Shemaroo Entertainment Limited (SHEMAROO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Shemaroo Entertainment Limited Q4 FY '22 Earnings Conference Call hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Shekhawat from Prabhudas Lilladher Private Limited. Thank you, and over to you, ma'am.

On behalf of Prabhudas Lilladher, I welcome you all to the Fourth Quarter FY '22 Earnings Call of Shemaroo Entertainment Limited. We have with us the management represented by Mr. Hiren Gada, the CEO and CFO; Mr. Kranti Gada, the COO; and Mr. Amit Haria, the VP of Finance and Accounts. I would now like to hand over the call to the management for opening remarks, after which we can open the floor for Q&A. Thank you, and over to you, sir.

Hello. Good afternoon, everyone. It's a pleasure to welcome you to the earnings call for the fourth quarter ended financial '22. I hope everyone is keeping safe and well. First and foremost, I'm very happy to announce that we have promoted Mr. Amit Haria to the position of CFO. And he has been with the company for over 15 years overseeing the finance and accounting department. I will first request him to brief you on the financial highlights, and then I will take over to discuss the business highlights.

Thank you, Hiren. Good afternoon, everyone, and welcome to you all. Let me start by giving you the key financial highlights. I will be discussing the consolidated numbers. For the fourth quarter of the financial year 2022, the operational income stood at INR 94 crores, a Y-o-Y growth of 31%. EBITDA for the quarter was approximately INR 9 crores. EBITDA margin stood at 9.31%, and net profit after tax was reported at INR 2 crores with a PAT margin of 2.19%. For the financial year ended 2022, the operating income was INR 381 crores, which has grown by 23% Y-o-Y. EBITDA reported was around INR 36 crores, which has nearly tripled Y-o-Y. EBITDA margin stood at 9.4%, while the net profit after tax was at INR 5 crores with PAT margins at INR 1.38 crores -- 1.38%, sorry. For Q4 FY '22 expansion on the new initiatives were INR 14 crores. And for FY '22, it was INR 67 crores. If you were to adjust these investments in the new initiatives, the adjusted EBITDA from existing operations would have been approximately INR 23 crores for Q4 FY '22. And for the year ended '22, the adjusted EBITDA would have been approximately INR 103 crores. For the fourth quarter, digital media revenue stood at around INR 46 crores, which were up 26% Y-o-Y. And for FY '22, the digital media revenues stood at INR 181 crores, which was up 21% Y-o-Y. Traditional media revenues in the fourth quarter stood at INR 47 crores, which were up 16% Y-o-Y. For FY '22, the traditional media revenue stood at INR 200 crores, which was up 24% Y-o-Y. Now I hand over the call back to Mr. Hiren Gada.

Coming to the operational highlights for the quarter. So the year started -- the quarter started in January with the Omicron-related lockdown and, in a way, slowdown. So the lockdown on account of Omicron variant in the first month of this quarter definitely put pressure on the revenues as advertising spends were impacted. There was caution at that time. Secondly, overall, this was amplified due to the triple threat of rising input costs, uncertainty in global economic environment and supply chain disruptions primarily in many of the advertiser sectors. However, on the positive side, we witnessed the return of advertisers who were absent during a large part of the COVID-19 pandemic. This partially offset the pressure on advertising revenues. On ShemarooMe front, we released 15 new titles during this quarter. with content across movies, web series and play, which have been well received by the audiences. We also partnered with BSNL domestically and Orange Telecom and Etisalat Telecom in Egypt internationally for the distribution of ShemarooMe. On YouTube front, we crossed 59.7 million subscribers on our YouTube channel, FilmiGaane. And the channel continues to maintain its foothold as the 20th most subscribed channel in the world. Coming to the broadcasting side, in this quarter, we witnessed which is the current quarter, which is April onwards, we witnessed the exit of the 4 big broadcasters from the GEC space on the DD Freedish once again. So they had exited during 2019, and they had reentered during the pandemic. But again, the top 4 broadcast -- the GEC channels or the top 4 broadcasters have exited, thereby creating an opportunity for the FTA-focused broadcasters to gain viewership. We took this opportunity to launch a new Hindi GEC-focused FTA channel called Shemaroo Umang. Our other FTA channel, Shemaroo TV saw an improvement in rating due to our content creation, quality content creation and increasing reach. And Shemaroo MarathiBana's ratings remain steady on the back of fresh programming. As you are aware, the last couple of years on the back of double whammy, COVID pandemic and its impact on the media industry as well as our investment strategy for transforming the company to a much more B2C player, as financial performance was subdued. Considering this, it gives me pleasure to report to you today that we closed the year with a very healthy turnaround despite the challenges faced during the year. As for the industry reports on the way forward, the India's media and entertainment sector is expected to be one of the fastest growing globally in terms of both consumer and advertising spend, reaching $3 trillion by 2025. As we are focusing now more towards the B2C strategy, we are confident on capitalizing on this opportunity pie through our strong brand presence. With these positive tailwinds and most of the world returning to normal in the aftermath of the COVID pandemic, we are witnessing a significant revival across all our business segments as well. And we are confident in our strategic plan for the long run. Although we understand that in the short term, the challenges for the economy do remain, and this could result in volatility in business conditions and revenue. With that, I open the floor for questions.

