Shemaroo Entertainment Limited (SHEMAROO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Earnings Conference Call of Shemaroo Entertainment Limited, hosted by Valorem Advisers. [Operator Instructions] I now hand the conference over to Mr. Anuj Sonpal, CEO at Valorem Advisors. Thank you, and over to you, sir.

Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisers. We represent the Investor Relations of Shemaroo Entertainment Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and first half of financial year 2024. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings 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 call is purely to educate and bring awareness about the company's fundamental business and financial quarterly review. Now let me introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us, Mr. Hiren Gada, CEO; Mr. Arghya Chakravarty, Chief Operating Officer; and Mr. Amit Haria, Chief Financial Officer. Without any further delay, I request Mr. Amit Haria to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Anuj. And good afternoon, everyone, and welcome to our earnings call for the second quarter and first half of the financial year 2024. Let me first start off by giving some of the key financial highlights, after which our CEO, Mr. Hiren Gada, will give you some of the operational highlights. For Q2 FY '24, the revenue from operations stood at INR 199 crores, which witnessed a growth of around 36% on a Y-o-Y basis. EBITDA for the quarter was around INR 17 crores, representing a growth of 121% with EBITDA margin standing at 8.65%. The net profit was reported at approximately INR 5 crores with PAT margin standing at 2.45%. For the first half of the financial year, the revenues from operations stood at around INR 352 crores, representing a growth of 45% Y-o-Y. EBITDA stood at INR 25 crores, which was up by around 19% Y-o-Y, and EBITDA margin stood at 7.08%, while net profit was INR 3.6 crores with PAT margins standing at around -- about 1%. With regards to new initiatives. In Q2 FY '24, the expenses amounted to about INR 30 crores, while for the first half of FY '24, it was about INR 43 crores. And if you were to adjust these investments, the adjusted EBITDA from existing operations in Q2 and H1 would have been approximately INR 47 crores and INR 68 crores, respectively. With regards to traditional media and digital media division highlights. Digital Media revenues for the second quarter stood at INR 63 crores, marginally down by 2% Y-o-Y for the first -- while for the first half of the financial year, it was around INR 120 crores, witnessing a growth of around 7% Y-o-Y. Traditional media revenues for the second quarter stood at around INR 136 crores, which grew by around 65% Y-o-Y, while for the first half, it stood at INR 232 crores representing a growth of roughly 78%. Now I will request our CEO, Mr. Hiren Gada, to brief you on the operational highlights for the period under review.

Thank you, Amit, and good afternoon, everyone. During Q2 '24, the company achieved robust revenue growth and maintained a positive margin, largely due to the strong performance in the traditional business. Overall, advertising demand remained subdued, due to sluggish consumer sentiment and a persistent slowdown in funding for new age advertisers. In addition to the above, the company's digital business was also impacted due to a higher base effect in the same quarter last year. The festive season is expected to bring in slight upswing in advertising spend; however, prominence of major cricket events during the quarter is likely to absorb significant portion of advertising budgets. This, along with continuous investments in B2C initiatives, is expected to keep the company's margins under pressure. On ShemarooMe front, we released 11 new Gujarati titles during the quarter with content across movies, web series and plays, including digital world premiers of blockbuster movies like Shubh Yatra Kutch Express, and the release of original web series, What the Fafda. We also launched the OTT platform in Indonesia via Excel. On YouTube front, with 66 million subscribers, Shemaroo Filmi Ganne is the 23rd most subscribed channel in the world. In Q2 FY '24, we launched original programs across our 3 broadcasting channels, Laddu Gopal on Shemaroo TV, Gauna on Shemaroo Umang and Jogeshwaricha Pati Bhairavnath on Shemaroo MarathiBana. Shemaroo GEC channels have a viewership share of around 7.4% in the overall Hindi GEC genre. We also launched a new DTH service, Bollywood Masala, with '90s movies -- Bollywood '90s movies on Tata Play in September 2023. By launching ShemarooVerse, we are now present in the official metaverse platform on JioDive VR Headset and are now officially present on the Web 3.0 platform. In regards to the ongoing GST case, the matter is sub-judiced, however, we would like to update the following. The case is primarily related to transactions of FY '17-'18, '18-'19, and '19-'20. The company is of the opinion that there are no -- there is no offense committed by the company and the input tax credit that is claimed by the company is proper in all respects and is in regular course of the business. Further, the company denied the claim demanded by the GST department and the same will be contested by the company as the company believes that all statutory deals and compliances have been duly paid and filed by the company. Further, the company also submitted due record asked by the GST Officer and deposited INR 12 crores under protest with the department and cooperated in their ongoing investment -- sorry, ongoing investigation. With that, I open the floor for question-and-answer session.

