Shemaroo Entertainment Limited (SHEMAROO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 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.

Thank you. 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 for participating in the company's earnings call for the first quarter of the financial year 2027. Before we begin, a quick cautionary -- 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. Now 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. Arghya Chakravarty, COO; and Mr. Ashish Gupta, CFO. Without any delay, I request Mr. Ashish Gupta 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 first quarter of the financial year 2027. Let me first start by giving you some of the key financial highlights, after which our CEO, Mr. Hiren Gada, will give you some operational highlights for the quarter under review. Now for the fourth quarter of the financial year 2027, revenue from operations stood at approximately [ INR 132 crores ], reflecting a 6% year-on-year decline. The company significantly narrowed its EBITDA loss to around INR 2 crores compared to INR 56 crores in the corresponding quarter last year. Net loss also materially reduced approximately INR 8 crores. With regards to the new initiatives, expenses in the first quarter of the financial year 2027 amounted to around INR 20 crores. Adjusting for these investments, the EBITDA for FX operations for the quarter would have been around INR 18 crores. The Digital Media revenues for the first quarter stood at approximately INR 56 crores, registering a year-on-year decline of approximately 17%. Traditional media revenues for the quarter were around INR 76 crores and up 5% year-on-year. Now I would request our CEO, Hiren Gada, to give you the operational highlights for the period under review.

Thank you, Ashish, and good afternoon, everyone. This quarter marks an important milestone in our transformation journey, representing the quarter following the successful completion of the inventory charge initiative that we embarked on maybe 10 quarters ago. For the quarter under review, while revenue client margin, the EBITDA and PAT loss reduced significantly. Digital revenue for the quarter declined by 17% year-on-year as select B2B syndication deals were deferred on account of geopolitical uncertainty, coupled with the inert lumpy nature of this B2B side of the business. This was partially offset by healthy growth in our consumer business driven by fresh content, stronger audience engagement and improved advertising monetization. The traditional business registered a 5% year-on-year growth, with the closure of select B2B licensing deals, which more than offset the impact of a subdued advertising environment. Given the ongoing back Blackout, continuing macroeconomic pressure and geopolitical tensions, the overall advertising outlook for our traditional business is expected to be subdued in the near term. in ShemarooMe Gujarati, the platform acquired the OHO Gujarati catalog in April 2026 adding over 22 Gujarati original web series. We also released 10 new items, including during the quarter across movies, web series and plays, including the original series Kajodu and the world digital premier of the Movie Jalebi Rock. As a covenant at series released during the quarter include Vitthal Teedi Season 1, Kadak Mitthi Season 1 and Season 2 and Cutting Season 1. On YouTube, the flagship channel, Shemaroo [indiscernible] passed 74.7 million subscribers, while Shemaroo Entertainment crossed 6.19 million subscriber milestone this quarter. Across this entire portfolio of channels, the company garnered approximately 9 billion views during the quarter, reflecting sustained digital engagement. On the syndication front, the company became the worldwide digital and satellite distribution partner for Millennium action trailer, [indiscernible]. We are also very proud that our first AI-powered brand [indiscernible] received industry-wide recognition within the Baby Blue Elephant at the Serious Creative Award 2026 and a brand at a Good Ad matter award. These accolades reflect our commitment to combining creativity with technology to build a meaningful consumer engagement. In conclusion, as you all know, it has been a tough couple of years, not only for Shemaroo but for the whole industry. Over the last few years, Shemaroo has witnessed the toughest times the industry has ever witnessed. In fact, the company has invested heavily during this period in its people, processes and offering the by building a much agile and sustainable company for the future. With that, I now open the floor for questions and answers.

[Operator Instructions] The first question comes from the line of Rehan Syed from [indiscernible] managers.

So I have just 2 questions. First on the margin side. [indiscernible] for your 5.6% decline in revenue, EBITDA improved sharply to a loss of from a loss of [indiscernible] last year. To excluding the [indiscernible] will have been the normalized EBITDA margin for the quarter? And more [indiscernible]

Rehan, Can you just repeat your question, your line is not very clear.