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

Hiren, congratulations. Just one question. On our channels, we have launched 2 channels, and we ran into straight away into trouble due to COVID and shutdowns and we were losing significant capital quarter-on-quarter on this. The whole idea in the last call, you explained is that the -- at least one of the channels will reach breakeven in the later half of this year -- or in FY '23. And before that even happens, we have launched now a third channel. So we're kind of confused, right? I mean like we have not reached a breakeven for the 2 channels, but we're now doing third one. So can you please explain the rationale for that?

Yes. So there are 2 parts to this. Firstly, one is a short-term opportunistic aspect, and other is a long-term strategic aspect. So in the short term, we saw and knew the exit of the big 4 broadcasters from their general entertainment channels from the FTA space. Now if you map the FTA ecosystem, there's approximately INR 2,500 crores to INR 3,000 crores advertising pie and which, I would say, probably around maybe 1/3 or thereabouts would have been taken up by the GEC channels of the big 4 broadcasters. Now the moment they are exiting that advertising pie, the revenue kind of becomes available to the existing channels who are there. And therefore, we clearly saw this as a tactical opportunity to actually get in and encash or participate in the pie that kind of opens up for this. So that is one. And that is, as I said, there's a short-term tactical part of it. There's a long term or a more strategic part to it, which is that, ultimately, over a period, the broadcast business works on a network effect. And this is something we've discussed many times in the past few calls also that the broadcast business works on a network effect. So the more channels you have that much more you are able to gain captive audiences or move captive audiences within the network, that much more your other operational efficiencies you are able to drive, that much more your pie with the advertiser you are able to drive. So that is the -- in fact, originally also, we had a multichannel plan right to begin with. And of course, due to pandemic and many other things, which right now I don't want to really get into that past aspect, so it was never that we were to launch only 2 channels. To bridge 1 more question -- or 1 more aspect of the question that you asked, that when we expect to break even and before that, we've launched this. So what does happen is that -- so there are 2 parts to this. Firstly, that breakeven, what we've discussed is fairly on track. So we do have visibility towards that. So we know that, that investment is kind of tapering off. Secondly, the DD Freedish platform does their auction only once in a year. So if you are participating in that, you're in, if you are not, you have to wait for 1 year. So in the scenario of the big 4 exiting, there was an opportunity available to actually do that. Having said that, I would add 2 things over here. The focus for the Shemaroo Umang right now in terms of distribution is extremely narrow in terms of trying to keep the primary leader distribution onto DD Freedish and maybe just a few networks where the cost structure could be low. It's only once we reach a certain revenue threshold on that is when we may look to scale up the distribution. So in a way, we kind of tried to keep the overall cost structure as low as possible but within that create the opportunity to encash on the event that's kind of happening.

Right. Right. So then is it like what you had mentioned is that our losses on new initiatives should come down to INR 30 crores, INR 40 crores. This year, we are on track for that in spite of the new channel?

As far as the broadcast business is concerned, I would broadly say, yes, we are fairly on track for that.

No, no, no. Hiren, INR 75 crores, INR 80 crores is the total loss on the entire new initiative including the OTT. This not only 4 channels.

Correct.

So the overall thing should half for the whole new initiative or only for the channels?