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

Am I audible?

Yes, yes.

Hiren, so the first question is, I think in the last quarter, we had indicated that because of the rebasing of the viewership share under BARC, I think the ad rates were slightly lower than expected and the demand was also subdued. So with festive season setting in, do we see any increase in ad rates happening for us? And continuing with that, since we continue to invest in original content and eventually want to take it to 4, 5 hours in each of the channels. If the ad rate increase does not happen, will we kind of revise our investment guidance of INR 75 crores going forward for the current year?

Arghya?

Dhwanil, this is Arghya here. Let me answer the first part of the question. See, I would say the festive season is just the corner and the last quarter had been -- I mean, if you look at the way our ad rates have moved, but I will not give us exact numbers. But there has been a positive movement in the average in the last quarter compared to the previous. Having said that, it is also a function about channel maturing and some content sticking in the consumer. In terms of the festive, we hope for a better ad market, but the ad market continues to be not to the best in terms of what we expect. So it's very difficult right now to comment on exactly how things will pan out until the end of the -- by the end. In the month of October, we saw some improvement. But again, I think it has largely been muted compared to expectations. Having said that, going forward, we will continue to build our channel and our investment in original programming will continue. And we hope it's a matter of time before ad rate starts normalizing. And that is not going to, in any way, impact our growth and slows the momentum. We will continue to build our channel. As Hiren spoke in his opening comments, we did launch 3 original content in 3 channels. In fact, Shemaroo MarathiBana, that was our first original GEC content. In fact, our second original just started sometime back. So that investment will continue, and we hope that it will keep improving. However, as of now, the outlook seems to be a little muted compared to what our expectations were.

I will add a couple of points to the question. This rebasing of the universe, actually, which was your question, that was -- that has more impacted. Of course, it has impacted to a good extent, the channel share itself. And that, therefore, affects the ad rate. That, in a way, we feel has now, in this quarter, stabilized the rebasing part of BARC. Second is to further add to Arghya's point on originals. While we are fully committed to build the channel and grow the original pipeline, we definitely, from time to time do take tactical calls in terms of, if a show is not delivering and performing. We have been taking those calls of pulling it off and taking it whatever, I would say, take a step back and then come back. So there is a clear strategy that we will -- the intent is not to -- the intent is to keep a hawk eye on the investment cash flow and the financial impact of that also. So to the last question that you had on investment, I think right now, we will hold the projection or the expectation of INR 75 crores. And we are hopeful that we should be able to manage within that. There -- I mean, I don't want to -- I mean, I hope that there is no overrun on that. There could be, but we will try our best to retain that INR 75 crore investment.

Right. Because I think until last call, I think the agenda is we had kind of said that we will be well within that number. And I think today, probably we are saying that we may even kind of surpass that. So is it because the revenue growth on ad rate improvement is not up to the level and that also...

The market has not supported to an extent. That has been one of the challenges, which are -- that the overall spends in the market, the ad revenue itself has been muted as far as the industry is concerned. And therefore, to that extent, the projection on the revenue has come off -- has been a little lower. And I mean, for us, the question was that, therefore, should we continue the investment or not. And I think we -- I mean having invested, we don't want to pull back now because that will set us off back by, at least, 12 to 18 months. So therefore, we've kind of -- as I said, within that, taking tactical calls of pulling off shows, which are not working. But still directionally, we are committed to the path.

