Shemaroo Entertainment Limited (SHEMAROO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '25 Conference Call of Shemaroo Entertainment Limited, hosted by Valorem advisers. [Operator Instructions] I now hand the conference over to Ms. 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 Q2 FY '25. 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 belief 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 now 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. Arghya Chakravarty, COO; and Mr. Amit Haria, CFO. 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. Good afternoon, everyone, and welcome to our earnings call for the second quarter and first half of financial year 2025. 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 Q2 FY '25, the consolidated revenue from operations stood at INR 162 crores, which declined by 18.5% on Y-o-Y basis. EBITDA loss for the quarter was around INR 27 crores and net loss was reported at approximately INR 26 crores. For the first half of the financial year, the consolidated revenue from operations stood at INR 317 crores, which declined by approximately 10% Y-o-Y basis. EBITDA loss for the first half was around INR 40 crores, and net loss was reported at approximately INR 44 crores. With regards to new initiatives in Q2, FY '25, the expenses amounted to INR 15 crores, while for the first half of FY '25, it was about INR 23 crores. And if you were to adjust this investment, the adjusted EBITDA loss from the existing operations in Q2 and H1 would have been lesser of approximately INR 12 crores and INR 17 crores, respectively. Digital Media revenues for the second quarter stood at around INR 67 crores, which increased by approximately 17% Y-o-Y, while for the first half of the financial year, it was around INR 124 crores, which grew by approximately 8% year-on-year. Traditional media revenues for the first quarter stood at around INR 95 crores, which declined by around 33% year-on-year while for the first half of the financial year, it was around INR 192 crores, which was a degrowth of around 19%. Now I request our CEO, Mr. Hiren Gada, to give you operational highlights for the period under review.

Thank you, Amit, and good afternoon, everyone. During the second quarter of FY '25, our overall revenue declined 18.5% year-on-year, primarily due to a higher base in our traditional business and in Q2 FY '24. While this growth was flattish against the previous quarter, which is largely due to the lumpiness of the B2B syndication business. That said, there were certain delays in deal closures in our traditional syndication business, which were largely a result of transitional changes in the media industry over the past few quarters. We expect these deals to materialize in the coming quarters. Additionally, there has also been sluggish demand for our broadcast advertising due to continued slowdown in the consumption economy. This put pressure on our traditional revenue stream. On a positive note, our digital business exhibited robust growth of around 17% year-on-year on the back of sustaining growth across the industry in digital advertising. The company's margins remained under pressure due to accelerated inventory charge-offs, which we initiated 2 quarters back. Our inventory has come down from INR 727 crores as on 31st December 2023 to INR 618 crores as of 30th September 2024, which is about INR 100 crores, a little more than INR 100 crores in 3 quarters. However, it is important to note that these charge-offs are early accounting in nature and do not affect the monetization potential of the content library, revenue or the ability to generate free cash flow. We continue to invest in intellectual properties, further enhancing our content portfolio to drive long-term growth. This has been done while keeping operational costs under check and at the same level as the previous year. Looking ahead, our focus remains on strengthening the balance sheet and maintaining operational efficiencies, which will help us unlock the company's intrinsic value. In our Digital segment, ShemarooMe continues to gain traction, particularly with our Gujarati content offering. In this quarter, we released 8 new titles, which include movies, web series and theater plays, expanding our content portfolio. Noteworthy premiums include the blockbuster movie BachuBhai, Kamthaan and the release of original web series, Goti Soda 5. On YouTube, Shemaroo FilmiGaane has achieved a remarkable milestone, becoming the 24th most subscribed channel globally with approximately 70 million subscribers, reflecting our growing digital footprint and audience engagement. During the quarter, we successfully launched 2 original shows, Shamshan Champa and Main Dil Tum Dhadkan on our channel Shemaroo Umang. Our general entertainment channels achieved a viewership share of approximately 7.6% in the overall Hindi GEC genre. We are excited to announce the launch of Jab We Met, one of our Shemaroo's iconic IP as the digital collection and gaming experience on The Sandbox-BharatBox. This innovative initiative allows us to engage with our audience in new and immersive ways. With that, I open the floor for question-and-answer session.

[Operator Instructions] The first question is from the line of Yash Kukreja from Equitree Capital.

Sir, my first question is on the debt part. Sir, my question is how much debt are we planning to reduce in H2?