So the way I would look at it is that we should be looking at this year in terms of investment. So because of this, there is definitely some amount of additional investment that would go in because there is a period of breakeven that is expected or whatever investment. As I said, the overall investment outlay we have kept at minimum. In fact, there's a lot of content synergy from the existing earlier content which we have already showcased that's what we are kind of working out. So the overall investment that for the year, if I have to kind of discuss, is approximately in the range of about INR 50 crores.

Okay. So then is it fair to assume that whatever EBITDA you did this year, net of that plus the reduction in that cost plus the growth of this year should be our EBITDA next year. That's a fair assumption?

Broadly, yes. So what I currently am not able to fully commit or comment on this. So conceptually, our -- how would I say, arithmetically, what you're saying it should -- that's how it should be playing out. There is only one difference in that, which is the amortization of the content libraries, that could have some changes on the EBITDA. But I think in terms of cash flow, I think, yes, that's how it should be playing out.

Can you throw some light? Are there any changes in accounting that you are doing which will mean higher amortization?

No, no, there is no change in accounting. But based on the consumption of the content, so right now, I don't have full visibility on the content consumption and that impact on the amortization. And therefore, there may be some marginal impact linked to that.

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

I just have a couple of questions. So in our presentation, you said that our ratings have improved on our GEC channel. So can you just throw some light on how that affects our revenues, like how much improvement we see because of rating improvement, et cetera?

Sure. So our Shemaroo TV ratings, the GEC channel which you referred to, which is Shemaroo TV, the overall viewership numbers have approximately doubled in about 9 to -- yes, about roughly 9 months. And that actually -- with a certain lag, it kind of broadly translates into the revenue number, assuming the overall advertiser sentiment remains the same. So if we factor in for a slightly lower advertising sentiment also, if correlation to rating -- sorry, the correlation of rating improvement or increase or decrease to advertising is normally 1:1.

Okay. Okay. And so you mentioned that the advertising pie is around INR 2,500 crores to INR 3,000 crores. And 1/3 of that was taken up by the 4 GEC channels. Now with them exiting, does that pie itself reduce a bit to some of the advertisers based with the 4 GEC channels? And how does it work?

So it's very early days yet because of 2 or 3 reasons. I mean one is the consumer is also kind of coming to terms with the fact that some of the key channels that they were consuming are no more on the platform and therefore trying to adjust and discover the new content. Secondly, so what was happening was that in the last roughly 1.5 years or so that the 4 channels had been present on the platform, there was a certain shift from pay platforms, such as DTH and cable onto the Freedish platform because very rich content offering was available there. So there is -- there could be some reverse migration to some extent for people who may be used to and may want to follow up on that content. To that extent, yes, the pie of the advertiser also will move. At this point, we are not -- we think that ultimately, DD Freedish as a platform itself, over the next maybe 2 to 3 years, will continue to grow because platform -- as new and new consumers are coming in, the entry -- this is the first entry point for the consumer. So we don't expect that to really change. And to that extent, we expect that the pie will, to a good extent, remain. There could be some amount of shift back. Finally, the advertiser follows the consumer or the viewer. So if the viewer shifts back or to the extent that they shift back, it will affect the pie. Revenue could be affected.

All right. Sure. Sir, you said for the year, our total investment in new business initiatives should be around INR 50 crores. So that means an average of around INR 12.5 crores per quarter. Is this close to what we're doing currently with INR 14 crores. So...

Total of the full year is INR 67 crores.

Yes. So that's -- I mean, this quarter we've done INR 14 crores, right?

Yes. This quarter, we had INR 14 crores. But in the current quarter now the new channel has been launched, so the current quarter is definitely likely to see additional -- I mean, slightly a higher investment overall. So the way I am looking at it is that -- so we spent -- we invested about INR 67 crores in the last financial year. This year, we expect that number to be down by 15% roughly.

Right. And we're expecting to breakeven by around some part of half of -- half year this financial year, right? In the first 2...

In the first 2 channels, yes.

And our cost has already been booked. So that means that we should just see revenue improvement, which will flow to the fact. That's the right way to look at it, sir?

So cost is a continuous thing, right? Every month, we spend on [indiscernible] content, on marketing, on people, et cetera. So cost is a revenue expenditure which happens on a regular basis. It's when the revenue on that business overtakes that overall or surpasses that overall cost is when the breakeven happens.