Okay. Sir, second question is on the balance sheet side. I think at the start of the year, we said that one of the key KPIs for this year is to reduce debt by INR 30 crores to INR 50 crores. So last quarter, we reiterated that. Are we kind of staying firm on that this year?

Yes, yes. We are committed to -- as in terms of our -- again, this is what we have intended to do. And as of now, we are fairly confident that it should happen. And we had indicated last time also that some of the cash flow investments -- I mean, so a lot of this will be back-ended in the -- through the second half of the year.

Right. Okay. And last, and I'll come back in the queue after this question. So this INR 12 crore amount that we paid to the GST. So that is not appearing anywhere in the P&L and cash flow. So it is after September 30 that we have made payment?

No, it would be appearing in the balance sheet item as an advanced paid to the government authority.

This is under protest. There is actually no demand raised by the department as of now.

It would be standing in the asset. So we had an input tax credit of around INR 10 crores, we have been paid from the same. So it is just from one account to another account, it is shifted.

So it's not -- there is no P&L impact of this is what your saying now?

As of now, no.

Okay. But cash flow, it should have been impacted, right? So cash flow is lower by that extent is what we should believe?

Yes. So if we look at the full year, it will play out that way. It will be lower by that extent. In the immediate, it was a credit lying in the account, but that credit would be consumed in the rest of the year. And to that extent, the cash flow will be lower.

The next question is from the line of [ Yogesh Bhatia ] from Sequent Investment.

Sir, actually, I'm new to this company. I wanted to know on our Slide #4, you have mentioned that profit and loss includes new initiative expenses of INR 426 million. So this is what we are talking about, the INR 75 crore budget that we have made for that new initiatives, correct?

Sorry, which slide are you referring to?

On the Slide 4, there is a small note, which says, first half FY '24 profit and loss includes expenses on new initiatives, net of revenue, INR 426 million.

This is the INR 75 crores we are referring to. Yes, you're right.

This is the INR 75 crores. So this budget has been made for FY '24 up to INR 75 crores, correct?

Yes. Yes.

Okay. But -- and going forward, how is this going to be in FY '25-'26 or that call we will take as and when?

That call we will take on a year-on-year basis based on how these initiatives progress and their respective annual operating plan for those years. So right now, we haven't yet made those plans for FY '25.

The next question is from the line of Yash from Equitree Capital.

Am I audible?

Yes, yes.

Sir, my question is regarding the growth in the traditional media. So sir, as we have observed 78% Y-o-Y increase in Q2 FY '23, we had 3 channels, right? And now we have 4. So I wanted to understand the comparison of growth. Like how much have these 3 channels contributed? And how is the new channel contributed? That is my first question.

Okay. So firstly, I mean, last -- at least, 2 to 3 calls, we have been alluding to the fact that this year's growth will be largely driven by traditional media itself. And various reasons, of course, new channel launches, et cetera. One of the -- so 2 things I would say here. One is, of course -- so it's difficult for me to give that breakup. But one of the thing is, for example, last year, Umang had -- so Umang had just started monetizing in July. And so we didn't have a full-blown Umang monetization in last year's base. So that is one of the things. Even Chumbak has started this year. So in this quarter, we have partial revenue of the Chumbak channel. In fact, I'll -- Arghya wants to add some points there, so I'll...

Let me answer that, Yash? So the new channel, which is -- the fourth channel which has been launched this year is just about 2, 3 months old. And it is in natural space. We are in still figuring out the right combinations and so on and so forth. So while -- and using the base, but that channel revenue right now is too small to really contribute to the large part of growth. A significant part of the growth are coming in the existing channel business.

Okay. Yes. Got it. And sir, my second question is regarding the viewership. So sir, our viewership now stands at 7.4%, and our target is to reach by more than 15% by 2026. So sir, I wanted -- so are we still on that guidance?

Yes.

