Shemaroo Entertainment Limited (SHEMAROO.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY 2026 Conference Call of Shemaroo Entertainment Limited, hosted by Valorem Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Hena Khatri from Valorem Advisors. Thank you, and over to you, ma'am.

Thank you, Danish. Good afternoon, everyone. and a warm welcome to you all. My name is Hena Khatri from Valorem Advisors, and we represent the Investor Relations of Shemaroo Entertainment Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and first half of the financial year 2026. Before we begin, a quick cautionary statement. Some of the statements made in today's con call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on this forward-looking statements in making any investment decisions. The purpose of today's earnings con call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for the opening remarks. We have with us Mr. Hiren Gada, CEO; Mr. Arghya Chakravarty, COO; and Mr. Amit Haria, CFO. Without any further delay, I request Mr. Amit Haria to start with his opening remarks on financial highlights. Thank you, and over to you, sir.

Thank you, Hena, and good afternoon, everyone, and welcome to our earnings call for the second quarter and first half of the financial year 2026. Let me first start by giving some of the key financial highlights, after which our CEO, Mr. Hiren Gada, will give you some of the operational highlights. For the second quarter of the financial year 2026, the revenue from operations stood at around INR 143 crores, which declined by approximately 12% year-on-year. The company reported an EBITDA loss of about INR 55 crores for the quarter, while the net loss stood at around INR 45 crores. For the first half of the financial year 2026, the revenue from operations stood at around INR 283 crores, which declined by approximately 11% year-on-year. The company reported an EBITDA loss of about INR 110 crores for the period, while the net loss stood at around INR 91 crores. With regards to new initiatives, expenses in Q2 FY 2026 amounted to INR 33 crores. Adjusting for this investment, the EBITDA loss from the existing operations for the quarter would have been around INR 22 crores. The same expenses in H1 amounted to around INR 65 crores. Adjusting for this investment, the EBITDA loss from operations for the first half would have been around INR 45 crores. Digital media revenues for the second quarter stood at approximately INR 60 crores, registering a year-on-year decline of 10%. Traditional media revenues for the quarter were around INR 83 crores, down 12% year-on-year basis. Now I would request our CEO, Mr. Hiren Gada, to give you operational highlights for the period under review.

Thank you, Amit, and good afternoon, everyone. Decline in revenues during the second quarter was on account of some deferment of syndication deals in the digital business and a muted festive season advertising in our traditional business, which was one of the weakest in recent years that we have witnessed as FMCG spend on television remains subdued. Additionally, a packed sports calendar prompted several key advertisers to reallocate budgets towards sports properties. With the impact of the GST rate cut now stabilizing in the economy and supply chain efficiencies showing improvement, we remain cautiously optimistic about our gradual recovery in FMCG advertising spend in the coming quarters. During the quarter, we expanded our channel portfolio with the launch of Shemaroo Josh, a Hindi movie channel introduced on 1st September 2025. The channel features a curated lineup of Hindi films across genres and is available on major DTH, cable and DD free dish platforms. In other updates, for ShemarooMe Gujarati, we released 8 new titles during the quarter with content across movies, web series and plays, along with the digital world premiere of blockbuster movies, Mithada Maheman, Sanghavi & Sons, Mom Tane Nai Samjay, Karkhanu. We also released the Hindi dubbed versions of Jhamkudi and Unfiltered Naari, which is a Hindi dubbed version of Fakt Mahilao Maate. On YouTube, our flagship channel, Shemaroo FilmiGaane, crossed a significant milestone of 73.5 million subscribers. Additionally, our Shemaroo Entertainment or ShemarooEnt channel crossed 60 million milestone this quarter. Across our entire portfolio of channels, the company garnered more than 11 billion views during this quarter, underscoring the sustained strength of our digital engagement. However, margins are expected to remain under pressure due to the ongoing accelerated inventory charge-offs, a strategic initiative we began 7 quarters ago. It is important to highlight that these charge-offs are purely accounting adjustments and do not affect the monetization of our content or our ability to generate free cash flows. Looking ahead, we remain focused on strengthening our balance sheet, driving operational efficiencies and positioning the company to unlock substantial long-term value. With that, I open the floor for the Q&A session.

[Operator Instructions] Our first question comes from the line of Anirudh K from [ Kuper Capital ].

I'm new to this business after a long time. I mean it's been a while. So 2 questions essentially. One, digital media deferment is understandable. Traditional media, do you see this as a structural downturn, right? Because you don't have sports calendars, you don't have multiple channels in terms of Netflix and Prime and everything else, multiple OTTs going on. So do you see the spend in traditional media that has gone down, especially when we had Dussehra and Diwali in October, which essentially means September should have been like a jampacked season. Do you see this as a structural downturn?

