Shemaroo Entertainment Limited (SHEMAROO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY '24 Conference Call of Shemaroo Entertainment Limited, hosted by Valorem Advisors. [Operator Instructions] I now hand the conference over to Mr. Purvangi Jain from Valorem Advisors. Thank you, and over to you, Ma'am.

Good afternoon, everyone, and a warm welcome to you all. My name is Purvangi Jain 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 call for the fourth quarter and financial year ending 2024. Before we begin, a quick cautionary statement. Some of the statements made in today's con call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by, and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. I would like to introduce you to the management participating with us in today's earnings call, and hand it over to them for their opening remarks. We have with us Mr. Hiren Gada, CEO; Mr. Amit Haria, CFO, and Mr. Arghya Chakravarty, COO. Without any further delay, I request Mr. Amit Haria to start with his opening remarks on the financial highlights. Thank you, and over to you, sir.

Thank you, Purvangi, and good afternoon, everyone, and welcome to our earnings call for the fourth quarter and the financial year ended 2024. Let me first start by giving you some key financial highlights, after which our CEO, Mr. Hiren Gada, will give you some of the operational highlights. For Q4 FY '24, the revenue from operations stood at around INR 199 crores, which represents a growth of around 21% on year-on-year basis. EBITDA loss for the quarter was around INR 8 crores and net loss was reported at approximately INR 14 crores. For the financial year ended 2024, revenue from operations stood at INR 707 crores, representing a growth of 27%, year-on-year, EBITDA loss stood at approximately INR 26 lakh and net loss was around INR 41 crores. With regards to the new initiative in Q4 FY '24, the expenses amounted to about INR 10 crores, while for the year ended FY '24, it was about INR 81 crores. And if you were to adjust for this investment, the -- sorry, adjusted EBITDA for the existing operations in Q4 and year ended FY '24 would have been approximately INR 3 crores and INR 81 crores, respectively. Digital Media revenues for the fourth quarter stood at around INR 64 crores, up by 30% year-on-year, while for the financial year ended, it was around INR 249 crores, replacing a growth of around 11% Y-o-Y. Traditional media revenues for the fourth quarter stood at INR 135 crores, which grew by around 21% Y-o-Y for the financial year ended, and it was around -- for the financial year ended, it was around INR 458 crores, witnessing a growth of roughly 38% year-on-year. Now I would request our CEO, Mr. Hiren Gada, to give the operational highlights for the period in the review.

Thank you, Amit, and good afternoon, everyone. Q4 FY '24 was marked by strong performance, with robust revenue growth of around 21% year-on-year, driven primarily by our B2B businesses. As part of our ongoing commitment to strengthen our financial health, we have initiated a series of measures this quarter, focusing on accelerating inventory charge-offs and prioritizing debt repayment. Upon due consideration with various stakeholders, the management has taken a bold decision to change the amortization estimation of the company's content inventory. We expect the existing inventory to be reduced by around 40% to 45% in the next 2 years. This is not considering fresh investments in content. Furthermore, we are also aiming to bring down the overall debt by about INR 100 crores over the next few years. While these actions have led to subdued margin in the current quarter and are expected to keep the margins under pressure in the near term, it is important to note that these charge offs are purely accounting measures, they have no impact on the monetization potential of our content library, nor do they affect our revenue or the ability to generate free cash flow. We are confident that these strategic steps will fortify our balance sheet and unlock the intrinsic value of the company. In our Digital segment, ShemarooMe continues to gain traction, particularly with our Gujarati content offering. This quarter, we released 13 new titles, including movies, web series, plays, expanding our content portfolio. Noteworthy titles include blockbuster movies Hello, Beti Kyare Boj Hoti Nathi, along with original web series, such as Warso and [indiscernible]. On YouTube, Shemaroo Filmi Gaane has achieved a remarkable milestone, becoming the 22nd most subscribed channel globally, and with 68 million subscribers reflecting our growing digital footprint and audience engagement. In our Broadcast segment, we launched the original show, Chahenge Tumhe Itna, on Shemaroo Umang, further enhancing our content offering. Our women entertainment channels continue to perform well with GEC channels securing a viewership share of approximately 7.1% in the overall GEC channels. With that, I would like to now open the floor for questions -- the Q&A session.