Yes. Yes. So that is, of course, an aspiration that we have put out. Arghya?

It's an aspiration and it is the target that we are chasing internally as a company. Of course, it will depend on various factors in terms of how the market plays out and so on and so forth and all that. But in terms of putting in the right inputs -- see that viewership share finally is an output metric, right? I mean an output metric is a function of various things, competition, X, Y, Z and all that. But in terms of our own -- I'm just clearing the target for sure, that's an aspirational target we are chasing. But in terms of putting in the inputs to have that kind of share in the future in terms of as Hiren said in his previous answer if you were to recollect, we are taking prudent calls. We are very, very careful in monitoring shows. We are adding shows. We are also changing shows. So there is a large focus on increasing the content as well as selecting the right content. So yes, so while we are at 7.5% today and we are aspirationally chasing the target of 15%, that numbers continue. But in terms -- more in terms of our inputs towards achieving that number is consistently going on quarter-on-quarter.

Okay. Sir, my last question is as our viewership was 9%. Now it is 7.4%. So sir, how is it impacting ad rates and what is the outlook for this?

Yash, the ad rate is a function of two things. One is obviously your viewership share and in terms of your position in the entire network. And also is a function of what is the demand in the market, right? It's a function of two things. So while -- yes, our viewership share is at 7.4%, but we have also seeing a steady -- as I said, if you would have recollect in the first question that there was a rebuilding of the universe. So that resulted in some initial changes in the viewership share, but that has now stabilized. So we have gone past that. And now the ad rates are functions purely of in terms of what the demand in the market is. We have seen as I said in the first response, slight increase in ad rates. But going forward, it will all depend on how the ad market pans out. So that's what the impact on the ad rate.

I would add also here, Yash, is that the rebasing effect, if we have to put it, it's probably between 50 to 100 basis points of market share -- viewership share loss because of the shift away of the free FTA audience to the pay audience. So in that sense, we are not very much off from where we were a year back. So we are broadly in that similar ballpark in that -- for that -- therefore, that input side of the metric on viewership share is not so much off, is what I would say. And of course, the market demand is a major question.

The next question is from [ CA Nihar Shah ] from Crown Capital.

Yes. I'm fairly new to the company. So can you please help me explain the new channel plan if possible?

Sorry, your voice cracked. Can you just repeat the question?

Yes, yes. I was just saying that I'm fairly new to the company. So can you please help me understand the new channel plan going forward?

Okay. I'll actually give you a little history. So we launched our -- this business we launched in January 2020 with our first channel, Shemaroo MarathiBana. And then right in the middle of COVID, so we had launched a test signal for Shemaroo TV, which is our Hindi channel, which is our flagship channel. And March 2020 was when we had launched a test signal. And the channel itself was launched in May 2020 in the middle of the lockdown. Post which 2 years period, we stabilized -- of course, COVID had hit us and ad revenue itself has not kicked in and things like that. So it took us 2 years to stabilize all of that. And April '22 was when we launched the third channel, which is Shemaroo Umang, which is also a Hindi GEC channel. And this year, May '23 is when we launched our fourth channel, Chumbak, Chumbak TV. So in terms of indication on the way forward that we have given at the beginning of this year itself is that there is one more channel in the pipeline, which is likely to be launched in the second half of the year. And right now, we are not able to give further guidance beyond that. In this financial year, there is one more channel that will be -- that is planned to be launched.

So we'll have to wait for a couple of months for us to come back on that.

Okay. Okay. And one more small question. I just read that the company aims to capture around 25 lakh subscription for ShemarooMe. So what numbers have you reached till now, like in the case of subscription?

I mean where have you read that because we have not put that out anywhere.

I found it in the note of last con call, but it's fine. No, no problem. Sorry.

Okay. So -- okay, okay. So that may have been just a derivative -- way to derive what could be a potential addressable market kind of thing. So short answer to that is to your question is that right now, we haven't put numbers out for ShemarooMe. All we can say is that our the viewership -- sorry, the mind share and overall share in the Gujarati market that we enjoy is tremendously high. And we believe we are literally the single largest player in the Gujarati segment on the OTT business. And yes, once the business reaches a certain critical mass is when we would be sharing more data on the numbers and things like that.

