Shemaroo Entertainment Limited (SHEMAROO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings 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 Mr. Anuj Sonpal, CEO at Valorem Advisors. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. 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 conference call for the third quarter of financial year 2022. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings 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 management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is only to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating with us in today's earnings con call and hand it over to them for opening remarks. We firstly have with us Mr. Hiren Gada, CEO and Chief Financial Officer as well; Mrs. Kranti Gada, the Chief Operating Officer; and Mr. Amit Haria, VP of Finance. Now I request Mr. Hiren Gada to give his opening remarks. Thank you, and over to you, sir.

Thank you very much. Good afternoon, everybody. It's a pleasure to welcome you to the earnings conference call for the third quarter of the financial year '22. And I wish you all a very Happy New Year, and I hope everyone is keeping safe and well. Let me start by giving you the key financial highlights or at the consolidated level. For the third quarter ended financial year '22, the operational income stood at INR 90 crores. EBITDA for the quarter was approximately INR 9.8 crores, and EBITDA margin stood at INR 10.88 crores -- sorry, 10.88%. The net profit was reported at INR 1.9 crores at a PAT margin of 2.07%. For the 9 months period ended December 31, the operating income was INR 288 crores. EBITDA reported was around INR 27 crores. EBITDA margin stood at 9.42%, while the net profit was at INR 3.2 crores with a PAT margin of 1.12%. As is evident from the financial results, I'm happy to share that we continue our recovery track in Q3 as well as -- in Q3 as well as seen in our improvement in both PAT and EBITDA level and margin level. For the third quarter, digital media revenue stood at INR 48 crores, which were up 19.4% year-on-year for the 9 months ended -- 9-month FY '22. The digital media revenue stood at INR 135 crores. I'm very sorry, I'll repeat this. For the third quarter, digital media revenue stood at INR 48 crores, which are up by 19.4%. And for the 9 months ended FY '22, the digital media revenue stood at INR 135 crores, which is up by 20% on a year-on-year basis. Traditional media revenue for the third quarter stood at INR 42 crores, which was down by 12% year-on-year. And on a 9-month basis, it stood at INR 153 crores, which is a growth of 26% year-on-year. Although unlocking resulted in green shoots in the economy -- economic revival post-COVID, media consumption slowed down across traditional and digital platforms. Large advertisers are facing a triple threat of rising input costs, slowdown in rural consumption and looming fear of countrywide lockdown, all leading to cautious advertising spend across channels. Despite challenges on both viewership and advertiser spend, the company has maintained positive margins during the quarter. As most of you are aware, the company has been in an investment mode in various new initiatives. Hence, it is important to note the expenses made on these new initiatives net of revenue for the periods under review. For Q3 FY '22, expenses on new initiatives, net of revenue were INR 20.7 crores. And for 9 months, it was INR 53.2 crores. If you were to adjust for these investments in new initiatives, the adjusted EBITDA from existing operations would have been approximately INR 31 crores for Q3 FY '22. And for the 9 months ended Q3, the adjusted EBITDA would have been approximately INR 80 crores. On ShemarooMe platform, under ShemarooMe Gujarati, we released 13 new titles during the quarter with content across movies, web series and plays. We also released our original web series, Yamraj Calling and Benaqaab on our ShemarooMe OTT platform, which have been well received by the audiences. We further -- we've also released the theatrical blockbuster, Dhuandhaar. On YouTube, we crossed 57.7 million subscribers on our YouTube channel, FilmiGaane, during the quarter. The channel continues to maintain its foothold as the 20th most subscribed channel in the world. We have also got into a strategic partnership with Spotify in the quarter for Shrimad Bhagavad Gita podcast. On the broadcasting front, increasing out-of-home mobility on account of unlocking and the festive season affected the overall television viewership. However, Shemaroo TV continued its support trajectory in ratings, while Shemaroo MarathiBana's rating remained steady during the quarter. Shemaroo MarathiBana premiered the Marathi dubbed version of Baahubali with noted film Marathi film and theater personalities lending their voices. Lastly, we also launched a new DTH service Classic TV on Tata Sky in December 2021. To conclude, although Omicron had a temporary disruptive impact on the economy and subsequently, the media sector, we remain confident of our recovery trajectory in the coming quarters. With that, I open the floor for questions.

[Operator Instructions] The first question is from the line of Viraj Mehta from Equirus PMS.

Hiren bhai, my first question is on new initiatives, our run rate of loss was INR 16 crores a quarter roughly, which has now gone up to INR 20 crores a quarter. I thought that this was going to come down. But in spite of revenues going up in new initiatives, the loss just keeps going up. That means our investments in this are going even higher. Where do we see light at the end of the tunnel?

So I would say that -- this -- the 1 major area where we ended up spending additional in this particular quarter, actually, I would say in the probably in the last more than 3 months, maybe 4 or 5 months has been the ShemarooMe Gujarati rollout, where we've invested heavily in some of the web series as well as attending marketing and advertising costs on that front. So that has been one of the areas that we have -- the spends have gone up. On the other hand, while there was an overall expectation that the television investment on the other hand would come down. It has kind of stayed steady or in a similar zone where it was because primarily, one of the big reason for that was because we -- in this quarter, we premiered this Baahubali which was obviously a large cost item, which on -- again, both on the content side and the marketing front. So there was an additional spend on that account for -- on the broadcast front. So therefore, that kind of -- in this quarter, there was an additional investment I would say, on content and marketing side.