Right. But, sir, earlier we used to look at our business from an 18% IRR point of view, which was the B2B business, now is there a similar metric to see the B2C business or what kind of margins or IRR should we be looking at? Because that would be more relevant when we break even.

So when we set up the broadcast business project, we -- the project IRR actually was northward of 21%. Obviously, the COVID has had some impact on that. But expect that the overall impact of the business on the cash flow -- on the margin, cash flow and the overall IRR is fairly strong.

All right. And sir, do you have any sort of division between how much revenue we're doing from B2C and B2B as of now?

Well, at this point in time, I'm not in a position to give that. But I hope that we'll -- just working out on a few more numbers that we should be -- we would be kind of sharing over the next few quarters.

All right. And sir, even on the inventory front, is it -- is that inventory fully fungible? Or there is a certain amount we used just for B2C, a certain amount for B2B, or how does that work?

So the content that we have is finally multiple rights. In fact, the whole strategy when we were investing in the content was to be acquiring multiple rights, all rights kind of situation, including a lot of the perpetual rights, et cetera. And to that extent, we definitely have [ stable visibility ] of the inventory. It may be linked to the fact -- linked to commencement of rights because we may have an existing licensing agreement with some other partners. And when those open up, yes, the availability of the -- that content is likely to be there.

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

Sir, even my first question is, so if I look at quarter-on-quarter, Q3 versus Q4, 2 costs have come down. One is our employee cost, which I think you had indicated there were some one-off in terms of increment, et cetera...

No, not one-offs I'll just reclarify...

Because, sir, you're...

Around the Diwali period is when we pay out our annual PLI, performance-linked incentive. So every year, this is the quarter where you will always see the peak, as in the highest employee costs.

Right. But my question is that it has come down by almost INR 5 crores. And I think we have done a new initiative investment of around INR 20 crores last quarter, which has come down by another INR 5 crores, INR 6 crores this quarter, so almost INR 10 crores, INR 11 crores of saving. And our EBITDA almost remains the same, and our operations costs have gone up. So can you help me understand which cost item has actually gone up significantly to kind of cause this kind of an increase in operational cost?

So partly -- so one is I would say that part of the investment reduction that you're seeing, you're double counting over there, I would say, firstly. Because that investment itself also includes salaries paid out to all the businesses where the investment is happening, right? So the part of the -- so what I'm saying is that the difference is not as dark as you are imagining. That's the first point. Secondly, the -- on the operational side, definitely. So one is there has been additional cost on content. So for example, during the -- this quarter, we introduced a new original show on Shemaroo TV. It's a crime show. So there is additional creation cost linked to that. There is -- even on the Marathi side, there were a few new shows that we have launched. So there is some content costs that has gone up on that. Plus on the digital side also, there has been some additional content. So there is one content investment part which has gone up. There is some additional marketing costs also that we have incurred during this particularly on the Gujarati side. And on -- in fact, Gujarati, Marathi, all our B2C initiatives, that they have added up to that. So there is a additional operational investment itself that kind of, I would say, has kind of taken up.

Thing is that even in spite of the increasing top line, should [ that ] increase our bottom line? I mean almost all parameters remain the same, except for maybe employee cost. Our investment also even Y-o-Y was almost the same. So my question is that if we grow at 15%, 20% on a top line basis, will we see growth or the incremental content investment will continue to drag our margins?

Definitely, we are looking forward to the margins being improving only then. And in a way, if you arithmetically also look at it, as and when a channel breaks even, the arithmetical aspect of it is a higher margin. So that is definitely what has to play out over the next 3 to 4 quarters. So there is absolutely no doubt about that, which is why even in the first question, so the only issue or challenger question in that,is the amortization part, which I said to the first question also that if there is any additional amortization on -- based on content consumption, and that could have some nominal impact on the content cost or the operational cost.

Okay. Okay. Then my second question is, sir, you launched Shemaroo Umang. It is in the same Hindi GEC space, right? So we already have a channel in that space. So I remember some earlier conversation that our plan was to launch some kind of a Hindi movie genre. So I mean, first, why is Hindi GEC second channel? And do we still have plans to launch more channels, if you can clarify upfront even if you can't reveal the exact details, at least clarify for people, I mean, investors will have some kind of an understanding as to what kind of investment horizon we are looking at.