Understood. So one small question is would you like to give any outlook for H2 going forward on the consol basis like entire thing for top line and EBITDA margin?

So -- I mean we don't give guidance, but indication we have given in the operational highlights itself that and I'll really read that. "Festive season is expected to bring a slight upswing in advertising spends. However, prominence of major cricket events during the quarter is likely to absorb significant portion of advertising budgets. This, along with continuous investments in B2C initiatives, is expected to keep the company's margins under pressure." This is the overall outlook that we have given. But to give a slightly different flavor, I think last 3.5 years, we have been investing in building the B2C businesses. We've -- actually, if you add up everything, we've invested probably close to INR 225 crores in our B2C business initiatives in about -- in the last 3.5 years. And that -- if you see the impact has already put us on a firm growth path. So we have -- even in FY '23, we kind of bounced back strongly from the -- on the top line side. And that trend continues in this first half also. And along with that, we have -- so there's a major business investment that has happened. Second major investment we've done is in the people -- on the people side in terms of bringing in thoroughbred professionals and putting in a lot of systems processes. In fact, the whole professionalization aspect, which is separating ownership and management right from the senior leadership down, that has been another very major investment that has -- we have done over the last about 15-odd months, which is now you can see playing out in terms of many of the metrics. And this is a trend that is -- we are -- I mean, not only we are committed, I think it's irreversible now for us. And this is something that we know will be a very important driver of future growth. So I think this whole combination of business investment, B2C side investment, people investment, et cetera, is what will we expect put us on a significantly faster growth trajectory.

The next question is from the line of Viraj Mehta from Equirus PMS.

The first question on the digital thing. Our revenue just significantly come out in terms of growth that you saw post-COVID and that is probably understandable but now it has started flattening out of declining. So where is this happening? Like either YouTube suffering or ShemarooMe you're not getting new subscriptions? Where is this entire -- like this quarter, we are down 2% on a Y-o-Y basis, not even on a quarter-on-quarter and have only started like INR 60 crores, INR 62 crores a quarter. So can you please elaborate on that?

Yes. Okay. Viraj, let me take this, Arghya here. So I think there are -- there are 2, 3 issues. I think one, which Hiren touched upon in the initial statement. There is a -- this quarter, there is a one-off base effect, a certain adjustment that happened last year in this quarter. So I think that is -- this is a one impact of that. But however, the size is, if we pull that and look at it differently, there are other issues as well. I think YouTube as a platform, there is a bit of a stress on the platform itself. As you know, YouTube enjoys significant amount of share. We are a senior player in the YouTube ecosystem. And overall, there is a bit of pressure on the views. So what is also happening is there is a shift of views happening from the long-form video to short form. So that is one of -- is playing out big time in the overall digital markets there. Also, we have a reasonably strong base of Facebook in our business. And that platform has not -- while our view market share -- our view shares in Facebook videos is all-time high, but that platform has not been delivering the best in terms of overall views for the platform itself. So these are the two things. In terms of ShemarooMe, I don't see any changes, and ShemarooMe is doing well even on this quarter. And thirdly, I think overall that there's a continuous illusion of, I think, advertisers -- huge advertisers which will impact the digital business. If you look at the YouTube CPMs also, there seems to have been quite bit of stress in the second quarter, which seems to be reviving a little bit as we go forward. But these are the 3, 4 reasons, which -- for which Q2 has been a bit of a soft -- has softly played out on the digital business. I don't think the negative will continue. We should be at a good trajectory hopefully in the next quarter. But -- so that's what it is. So I mean it's a combination of 3, 4 things.