Just was in around your EBITDA margin right? Behind in [indiscernible] revenue, EBITDA improved sharply to a loss of [indiscernible] a loss of [indiscernible] last year if you exclude the investment initiative, what have been the normalized [indiscernible] and what revenue ratio is required by the company tested positive EBITDA without is [indiscernible] this is my first question.

No. As we -- as Ashish shared in the opening comments, if we exclude the EBITDA -- if we exclude the investment, EBITDA would have been about INR 18 crores. Actually a line is a little unclear I'm not able to fully understand.

I have asked that only if I remove that [ INR 198 million ] investment part, so our EBITDA loss is this INR 18 crores. So what would have been the normalized EBITDA margin I'm asking for the quarter.

EBITDA gain. Our EBITDA gain would have been INR 18 crores. So currently, with this initiative, our EBITDA loss is INR 2 crores, excluding these investments, our EBITDA gain would have been INR 18 crores.

I'm asking on the future part, like what revenue threshold we have to maintain to deliver positive EBITDA without reducing growth investment? Yes, this is my full question.

So ultimately, it's not about that. I think it's -- essentially, it is a content monetization. So as our content monetization is growing and -- we have been working on the Paragon in the last few quarters on a lot of operational efficiencies. So it's a combination of that. So margin growth or margin improvement is combination of revenue increasing and cost reduction. So it's not only on revenue side.

And also, [indiscernible] is increasing revenue and obviously, as Hiren said, [indiscernible] be deduction of cost. But what is also important is the mix of revenue because all revenues don't come at similar margins. There are some revenues increased margin. So there's also a big [indiscernible] so no factors will be at play, but we can't really put a number in terms of a threshold because maybe at sometimes the lesser revenue also maybe profitable or higher revenue also may not profitable, depending on what is the kind of mix, I think that.

Okay. I understand this part. And my second question is around your front-end monetize strategy like [indiscernible] is one of the largest content average in India. Even the revenue trajectory has remained under pressure over the last few years. [indiscernible] in the content laid remains commercially under monetized and was giving you monetization levels on additional [indiscernible] or moderate asset over the next few years?

So there are 2 parts to this. I think, it's not about under monetization of the leverage. I mean, today, it's the kind of digital distribution that is available at everyone's back-end call. We have fully utilized our library and not only fully utilized. We have a large -- I mean, today, if we are generating as we have had earlier in the call, 9 billion views for the quarter, that shows that there is a very strong traction of the content on the digital and media side. So it is not about -- so I assure that there is no underutilization of the content. There are 2 factors over here, which are impacting One is the fact that traditional media monetization has been steadily and gradually reducing over the last about 2 to 3 years. And of course, that is get the overall monetization of the library at -- in fact, that part of the revenue stream has been on a degrowth side. But on the other hand, the digital monetization on various platforms like YouTube, Meta or many other fiction-based platforms or international platform it has been on a growth trajectory. So it is -- actually, even net of that -- the good thing I would say is that the content library continues to, I would say, connect and track well with audits. So because of that, it has ported extremely well on the digital media side on the digital front and some of our market content titles like Welcome, Jab We Met, [indiscernible], et cetera, et cetera, our performers on our, in fact, on most platforms that they are present on. So particularly on the digital side, exact. So -- that is actually giving us a very good hedge and a very good futuristic predictability of the revenue.

Okay. And just last one more question from my side. Like in the last time you have to cause some [indiscernible] revenue and EBITDA for going forward for last 2 years.

Next, how many next 3 years?

Yes. 2 to 3 years.

So I think definitely, we are aiming at a double-digit plus kind of growth. One has to see the industry context where traditional media has been demoing and digital media has been growing. Recent growth of digital media has been roughly low double-digit kind of number. We are intending to outdo that by at least a couple of percentage points overall. So blended growth, I think, should -- we should be at the aim has to be at more than -- I mean, at a healthy double-digit kind of a growth rate.