And that is likely to continue? Or will we see that taper off back to INR 15 crores, INR 16 crores loss a quarter.

We are hoping that -- I mean, as of now, we definitely are hoping that, in fact, it should be coming further down. But yes, first target obviously is to bring it below 15, 16 a quarter and subsequently to bring it down further.

Sure. Sir, my second question is, if I look at the employee cost, on a quarter-on-quarter basis, it has grown by INR 3.5 crores, INR 4 crores. Is there any one-off item there? Any bonus there? Or this INR 20 crore is now the run rate for quarterly basis for employee cost?

No, I would -- one second, I'll tell you. I would rather look at the 9-month cost for -- reason being, during this financial year, we've paid out all our performance-linked incentives, et cetera, in this last quarter. And in the previous financial year, we had paid it out in the Jan to March quarter.

Okay. Okay. And can you talk about -- a little bit about Hiren bhai, where are we in terms of breaking even MarathiBana? Because last time on con call you said that by Q4, we should be closer to breaking even in MarathiBana. So where are we there? And where are we in terms of Shemaroo TV?

So. Okay. At this point, the overall broadcast business in terms of operating metrics has been better. So our -- the ratings on Shemaroo TV, in fact, have grown more than 20% during this quarter. So viewership and TRP overall has grown by more than 20%. MarathiBana actually has remained broadly stagnant. One of the reasons also is that there was 1 new channel launch in Marathi, which was Sun Marathi, which launched in October. So we have held our ratings in the light of a new entrant. So to that extent, that recovery has actually been a little bit delayed. But the good news is that Shemaroo TV, which is a bigger revenue by opportunity has actually grown -- has actually -- and if we see almost last almost 6 to 7 months, we've grown quite well on Shemaroo TV. And we are hopeful that over the next 2, 3 months that will translate into the revenue advertising if rates kind of going up. And -- if I have to overall look at this business, based on where things are today, I think we are confident that these 2 channels business, we should be breaking even in the next financial year.

Okay. No, that's very heartening to know that we will be breaking even both these channels next financial year. Sir, just one last thing. Yes, if we look at our digital media, we are roughly between INR 45 crores and INR 50 crores a quarter, right? And so hopefully, we grow on that a little and that being a very high-margin business. And your loss from your new initiatives you're saying should come down substantially from probably INR 15 crores a quarter to INR 10 crores a quarter to at some point breaking even. Should next year be the year where we, the shareholders, see at least INR 20 crores, INR 30 crores of profit? Or that seems like a long way away?

Well, I am not in a position to give any forward-looking statements -- but what you are saying has been our endeavor, and I think we are definitely working on that -- on those lines. In fact, we were -- this year, actually, this delta variant actually threw a lot of things out of gear kind of a thing. And in spite of that, I would say that this 9 months, we have kind of held well -- funded everything out of internal accrual, reduced leverage. So we've generated actually, very strong internal accrual, which has helped to fund all of this put together. So in that sense, yes, I mean, if -- like I said, I'm sorry we're not able to give any forward-looking statement. But yes, that should -- that would be our own effort also.

And what will be the debt today, Hiren?

Debt -- it's held at the September level. September was INR 247 crores. We are at INR 248 crores.

The next question is from the line of Shikha Mehta from Equitree Capital.

I have a couple of questions. So actually, today, in The Economic Times, there was an article about how ad expenditure has increased by 37% year-on-year and 10% since 2019. But we -- even in our opening remarks, have mentioned that there's a which is causing ad expense to reduce. And even in our numbers, we've not witnessed any sort of improvement even since 2019 and quarter-on-quarter also as top line has reduced. So if you could just throw some light on that.

See, firstly, I think what is more important to understand is that our business is, our revenue, if we were to put it is actually has 3 components to it. One is what comes from subscription-based business? What comes from advertising-based business? And what comes from syndication? So if I actually were to look at the advertising base component of it, it's probably grown in that line itself because last year, the base effect was there, right? We had a low base due to last year's COVID scenario.

So we're saying our ad has grown north of 30% from last year? Our ad -- revenues from ad?

Yes, yes. The business which is dependent on advertising directly or indirectly. So television, net channels or YouTube, et cetera. If I were to look at those businesses, we would have grown definitely upwards of 30% or probably in line with the industry also. But it's the other businesses. So for example, one of the things that we also discussed is the fact that the unlockdown during this quarter or actually post August, September has led to increased mobility amongst people, and it has actually reduced media consumption overall. So...

But sir -- sorry to interrupt you, but during the lockdown when there was higher viewership, that time we saw -- we didn't benefit from it. So...