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

So Hiren-bhai, my first question is about this inventory charge-off and you guys have changed the amortization policy. But as you said, it's more of an accounting entry. So given that how will it help in terms of kind of lightening the balance sheet? And the reason I'm asking this is that I think I've been following our company for many years and for various internal and external reasons, the debt reduction has not taken place, including this year where you were aiming for at least 30% kind of, of debt reduction. So why would it happen now? What has changed or what will change? If you can talk a bit about that because more than P&L, the concern is surely on the balance sheet side.

Thanks, Dhwanil, for these questions. I would -- before we -- I get turned to answering, I would first like to clarify that this year, we had targeted not a 30% debt reduction, but a INR 30 crore debt reduction.

Sorry, INR 30 crores. Yes, sorry.

And so as you know and which we discussed in the last quarter that so first I just quickly finish off why that has not happened. And then we'll move on to what is a third process for this. So basically, we had targeted a INR 30 crore debt reduction from around INR 320 crores to INR 290 crores. That is what we had aimed for this current financial year. As you all are aware that Q3 was an extraordinarily bad year -- bad quarter for the entire industry, including us, and we had reported a heavy loss. And that loss impact has held us back from this number. I would also like to draw the attention that the debt in December Q3, 9 months -- sorry, December '23 end was INR 362 crores, which by March, we have already brought it down to INR 338 crores. So there is a strong underlying cash flow generation, which is happening. So now coming back to the question on why -- or firstly, I want to give a little context on what we have embarked, and why we have embarked on this is that last 2 to 3 years and even probably prior to that also -- prior -- but particularly more in the last 2 to 3 years, we've always had this question in terms of the overhang that debt and inventory. Both these questions kept, and there was a third linked question, which is free cash flow generation, which we kept having for last 2 to 3 years, particularly. So we kind of looked at that this whole -- and that has been one of the impediments to the value discovery. I mean, so today, we are at a INR 700 crore top line, which, for our industry, puts us into a certain league or not a small player kind of a league, but that is not reflected in our market cap or the kind of valuation that we believe should be happening. And when we reflected back or even did some research on what is -- why this is the case, our clear understanding came out to be that this combination of balance sheet correction, which needs to happen is something that is likely to do that. Now balance sheet correction is not one thing. It's not just debt repayment. It's a combination of debt -- sorry, inventory paring down, it's a combination of inventory and debt because they are both opposite sides of the balance sheet. So I think that is really what we have attempted to address this in a way, I would say, take the bull by the horns. And over a period of disciplined execution, bring it down to a level which kind of makes the whole balance sheet and the underlying business financials in a comfortable position. That has been the third project. And in doing so, we are obviously demonstrating free cash flow. Now the whole idea here, we believe that over a 2-year period, if the inventory -- existing inventory can come down by 40% to 45%, if the debt can come down by about INR 100 crores, that makes the whole financial outcome extremely strong, and that can help the value discovery purpose.

Right. But hereby my question still remains that this -- with this more of an accounting, inventory charge-off is an accounting entry. So how -- what is the plan to reduce this INR 100 crore debt? Because those kind of things have not happened in the past. So that is what I want to understand. Are you going to reduce the investment in the new initiatives going forward, hence, expecting better cash flow and then debt reduction? What is the kind of gliding part for the debt reduction?

Sure, sure. So I'm just coming back -- I was trying to answer the question on the inventory part. But yes, that part also I'll come to. So we have good visibility on the content monetization already. In fact, in the last -- in this quarter itself, we have been able to generate a certain amount of cash flow, which has helped bring the number -- the debt itself from INR 362 to INR 338. If I have to put it, it's brick by brick, there are multiple different triggers and aspects. Firstly, on our investment businesses, the expected investment, now that the businesses have reached a certain stage, is definitely not -- it's going to be significantly lower than what we have invested last year. In fact, it would have -- last year also the budget was lower, but there were some extraordinary events. This year, we have actually built the investment plan and the annual operating plan in a way that the investment in a way stays fairly stable or at a much lower number than what we had last year. So firstly, there is a lower investment, which is combination of -- so which is a lot to do with the progress of the business itself and a few other market forces combination that we have expected. Second is that the cash flow generation on the content library has been growing for last few years that we have expected. So there is a certain growth in the cash flow generation itself that we have -- so it's a combination of maturing of the investment and growing on the cash flow that is expected. So based on that itself, last year also we had estimated. But as I said, this year, we have a fair visibility on the numbers.

Okay. So 2 follow-ups on this. So essentially, what we are saying is that INR 100 crore debt reduction in couple of years, which means INR 40 crore, INR 50 crore reduction every year, is that the right assumption to make?

Correct. Correct. Correct.