So as we have shared when we started the whole accelerated inventory charge-off, that our intent is that in 2 financial years, which is FY '25 and FY '26, we will reduce the debt by about INR 100 crores. I believe we have good visibility for that, and we are fairly on track. Now how much of that will happen in H2 of the current financial year and how much will happen in next financial year is difficult for me to say at this point in time because as I have shared in my opening remarks that there are some transition changes happening in our industry. And because of that, a few deals could move here or there between a quarter or something. So I think -- but overall, directionally, and in terms of visibility and content portfolio, I think we have very strong confidence about what we have intended to do.

And sir, my second question is how much have we spent on the new initiatives in H1?

In H1, we have spent INR 23.2 crores.

And sir so and targets for the full financial year is around INR 60 crore, right?

To give you a sense, this was -- in last financial year, this number was at INR 42 crores. So we've actually brought that under significant control. And directionally, we are moving in the right direction as far as that path to profitability is concerned.

And my last question is what is the strategy on write-off, sir? So as we have had 3 quarters where we have written off inventory. So how much are you planning to do in H2?

So overall, we had mentioned that around 40% of the inventory as of December is what we are planning to write off for the 9 quarters. So I would assume in the region of between INR 50 crores and INR 60 crores is what would be charged off up as an additional inventory in H2.

And sir, what has this number been in H1?

It's in the same region as the -- in the region of around INR 60-odd crores.

[Operator Instructions] The next question is from the line of Jyoti Singh from Arihant Capital Limited.

Sir, basically, I wanted to understand on the Shemaroo FilmiGaane that we have done well, like 24 more subscribed channel in the world. Sir, how much like overall little like we are doing, but how much revenue we are doing basically from this song segment because all the labels company, they are doing very well. So in that competition, where we are and what our target for this segment?

I would like to first clarify that there is an audio business, which is a music business and then there's a video, which is the audio-visual part. So audio is something that goes through many audio apps like Spotify, Apple Music, Saavn, JioSaavn, et cetera, et cetera. We are -- traditionally, we have never been a music label. We have always been in the -- on the video side of it, right from the beginning, we've been a video level. So video cassette, VCDs, DVDs, et cetera, et cetera. Having said that, what we get as a part of what we own is the music videos of the content that we have and that to this practice of the industry was till the year 2000. Post 2000, the music labels are retaining the music video rights. The producers have been assigning it to them. So pre-2000 is broadly cut off in the year 2000. So pre 2000, whatever we have, that is what we have as a part of our portfolio, and that is what we have put on our music piece of our -- of the YouTube and various other digital platforms. So that's just to set the context. Secondly, essentially, this is a business which has grown phenomenally in fact amongst, if I were to call out as a classic or a retro music kind of channel. We are the leading channel on YouTube overall. So that is something that happens and we continue to invest strongly on the content to further acquire and to retain our libraries that we have. So in fact, we already have pre-board fair amount of content, and that will come up for commencement of our -- of the monetization period over the next few quarters. So that's broadly how we -- because this is a channel, which is highly yielding for us, which gives us a very good revenue stream and gives us good visibility and it's a leading channel. So we continue to invest strongly in the music side of the -- of this.

Yes, understood. Fair point. I understood your point on the label side. So it's like -- it was label, they are also only YouTube, and they are doing recent and now YouTube or Shorts are getting monetized. So because we are having more of existing library. So that is fine. So that's what I asked your future outlook.

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

First question -- you're able to hear me?

Yes, yes.

Sir, first question is, if I look at our H1 numbers, we have almost INR 57 crores, INR 57 crores, INR 58 crores of PBT loss. And as we mentioned that the total inventory charge-off is around INR 50 crores to INR 60 crores. So net of that, we are PBT breakeven, is that the right way to look at it?

Yes. Amit, you want to add?

If we have to not take the additional charge-off, then I think so it would be appropriate that we would be probably kind of a breakeven.

And sir we spent on new initiatives around INR 23 crores. So for this year, any budgeted number that we have?

I think we had given at the beginning of the year at about INR 60 crores is the annual target.

And we expect that to be well within that number? Or like last year, I think we exceeded our numbers.

Thankfully. I mean, I would say, has worked very hard to keep it significantly better. And as I was saying earlier, directionally in the right direction. And if everything goes well, I think we should be well within the limits.

So H1 number has been at INR 24 crores. So taking a view from there, I think we would be more or less in the line with the budgeted number.

He's asking whether we'll be better than budget or not. I said -- if everything goes well, I mean we will be -- our intent is to do better than that, obviously.