The advertisers pulled out. There are -- let's separate 2 things. There is consumption and there's advertising, right? Now consumption has impact on 2 parts. Advertising is 1 part and subscription or pay revenue is the other part, okay? Now what I'm saying is that when there was a lockdown, advertisers pulled out and the overall ad revenue came off, which was in 2020, it happened significantly in the first -- almost first 5 to 6 months of the lockdown. We were down overall by anywhere between 60% to 80%. And then slowly, it clawed back 2021 because of the low base effect that revenue actually grew significantly, right? So that is one part of it. Now when you come to the pay revenue aspect, that's what I will say that because of the unlockdown as part of it, the pay revenue actually has been stagnant or probably even degrown to some extent during this quarter because of the fact that there is a lot of unlocked movement of people who then, therefore, don't have enough time.

So to just understand this better, could you give a breakdown of how subscription has done, how ad is done and how syndication has done? Because right now, it's seeming a little murky.

What I'm trying to tell you is that, see, our overall top line has grown by 23% during the 9 months. Within that, the advertising-led business has grown by upwards of -- probably it has grown in a similar range of what you are indicating for the industry.

So around 35% or upward?

35% plus. Okay. But the subscription-led business would have probably degrown to an extent. -- and that has pulled down the overall average down.

Okay. And so same with syndication?

Syndication may have been probably marginally higher than last year because we definitely had -- but it's not at the edge scorching base of 37%.

Right. Okay. And can you give me a broad breakup of revenue between ad?

No, I also myself wouldn't have -- we don't look at it that way, honestly. So -- but since this question of advertising revenue has come up, I thought that this -- even I saw that article and when we dug deeper on that, this was the -- and kind of we compared it with our own business. And what it says is broadly correct that advertising revenue would have on a year-on-year on a low base of last year has grown by maybe about 37-odd percent.

Right. It's not only on the low base, in fact, from 2019, also it's grown by 10%.

By 10%, yes. Yes. So -- you're right. There was a...

It's not just the low base, correct?

Yes no, It is not, I mean, if we see from '19 to '21, it's a low growth, right? Because the last year was a low base of 37%. But having said that, that 10% what you are saying or what has been quoted or 37%, that's something that we have also experienced.

Okay. And sir, if you could just throw some light on our traditional media business of 12 because we're not growing at the pace we want to be growing at. And my understanding would be that a lot of the channels, et cetera, would need to acquire new content, which was long overdue.

To give you a sense, actually, for this 9-month period, while digital media has grown at 20%, traditional media has actually grown at 26%.

That is, again, based on the low base, right?

Ms. Mehta?

Yes.

Ma'am, sorry to interrupt, but we have participants waiting in the queue for their turn. You can just finish your questions and then come back in the question queue. Yes, you may please proceed with your final question.

Yes, sure. So if you could just give some -- the traditional media growth of 26%, again, is due to a lower base, right? So I mean can we maintain this growth of 20%, 25-odd percent going forward? Are we seeing some sort of improvement?

Overall traditional media has kind of seen a better growth this year which is reflected in this number. Right now, very difficult to comment on how it will close for the full year. But we are confident that it will maintain at least for this year at least. And yes, because of the low base effect also because otherwise, the traditional media normally has always been single digit -- high single digit or low double-digit kind of a growth business. So considering the low base effect, we hope that it will maintain the growth of the digital in any case for the -- so that is a higher growth based on the fact that there is a low base.

Which means overall also, we'll be looking to grow at around north of 20%, 25%, right? If both are growing at a similar pace.

I'm unable to give you a forward kind of statement, but my -- the point I'm making is that for this year, FY '21 -- sorry, FY '21, '22, the current year that we are seeing, we hope that traditional media should be at least the same similar growth of what digital media is, if not, then that.

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

Am I audible?

Yes.

so here, one thing I wanted to understand was on the traditional media. I understand you may not be able to give exact numbers on 3 different streams, but at least give us some sense in terms of how large is the syndication business? And Q-o-Q, we have seen the decline in revenue. So is it largely because our syndication business has gone down or how should we look at that?

Yes. So syndication business is a deal-based business. And to that extent, that has been affected in the current -- in the Q3 so that is, in a way, a combination of cyclicality and seasonality kind of a thing. And unfortunately, I'm not able to give you a color what is the size of that business. But it has definitely been -- so last quarter, we -- and I mentioned it also last quarter that this was led by a few satellite syndication deals.

Right. Because even, to be very honest, one problem that we, as an investor are facing is that you have pumped in INR 180 crores, INR 200 crores in new initiatives, but we hardly have a clue as to where that business is going, right? So in terms of numbers, whether broadcasting, viewership, whether revenue. So give us some sense on that, I mean, otherwise, we are almost groping in the dark. It's a black box for us. So I feel it's important for you to at least give us some sense as to where the things are going.

So I have, in fact, given in the previous couple of questions that came up. I actually said the thing also that the -- what has happened with the ratings and all of that. And what I would like to just add over there -- or even something which I said is that as of now, we are -- that's quite confident that it should be breaking even in the next financial year, that business.

Okay, okay, okay. So you are talking the TV channels, right? The ShemarooMe will still remain -- we'll continue to spend money on ShemarooMe.