Okay. And second question, you are saying that you will reduce the inventory by 40% to 45% in again 2 years, so we are almost charging of INR 280 crores, INR 300 crores over 2 years. So roughly, the accounting charge-off will be around INR 35 crores to INR 40 crores a quarter. Again, is that the right number to look at?

Yes. Yes, Amit. Yes.

The next question is from the line of Shivam Agarwal from Equitree Capital.

Sir, I have a couple of questions. First, like with the recent completion of our -- tenure of 2 independent directors, so could you provide impacts into our strategy for reconstituting the board and like till when the appointment will complete?

Amit, you want to step in?

So we have already announced for the appointment of the new directors.

Okay. So with the independent directors are appointed...

Two new independent directors have already been appointed.

If you see the outcome of the meeting [indiscernible].

Yes, which was filed on Friday itself. The details of the 2 independent directors.

I have [indiscernible], sorry. And sir, second thing, considering the annual salary announced Shemaroo, it's [indiscernible] approx, so our recent focus on hiring top-tier management...

Your voice is cracking a little bit. Can you please repeat the question?

Sir, considering the annual salary expense of [indiscernible] and the recent focus on hiring top-tier management. So can you please provide me on whether we are currently hiring initiative or complete? Or any other -- what are the projected salary expenses in current FY '25?

So our overall hiring broadly is in place. And now any further hiring would be broadly incremental in nature, not the kind of upgrade we have done over the last 2 financial years. The additional cost or the number for this year, while I'm not in a position to give it to you, I can just say there are 2 components which will lead to an addition in FY '25. One is, of course, the normal salary increments that we would have given to the team from 1st April -- effective 1st April onwards, and second is that we had some of the talent joined us midyear, between, say, June, July to almost October, November. Their annualized -- so there we may have had an prorated payout which will kind of get annualized from henceforth onward. So...

So we are not looking for a massive increase in number itself?

It would be incremental. As I said, a combination of normal increment and some annualization of some of the existing numbers.

This is a Arghya here, sorry. I think just to answer, I think most -- I mean, large part of them, but I think the entire part of the top level hiring is not company. Anything now happens will be on incremental basis.

The next question is from the line of Maan Vardhan Baid from Laurel Advisory Services.

So I just wanted to understand that sort of -- because we've now embarked on this drive of writing off inventory. And sort of, I think, even this year, we've written off almost close to INR 50 crores of inventory. So I just wanted to understand the process behind writing of this inventory. And sort of what slightly -- maybe if you could sort of explain as to why are we writing off more inventory than what our P&L kind of permits? So that actually weakens our net worth, [indiscernible] our net worth, the moment we start showing losses. So just curious around that point.

Yes. So again, coming back to what I said earlier. So I'll answer it in 2 parts. First, I'll try and answer the second part. So as we discussed that, this is a -- we are -- this has been a question or challenger kind of feedback constantly from various stakeholders that we have received that in relation to the overall size and financials, the inventory is high and the debt is also high. And this step has been taken to kind of correct that. There is a onetime kind of an accelerated charge-off that was -- that has been embarked on and that has been envisaged. Now yes, in the short term, while it will definitely lead to P&L losses, we expect that once that is done with, the underlying profitability and more lighter balance sheet will kind of throw a far better opportunities, far better ratios and far better visibility of the intrinsic work or the intrinsic value of the company. That's the thought process and the confidence with which we have kind of embarked on this. Now to answer your other question on what is the process. So typically, we have been charging it off so in a so-called price which we had for longer period, which is 10 years and above, we have been charging it off in 2, 5-year cycles broadly, so that we are able to cover the monetization time frame in a 10-year period. What we have now done for a certain portion of the inventory is to accelerate that and reduce that tenure into a lower number. So that's the broad change that...

Okay. And sort of just also wanted to understand the impact on taxation of this measure that when we aggressively write off, are we permitted to carry forward these losses?

Yes, we are allowed to carry forward the losses as business losses.

Okay. If you could also update us on the GST matter. I think there was a provision that has been made this year and sort of where do we stand on that matter with the authority?

Sure. So as far as the GST is concerned, as on date, we have -- we don't have any further update or communication from the authorities. There is no demand. There is no show cause or any such thing. We have been providing details that they have been asking us for. And as and when we receive any show cause or something, we will definitely -- anyways would need to update, and we will update. So there is no change on that in any case. And I would just like to -- I mean, so fundamentally, the matter is sub judice and continues to stay so. But I would just like to do 2 things. One is, of course, reiterate that we believe that all the statutory dues and compliances have been duly paid and filed by the company, okay? And secondly, as a matter of prudent accounting practice, the amount that we have paid, which is the INR 12 crores under protest, which has been paid to the department that we have charged off as a provision or we created a provision under other expenses in...