Our next question comes from the line of [indiscernible] with 360 ONE Capital.

I just wanted to ask about 3 things in terms of the numbers. One, is there any debt reduction plan? And if you could describe what that is going to look like, guidance on when we can see a P&L profit and the revenue breakup for FY '27 in terms of digital revenue traditional business, et cetera.

On the debt side I'll just go one by one. So on the debt side, I think by the end of the year, so we may have quarterly ups and downs and particularly given the whole geopolitical and other situation, there could be a little here and there around. But we definitely have a debt reduction plan for this year. How much it will be right now, it's very difficult to say because we started the year with this whole geopolitical uncertainty, and that has kind of got compounded last month with this par blackout. So ratings like also because of which definitely, there is an impact from the traditional media revenue on the syndication side of many -- it has a secondary impact on the traditional media, television linked businesses. But notwithstanding that, I think we are looking forward to a very healthy second half of the year because there is a festive season, there are a lot and a lot of operational gains and the digital engine is firing quite nicely on the consumption side. So I think all of that put together, I think I'm unable to give you a -- I mean it's no point that I give you a target or a number right now and then it doesn't hold by the end of the year, but we have a reduction plan. Your second question was on profitability. Yes, profitability. So, let's put it that way that given a combination of the fact that digital media continues to grow along nicely, and our content has quoted extremely well on the digital media. I think that's a revenue stream and a cash flow that is steadily on an upward trajectory. And that, combined with the fact that our overall investment plan for the last almost 3 quarters have been significantly focused pivot to the digital media and reduced from the traditional media. I think -- and the third point is the operational efficiencies that, again, we've been working on over the last -- particularly last 3 quarters also. I think the results of all of that will be visible every quarter, I think we should be seen an improvement on a quarter-on-quarter basis. Now when it will tip into a profit, it's difficult for me to pin point. Let me -- if I have to give a a conservative view, the aim will be for the year to be EBITDA positive, at least. And yes, hopefully, next year. Hopefully, I think we are very confident that we will be bottom line positive also. Sorry, the revenue breakup yes. So as I said to the previous caller also, Digital, we are anticipating or we are looking forward to a double-digit growth rate. And traditional should probably be flat to yes, I would imagine it will be flattish -- not a degrowth. So hence, leading to overall double-digit kind of top line growth.

Our next question comes from the line of [indiscernible] Desai with Turtle Capital.

So my first question is, so we talked about the digital media focus and overall increasing on the digital media side in this call. So because that segment is growing faster as an industry. but if I look at the growth on the digital media side for our own business, FY [indiscernible] as has gone at 19-odd. So how should we look at the growth in this business given the scale or the size at which we are and content likely that we have, [indiscernible] to kind of spin off or 20% plus kind of a growth. What are the challenges to grow at 20%?

No, I think as I was talking to the previous question also, the context here is, we are finally in an industry environment, right? So I may want to grow in a certain way and all of that. The question is that what is the underlying growth that the industry is offering. And we are -- our attempt is always to grow faster than the industry. Now in the last 2 years, actually, the -- if you see the underlying growth rate has itself been low. So Yes, we have not grown at that pace in the last 2 years on that side. But there is also an underlying context because of various various reasons. Now we can go into some of those reasons. But the idea has been to be growing at faster than industry growth rate. There is another angle to the whole thing is that growth at what cost is another question. So the idea for us also is to maintain a profitable growth rate and not burn out. I mean it's very easy for me to -- if I take the example of ShemarooMe okay? We can scale up by burning significantly more amount of money. We can scale up that number. But then that will burn a bit role on our cash flow and balance sheet. And a few months or a few quarters later or maybe a year later, we would attain say that is this business worthwhile why are we investing in this business. Rather what we are doing is we have a strong belief in this business. We have a full position with very strong leadership and share of mind of consumer as far as the Gujarati entertainment is concerned. And to building and bringing in more efficiencies. So balancing growth and profitability, I think, is an extremely important part of that, managing everything within the available cash flow and balance sheet kind of thing. I think that is the second consideration that will always be linked to growth.