So there are 2 parts to this. One is the fact that digital is -- sorry, the viewership is migrating to digital. I think that is anyway structural -- it's a secular theme. I don't think there is any denying of that fact. And over a period of time, if we see MAB last, whatever, year-on-year or over last 5 to 7 years, the share of digital -- consumption on the digital platform has been going up and traditional has been coming down. I don't think that we are trying to shy away, or we, in fact, embrace or recognize that fact. Having said that, I think there is still enough and more use and consumption on the traditional platform, not only consumption, there is enough revenue on the traditional platform, which is there and available to capture. And that is really what we are trying to work with. There have been some, I would say, seasonal -- or more than seasonal, I would say, cyclical challenges. It's not really, I would say, seasonal to that extent. So for example, in the last couple of years, we have seen a severe slowdown in consumption in the economy, which has impacted the ability of the various brands to advertise and spend on advertising. They have just focused narrowly on what we call performance marketing or point-of-sale kind of spend versus actual brand building and those kind of things. Now the larger structural question, even beyond digital and traditional, is the fact that is the India consumption story going to bounce back or not? We believe beyond cyclicality, it is going to bounce back. And once that happens, I think a lot of spends would get unleashed. And even today, in terms of consumption, so we have seen consumption patterns on television over the last several quarters, and they are fairly intact. It's not that the consumption has been dropping. So digital has grown, no doubt about it. The share of digital has grown. But actually, television has held on its own. And television, I would say, is very much alive and kicking. It's not really dead or it's not about to die down soon. If that was the outlook, obviously, we wouldn't have continued to invest in that platform. But we've also -- considering the cyclical impact of where things are, we have also tempered down the cash flow and the investment that is needed.

Got it, sir. Helpful. That's very helpful. The second question then is this inventory write-off. Sorry, I should have updated myself, but if you could just tell us this inventory write-off that you have been doing for 7 quarters, is it like a INR 50 crores, INR 60 crores per quarter? How much more is supposed to be written off? If you could just give a rough idea? Where did we start and where will we end?

Actually, we can separately take it offline, but this is now -- after this quarter, we are 2 more quarters away. So March quarter will be the last quarter. I don't remember the exact number where it was before we started. But just to give you a sense, we were -- last year, 1 year ago, September, we were at INR 618 crores of inventory. We have closed with the current -- September '25. So September '24 was INR 618 crores, March was INR 568 crores, and September is INR 477 crores. So we have been consistently writing it off and it is there. So March '26, Q4 of the current financial year is the last -- it was a 9-quarter write-off and Q4 is the last quarter for that.

Got it, sir. Got it. Sir, last question, sir, is there any guidance that you're giving on revenue? I understand below the line is very difficult to give. But at least on the revenue bit, are we okay with doing a INR 650 crores, INR 700 crores revenue in FY '27, the way you see it?

So if we were to simply annualize what we have done, then it kind of falls somewhere in the range of about INR 550 crores to INR 600 crores, okay? There is obviously some deal deferment and things like that, which will kind of get added. This cyclical uptick has not yet materialized in the spend. So we don't see a -- at least in the current quarter, Q3, we don't see any meaningful change in the advertising spend trajectory as of now at least, because most of the advertisers post the GST, they have faced a lot of operational challenges on inventory and credit notes and logistical questions and all of that, pipeline inventory that was in the system. I think it will take a couple of months to stabilize. Everyone has, in fact, guided around that. We believe probably -- so we are already nearly 1 month, 1.5 months away from 22nd September, the effective GST change date to now, I think, and probably my sense is that we'll take another -- probably it will be till end of December, we will see that destocking impact and everything else that would be there in this -- and that will impact their cash flows and sentiment to advertise, because they are significantly caught up with the operational questions and challenges, most brands. And so therefore, if we extrapolate, this quarter definitely seems to be subdued in terms of the advertising spend. Yes, we have some syndication [indiscernible] which have materialized. So that will be helping us for the year.

Our next question comes from the line of Neil from Equitree Capital.

Sir, am I audible.

Yes sir, you are.

I had a few questions and almost 2 questions are anyway answered. One of my questions is, sir, you just mentioned that your YouTube channels have crossed 73 million and 63 million subscribers, and there has been around 11 billion quarterly views. Am I right?

Yes.

So sir, I want to understand if the company has formulated any new monetization models, so to go beyond ad revenue to cater to this large audience base.

So finally, see, YouTube is a platform owned by Google or Alphabet, right? So we are one of the content partners on the platform, and there are probably quite a few -- there are millions of content partners on YouTube's platform. So finally, our dependency is on Alphabet or YouTube's own monetization strategies. Now what are their monetization strategies? One is, of course, fundamentally, there is an ad based and second, there is a subscription based. And third, there could be a transaction based, which is called a transaction VOD kind of model, pay-per-view kind of model. In India -- okay, let's put it this way. So Google has been -- obviously, there is YouTube Premium. They have introduced recently a Premium Lite pack at a lower rate. And all of this is with the attempt of increasing the subscription pie for YouTube. And our experience -- so we participate in terms of the monetization of the viewership that our content generates. If it comes from a free subscriber, there's an ad which gets displayed and we earn a share of that. And if it's a paid subscriber, then we get a proportionate share of the paid pie. So in a way, every viewer that comes on YouTube, we get some share or some way of monetization participation. Our effort is really about, firstly, keep adding fresh content, keep adding more and more fresh and relevant content. Second, to do a good job of meta tagging and various other -- keeping the whole hygiene on the search and discoverability of the content. Third is obviously to keep a healthy CMS or a healthy platform, which results in deep engagement and viewership. So the fact that while these numbers we keep sharing is to give an indication of the continued depth and level of engagement and the health of our entire CMS, these are kind of health metrics of the CMS, which finally results in monetization as per Google's own algorithm and things like that. So that's really how we look at the whole thing. So YouTube keeps adding or coming up with more and more monetization mechanisms, and we get our share of anything that they do.