The ShemarooMe is likely to remain in an investment mode for next year, at least, is what the way we are seeing it because that opportunity in terms of when it matures still some time away. And I'm right now -- I mean we all hope that it happens faster. But more importantly, if you understand what we are doing or building is really the strong direct B2C business over there, where the connect of the brand in the core audience of our offering is strengthening with each offering because of, obviously, the content. But equally importantly, the attached marketing and brand building, et cetera, that goes along with it. And that, in a way, is helping us create a very, very strong position in that core audience. And definitely, I'm -- in a way, increases the I would say the entry barrier also and helps create much more loyal audiences, which kind of results into a repeatable business on a month-on-month basis. So that's the nature of that business, which is a subscription-driven business.

Okay. So I mean the point I wanted to understand was that INR 15 crores average quarterly investment in new initiatives post breakeven, will it go down substantially to INR 5 crores, INR 6 crores or will it, I mean, will continue to take that whatever was given to broadcasting channel and pump it into ShemarooMe? How do you think about that?

Okay. Put it this way, we -- so the way we are looking at the business is we are looking at what is our -- actually, what is our cash flow generation on a month-on-month and quarter-on-quarter basis. And out of that, we kind of allocate the investment to 2 various businesses. So one is we are very careful about ensuring that we do not invest more than what we are generating. Whereby we may then need to go and borrow or something? Secondly, what I can say is that even within these businesses, based on what is the real potential. Finally, we have to derive an IRR on this business. And what is the actual real potential of these businesses and the investment will only be based on what is the available scale or potential of this business. I cannot -- for supposing, for example, if the business is going to be INR 100 top line, say, 3 years from now. And today, supposing it's at say INR 10, INR 15 or even INR 20, and that's projected to go to INR 100. Now I cannot go and invest INR 200 for -- to generate that 100. So keeping that view or discipline is something that we have been mindful of. So while I'm not able to give you a number, what I'm just trying to share with you is the philosophy or the directional aspect. And yes.

Okay. Sir, last question for my side. So even one thing like you broke up traditional media into 3 things, and even without giving numbers, you gave us some sense as to which part of the pie is growing and which is kind of stagnant and where the degrowth is. Similarly, on the digital side, if you give us sense, of course, ShemarooMe, of course, must be growing. So between YouTube and the OTT syndication, The growth rates are equal or one of them is more kind of towards the...

YouTube has grown faster. If I have to just answer in one line. YouTube has definitely grown faster on revenue because digital advertising has been on a fast growth mode.

[Operator Instructions] The next question is from the line of Rishikesh Oza from RoboCapital.

Sir, my first question is, as you mentioned about the traditional segment growth at a similar side of the digital on low base. So basically, would it be fair to say that the traditional segment recovery would happen somewhere in 1, 1.5 years?

Yes. I mean we are hopeful that -- so 2 things I want to highlight here. One is that -- see is that -- as and when the times normalize, so as I even said in my opening remarks that -- we are all looking forward to a very temporary disruption from Omicron. If we don't have any further challenge on the COVID front, that's one part. I mean has that happened? I think the economy overall is on a fairly decent growth path or -- I mean probably many vectors are beyond just the recovery part. But overall, at an economy level, we would be in a decent growth path. And that definitely will translate to an overall ad spend growth. And that will have an impact on the traditional media recovery. Second thing, what I -- what one need to understand is the broad change in the business model that we have been working over the last couple of years, whereby the dependence on B2B businesses, which is the syndication business, actually, we have consciously been bringing it down, increasing the presence on B2C through television channels, which helps us create a much more recurring revenue, a more stable, predictable revenue stream and a much stronger brand connect with the audiences. So that is something that's in kind of, I would say, in work-in process -- work in progress. But I mean, I would say in terms of along that path. And -- we see -- actually, we now see a good light at the end of that tunnel. So I'm hopeful that, yes, we should be in that -- earlier than the time frame that you have mentioned.

Okay. That's it. Okay. And also, my second question is for how many years are you going to fund these new initiatives, right? Will we keep on funding for maybe 2, 3 years? Or like when will you pull off that plug ?

So each of these depend on the ultimate outlook of that business, right? So if something is today at 20 but expected to go to 100 in a 3-year time frame, then it is likely to see an investment -- continuation of the investment. And even though it may mean that we have to probably -- I mean, obviously, we need to invest heavily if we have to reach that . Versus if something doesn't have a potential. We've actually pulled up on many businesses where the potential was not there. So we -- I can say one thing that we are not scared of pulling the plug on businesses. More importantly, where it fits in strategically, what is the potential of that business? And how we are on the execution curve. So I think all 3 -- if you look at it, that's the combination. There are many factors that go into that decision. But I can easily say that this is a continuous review exercise that we do literally on a month-on-month basis on where we are, which is why, in fact, even to the previous question I highlighted the full philosophy on how we decide on what is the cash flow limit of investment and things like that.

The other way to look at it is the digital dividend that we're seeing today is a result of a lot of investment that we did in the past 10 years.