So sir, is it again general our general understanding is and correct about that, let's say, beside Shemaroo, which anyway or the [indiscernible] kind of spending money and burning money there. But net of that, the digital business is a high EBITDA margin business many of them do 25%, 30% plus kind of an EBITDA margin business. Is that a fair way to think about it?

So it depends on what which part of the business solution you are residing in or you're working on. So if you are -- in the consumer taking side, at this point, no 1 is making money, right? So which is Shemaroo. Then there is a -- there's a mid-segment where you are owning content and aggregating and licensing content across across the industry-wide kind of platform, whether it's Amazon, whether it's Shemaroo sorry, YouTube or Meta or many other even internationally, et cetera. However, there, it depends on what is my [indiscernible] of content. So if I have legacy content, the margin could be as high as 80%, 90% because the underlying cost is all written off, charged off, paid off everything. But for what I acquire new, margins could be it would be minus it would be now marginally positive depending on whether I have overpaid, overmade or at what rates are acquired. So the blended margin over there is, again, a function of what is my mix of existing or legacy content versus new kind of a thing. And then third part of this value chain is on the creation side. where I -- there is more you can say like what calls TV side of the thing where it was production work for higher kind of a thing. So there, there could be some fixed margin kind of business, which could be in the range of between 10% to 15% or even 20% depending on who it is. So I think it's very varied. I wouldn't say it all depends on which side of the value chain you are playing.

So sir, is it safe to say that the part of the business is the highest margin business followed by syndication and follow by this kind of a work which we do on a kind of preapproved basis? Is that a [indiscernible] wise, that's a fair way to think?

I would put it actually again, based on -- as I said earlier that the -- what is the win-at what is my in of the library ownership. What I have already paid for and charged off is highly profitable, irrespective of whether it's on YouTube or [indiscernible]. And what I have really acquired, there is a cost I'm bearing for that. And whatever IRR, et cetera, have worked on, I will kind of deliver based on that. So the -- again, whether it's YouTube or [indiscernible], it doesn't matter. So even our as, for example, say, I was talking of welcome or something where the the lending, if I have licensed, welcome to some platform within India or internationally, et cetera. Then the margin is significantly higher because it's already paid for. In we welcome on -- Youtube is also a higher margin, but not necessarily a new acquisition on either of the [indiscernible]

So Jane, I think let me just put a bit of color. I think what Hiren is saying absolutely right. I think just to put a color to it, margins depend on the kind of content that we whether it is through digital video or through indication. The length of the content files that we have monetized that we have can or amortized, that is the basis on with margin [indiscernible]. If we are -- it's very -- it would be interesting to say that we will deliver high margin, not to for tomorrow if I acquire a content going recently of a new contract. And we put it on YouTube. There is a -- which we pay for it, there's a chart in [indiscernible] kind of IRR at which we have acquired it. It's not that the content has been acquired by us alone. There are a lot of other competitors in the market. So the pricing of the new content that we get on YouTube is a competitive one. So in that, the margins will not be the same as what we will get in terms of monetizing the older content, which we have started to a larger sense. So it's a mix of the kind of content that we are monetizing rather than the platform, both on syndication as well as on YouTube.

Think I would more understanding to get, but I think probably that can happen offline. On the -- yes, on the -- sir, on the new initiatives, I think we have guided that we will it by more than 50% in FY '27 compared to FY '26. And I assume a large part of cash will come because the traditional media side, we will kind of contain our turn. So does it mean that we are in kind of scaled back and some of the channels will be kind of shut down, not renewed. How will this come? And is this 50% plus reduction kind of on track for the current year?