So we believe the amount is fully recoverable. And hence, there is a provision made, not a write-off, basically.

Understood. Also, a broad comment on the advertising environment. I mean this quarter, top line was strong so...

Arghya, you want to take that?

Yes. Okay. So I think the -- so top line growth as you see, we have indicated in the call itself has come on the back of some strong B2B revenues. We've had some -- as we have indicated in the past, these B2B syndication revenues are lumpy in nature and some of those revenues accrued to us in this quarter. So I think that is [indiscernible] this quarter. Advertising revenues, while, at an overall level, we can see that the FMCG advertising revenues are showing some signs of revival, not yet fully up there, but definitely better than the last quarter, it is moving positively. The indications are positive. Hopefully, after the elections, and then there is certainty in the market, things would be better. But there are signs of some revival in this FMCG business, not so much in the e-com and the other parts of the business. And it is visible in the GEC, but more so in the regional space and in [ vehicles ] and sports. But -- it is very strange, but much -- it is positive definitely compared to the last couple of quarters.

[Operator Instructions] The next question is from the line of Sakshi Chhabra from Swan Investments.

Yes. Sir, I just wanted to understand that on your accelerated inventory write-offs, so is it on the fresh content that you will be acquiring, this will be applicable? And if so, in the first year, what is the percentage of write-off which you will be doing on cash content?

Sorry, you mean to say is that is the policy applicable for the fresh content?

New content. Yes. Yes. That's my question.

Yes. So wherever the -- as I said, certain type of content, if the fresh content falls into that bracket of that, it would be applicable.

So can you explain that a little more in detail as what...

Depending on certain cat type of content and certain aging of content, we had earmarked a 10-year kind of charge-off policy, which we have shortened to different time lines based on the aging and other criteria. So any content freshly acquired, which falls into that same category will be applicable.

Okay. But how is that categorization assigned like I'm not able to understand that.

As I said, it's a -- so there are some parameters have been applied, which are based on the aging of the content and the monetization...

The estimated life of the content?

Yes. So that estimated life of that content, which earlier was estimated at 10 years has been brought forward as in it has been reduced.

Would you be reduced to about on an average...

As I said different [indiscernible] has been reduced literally from 2 years to -- between 2 and 10 years. But some of it has been brought for -- a lot of it has been brought forward basically.

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

In this quarter, how much inventory write-offs have been done...

As a result of the policy?

Yes. The incremental inventory write-off for the amortization?

Approximately around INR 10-odd crores incremental write-off would be there.

And that will be included in the operational cost?

Yes.

Because I was unable to locate that properly because neither could I look at it for the cash flow...

All content consumption will always come under operational cost, direct -- it's a direct operational cost.

Agree. So you will have one effect on the operational cost. And since you mentioned it is a noncash item, so are we also putting it accounted under the cash flow?

See, the accounting charge-off doesn't have a cash flow impact. What it has is -- the second effect of that goes into stock.

In the cash flow, there is...

Okay. So in the cash flow, it will be accounted under inventory part.

Yes, correct.

Okay. Got it. And secondly, on the business side. See, our traditional media in the last 3, 4 quarters, again -- sorry, digital media in the last 3, 4 quarters has remained kind of flattish, or I would put it even for last 6, 7 quarters right from September '22, we have been coming in the range of INR 60 crores odd, INR 60 crores to INR 65 crores range. So how do you look at this new media sales to grow and what are we trying to do over there, just to understand this?

Sure. Yes, Arghya, you want to take it or?

No, no, go ahead, Hiren. I'll add on.