So sorry to harp on this a little bit. Our longer-term strategy question on this is with some of the platforms like Hotstar and even JioCinema, they're becoming free. And in Hotstar, we can access matches for free. JioCinema is free. So with some of these platforms becoming free, Netflix reducing the prices, does this -- is it like -- is it a time that will start -- it has put a lot of constrained or a lot of competition for free use, which is essentially YouTube for us and Facebook for us because people have newer avenues of entertainment for free, which were not there earlier. Which means either then we have to be present there or otherwise, the platform as a whole, like a YouTube and Facebook will start losing clients and views?

Viraj, that is largely a question actually for YouTube and Facebook to actually solve for. And it is -- there could have been definitely some impact, but if you look at it in the last quarter, there were not really too many events. I mean, going forward this quarter, for example, there's a World Cup, which is happening free. So it has an impact, not just on views, but it will also impacts on the ad money, right? So ad rates projected for our -- as we have given the projection -- I mean the outlook that we have given where we have talked about that some part of the advertising money for the festive will be absorbed by the cricketing event. So those kind of stuff is there, but also remember those platforms are also gravitating towards short form. So again, it is not complete, while some part of what you say maybe playing off. But I don't think it will completely that could be the result, also movement of long form and short form in those platforms.

Also, I would just add, Viraj, a couple of points here. I mean, sports is a -- while sports is a very big viewership driver, sports is event based. So we don't have such a big event calendar ever in sports or cricket rather, that will absorb the consumers' time and viewership throughout the year. And that is the fact even on television. I mean sports on television also combines the overall viewership share of between 5% to 8% only in spite of each -- at a match level, it is -- it will be the highest viewed event on that day. But when you normalize it over a full year period, that comes down to less than 8% or thereabouts. So I believe that is also -- that would also be the case here because the need for entertainment. The fact that there are, whatever, a few hundred million people are logging into various entertainment platforms on a daily basis, that need is there every day, irrespective of whether there is a sporting event or not. So to that extent, I don't think that this really is the case. Yes, this gravitation towards shorts and we, in fact, have a very, very strong play on the short side. We have -- we may continue to maintain. In fact, actually, we have higher viewership shares in the -- on the short side on both YouTube and on the Facebook, Instagram-kind of platforms. But the monetization model over there is yet to fall in place. So for many of us, this is on that side of the thing, it's more of an investment story where there is a strong investment, there is a certain amount of viewership gravitation happening over there. But the monetization will probably still take a few quarters to kick in itself. And then we'll see how it's playing out in terms of current versus others. So if I have to, Viraj, summarize actually, I mean these are all passing phases from time to time, where few factors, conversion give an impact of low or no growth or those kind of things. The trajectory of digital growth will continue to remain higher. However -- and this is something we have shared in the last few quarter's calls also that we expect that the trajectory will now be lower in terms of -- I mean, those -- gone are the days of the 20%, 25% kind of growth rate because the base effect is very high now. We all read about the fact that digital spend, advertising, overall digital advertising and surpass TV and all of that, right? So the digital spend from here onwards is going to be a more normalized story. And with our viewership shares on all these platforms, I think we are fully geared to participate in all of that and actually do better than what the industry grows. So that I don't think is an issue.

Right. And my last question is Hiren bhai is if you remember at the start of the year, you had mentioned that we'll reduce the debt by INR 40 crores, INR 50 crores. Now our debt is up by INR 15 crores. So if we have to stick to the guidance would be reduced our debt from your point onwards, from September onwards by INR 50 crores, INR 55 crores net of investments, which would mean our existing business ex of investments has to generate a cash flow even if it is INR 30 crore burn of over...

Viraj, I got your point. I have just replied to Dhwanil also on the same, and I will -- so firstly, 2 corrections I want to make. INR 40 crores, INR 50 crores is not what we had, it's INR 30 crores to INR 50 crores is what we had said. Secondly, Q1, which is June quarter, the debt was at INR 341 crores, which we at that time shared is that we believe this is a peak from INR 341 crores, we've already come down to INR 332 crores, which is higher than what it was in March. I understand that. As of now, we are holding back this thing and something we had said at that time also that this will be back ended, not in the first half because there is a channel launch and other investments in the first half of the year. So we are hopeful that in the second half, that should be playing out.