Yes. So as I said earlier also that this was a -- I mean, so the strategic part of this is the fact that we always had a plan for more channels, and we have shared that earlier also. The tactical part was related to the fact that there is exit of 4 large broadcasters, because of which the GEC consumer is kind of becoming underserved for their content needs or their entertainment needs. And that tactical aspect kind of was far more compelling for us to launch the second -- launch the third channel as a GEC. I would, on the other hand, say that, in fact, there have been in the last year or 2 quite a few movie channel launches that have happened. So we actually were looking at the competitive space on the movie channel and trying to see what is -- if at all, we have to do a movie channel, then what would be the -- what would be our edge or segment or niche or those kind of things. But in the -- while our team would have been evaluating or examining those kind of options. Clearly, this opportunity came up, which we kind of thought to look at. Yes, Kranti wants to...

I'd also like to help you understand that how the 2 channels are positioned. So Shemaroo TV, they are positioning it and we had already started positioning it earlier at a slightly more male skewed PG. We have 2 prominent crime slots which are doing very well for the channel. We have a very strong micro slot also on the channel which does well. And Shemaroo Umang is a female PG-oriented channel and so very, very inclined towards drama shows, around female audiences. So that way we are also positioning both the channels separately. What we also see is that content availability-wise, this better suited the plans right now. And also, as Hiren mentioned, the movie space we saw was getting a little crowded at the moment. So overall, then we worked out, we saw that this was a far better space to be in, in our journey at this point.

And to answer your second question on what is the road map and plan, see, I've said this in the past and I'm repeating this, that clearly the move towards a network has to happen. There is no doubt about that. What we have always maintained and that I -- even within this current channel launch, also the thought process and the overall, I would say, financial discipline was that how much we can minimize the investment and manage the overall investment outlay with a certain cap. So we have put in an internal cap on how much we would invest on that. And we will not let any new channel or new opportunity put a strain on the balance sheet. So that part we are very clear about, and we've kind of -- even when we've done this launch, we've been very, very mindful of that aspect. And clearly, we see that discipline in the approach in the way forward. So that part is very clear. Secondly, in terms of what else will happen, when it will happen, right now, it's too early days. I think our first challenge obviously is to -- in fact it's very early days for Umang itself. So we have to see the numbers and see where it opens in terms of the ratings and revenues and what is the path to profitability for Umang itself. And it's only after stabilizing the operations here that we could even look at or think of something.

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

Sir, I just wanted to understand. Now you mentioned that the losses of the investment on new initiatives in FY '23 is likely to be around INR 50 crores, which was INR 67 crores in FY '22, right?

Yes.

And, sir, can you provide some breakup of this INR 50 crores, so how much we are expecting from existing 2 channels of Gujarati and Marathi as well as how much -- what quantum can be from the third channel in this year?

Well, I would -- it's very difficult for me to give you that breakup. But what I can indicatively share is that -- or at least based on our internal plans is that a large part of this is going to be invested overall -- well, more than 50% of it is going to be invested in the broadcast business overall, and a significant next level is going to be invested in ShemarooMe, which is the OTT business. And there are a couple of smaller initiatives where probably less then maybe 10%, 12% -- 10% to 15% would grow.

Okay. Okay. But sir, earlier, we were of the view that at least Marathi will break even, right, in maybe next couple of quarters. So is that what we are still holding on to?

Overall, as I shared earlier also that we are fairly on track for the overall breakeven which we've -- time line that we have discussed. I mean give or take a month or 2 here or there, but we -- I would think that we are reasonably on track for the overall breakeven of these 2 channels.

By what, FY '23 and...

Around the middle of this year, as in middle of this current financial year.

Okay. Okay. And sir, just last thing, like for the full year, we are guiding for INR 50 crores of losses. So anything by year-end exit run rate, maybe what's on the quarterly, one may look at vis-a-vis INR 14 crores that we have done this fourth quarter?

So one thing considering that Umang has just launched and there is right now no revenue on that account, on that channel because till the numbers come and stabilize and the revenue will kind of start coming in, the -- I mean, I would say that a certain part of the investment is definitely bound to be more front-ended because of this. Also, the fact that until they -- until the existing also don't break even, a certain part of the investment is likely to remain in this -- in the first half of this financial year.