Yes.

The next question is from the line of Rahul Jain from Credence Wealth.

Hiren, just to go back to this employee cost. In the last 4 years, we have seen a sharp jump in the employee cost. Typically, 4 years back, it used to range in the region of around INR 30 crores or lower than that. And from INR 30 crores in FY '17, it's gone up to 40%, then 55% and 68% and last year, March 21, it was roughly 59%. And current year, what we are observing is again, you are already reaching 9 months 52 crores, one of the previous participant had asked about the increase in the employee cost for this quarter. So even when I compare this 9 months compared to the previous 9 months, the number is higher from INR 47 crores to INR 52 crores. So we have this recent resolutions with regards to employee stock options and increase in salaries for key personnel of the company, the directors and the key personnel. So going forward, how do we look at this? Is this INR 20 crores going to be now the run rate going ahead, how is it going to be? How do I look at the employee cost? Are we done with the major additions which we required for our various new initiatives and somewhere this employee cost can become stable now?

So what I was trying to explain also to the previous caller, maybe I didn't come across in the right manner. INR 47 crores growing to INR 52 crores is roughly about 11% increase in 9 months, okay? So that's -- as I was explaining, that's a better way to look at it because in the previous year, if we see September versus December. In December, we have normally a -- sorry, around Diwali, where we pay out normally our performance-linked incentives. So there is always a slight benchtop lumpiness and because Diwali bonus component, which comes in that so it bumps up the December quarter number, you can always see traditionally, you can compare December with September and any of the year. So that is something that I would like to kind of just reiterate that aspect. Now coming to the management's remuneration growth. So actually, if you go back and see the last 4 years. The promoters and directors actually have not taken a salary hike in last 4 years. We actually run the company cash flow and investment need were there. We've actually not taken a salary hike for 4 years. So in a way, one correction of that is due now that times are better. And secondly actually, if you see the absolute number -- those numbers are ridiculously low compared to anyone.

No, no. I surely appreciate that, Hiren. So I am with you, and I really appreciate last 4 years, management remuneration has not been changed. So that is really appreciated. What I was trying to understand, so nothing against what has been there that typically, is it a pointer now that probably we are through with a lot of burns and somewhere this is going to stop maybe in a quarter or so. So basically, next year onwards, is this an indication to you feel next year should can be a really good growth here in terms of revenues? Because you are taking this after 4 years, so I was trying to understand from that perspective.

Sure. No. I'll also -- so there was 1 other question in which I wanted to address, which was regarding recruitments and further increase. So 2 things are there. One is, as we all have been reading and all of that, there is a -- at this point, overall cost pressure on people cost front across the entire corporate world. And to that extent, even we are not isolated from that. We, I would say, have reasonably managed our cost structure -- in fact, if you go back to FY '20, the number was higher than this FY '21 March number. So actually, we tail down on our cost. And given the current run rate, I don't think in FY '22 also, we'll cross FY '20 employee benefit expense. That much we have managed the ship with relatively tight cost structure. See, but ultimately, this is a people-based business, and we need to obviously have great talent to drive the growth of the business. And as we actually expand into newer horizons, more digital media, et cetera, that aspect is bound to happen. So continuous addition of people, key people or mid-level or whatever is a continuous process. Our overall target is that we look at each businesses AOP and see what it can support. And accordingly, we look at what is -- and people cost, et cetera. And accordingly, we look at how do we bring the new talent within that structure. Also, as a part of that, we also like -- have taken the shareholders' approval for the ESOP plan because that will also help us in both attracting good significant talent and also retaining some of the key existing talent through -- and not just retaining, giving them a great participation in the company's future. So that is -- just to answer your third question on whether the people cost has kind of plateaued out or not. I think overall, this year, entire corporate India is facing this challenge on people costs. And that, I think, will definitely be there for us. And in fact, ESOPs has been also created to help us deal with that in as good a manner as we can. But yes, to answer your third question or last question about whether these are indicators of I would definitely say, as I said earlier that now that we have the operational cash flow and performance has improved significantly. We definitely felt that this was a time when we could at least correct our remuneration to more better levels at least, not yet to market levels, but at least to a better level. So definitely, there is an impact of the operational improvement on that.

The next question is from the line of Deepak Poddar from Sapphire Capital.

Sir, you mentioned about the breakeven in the next financial year. So I just wanted to clarify, you mean like the entire financial year, like at what point in time are we looking to break even in the next financial like by mid next financial year or by the end of the next financial year?

Well, while I am not in a position to pinpoint the exact time. But if I -- I mean, the aspiration is that in the first half, we hope to do that. But right now, given that it has too many moving parts and dependencies attached to it. I'm a little hesitant to kind of commit to a time line on that.

No, no. Fair enough. Understood. And my second question is on your revenue side. So by when are you looking to reach a pre-COVID of INR 500 crore top line. So is that what we are targeting maybe next year? Or any comments on that?