The next question is from the line of Hiral Nandu from Kalpvruksh Capital.

Congratulations for a good set of numbers. I just heard in the beginning your commentary that you're talking about some...

Sorry for the interruption, Hiral.

Hiral, we can't hear you. Can you come closer to the line or?

Is it better now?

Yes, it is better.

Yes. So just wanted to understand, I heard about some Meta and Web 3.0. Is there some new line of business? And what is the revenue potential or future growth potential of that? I just wanted to understand.

Yes. Arghya will tell.

Yes. So Hiral, this is -- I mean, right now, Web 3.0 and the Metaverse is pretty much in the initial phases and everybody is experimenting the models -- the business models are not very popular, but it is something for the future. What we are doing and we are obviously keeping our investments also to our minimum. It's a very careful varied look in terms of what we are building. We are actually -- what we're doing right now is keeping Shemaroo ready for the future. So we have built our own metaverse called Shemarooverse, which is all built in-house with in-house talent. And that is just get ready, and get launched it with JioDive VR just a couple of weeks back. We are keeping ourselves ready. We're also in touch with meta, whenever their oculus comes up, we will also be partnering with them. So it's a very initial phase right now. We cannot -- don't have any revenue projections, any future. The business model itself is not developed, but we are keeping ourselves future ready. As and when this arena in the media entertainment phase opens up, we will be ready to plan that bandwagon. That's what we are expecting.

I'll just add to that, Hiral. I mean if we look at the various phases of the Internet itself, where Phase 1 was text and images kind of a thing. Phase 2 has been about video, right? Now Phase 3 is a deeper immersive experience, which kind of leads into the Metaverse. And we believe that there -- or whatever we have understood until now that the whole definition of entertainment can undergo significant changes with that kind of technology that Web 3.0 is able to bring in. And this is still -- the Web 3.0 itself is at a very initial stages of experimentation. So what we have done is while keeping the investment as low as possible, trying to ensure that we have a strong participation in that so that when the future arrives, we are not -- and this has been a pattern for us. I mean we were amongst the first 5 to 10 people to sign up with YouTube when it came in India. And that time our revenues were -- we didn't know the revenue model because we were selling DVDs for INR 200 and INR 300 and YouTube said we will show for free. So still we were -- we did not shy away from experimenting and participating and that has helped us build today the business where it is. And therefore, we believe that an early start on this will help us to participate as and when this scale up.

Basically keeping us with future ready.

Yes. This is about being future ready.

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

So two more questions. So one question, Hiren bhai, we have always kept 18% IRR as the benchmark. And I think we have indicated that even for the new initiative that is a benchmark, right? So we have invested INR 225 crores over the last 3 years. So if this benchmark anywhere close to this benchmark was to be hold. We need to generate next year, INR 50 crores, INR 70 crores kind of profit and then INR 100 crore. So are we on track to that? Or are we lowering our benchmarks? Or -- and what are the 3 or 4 KPIs that you guys internally look at when you invest such a large amount of money, what are the 3 or 4 key things that you need to see to continue to invest? Can you talk a bit about that because we don't have any quantitative information on this, so please elaborate on that?