Yes. Yes. Because the reason I was asking because since we are fairly on track for breakeven on the 2 channels, so is the third channel only, which would be a drag by fourth quarter end, right? So ideally, one can expect the INR 5 crores to INR 10 crores would be the maximum quarterly expenses on the new initiatives that you might be looking at by fourth quarter.

I hope that is the way it plays out. And I mean I'm not able to fully give visibility right now on that. But yes, I mean, logically, what do you say makes sense.

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

Two questions, if I may. First of all, can you provide any commentary on what are the broader trends you are seeing in the advertisement market? Any improvement on how will the coming year looking like from the industry perspective?

Sure. So overall, as I said earlier, so as far as TV is concerned, the largest advertising segment is the FMCG sector, followed by some of the other sectors. Now definitely, FMCG sector is going to remain challenged for at least, I believe, 2 quarters, maybe even slightly more than that. And to that extent, their spends are likely to remain tepid as they all are grappling with high rise -- fast rise in the input costs and a level of demand challenge on -- particularly in many -- I mean, pockets like rural pockets, et cetera. So that is definitely going to be the -- that is a challenge that this sector is facing. Other -- a couple of other sectors which are prominent advertisers, like automobile or even mobile handsets, et cetera, there the semiconductor issue has kind of come to the fore in terms of the supply chain. So that has been a challenge. The good thing is that a few sectors which had kind of scaled down on advertising during the pandemic have kind of come back or have started scaling back. Also, some of the sectors which were virtually absent or, say, travel and leisure or even entertainment, for that matter. I mean, movie releases were not happening, so there was very little movie-related advertising, for example. So I think a lot of those sectors are slowly also coming back. So partly offsetting this -- on the digital side, I think key advertising sector is a lot of the new age tech, consumer tech and digital tech, fintech kind of companies. I think there, broadly, I mean at an aggregate number -- at an aggregate level, I think the trends are fairly in place. As in the outlook is reasonably robust because there is a fair amount of funding that is kind of still going in. Also, a lot of the businesses have scaled up and are breaking even or near breakeven. So we are seeing reasonably good trends on that front. Yes, so broadly, this is how I would look at the advertising outlook. The only thing I would add here is that this is still a medium term -- I mean, just a 2-quarter, probably maximum 3 quarter headwind. I think the -- if we zoom out or look at 2 to 3 years, I think we are headed for really great time on the advertising spend front because the economy is expected to be extremely robust in terms of the growth, a. B, India is a consumer economy and every new product launch, every new -- every brand, existing brand or new brand has to reach out to the consumer and media is the medium through it will reach them. So to that extent, a lot of expansion plans of many companies, many product expansions, many segment expansions are being announced. Finally, a lot of that will have marketing and advertising expenses linked to it. So I think the -- from that point of view, I think the outlook is really, really very good. It's, yes, 2 quarters or maybe 3 quarters, there could be some volatility or headwinds.

Understood. Understood. And then the second question is can you provide the breakup of digital revenue and the traditional revenue for either for fourth quarter or the full year FY '22.

Digital revenue, Kranti? No, so you want the digital revenue breakup?

Yes. So typically, every quarter, you mentioned the revenue breakup for digital in terms of YouTube, telco and the OTT, DTH and others?

Yes, Kranti?

Yes. So I would say that it is pretty similar to what it was last quarter, whereby YouTube is upwards of 50%.

60%.

50% to 60%. And I would say telco is to below 10% level. So no much change from quarter-to-quarter, I would say, on that quarter.

And any color on the broadcasting side, any break up, general sense? Traditional media side.

Yes, Nitin, I think we'll not be able to answer that question now. But over the next couple of quarters, we will be giving different color on the overall revenue pie over the next...

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

Just my first question is about ShemarooMe. So if you can help us understand 2 things: number one, competitive landscape that is emerging in ShemarooMe Gujarati; and number two, content cost, please?

Yes, Kranti?

So on the competitive landscape, I would say that currently in terms of a national app, an organized player providing consistent quality Gujarati content, I'm happy to share that we would be the leader over there. We have over Gujarati which has been around now for roughly 1 year. But what we have seen is that till now the content that they have put out is limited in terms of number of -- amount the content that has been put out. So therefore, we feel -- and none of the national apps are focusing on Gujarati content in the same way, so we track all our competitors very closely. So currently, I would say in terms of serving the majority consumer in terms of variety, quantity and quality, I think we are registering both in terms of mind share and attention share of the consumer over there. In terms of cost of content, I'm not sure I can share right now.