So as I was explaining to one of the questions -- replying to one of the earlier questions that -- basically, there is a change in the business model. So the full indication by something that we have consciously defocused both in terms of the management focus as well as in terms of the capital allocation. And rather focused on investing in the B2C aspect, which is all the various -- so one is television channel and of course, the other is the digital ShemarooMe. So in that sense, it's a conscious effort to actually take or not really change that trading revenue for the sake of top line, rather build a much more loyal audiences, recurring, more predictable and stable revenues on the B2C side. So to that extent, right now, we are not chasing that number. I mean, we are hoping that over a period of 2, 3 years, we will be significantly higher than that. But whether that number when it will happen is not something that is my current goal.

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

Two questions. First of all, I would like to understand that the sequential fall in the digital revenue was -- sorry, the growth in sequential revenue in the digital segment was quite taped. Can you please talk about what went on there? And then I have a follow-up.

On digital media air thing?

Yes, yes, yes.

it's been 20%.

No, sequential. It was a percent right compared to September quarter.

Sequential -- actually, there is a level of seasonality over here. So I would actually not be too -- in fact, this is something that we have always discussed even in the past that as far as digital media is concerned, in fact, overall, because media has its own seasonality of across various parts. So we actually don't look -- compare it on a sequential basis.

Okay. Okay. So I have a follow-up. I just would like to know what was your digital media breakup as you always give this quarter. And also, can you please talk about your OTT business, ShemarooMe? I mean, is subscriber numbers are rising? If yes, at what rate? A number would be helpful.

Sure. So at a broad level, YouTube is probably now approximately 2/3 of the digital media revenue. And the rest is split between now telco business is below 10%, and the rest is ShemarooMe and other syndication businesses.

And on the OTT subscriber on ShemarooMe, I need to know.

Right now, the base is still building up. I can say -- I mean, on low base, we may -- if I give you some number and we grew by so many, 100%, 200%, it really doesn't make too much sense. When the -- when we reach a certain critical mass, we'll be happy to share the numbers. But directionally, I can say that the -- all the consumption metrics and the subscription metrics are quite positive and strong, at least that much I can definitely say we are definitely seeing extremely good user engagement. We are seeing very, very good completion rates of our any fresh content that we are putting up, the minutes of usage, et cetera has been on a broadly on an upward trajectory.

The next question is from the line of Sidhant Mattha from B&K Securities.

So 2 questions, sir. So first of all, just the previous question that you told about 2/3 of the revenue is coming from YouTube, 10% around telcos. So...

Less than.

Less than 10%. So around 25% to 30% coming from ShemarooMe and other businesses. So because in your new media revenues, you have the -- you include the television business also?

No.

So, so that is traditional business?

Yes, yes, yes.

Sir. And secondly, sir, one more thing. Sir, because we haven't been seeing genre ratings, we have been seeing the ratings as per the state or the area-wise from the free ratings which we have access to. Before that, we used to have genre ratings. So I can't see Shemaroo MarathiBana on the -- like earlier there used to be Marathi Free and Marathi Pay and then Marathi Free, I used to see Shemaroo MarathiBana always on the top first and second. Now because it's a region wise, there are Hindi channels and Marathi channels, both mixing up together. So how is Shemaroo MarathiBana performance been through -- in the genre specific, if you have the data? And how has Sun TV Marathi channel performed after its launch in October?

So Shemaroo MarathiBana in the Marathi movie category has been both in terms of its ratings as well as ranking being stable. And Sun Marathi has opened I would say, at an acceptable level, but it has not made any dent in our ratings or affected our consumption as of now.

Okay. So I don't remember, but used to be #1, #2 in Marathi Free with, I think, so first Marathi being the #1 channel and you being the second number. Is that the similar line which I can see? Or is there something which has changed?

So now in the free market, there are 4 Marathi channels. , Zee Chitramandir, Sun Marathi and Shemaroo MarathiBana. continues to be largely movie-based programming channel, while Sun Marathi is a GEC and Chitramandir also in the last, I would say, 3 months changed its programming to GEC program.

They added a lot more GEC to...

GEC programming. But...

It started as a movie channel. It's a movie feature channel.

We started in the past 3 months, it has added a lot of GEC programming, which is leading to its growth. The viewership is coming on the GEC content. In the movie space, it continues to be and we are largely both stable, a little up, a little down, that kind of. The gap is not too much and we keep going up and down between the 2 offers.

Okay. So Zee and Sun having -- see, Zee Chitramandir and Sun Marathi haven't entered your ratings as per...

Chitramandir's ratings are higher than both as Sun Marathi. But Zee Chitramandir is in the process of transforming more into a GEC movie channel.

So then that happens -- okay.

So Zee Chitramandir is still a movie and Marathi combo. Sun Marathi is a pure-play GEC. So if we look, if we were to break it into genre as you were kind of saying, movie and GEC, then it's .

Okay. Because now we can't -- because the data isn't freely available, so I just wanted to have your imports, but that's not an issue.

The next question is from the line of Rohit Trivedi, an individual investor.

Hiren, can you hear me?

Yes, I can.