I think, Dhwanil, yes, you're on the right direction. Because as we said in the beginning, right, our focus on our investments whether it is not just 1 but in terms of all our investments is AI, our people investments, everything is towards the new business business. So the new initiatives on traditional is obviously something we will get spilled down whether it is in terms of channel scale, rationalization or whatever that will come to know as we go ahead. But for example, new creative of content is something which we have already scaled on a lot in the traditional use. While the new creation of content is getting a new creation acquisition of [indiscernible] is getting tied up in the digital business. So yes, moving more towards that as we go forward because of the kind of spaces that we are already aware.

And to the second part of the question, yes, I mean, as of now, we are on track to -- for what we -- in fact, we are well on track for that.

Our next question comes from the line of Chirag with Kit Capital Limited.

I've joined the call late. So if my questions please. Sir, I just wanted to understand, as now our rationalizing of inventory has been completed, and this is a new normal. At a rate of INR 600 crores top line today, we would be roughly making INR 50 crores to INR 60 crores of EBITDA. And if I'm not wrong, we have to service and interest expense of about INR 30 crores to INR 32 crores, roughly on an annual basis. So just wanted to understand, is this understanding correct about how I'm looking at it right now and down the line as we would be spending more on content, that would be the real kicker for the future revenue growth.

Okay. So you joined a little late. We were talking about the margin profile discussion on basically, without giving much more color, essentially, it's not -- at this point, it is -- I would say it is not exactly 1 to 1 linear correlation or plan to margin. I think there are 3, 4 factors at play here. First is the fact that all business that we do or every content is not necessarily similar or same EBITDA margin. So our focus is to juice out and mine more and more of the content, which is already paid for and charged because that has highest amount to the EBITDA overall margin. Second driver is on the cost side, which is where over the last 2, 3 quarters, there has been a significant operational efficiency drive. And we we should see the impact of that over the next few quarters as we go along. The quarter was a improvement on that should be visible. So it's not a straight line answer, but Yes, I mean, ultimately, at some point, we hope to far exceed the kind of numbers you're talking about.

Got it. So one thing I would like to understand is on the new initiative that we are taking relative to the OTT platform. If I am able to understand the initial business curve where we spend a lot on tech, where we're spending a lot of employees in spend that take this. It takes certain 5-year time line as we continue to build a new inventory on the platform. And always new inventory, something that drives the newer subscriptions and continues for a subscription on the OTT platform. Just wanted to understand, as per you, as you have started it a little couple of years back on OTT specifically. So what will the time stand for us to achieve the normalized tax spends and normalized employee spends to achieve a breakeven level on the OTD platform specifically? [Technical Difficulty]

Ladies and gentlemen, the management has been disconnected. Ladies and gentlemen, the management line has been connected again. Over to you, sir.

Yes. Sorry, Chirag, you were asking I don't know what happened.

No, no, I'll repeat my question. Yes. So the portion specifically, sir, related to the OTT platform on trying to understand. This business has its own initial curve where we spend a lot on [indiscernible] to deploy the platform. And there is a huge initial CapEx required to set this up. However, this addition cost keeps on reducing with time. So, [indiscernible] And content is the real driver for the newer subscription at [indiscernible] platform. So I just wanted to understand, as per you, how long will it take for us for this bigger CapEx to keep what happening on the platform? And when can we look or when can you think about that this platform will reach to a breakeven level?