So the TV business is a long-gestation business which we have stated many times, and I would repeat that again. This business will take an investment probably for another 4 to 5 quarters before it really stabilizes and turns cash positive. It's again something that we have been talking off. Now what is the potential of this investment -- of this business? What are the KPIs or ROI drivers over here? I think there are multiple. Firstly, the operating leverage on this business is tremendously high. Once you've crossed a breakeven level, your investment doesn't grow, but the revenue -- additional revenue kind of throws in a huge amount of profitability or it's highly EBITDA accretive or margin accretive. Secondly, this business working capital cycle or the financial gearing of this business is completely different from the trading business because there is a much shorter cycle of -- so in this business once it is in a cash flow positive kind of situation, it would throw up the cash and lighten the balance sheet overall, which helps to reduce the overall -- I mean, helps change the overall balance sheet nature itself. Thirdly, and I don't want to quote any specific number -- sorry, player over here. But to give you an indication, Tier 2 channels, Tier 2 GECs, which are not Tier 1, the Tier 2 GEC, which are well established for more than 8, 10 years. Their annual revenue at a channel level itself is upwards of INR 400 crores. In fact, in the range of ad revenue in the range of INR 400 crores to INR 800 crores, with EBITDA margin of upwards of 25%. In fact, one of the channels we know actually has an EBITDA margin of more than 50%. Again, it's linked to the operating leverage that the channel is able to derive from this. So that is the, in a way, I wouldn't call it full-blown potential, but that is an indication of what kind of business potential this business really has. We are in a fairly, I would say, now a good stage to take that next leap forward once we are able to stabilize on this new content creation pipeline. So some of numbers you are saying, I don't want to comment on that. I thought I should give you a little different qualitative perspective on what potential this business holds.

Okay. Okay. Just one request Hiren bhai. If you can share and I made this request earlier also. If you can share GRP, TRP data, which is any way known to the industry, but because it is under subscription, if you can share that, it will give us some indication where we are going. I understand you have started sharing the viewership share. But if you can share that, that would be very helpful. And second question is with respect to -- so let's say, this year, last year, there was no Shemaroo Umang was on a very low base. And this year, I think Shemaroo Umang will have a full base. We also started monetizing Chumbak. So going forward next year, if the ad rates doesn't improve and it remains -- market remained subdued, demand is bad, but we need to continue to invest in original content. So that will mean that we may not have a top line growth, but we still need to invest in the content. So again, the margin will be under pressure. So do you foresee such scenarios when you build scenarios? And if so, what are we thinking in terms of countering such risks?

So in the short term, for a 2 or 3 month that kind of a scenario is possible, okay. But -- I mean, that kind of a scenario for us, I would say will not be status quo kind of a thing. We will -- I mean, there -- as I said earlier also to -- at the beginning of your question, and in a way, it's the same similar question differently I want to answer or actually the same answer is that we are mindful of the bottom line and the cash flow in this situation. So we have been -- as I said earlier also, we have been pulling off nonperforming shows and bringing down that cost structure. So there is -- there are various levers that we would kind of push around to ensure that investment is maintained also and still the investment doesn't go out of hand. But yes, in a quarter, things could go here or there because anything that you take a decision also for it to fully play out and actually show up on numbers and all that does take a good 2 to 3 months.

Okay. So basically, on a yearly basis, if you see such scenario, you may recalibrate your investments is what you're saying?

Yes. Yes, yes.

Okay. And last if I can squeeze. So if I look at the new channels that you are planning to launch and create a bouquet. So if I see the positioning wise, you have a very large content of Gujarati titles, Gujarati nataks, Gujarati drama. A lot of such things. So don't you see any white space in the channel side of it in that space, even that natural course for us to kind of capitalize on the opportunity at the lowest cost?

You mean to say to launch a Gujarati channel?

Yes.

It is -- I mean, it is one of the options and opportunities. I, right now, wouldn't want to comment on that. It is in evaluation...

I mean, as I said the way you think, we also can see that. But hence, it is part of the evaluation process, but there are various other things also one needs to keep in mind. And I'm not saying no or yes or anything. It is part of the evaluation process, but there is a natural ability for the content that we own and process, yes, you're right. But in terms of market and future growth potential, all that is baked into our decision-making process. And it is not ruled out, but it is not something that is on the immediate horizon as well.

Ladies and gentlemen, as there are no further questions, I now hand the conference over to Mr. Hiren Gada from Shemaroo Entertainment Limited for closing comments.

Thank you, everyone, for joining in the Q2 half yearly FY '24 earnings call and listening patiently. Looking forward to seeing you all in the next quarter. Have a great festival period. Happy Diwali, Happy New Year -- Prosperous New Year to everyone. Thank you.

On behalf of Shemaroo Entertainment Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.