So Hiren, as you say, there are 3 components to our revenue: subscription, advertising and syndication. And advertising, as you have said, has grown more than 35%. And my question is about kind of the subscription where the answer was either not clear or I wasn't able to kind of rightfully understand it. So subscription would be ShemarooMe largely and it would be around 25% component kind of right of the digital pie, which has grown by 19%. Does that mean -- and YouTube, as you have said, kind of right has grown very well. Does that mean that overall ShemarooMe hasn't performed as much as we expected in terms of revenue, so it may have kind of got the users and kind of watch right and everything? But in terms of revenue, it's not performing as well as we expected? Although earlier you alluded that we are kind of putting a significant amount of investment into that, close to kind of out of INR 20 crore, I believe, a significant amount would be going to ShemarooMe. So what is overall picture of revenue user kind of growth rate and subscription growth rate in ShemarooMe and how the investment is going forward in that direction?

I think you mixed up couple of answers, which I was discussing. So first, I want to give the revenue breakup for new media or digital media, which is, as I said, roughly 2/3 is YouTube, 65-odd percent is YouTube. Less than 10% now comes from telco, which at some point, the reason why I'm giving it separately in this manner is that, at some point, telco was 50% of the revenue. But we've seen -- we've kind of absorbed that coming whatever that fall in the telco revenue. The rest, which is a combination of ShemarooMe and syndication revenue book. So that's the breakup of the digital media business. Now the question that earlier was asked was for traditional media where advertising revenue has grown by 37% or more kind of a thing. Or even if we look at overall ad spend actually in India, then the ad spend has -- because of the low base effect grown by 37%. Now there if I were to look at it as an aggregate level of the company, then we have 3 businesses, or 3 sources of revenue models, if I have to put it. One is subscription base, one is advertising base and third is syndication base. Now when I further look at subscription-based revenue, ShemarooMe is not the only 1 in fact, it's -- there are others like DTH is a subscription-based revenue, and there are a couple of other subscription-based revenue strings also. So all put together, what I was trying to say is that the -- and the revenue on subscription has degrown compared to last year. Now when we look at ShemarooMe specifically, actually, ShemarooMe launched in April only. So last year, we had hardly any subscription revenue on ShemarooMe. So there is no base comparison available itself for ShemarooMe.

Right. So can you then kind of like please, Hiren, talk more about ShemarooMe that what is the trajectory in terms of investment that we are doing? So a bulk of our investment, is it geared towards ShemarooMe? Or is it kind of equally spread between the television channels and ShemarooMe? Because it seems that television channels are kind of it would break even in the next financial year, while ShemarooMe seems to kind of have a longer time horizon in terms of investment.

Yes. So Mr. Trivedi, as I -- so as I said earlier, even now the bulk of the investment is towards the television channels business. And the way to look at it, there -- so we -- while I'm not in a position to give specific numbers, but philosophically, our set -- strategy-wise or policy-wise is something that I shared earlier, where I was repeated for the -- in case one has not fully grasped it. So basically, what we do is, we look at what is the investable cash flow available to us. On the other hand, what is the business plan need for investment? And third, obviously, what is the big picture that investment that this business can support in terms of scale or potential. So based on that, something which today if it is, say, at a revenue of say INR 10 or INR 20 and has a potential of INR 100, I'll not go ahead and invest INR 200, INR 300 to generate, 3 or 5 years down the line, revenue of INR 100. So we, to that extent, have -- would cap that investment on that business is potential -- based on the business' potential. And at the same time, we would look at what is the cash flow supporting for that business. So all put together is what that individual business' investment trajectory is kind of decided.

And I've got a very short question about inventory? May I?

Yes.

So we haven't got the kind of inventory number at the end of 9 months. We have got it kind of at the end of 6 months. So can you kind of please talk about inventory figure? And has it increased? Or is it at the same level? And where inventory investment is more going forward would be? Would It be in ShemarooMe or kind of traditional digital channel -- sorry, traditional television channels.

Mr. Trivedi, the inventory has come down from INR 706 crores as of September to INR 700 crores.

Okay. And going forward, inventory investment, would it be more for ShemarooMe or the television channel? Or how would it be splitting going forward, if you can tell me?

No, it would be both. I mean each of these businesses have their own fundamentals and their own need for content and investment. And it would be both. So I cannot right now break up or say that it will be more for this or less for the other.

The next question is a follow-up from the line of Shikha Mehta from Equitree Capital.

Hello? Am I audible?

Yes.

Yes, ma'am. Please proceed.

Yes. I just had a couple of more questions. A follow-up to the previous participant's question about inventory. If you could just give a ballpark figure also of how much inventory is blocked in new initiatives and how much we have otherwise?

I'm sorry but right now, I'm not in a position to do that. But yes, I mean, all I can say is that over a period, the new initiatives will be less lower on inventory.

Okay. Okay. And sir, you were still maintaining an IRR of 18%, so if you could just give even a ballpark guidance on when we would be able to return to, say, INR 70 crore-odd PAT where we were?

So Shikha, if you actually see the EBITDA margin or the EBITDA net of the investment, we actually are already at that level, right? It's that cash flow that we are taking and investing in the new initiatives that is what is kind of giving you the impression that we are not generating that IRR.

