil ] from SS Capital.

Sir, I had just a couple of more questions. One thing is, if I thought possible, could you start sharing some qualitative numbers on like how much of our revenue comes from subscriptions and how much of it come from the free or app paying customers even if not on a quarterly basis, annual basis, that would be really helpful in tracking how that [indiscernible] is playing out. Concretely, are people shifting and how that is reflecting in our financial. So it's more of a suggestion if you can maybe share it answer here also, it would be wonderful.

So that will be difficult. But what I can tell you is on the music side, music streaming side, it is -- there's no comparison is only and only advertising today. Very little subscription is going. On a separate chat later, I can tell you my view, as to why subscription is not picking up, and I don't think it's got much to do with the customer.

Essentially, just to understand better, if at all you might be able to serve like why is it difficult to show with us in terms of the breakup.

Subscription and advertising breakup right now, we will not be in a position to share. There's all sensitive information, and we don't want to go out there and give that out every label has a different kind of a deal going on. . So we don't want to put all that information in the public domain. But whenever we believe that subscription income is becoming not even significant -- even minor significant we will come back to you and share the good news with you guys.

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

Thank you, everyone. One long call. I'm happy right now with the amount of interest that all of you guys are showing in our company. . I'll just repeat our guidance. We believe that the music business, as we people go over the next 3 to 5 years, should be growing between 25% to 30% year-on-year. The films and series business, we believe that business should also start growing between 20% to 25% year-on-year, and that's an increase compared to what we used to say earlier. We are seeing the foundation becoming more and stronger out here in that business. On the profitability, our guidance remains that operating income before content interest and depreciation should remain between 32% to 33% of the revenue from operation as we go ahead. Our big focus is going to be new music content investments as market starts opening up and movies start getting released, you will see much more of Saregama coming from all sides. So we will -- while we people keep on striving to grow our revenue between 25% to 30%, we have a eye always and always on the profitability of the company. Hopefully, with your help investing in the company grows stronger from here. Thank you. Bye-bye.

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.