I mean I don't want exact cost, but if you can just share the trajectory, let's say, in the last 2 years, for example, if we take an index value of 100, then whether content cost has significantly increased kind of like to 120, 130, or is it fairly still in the same range for the kind of content that we are serving on ShemarooMe Gujarati, please.

Yes, sure. Mr. [ Trivedi ], so there are 2 types of content. One is acquired content, and one is created, so web series kind of things which we are creating. So I would say that broadly, if I have to index, as you were asking, the -- on a like-to-like basis, the costs are broadly in a similar range. However, I would like to add that as our own numbers are growing and the response from the audiences, et cetera, traction has been growing. We are slowly and steadily scaling up the investment on the web series to kind of make it more richer in terms of production values, star cast and those kind of things to kind of -- because otherwise, at the beginning, it was probably much more smaller and barebone, I would say, comparatively but at least to bring it to a certain level so that the consumer kind of gets a richer and better experience. So to that extent, the outlay may be slightly going up, but like-to-like, the cost structure is roughly in similar lines.

And my second question is about traditional syndication business. So I am aware that we are not focusing a lot on that. That is not our kind of right key growth area, so to say. But at the same point of time, it could contribute, I believe, kind of right some significant amount also in at least next year or 2. So if you can't share the number, can you just tell us the demand trajectory that is kind of like there in the traditional syndication business? So over there also, let's take kind of, right, an index value of 100 for 2019, '20. And how is it shaping up right now? And what is our expectation kind of like for at least next year or 2?

I would say demand trajectory over there at '19, if it was 100, we probably are -- actually very difficult to say, but I would think we should be in the range of about 60% to 70% of that where we would have been in 2019, '20. And I expect that this year, we should broadly be back to somewhere near about 90% of where we were in '19, '20 on that. In terms of the underlying demand trajectory, the fact that we have defocused and not invested significant fee on that front and we have -- and/or in some cases, we may have held back content also for our own consumption on our platforms kind of doesn't mean that our business on that front will kind of return back to 60%, 70% or 80% of where we were. In fact, we have consciously defocused the capital allocation. So at that, I just want to add to the point.

Perfectly understandable. Hiren, just kind of add-on question over there. So in the recent deals that we made in the traditional syndication business, are we still kind of, right, nearer to the IRR of 18%? Or has it gone down significantly? Or how is it shaping up?

No. I think 18% is something that is happening on the content. What -- one of the trends that I do see in the way forward is that is it possible that so the 18% value is at the aggregate level. Now what digital has done, definitely that it has, to an extent, help scale the digital component and maybe, to that extent, partly reduce the tradition. So that little bit offsetting of that may happen in terms of the mix. But the overall 18% IRR on the investment, I think, should be fairly -- in fact, that I don't see any challenge at all.

The next question is from the line of [ Harsh Beria ], an individual investor.

Can you talk a little bit about competitive market dynamics in your Marathi TV ventures, so in MarathiBana?

Yes. So there are 2 ways to look at this. One is on the Marathi movie side, what is there; and other is on the Marathi FTA side, what is there. So Marathi movie side, there are 2 channels -- there are about 5 Marathi movie channels at this point in time. And a sixth one is around the corner, which is to be launched, I think from what we understand, probably at the end of this week or maybe within a couple of weeks, it will launch. And so this includes 3 channels from Zee's cable, Shemaroo MarathiBana, and one more channel right now. And then there is a fixed channel -- a fixed movie channel that is to be launched. That's on the movie channel side. Now coming to the free-to-air side, free-to-air, there are currently 4 channels in the Marathi language overall, and we are, of course, one of them. And one of them is a GEC channel, and the others are all Marathi -- sorry, movie channels.

Okay. And I remember you guys had mentioned that this made revenues of like the market size was about INR 800 crores to INR 1,000 crores, the advertisement pie. How much would you think that the FTA channels would get out of this market size?

My sense is that the FTA pie, so what is happening now slowly, slowly because as we discussed earlier that there was a certain migration happening from pay platforms to the free-to-air or a Freedish platform. My sense is that the FTA pie probably should be in the range of approximately around 20%.

Okay. And would you say that...