Okay. So okay. And yes, sorry, Arghya is out station. So we are not in the same room. So sorry about that. So see let's understand the context for digital media. So in digital media consumption, post the COVID surge that has happened, there has been some clawing back or reduction back. And that probably is still playing out or maybe towards the end of that playing out cycle. So probably, COVID took something which was at 100 maybe to 200 or thereabouts. Post COVID, things have normalized back to 150, 130, 160, somewhere there. So there is a -- and obviously, COVID created a high base impact for everyone, which kind of caused a slowdown or optical at least slowdown kind of a thing. And that is across the digital acquisition, particularly in media consumption, we have definitely seen that. And whether it's all platforms, and this is documented, if you see the latest industry reports from most of the experts also, they talk of a similar kind of thing. So the overall underlying landscape itself is kind of being a tempering of that growth, which is a post-COVID adjustment. We expect that probably that adjustment period may be nearing its end or may take 1 or 2 more quarters to finish that adjustment, post which the normal growth will catch up and [indiscernible] coming back. However, now that the base itself has grown so large, and this I'm talking, Rahul-bhai, at an industry level, first. So at an industry level, the base has itself grown so large now. Now the 20-plus percent growth rates and all of that are not really going to be -- they are going to be very difficult to replicate and achieve in the visible future. So therefore, we expect that -- or in fact, the industry reports also suggest that growth rate coming down to somewhere in the 13% to 15% kind of number that last year also, calendar '23, it has been in -- around sub-15% kind of a thing. We have, in fact, done better than that. And our effort will be, since we also highlight one more factor is that we command a very high viewership share on all the categories that we operate in YouTube, particularly on the Bollywood side, films, music, et cetera. So for us also, to move the needle, our dependency on the underlying growth is very high. Within that, we have been growing faster. So maintaining or gaining our viewership share kind of a thing. So that is broadly and we have a strong content pipeline lineup and content plan as usual, which has kind of given us already a good growth number, and we are confident that, that should be fairly doable.

I think if you just add on to what Hiren said, so there are 2 aspects of that, obviously, one, which is viewership led, which Hiren just talked about, and all the factors contributing to the viewership shares and where the viewership stand. Also important to note is that the last year has been pretty soft on the ad expense. So how do we get our digital revenue, it's a function for viewership as the ad expense on -- largely on the channel of YouTube. So the ad expense has also been reasonably soft in the last year compared to what it was from 2 years back, it has grown very well, and which is climbing a heavy base. So that also has contributed to the ad, this has not also been very strong in the last year, obviously, in our channel because there are a lot of sports and other events, which happened. We had IPL and the world cup and so and so [indiscernible] on which money has moved. So while we are on an upward trend and the trajectories looks okay, but the growth have been soft on account of what Hiren said and also on the account of...

So Hiren-bhai, basically, do we understand that from the digital media -- traditional media has done much better for us in the last 3, 4 years compared to the digital media?

Particularly last about 4 to 6 quarters, it has been better. Prior to that, digital has been growing equally strongly. And also the reason, let's not forget is the fact that there has been a significant underlying investment in the broadcasting business initiative itself. So as the channels have grown and matured and all of that, there is a new stream of revenue that has come up and which has grown robustly and contributed well to the overall picture.

No. So the reason why I'm saying so is that now we have -- sitting on almost INR 450 crores, INR 460 crores of traditional media business.

Correct.

Right? So that again has built up in the last 3, 4 years. So your -- this base has become larger. So how do you see this particular segment of the business doing in the next 2, 3 years -- next 2 years?

So see, so there are 2 parts to this. One is -- so firstly, if you ask me, frankly, beyond a point, it doesn't matter because the content that we are -- whether it's for broadcasting what we are creating or whether it's Bollywood content or Gujarati or anything else, it's ultimately the content which works where the consumer comes from, it really doesn't matter, okay? Whether the consumer is coming on television platform or on digital platform, it doesn't matter because either way, we are well placed to monetize it and earn out of it. Secondly, in the way forward, industry estimates on television advertising are somewhere in low single digits, 3% to 5% in terms of growth. And digital are, as I said earlier, somewhere in the range of about 13% to 15% advertising growth. Within this, given our -- the fact that we have been overall gaining viewership share on the television side, also we have obviously grown faster and taken away some revenue or added and grown from that. So frankly, as I said in the earlier point that it doesn't matter. We have to be, firstly, where the consumer is. And secondly, we have to have a monetization mechanism available. I think that is probably more important. Now [indiscernible] whether people are continuing on television or on the digital media, how does it matter? We are there to capture the revenue on either front.

The next question is from the line of Rishikesh from RoboCapital.

Sir, can you please tell us the adjusted EBITDA for this quarter? And how much expense was for new initiatives and how much was for inventory write-off?

This quarter, the expenses for the new initiatives were INR 10 crores, and the adjusted EBITDA for the quarter was INR 3 crores, and for full year, it was INR 81 crores.

Okay. And what was the investment for new initiatives in FY '24?

INR 81 crores.

Okay. And what investments do we see for FY '25?

We are estimating that investment to be approximately in the range of about INR 50 crores.