Okay. So to kind of -- Correct your understanding a little bit. A lot of the spends are actually, I would say, variable in nature, and they are ongoing. So, for example, yes, there is an initial buildout, but then -- there is an ongoing improvement. Every day, literally every day, every week, there is some new integration, some payment get something, some you feature something or the other is keeps. So there is a constant -- and that's just one example. The team works on the customer away, et cetera, et cetera. All of that is a continuous OpEx kind of nature. On time investment also once -- so thankfully, we had a very good starting point. In fact, that was our right to win as a starting point on that -- so it was not any significant CapEx to begin with. But on an onward basis, there is a content investment as we shared even last quarter, we have released on these movie web series and we acquired the library, et cetera, et cetera. So firstly, to correct my understanding, that is one part. Coming back the larger spend on this business. are around customer acquisition and content. So the customer acquisition cost of CAC, as you may call it, which is a combination of above the line marketing as well as performance marketing for -- from a sales side of view. That's one large part of the revenue sorry, part of the cost. And content is the other large part of the cost. Now how does this business take shape in the way forward. I think -- what is important is that how are we shaping up in terms of capturing the lifetime value of our consumer. So if we are able to, for example, build the lifetime value. Now for that, what we need to do is essentially keep something good quality content and make the consumer come and consume more and create -- make it a part of his daily habit, daily regular routine platform that the consumer keeps visiting because then the loyalty and lifetime value kind of gets captured. I would, as far as ShemarooMe is concerned, we are actually at in a very, very good position with the Gujarati -- in fact, we are probably one of the very neatly placed platform, which was a 2-year plan. I don't -- I haven't seen a 2-year plan virtually anywhere. I don't think any other platform in India for the full year plan. We offer a 2-year plan, and we have a decent uptake on that, which shows that the consumer trust the brand and is willing to put in money for 2 years. And we trust the fact that today, while there is no visibility that I cannot tell the consumer that in December, I'm going to give this content and next March, I will give you that content. But we trust also the fact that we will curate and offer formidable and useful content for which the consumer is willing to pay today for 2 years. I think that is a very big summed up for us in this journey, which gives a lot of consumers, which gives us a lot of confidence that the consumer believes in us. So finally, the Profitability will be based on are we able to bring in more renewing customers because the cost of acquisition kind of is not applied for the renewing customers. than our cost of acquiring fresh customers. And while we haven't reached that point yet, and it is still some time, I would imagine we are at least about 2 years away from that point. But so would most other OTT platforms be what my sense is. But the kind of now that we are getting from the consumer on platform, the kind of renewal rates or the kind of traction on -- and the kind of common I would say reference to ShemarooMe for Gujarati consumers, and it has become a default at entertainment platform for the consumer. I think -- that gives us a lot of confidence that we do -- we are on the right track. We are doing the right thing. And yes, I mean, that's how I would put it.

Got it. So it totally makes sense because our around was not earlier at we are penetrating towards that. I was able to that as I look at the regional contra Indian market. South Indian markets related to movie and on are a big chunk to the overall growth in the nonspace, which does not get really highlighted growing at 20-plus percentage if I'm not wrong at this particular industry. Just wanted to check this then, have we started providing the data related to DAUs, MAUs, paid or total subscribers that are there on our platform?

No, no. We have not been -- and I -- at this point, I mean, we don't intend to. In fact, most of the platforms are globally also, they have stopped giving a lot of these data on a regular basis because everyone realized that this on metric to similarly look at. There are many, many more factors that drive the health of a platform.

Okay. And can we know that what kind of revenue the platform is winning today?

Sorry, Unfortunately, I defined, we are not...

So I think we should understand that first of all, we don't give up any of the numbers on Shemaroo. But it is on a very strong revenue, is all we can say. Strong double-digit revenue growth for the 3 growth [indiscernible] it has been for quite some time. And as Hiren said, we can -- it's -- we are a fully SVOD platform. So hence, further scale can be assumed, but we have very -- we are very prudent about the kind of burn that we also we wanted to grow. And on your profitability question, I'll just add 1 small so that the objective here is to build as big permanent life base as possible. And once that is there, keep giving as good content as we can keep the consumer experience high so that the churn is minimal. Once the churn get minimized, the route to profitability is to build a significant date and then to reduce the churn. That's the route to profitability, and it is some distance in, but we are.

Understood. Will it be fair to assume that once we achieve a potent like INR 100 crores for the OTT platform, then will we start at least a broader revenue numbers for the [indiscernible]