[Operator Instructions]

There's a trail off -- as in there's a thought trail on Marathi. Then maybe -- yes. Sorry, I mean, I hope that's okay with you, Mr. Baria.

Yes, yes, that's fine. My trail-up would be you guys had launched both your Hindi GEC channel and Marathi at the same time. Which would you think is doing better as a business?

At this point, the Hindi GEC channel. So to begin with our initial phase, the Marathi channel actually started off exceedingly well. But the Hindi GEC channel has seen a far better growth trajectory in the last about 6 to 8 months. And 2 things in terms of the -- so GEC is much more sticky and commands overall better ad rates because there's a high level of appointment viewing. And secondly, the Hindi GEC pie itself is very, very big compared to the overall Marathi language pie. So in that sense, I would -- I mean, it's a good development in a way that Shemaroo TV is actually on a better footing right now. Not that MarathiBana is on a bad footing, but between the 2, if we were to compare, I would say Shemaroo TV is on a better footing.

We'll move on to the next question. That is from the line of Shikha Mehta from Equitree Capital.

I just had a couple of follow-up questions. Can you give some guidance on when we can see our ROEs returning to 15% plus?

Sorry, I was not able to understand the question. Can you please repeat?

So historically, our ROE used to be north of 15%. So can you give some guidance on when we'll be returning to that?

So if I were to -- I mean, if you were to really look at the -- even today, the EBITDA level without the investment, actually, we -- even the margin and the overall structure, cash flows, et cetera, is fairly strong. It is the investment, I guess, as the investment phase tapers and the existing channels start contributing significantly more. I expect this to be probably about 2 years out from now.

Okay. And sir, our debt has reduced to some extent this year. But with our new channel coming in again, do we expect it to increase slightly or remain flat? Or are we expecting a reduction?

So if I were to -- I've kind of answered this earlier also during the call that if we were to -- so there is a certain amount of front ending of the investment because Shemaroo Umang kind of has just launched, and the others are also not yet in the breakeven stage. But if I were to take the full year path, the whole idea here is that the overall investment we are looking at managing within a certain amount of financial exposure. And therefore, a, what can be managed with internal accruals within that, b, once we have a certain level of breakeven, the effort to reduce the debt kind of opens the opportunity to reduce the debt, opens up on a continued basis. And that's really the thought process.

Sir, currently, banks are receiving a larger sum of our earnings than the shareholders because finance cost is almost INR 25 crores, and our PAT is around INR 5 crores. So what kind of debt reduction will we be looking at over the next 2 years?

This is -- And as that is likely to happen, right? Once the investment tapers off or the cash flow overall increases, the banks obviously would get paid off to that extent.

So this again, I'm guessing, will it take 2 years for us to [ ease situation ]. Is that the right way to look at it?

Yes, probably. I mean right now I cannot give a forward-looking statement on our guidance on that. But the -- if you look at the way we have kind of gone about on the business expansion front, we've managed it within the internal accrual. So if you see FY '20 peak that we've not crossed that, we've kind of [ negatively ] come down from there and still done annually investment in the range of about INR 60-odd crores last 2 years. So that itself shows the strong internal accruals from the existing business and operations and still serviced all the banks on time and complete. So that kind of shows the strength of the content library itself and therefore the internal accruals that are getting generated. Now as and when these investments mature and start contributing, we are obviously going to use a significant part of that to repay the bank.

Right. And sir, do you have a base case scenario given the volatility in the market, et cetera? What kind of base growth are we expecting for, say, the next 2 years, 2, 3 years?

Sorry, I'm not -- I didn't hear the question properly. Can you repeat that?

Given that the situation in the industry is quite volatile right now, do we have a base case scenario where we're expecting a certain amount of growth every year or something of that sort, if you could just help with that?

I'm not in a position to give a forward-looking statement, unfortunately, right now. What I can definitely say is that we expect that if -- as and when this -- I mean, this year, we do expect both the traditional and digital businesses to grow at a certain pace because the investment in the -- sorry, the growth of revenue of the TV channels is likely to happen more in the current year itself. So that's really the only thing I can currently talk about there.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.

Sure. Thank you so much, everyone, for joining in, and we look forward to a great year ahead. And with that, we'll sign off. Thank you, everyone.

Thank you. Ladies and gentlemen, on behalf of Prabhudas Lilladher Private Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.