Okay. And how do we see these investments on new initiatives going ahead? Can we say that FY '25, let's say, INR 50 crores, in what year can we see that they will go down significantly, let's say, below INR 10 crores, INR 5 crores, something very municipal number?

So there are 2 parts to the investment. One is the television broadcasting investment and other is the ShemarooMe. These are the 2 key components of the investment. Television broadcasting, we are looking forward that probably somewhere in the next 4 to 5 quarters, we should be significantly nearing a breakeven kind of situation. As far as ShemarooMe is concerned, OTT industry still -- in fact currently, the OTT industry is not doing that. So we have actually toned down even in this current quarter gone by, and we think way forward also we have toned down the investment. We believe that this business is likely to stay in investment mode for at least a couple of years more till it doesn't achieve a 3-figure mark on consumption, viewership and adoption kind of number. So our effort has always been to be as frugal as possible and manage the overall investments within a certain amount on an annual basis rather than overspending or overpaying on things.

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

Sir, we have seen around a 20% growth in business for Q4. And sir, most of it was driven by B2B transaction, I guess. So sir, I wanted to understand the performance of the 4 channels that we have. So I wanted to understand the like revenue realization growth from the first channel, and also the update on like the most recent, so how are we seeing this revenue realization growth? And also, sir, how long does it take for a channel to break even?

Okay. Arghya, do you want to answer this?

Yes, I think -- so I'll answer because this question keeps coming. I think the 4 channels are on different kinds of revenue transition because of, obviously, one is duration of the channels in existence and the kind of competitive spaces they operate in and the kind of viewership share that we have been able to generate out of that. I think if I look at, and it's difficult, and we will not be able to give numbers to it. But I think [indiscernible] point of view and from a completely stabilization point of view, I think Shemaroo TV is the first channel that we launched is quite -- it's -- very recently on its way forward. And we see that trajectory continuing the way it is without any too much of challenges and bumps. Then we have Shemaroo MarathiBana, which also was a very earlier channel. Of course, it operates only in Maharashtra and has been doing reasonably well with some ups and downs because we have been investing fresh content release towards second half of last year. And it was doing quite okay, but in the -- as you might know, coming from April this year, we have brought it out from the [indiscernible] for various reasons, largely being the -- the license cost being too high for the kind of [indiscernible]. So Obviously, MarathiBana, we are starting relatively fresh, which now completely entering in the play world. We are readjusting our content or readjusting our programming in order to -- because it's almost a fresh start to our MarathiBana. Though it continues to play in -- it was in the previous part, part of Maharashtra is only [indiscernible], and it continues to be in the table, but obviously, the strategy and the content planning, et cetera, will go through some changes. The fourth channel, which is the very new channel, which was [indiscernible], which was launched in the middle of last year. I think it has stabilized and it's really doing well, considering the time it has spend. And we have reasonably strong hopes in the channel this year, the way it is trending also looks good. So 4 channels are in 4 different spaces. Shemaroo, as I said, [indiscernible], which is our main channel for original shows, went through a bit of an up and down kind of a situation. That channel, we had launched quite a few earlier shows, which we had brought down in the last quarter because some of the original shows were not doing well. We still continue our focus on the originals there, which is right now having a couple of original shows, and we have plans to dial up again in the next couple of months there. So that channel is the one which is -- which we have a lot of plans and hopes for in the future. But it's going through a slightly rocky phase because it is largely dependent on original creation. So -- and in terms of profitability, this question has been asked many times, it's a question of different channels in a different space. At an overall level, as Hiren said, somewhere in the 4, 5 quarters down the line, we hope to have an overall [indiscernible], but with different channels in different spaces. Hiren, if you want to add anything, you can add.

No, I think fairly, just one point I would like to add is that one of the factors which actually would be -- put the free [indiscernible] a little behind by about happened last year, which was a rebasing of the sample universe with the -- done by the rating agency [indiscernible]. And that has, in a way, shifted out certain numbers. And that has -- so one of the impact for last year definitely has been this rebasing effect, which we are fairly hopeful that, that correction back should happen during next few months is what I think. And that will, of course, definitely change a certain amount of the revenue that has been given up.

Okay. And sir, my second question is, what is the update on the launch of new channel?

We are -- Arghya, you want to?

Yes, as of now, we are in the state of evaluation of the launch of channel. I mean that's something which we'll always be able to because we want to have a network of channel. As of now, we are still evaluating when and how to launch the next channel. Yes, Hiren, sorry.