So again, to reiterate, our IRR is at 18% or north of that, right?

Yes.

The next question is a follow-up from the line of Dhwanil Desai from Turtle Capital.

Just 2 more questions. So first, I wanted to understand since we are not trying to defocus from the syndication business. What happens to the perpetual inventory that we have on that account where we don't have digital rights? How do we treat that? And what will happen to that?

Where we don't have digital rights?

No, I mean some older content where we may not have digital rights, only TV rights or anything like that?

I think it will be less than 1% of our -- less than maybe 5% of the inventory.

Okay. And the content where we have both the right spots since we may not be then kind of doing a syndication for the TV channels...

No, no, no. So I understand we will lose the revenue opportunity to generate the IRR. There are 2 questions here. I have an inventory where I own either perpetual or even say period rights. Now if I am not -- I don't have a B2C monetization of that content, then I will definitely look to syndicate that content. So I'm not averse to -- even in last quarter, we have -- and we continue to have television channel deals for that. So -- but that is only out of the core inventory -- from the existing inventory. Limited in terms of capital allocation -- it's not even where we will not invest. We will invest, but if I was investing 100, now that investment has come down significantly, maybe less than 50, maybe 30 or thereabouts. That's the only difference. I'm not -- why would we lose a revenue opportunity.

Understood. Understood. Completely understood. And second question is with respect to your content strategy, both for Shemaroo MarathiBana and for Shemaroo TV, any new content to be launched, anything that we are trying to do to increase viewership, get more pool, if you can talk a bit more about that?

There are a lot of experiments as well as initiatives that are continuously on. We do it on a continuous basis. Just to give you an example, we launched Korean dubbed shows on Shemaroo TV dubbed in Hindi. Now it was almost -- you can say probably for the first time that Korean content dubbed in Hindi has been launched on television, may not be first, but one of the early movers, I would say. So what I'm trying to say is that these are experiments that we do on a continuous basis because that also keeps the excitement of the audiences, the connect of the audiences, it gives us more talking opportunities. And no one knows which is going to be the next big hit. So it's something that innovation or change is literally the only constant or the name of the game, and that's something that we keep doing. So I mean, I just give you 1 example. So I'm unfortunately not able to share my forward slate on that. But all I can say is that our team is continuously on this whole innovation or experimentation and something that works, we continue or scale it or expand it. If it doesn't work, we scale it back or -- all that is something which is literally on a continuous basis.

Yes. Dhwanil, I also wanted to add that our audiences are also continuously changing in terms of their consumption behavior. So -- and we believe that we can catalyze some of that change for them also. So hence, actually, we do a lot of experimentation. At the same time, we are very cognizant and P&L-oriented for our investments, I mean, experiments also. So we do it in small measure. We see and monitor closely how it performs and then decide to expand it. And I think the rating gain that we have seen on Shemaroo TV is a payoff of some of the experimentation that we were able to do and gain loyal audiences and differentiated actually content also on the channel. So yes.

Okay. I mean I was trying to understand more like the recently launched channel Q. They are trying to do a lot of -- bring lot of digital stuff onto the TV. Any such initiatives or more original from Shemaroo TV, any thoughts around that?

So, Dhwanil, we studied the channel. And what we also did is that the appeal of a lot of that content when we studied the audiences was coming from the kids segment. plus some things -- anyway that is 1 way to do it, and we will also experiment the various...

We will definitely experiment. And all I can say is, as I said, that there is I'm not able to share the forward slate of various content offering because, obviously, as you can understand, it's a little confidential at this stage.

The next question is from the line of Rahul Jain from Credence Wealth. .

Just with regards to the inventory part, so you mentioned the current inventory is down to around INR 700, INR 706 crores compared -- almost flattish compared to last quarter. But going forward, how do we look at...

It's down by INR 700 crore over INR 706 crores. Yes, flattish, but yes. Some of or it has been coming off.

Right, right, right. It has remained stable or it is coming off. So typically, next, say, 1 or 2 years, how do we see the inventory level and say compared to the revenue? So on one side, do we envisage reaching a revenue level of INR 500 crores, INR 550 crores and inventories coming down from, say, INR 700 crores to around a similar level of revenue. How far that could be?

No. So if I have to -- I said this earlier also that I believe that our inventory has peaked long time back. We have been on a downward trajectory. We were at -- probably at peak, we were upward of INR 750 crores of inventory, maybe I don't remember the exact number, but probably somewhere upwards of INR 750 crores. Over 2 years, we brought it down to -- not even 2 years actually, probably less than that. We've brought it down to INR 700 crores. And directionally, it is going to be downward. Now what is the speed of going down for now, at least, I'm not in a position to predict that.

As there are no further questions, I now hand the conference over to Mr. Hiren Gada from Shemaroo Entertainment Limited for closing comments. Over to you, sir.

Yes. Thank you, everyone, for joining in for our -- for the Q3 earnings call, and we hope that everyone stays safe and stays healthy. Looking forward to a great next quarter. Thank you and all the best.

Ladies and gentlemen, on behalf of Shemaroo Entertainment Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.