And Hiren bhai and Arghya, both of you can talk a bit about because whatever traditional media number is there, there is always this, the syndication part, which again the breakup we don't give. But if you can talk a bit about how the broadcast business is doing in terms of the monetization, the ERs in terms of market share? And also, are we near to breakeven at a portfolio level? How do we look at that journey from breakeven to becoming profitable? More color on that would be really helpful.

Hi, Dhwanil, this is Arghya here. I'll take that question. I think there are 2 parts to address as Hiren said in the beginning, while our digital business has shown growth in H1, the overall, the numbers are affected by the traditional business. But a large part of the traditional business decline is because of the syndication deal, which as was indicated, is because of the transition in the industry that is happening over the last few quarters. Broadcast business also, I would say, while it is not declining to that extent, it is almost flat from a business point of view. But the kind of resurgence on demand that we had expected, which we have been expecting now for quite a few quarters and broadcast is something which we are not seeing completely. I think it is partly because of the consumption economy being not in the most robust situation. And we are all hopeful that it will turn around, but it has still not seen the light of the day. In terms of our shares, we remain consistent from the quarter-to-quarter, not -- no major change in viewership share has happened. We are at about 7.6%, 7.7% that kind of viewership share in the GEC segment. And as you know, ER is a function of demand. So if you look at the overall industry level also, the overall fill levels of all the entire industry on GEC remains a little subdued. And it is only on the fills are full when the pricing will go up because finally, at the end of the day, the demand has to outstrip supply for the pricing to go up. So pricing has remained flattish. We are not seeing that kind of improvement. But at an overall level, broadcast is not doing as robustly as we had expected largely due to the advertising economy remaining still a little soft, especially for the traditional business.

Just one follow-up on that. So, Arghya, essentially, so demand environment is something which is not in our hand. The only thing probably what we can do is try to increase the viewership share and the market share. So what are we doing on that? Because we are at around 7.5%, 7.6% for a few quarters now. So what are the initiatives that we are taking to move towards that aspirational number of 14%, 15%?

So Dhwanil, it's a continuous process. I mean it's irrespective of the demand situation in the market. I mean these are things which are not linked actually. We would always want to keep increasing our viewership share irrespective of what happens in the demand scenario. So it's a continuous process, we keep evaluating shows. We keep evaluating options. We keep increasing FPC, we keep changing FPC, but also we have also been very prudent if you look at our overall cost line, which I think Hiren has mentioned in his opening statement. Our cost lines have remained flat quarter-on-quarter. So we have been also prudent in terms of not going over good, considering the overall situation in the marketplace. While we do that, there is a significant evaluation of program content, both in terms of what we get syndicated and what we create. And as Hiren said, we've created 2 new shows, the show pipeline continues the way it is. And it will be a little more gradual process because of the overall situation around the economics of the -- and if you look at, as Hiren said, our initiatives on our investments on new initiatives have come down from INR 42 crores last year H1 to INR 23 crores this year. So it also makes sure that we have been pretty prudent in the way in which we have gone about it. And we'll continue to be so until we see the buoyancy comeback on the consumption economy.

[Operator Instructions] The next follow-up question is from the line of Yash Kukreja from Equitree Capital.

Sir, I wanted an update on the new channel.

Which channel, the new to-be-launched channel or?

Correct. Correct. New channels, right?

Yes. So as we updated last time, we are all set and ready with everything in terms of right from the content to everything. But since the conditions are not ripe yet, the demand scenario on advertising, et cetera, ad spend is on the lower side. We have held back till we don't see that bettering of that. So because obviously, it is additional investment, we'll rather do it at the right time. So that is the thing. So right now, we still haven't seen that right conditions -- right conditions for that.

And sir, any update on the GST case?

We had received the show cause, and we have intimated on the exchanges also with demand of INR 70.25 crores, along with the interest and penalty thereon. And company has replied with the -- has appropriately replied with repeating all the charges and claims.

And sir, my last question is how have the ad expense been? Like, have you seen any surge in that end due to the festive season?

So I just spoke about it, yes. I think there are 2 parts to it. Baseline advertising still continues. And hence, there is a reasonable -- there is some kind of growth in the digital part of the business. But the third which normally affects the broadcast business, which starts happening is something that we are yet to see.

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

Sir, one question on the MarathiBana, I think it was -- it has become a pay channel if I recollect correctly. And we said that we need to now restrategize on that. So if you can give update on that, how that process is going? Are we getting back that viewership shares that we have in that market? How are we thinking about that channel?