Yes. So while we are in a certain state of readiness for that. But yes, given the last couple of quarter events on the external fund, it'll be advertising landscape and all of that, we have ourselves on a bit slow [indiscernible] and are evaluating the viability and things like that.

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

I have 2 questions. So first is if I look at our GEC viewership share, even if I adjust for the rebasing effect that happened last year, we are at around [ 7.1% to 7.5% ], which used to be slightly higher. So my question is that let's say, if you don't launch any new channel, and considering that we are running at full inventory like you explained in the earlier calls, the only way to grow is through higher effective rates so -- ad rates. So without viewership share increase, the only lever that we have is the improvement in the external environment. Is that the right assessment? And if so, aren't we too dependent on the external factors on that? And how do we see our viewership share growing?

So there are -- yes, okay. Go ahead, Arghya.

Yes. So Dhwanil, we -- I mean, external factors will always be important, right? Because we are in the Free Dish space, in the GEC -- in the Hindi GEC space, specifically. And in Free Dish space, as you know, the revenue model is completely advertising led. So there is an externality. But at the end of the day, remember that Free Dish Hindi GEC caters to a very large audience, which is not catered by the free audience. It's a very large incremental audience. So there is enough and more space for advertising monies to come and advertising monies will come. And so -- it is a function where -- a lot of it is a function of demand and supply, you are right. And as I was just indicating, showing some green shoots of opening up again in this quarter. And hopefully, post direction and everything stabilizing, we also see -- we are very hopeful that the coming [indiscernible], we'll see some strong rebound in the advertising revenue. So that is demand. That is one. Second is in terms of viewership share, you're right. Our viewership share is slightly suppressed more than compared to what we should have been. And as I said in the previous answer, there are some of our original shows, which did not work as well as we wanted. But as you know, or if you don't know, let me just let you know that what happens is in Hindi GEC, normally, the strike rate of shows subsidiary is normally in the range of 1 or 2 or maybe 3 max out of 10 shows succeed. So it's not that none of our shows succeeded. The beginning -- the first show that we had launched, Kismat Ki Lakiro Se, did reasonably well. But subsequently, some of the shows did not go well. We are right now also working with some of the top producers being in newer shows. We are also being very quick in replacing shows which are not working. So we have a cogent and well-thought-out programming strategy in place to drive viewership share. Irrespective of the fact that the advertising market opens or not, we have to continuously strive to drive our viewership share through smart programming. So that's where we are. We are also taking quick calls, hence, in this last quarter, we have actually saved a lot of our investments by shuting shows which are not working. At the same time, we are also commissioning shows with best of producers with the best of trust. So it's going to be a combination of both. It is not just [indiscernible] factors, but which are related to because [indiscernible] is important, but also at the same time driving running shares with smart programming what we are handling our content as well.

Okay. Okay. See, the question that I have and the point that I'm trying to kind of arrive at some kind of understanding is that in the earlier version of Shemaroo, you used to do 27%, 28% EBITDA margin and now the way we are charging off inventory, apparently, we were charging off inventory on the lower side content cost and, hence, probably gross margins were also not true reflection. Today, we are in the space where we are still in the [indiscernible] in terms of business is scaling up. So as a management, when let's say, INR 700 crores become INR 1,000 crores as we scale up, how do you guys look at EBITDA margin? Because from the moving part that they are in the business at the current juncture, and the accounting side of it, we have absolutely no clue how the margins deliver. So unless you guys help us understand how you guys think at a scale, how this business will have a steady state margin, how would we get some sense?

