@narender @desaidhwanil @Gaurav_Agarwal
Thanks for highlighting key issues. Appreciate your efforts.
Find enclosed my opinion on your points:
1) Shemaroo has two form of business. When it buys aggregate rights for 5 year broadcasting, it is kind of trading business. It sell same to the movie channel and one time income for 5 years get booked along with cost of acqusition. The second form of business is when it acquire perpetual rights. It would have residual life of anywhere in range of 10-55 years (Given that Shemaroo has acquistion in second round of broadcase rights). While the cost of acqusition is wirtten off in 10 years (for broadcasting), the benefit would contnue to incur over period of time. Please refer to Dhwanil and my old notes to understand more on the point.
2) As I said, nearly 70-80% business in 2010-11 was kind of trading business. Hence, company follow the booking acquisition in invnetory. They have also clear policy to write down any broadcase movie which is not being sold within 18 months, against profit. So inventory cost, in my opinion, is current and probably understated (as inflation of around 10-12% per annum is not caputred).
Peronally, I do not see merit on calculating inventory turnover ratio, as during 2012-16 period, Share of traditional media (prominently broadcast rights) have declined from 92% in FY12 to 83% in FY16, while New media has gone up from 8% to 17% during the same period. The New media business is more driven by internet penetration and broadband speed in the relevant audience along with content available for offer. Further, acquisition of title is also lumpy and hence in past AGM, management did said that as on date figure analysis of inventory would not give much insight. I have covered same point in my notes.
Please, note that the Inventory turnover ratio would be relevant for old media business. We do not have inventory breakup for aggregate right and perpetual rights. In order to make more insight from inventory turnover, we would need following information:
Perpetual inventory value as on March 31, YYYY
Aggregate inventory value as on March 31, YYYY
Traditional sales of Perpetual title during FY##
Traditional sale of Aggregate title during FY##
New media Sale from Perpetual title during FY##
New Media sale from Aggregate title during FY##.
We can consider then aggregate inventory turnover ratio as we do for typical trading company. The reason we decreasing ratio of inventory turnover is also due to invenstment phase of the company. As explaied in Dhwanil notes, the company is currently acquiring more rights (specially in perpetual titles) then what is selling. The management claim that benefit of same would acrrue over balance life of the perpetual right, while inventory cost is written off over 10 years. If my understanding is correct, the company is charging significant cost of P&L (which it could have easily avoided by writing off perpetual rights over say 30 years, as against current form of 10 years).
I know I have not explicitly reply to your query, but hope explain why inventory turnover would not make sense in isolation.
3) During FY11 to FY16, CAGR growth of New Media Revenue is 70% p.a. from Rs 6.7 Cr to Rs 63.51 Cr. If we trust the number, then it is almost 2 times the number suggested by the Assochem Media report.
4) While, I am not an expert to comment on same, I take numbers to speak for same. Please note that the past CAGR of 70% p.a. is generated with lesser number of title of old content, limited net speed, and lower penetration in relevant audience (I assume relevant audience being 50+ for Shemaroo old content). I believe it would continue to show higher than digital media growth with all these factors being favourable. As you correctly suggested, the young generation (I assume your age being less than 30:wink:),which are early adapter of broadband, would not like watch Shemaroo content. But eventually, it progress to all age group over period of time. Once it penetrate to agre group of 50+ (which would be last adopter), we would see real spurt on demand for Shemaroo content. Hence, I personally do not see growth for Shemaroo being limited over next 3-5 years.
5) You are correct about 60% user being from outside India. But please note that as per wikipedia link enclosed below, Gujaratis are estimated to comprise around 33% of the Indian diaspora worldwide and can be found in 129 of 190 countries listed as sovereign nations by the United Nations.
Now my introduction to Shemaroo was mainly due to Youtube channel of Gujarati Drama. In fact, Gujaratis are generally big fan of Drama as against Gujarati movie which is what more preferred by South Indian, Marathi and Bengalies. I see that being a major push factor for Shemaroo which has largest Gujarati Drama liberary to be encashed.
I do look forward to your counterview on above points.
Appreciate you hard work on the various points and find CISCO forecast being very useful. Infact, management did indicated about same in AGM, but did not have India data to share. I would request if you can check same source for Indian Scenario, if avaialbe.
I would also request you to control your passion and aggression while replying. In fact, when more and more people ask difficult questions, it assist me to sharpen my thought process. For instance, the last points about T Seriew 60% NRI view have given me another perspective about Gujarati drama content of Shemraoo and huge potential it has in India and globe.
Disclosure: Invested and Added more during last month.