So it is still work in progress, Dhwanil. It's just been 4, 5 or 6 months since we have moved. We are evaluating various options. We are trying out a lot of syndicated shows. We are trying out a lot of our own content to dub in Marathi. Some of them are doing quite well. But in terms of a full-blown action in terms of what kind of originals to bring in and what is the positioning of the channel. We are -- it is still work in progress. And as Hiren was saying and as I also said, the market is not really very ripe to try various experimentations on the channel is the viewership share remains the same on what it was when we have moved it to -- in the month of April and May. There is slight movement 1% up down here and there, but it is still work in progress, and we will not really press the levers too much unless the marketplace outside becomes more ripe and right.

I will add to that. So basically, to clarify, we the channel continues to remain free to air. It's not a paid channel. What we have done is we have exited from Freedish, which was a very high cost option for -- the price had gone up to an unviable level. And as we've shared earlier also that this year, keeping the overall structure to a prudent and viable level was a very important part. So this is -- that was one thing that, therefore, we did not renew our overbid for that. Now having said that, it continues to remain free. And actually, on the -- so free, but on the pay distribution network, pay ecosystem. Having said that, we have more than -- actually, we have grown from where we started through the programming strategy and everything. What Arghya referring to is what is the next step from here, how do we take this channel forward is the whole thing. So we have actually revived more than. So moving out of the free ecosystem, in effect has been a good decision from what we can see in the last 6 months of performance.

And one last question, that if I look at the entire ecosystem of TV broadcasting, do you see any market share shift or ad spend shift moving away from GEC to other categories? And another corollary to that is in the FTA space, the largest player has also launched a second FTA channel. And I think that also in terms of viewership is doing reasonably well if I'm right from the BARC data, whatever that I can see. So what is the impact of that on the overall FTA ecosystem and to us?

So 1 question. First question was shift of advertising money from GEC to any other genres. I think finally, advertising money follows viewership. So as viewership trends change, the advertising money shifts or moves along with that. And to give you a sense what has happened in the last couple of years is that there has been a plethora of new movie channels that have come up. So movie genre has taken up a certain amount of viewership share from many genres, including from GEC, which definitely has taken some -- so money has followed that over there to some extent. Second, few pockets of regional channels in, say, Marathi, Bangla, et cetera, have also grown -- some channels within those pockets also has grown significantly. So their share in the overall pie has grown in terms of viewership and therefore, their share of the advertising pie has also grow. So -- but fundamentally, the core point is that advertising money moves with viewership. But this is what has happened broadly. So GDP genre definitely has lost some amount of advertising revenue because of certain shift in viewership. Second to mention about the -- or the second question was regarding second channel. In fact, that channel was actually -- has been around for some time. They in fact had a third channel, which they shut. So they have consolidated the content around into 1 channel, what they had in 3, they now made it in 2 channels. So that is what has actually happened. And in fact, because this channel was launched at the same time when Umang was launched. So it's been around for more than 2 years, 2.5 years or more.

This has been for quite some time now.

[Operator Instructions] The next question is from the line of Sanjeev Damani from SKD Consultants Private Limited.

Sir, actually, I'm new to the company. I am also new, I joined at 12:20, only I'm a bit late. So my first question is that such a huge loss that we have incurred in this quarter and half yearly is not worrying the management and what are our strengths that we can perform better in the next 2 quarters that I would like to understand what -- I mean, suppose some new hits are expected to be launched or something like that. So I want an overall view for this year from the company, sir.

Mr. Damani, can you hear me? .

Yes, yes.

So I request that actually, we have covered all of this in the first 15, 20 minutes of the call. So I would not like to repeat it right now because there are more than 50, 70, whatever few -- many people on the call. So I really don't want to spend that -- we can take it offline, you can connect with us separately or with our IR agency Valorem Advisors and we will take you through all of that, if you don't mind.

No problem. So would you like to add anything to what you have already spoken, sir?

No, I think we have broadly covered and, in fact, subsequently also in Q&A, people have asked questions about it.

[Operator Instructions] As there are no further questions from the participants. I now hand the conference over to Mr. Hiren Gada from Shemaroo Entertainment Limited for closing comments.

Thank you all for participating in the call. I hope we've 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 our IR managers, Valorem Advisors. Thank you and wish you all a very happy Diwali in advance. Thank you.

Thank you very much.

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