Okay. So there are 2 parts to this answer actually. So firstly, on the margin -- on the traditional business or on the [indiscernible] business model, which was the aggregation, syndication and content business, that I don't think changes. If you -- even now, if you see the underlying adjusted EBITDA and all of that, those margins are in that range only. That cash flow is also in that range because if you see this year after an investment of INR 81 crores, the debt has gone up by INR 18 crores, okay? So there is a underlying free cash flow that is getting generated, but it is being invested. Now yes, the third question is that whether that investment has broken even, what is the visibility on that breakeven? And then in a steady state, what are the margins on -- or how -- what kind of margin business is that, okay. I have 2 points over there. One is that, as I said earlier that, that business, we are looking forward that in the next 4, 5 quarters, that business should reach a steady state, at least a breakeven kind of a position. Okay. And this business is known to have super normal margins. We have enough and more data from a lot of other peers in this industry, who we know are working at significantly higher margins. Now we are saying that may or may not happen, and it may take some time to happen. But at least once the business is on a certain path, the way forward on margins, free cash flow generation and sustaining the business in it's way forward is the important first step that we are looking forward to achieving on that, and I think we have a lot of levers for that, some of which are external, but quite a few are internal also. And we are -- we have a fairly capable team in place to actually push and drive a lot of those levers. That team has come -- been brought in place over the last about 3 quarters or so. It's now over the last, as I said, 3 quarters, has stabilized at a certain level. And now raring to go in terms of taking the things forward. And we are definitely hopeful and confident that they will be able to deliver significantly strongly on that. And the second part to this is that this business, in terms of its working capital nature, is very different from the aggregation business because this is a relatively smaller working capital business, notwithstanding in fact, the fact that we have been steadily investing. But fundamentally, the working capital nature, if you can see on the balance sheet effect, is significantly different. So I think that is, if you ask me, the way to look at it. So it will -- even at a slightly lower margin, this business can improve the return ratios for the company quite significantly.

Okay. Got it. And just one small request, sir, like you have been giving initiating numbers separately, if you can give the inventory charge-off numbers also separately because otherwise, again, we will have no clue on how much of inventory is getting charged every quarter. What is the normal consumption and what is the extraordinary charge-offs?

Sure. I -- we will look into it. I am not able to confirm that right now, but we'll try and address it in some way. The idea is not to -- not give out some -- so we have -- so what happens is that as we go forward, there's a challenge on the numbers because fresh inventory, et cetera, comes and it all becomes finally fungible in that sense as it kind of becomes one block. So to calculate the base and all of that is a challenge. We'll try and attempt to give as accurate -- we'll look into it.

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

Hiren-bhai just to understand this, this year, if I look at our operating profits, apart from adjusting for the INR 81 crores new initiatives, there is a INR 12 crore GST provision and there is a INR 10 crore incremental or excess inventory write-off. Is that clear -- is that right?

Correct.

So if I look at last 3 years of operating profit adjusted for the new initiatives, those profits have been around INR 100 crores only, no change. They have not moved up. Our margins also, the operating margins, again, for existed -- for this new initiatives as well as this current year's inventory and GST, they have actually fallen from around 27% to 14%, 15% now. And as the previous participant was talking about earlier, we used to get around 27%, 30%, or 25% to 30% range of margins. In last 3 years, those margins have now come down to 14.5%, 15%. So one, what has actually led to this deterioration of margins and what is the steady state margin for our business now?

I [indiscernible] that it's a very, I would say, arithmetical way of looking at it. We have to your -- so you adjusted the numerator, but not the denominator. That's my only concern on that. So this is a separate discussion, we can probably look at it separately, but that margin what you are taking off, you have to even take off the top line from the denominator, then you will find that the margin on that existing business is maintained.

Top line from the denominator?

Yes.

Okay. Awesome. Okay. And possibly take it offline. So now in last 5 years, we have spent INR 300 crores on new initiatives. And is it possible to understand out of this how much will be spent in cash or how much it will have impact in the cash flow?

So if you see the debt impact, it has gone up by -- I don't have the figure off it, but my sense is that, that would have gone up by about INR 75 crores to INR 80 crores. Rest is all through internal accrual.

Okay. But this INR 300 crores is [Foreign Language] spent in cash or the cash flow would have accounted...

Yes, yes. So it is visible in the debt number. See what I'm reporting and how the debt is going, we can calculate or adjust based on that.

Okay. And so next 2 years, Hiren-bhai, or 2 to 3 years, how do we look at this number of new initiatives? Because what happens this year now, we have an excess inventory write-off being done every quarter. So are we trying to take somewhere...

As I said earlier that this quarter, we are expecting -- sorry, this year, FY '25, we have budgeting for approximately INR 50 crores on the fresh investment side. Next year visibility, right now, I am not able to give because it depends on -- we are at the beginning of the year. So I don't know. But yes, if things go as per how we have anticipated that we -- if we are able to breakeven in a 4-, 5-quarter period on the overall business, then the investment in next year will come off reasonably to say only broadly at -- for ShemarooMe and some small amount for the Broadcast business. So if we are able to achieve that breakeven, near breakeven at least situation, then the next 2 years, the investment will come off reasonably.

As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

Thank you all for participating in this earnings call. I hope we have been able to answer your questions satisfactorily. If you have any further questions or would like to know more about the company, please reach out to Valorem Advisors, our IR managers. Thank you, and looking forward to seeing you with the Q1.

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