Okay. Sir, I have another question. I guess in the last con call, you had given this guidance that you are expecting to write off inventory around INR 140 crores. And so far I see, in first half, you have write-off around INR 91 crores. So will we be able to meet the guidance and write off around INR 140 crores by end of this financial year?

So Neil, this is Amit here. So when we said INR 140 crores, it was an accelerated write-off. Apart from that, regular write-off of inventory would also be there. So if guidance of INR 140 crores has been given, out of which INR 70 crores -- roughly, if I were to allocate, INR 70 crores would have been done in the first half, INR 70 crores would be taken up in the second half.

Okay. So are we in line to meet that guidance, sir?

Yes, yes.

Yes, yes. So we have actually a fixed amount. So when we got the 9 quarter thing, it was -- the quarterly charge-off is fixed. It's a straight-line charge-off. There's no deviation on that. Hello?

Yes, sir, we can hear you. Please go ahead.

I have made the comment.

We have made...

Okay. I guess there's no response from the line as of now. So we'll move forward to the next speaker. Our next speaker is from the line of Vishal Sanghvi, an individual investor.

I have a couple of questions. So first is what is the syndication deals that we can expect in the coming quarters, sir?

So we cannot actually -- unfortunately, I'm not at liberty to give amounts. But what I can say is that some of those deals actually have already materialized during October, and we have already done the invoicing and received the payments also for some of those -- in fact, quite a few of those deals. So they were actually -- in a way, we had concluded them towards the end of the quarter. But as per our revenue recognition policy of various [indiscernible] that we need to complete before recognizing the revenue. That was not concluded. So it kind of got deferred into this quarter. So that is what we were referring to.

Correct. Also, sir, another question I had is that what is your outlook on the free cash flow for '26, and the debt reduction plan for '26, because right now -- am I audible, sir?

Yes, I can hear you. I thought there was someone else trying to talk or -- I don't know. Okay. Anyway, you continue.

Okay. Yes. So just outlook on the FY '26 free cash flow as well as debt reduction plan.

So this is Amit here. So last con call, Hiren had said that it looks a bit difficult at this juncture to meet the debt reduction guidance considering the investments that were planned and the way market has performed. However, with respect to free cash flow, we have been able to tightly manage the ship with tighter control and better recovery in receivables, better management of payables, and have been able to generate an operational cash flow of INR 32 crores, which is reflected in the cash flow and helped us in not taking any further debt in spite of the losses in the first half.

I'll just add to that. So we had an intent, when we began the year, of reducing the debt by about INR 40 crores to INR 50 crores. That was our intent. Two things kind of derailed that to an extent -- to a large extent, I would say. One is the fact that the big broadcasters brought their GEC channels onto the Free Dish platform and therefore, took our viewership and advertising share, which has resulted in a lowering of the cash flow generated by that business. Second, of course, the tepid advertising situation has -- for the same GRP, what revenue we would have expected or what the market generally would have received, that revenue has been also lower. So both these factors combined has derailed that plan. And this is something that we had indicated in the last call also that we will try our best to -- and these market conditions are dynamic, we don't know, because between the last call and now, this entire GST cut has been paid out, et cetera. And obviously, it has further changed some of the ground situation, both in a short-term negative, but long-term positive way. So we are very confident and hopeful that -- if we believe in the India consumption story, without the media spends and brand building of every brand that aspire for any consumption, has to play out. So that we are confident will happen. But yes, in this current financial year, these are 2 key factors which have kind of impacted our plans of debt reduction. Having said that, in spite of all the P&L loss that is visible, you can see on the balance sheet side that actually, even in this intervening 6 months, we have actually reduced the debt, even though albeit marginally by INR 5 crores, but which in a way indicates that the cash flow position has been reasonably comfortable.

Correct, sir. Sir, last question. Since we had a very sports-heavy calendar, has the distribution of viewership among the Free Dish ecosystem, like has it stabilized among the top players?

Yes, yes. Viewership has stabilized for last almost, I would say, 2 to 3 months, at least, the viewership, maybe even more. Almost post June, July, post the IPL, I think the viewership has kind of stabilized. Yes, there will be week-on-week some fluctuations here and there. But at an overall level, I think the viewership has stabilized.

Our next question comes from the line of Dheer Thakkar, an individual investor.