I have been struggling to justify the valuations here for a while. My high level assumptions were:
Lets assume in FY30:
-800 mn total music streamers (There are about 200 mn today based on various reports, this is 20% CAGR growth)
-10% paid subscribers (from <1% today) with ARPU of Rs 500/per year (Gaana annual plan today is Rs 299)
- Free subscriber ARPU: Rs 100 (25% of paid ARPU: complete assumption, based on the fact that VIkram says streaming subscriber rev/stream is 3-5x of free)
-Then in FY30: total revenue to the streaming platforms would be: Rs 11200 cr - Lets assume Music labels get 50% of this (global peers get similar): Rs 5600 cr revenue from audio streaming for music labels
- Lets add 25% for Youtube: 1400 cr
- Lets add another 10% for other digital (Netflix, TikTok, FB, etc): 560 cr
- Lets add another 15% for others (sync, TV, perf. ,etc): 840 cr
- Lets be generous and give another 500 cr for optionalities (connected cars, smart speakers)
- Total Music label revenues comes to 8900 cr in FY30
- Assume Saregama market share: 25% (from 10-12% today): 2225 cr revenue
- Assume Saregama EBITDA margin: 30% (new music will be margin dilutive): 668 cr
- FY30 EV/EBITDA multiple: 30x so FY30 EV: ~20k cr
- FY22 EV: ~8k cr
- Expected IRR: 12%
Broadly I would say these are very very optimistic assumptions. Despite that, expected return coming to 12% and that too after a nearly 30% correction. Where is the margin of safety?
Disc: Invested