This is a good move by Saregama, but wasn’t intended by the management as I could see via the concalls. However, this might ignite a new Anti-thesis for the company I was waiting for,
Singers in the west, (Take TAYLOR SWIFT) have publishing rights to their music which gives them the power to re-create the song over with even a better quality and that can hurt the label a lot. Atleast that’s what the Taylor Swift saga revealed. (also depends upon the singer’s reach and popularity tho)
And the label has the master recording only.
Now need to see what the label here in our case Saregama has done. Has it done for both or not.
I might be wrong. I’ll be happy making more money if so.
Disclaimer : Invested and biased.
Anti thesis seems to be playing out for india music industry.
These songs are liked and heard globally. Moreover albums are getting shot abroad. Makes a lot of sense to collaborate with Music labels in the West too.
Saregama has a great reach in India and as a matter of fact all the music labels have decent enough reach abroad as well. But for a truly global reach one needs to tie up with music labels abroad.
Saregama announced demerger today. Should unlock value in the core music licensing business
Entire distribution business of the Company relating to sale of all its physical products including caravan on digital marketplaces along with identified non-core assets (including investment(s) in publication business) and other activities and/ or arrangements incidental or relating thereto (“E-Commerce Distribution Business”)
*Entire Distribution Business is demerged and formed as separate Company. (resulting Company) and will be listed in NSE and BSE.
*Two shares of the resulting Company of Rs 10/- Face value will be issued and allotted to the shareholders of the Demerged Company (original Company) for every one share of Rs 10/- face value.
*the Company is currently in process of seeking its shareholders approval for sub-division (split) of 1 (One) equity share of the Company having a face value of INR 10/- each (fully
paid-up) to be sub-divided into 10 (Ten) equity shares of face value of INR 1/- each (fully paid-up). In case the same is approved by the shareholders of the Company, the share entitlement ratio, Post Split, for the proposed Scheme would be as follows:“1 (One) fully paid up equity share of INR 10/- (Indian Rupees Ten only) each of the Resulting Company, credited as fully paid up, for every 5 (Five) equity share of INR 1/- (Indian Rupees One only) each of the Demerged Company.”
The turnover of all resulting entity is only 3.78%
Yes, the resulting entity will hold physical assets of Saregama but the demerged entity will hold the digital assets. The book value of the physical assets may be fairly high but it is the digital business from where the moolah is coming…
So I feel digital business should have been given more valuation…
These are not “digital assets”, it`s just the sales of Caravan via Ecomm platforms for which they will charge some % as commission. All the assets remain with Saregama
As per my understanding, it is the low income generating assets which have been spun out… And therefore on the basis of the earnings potential - the swap ratio is not justified…
May be justified on the basis of book value though…
In addition to direct impact as above, one qualitative aspect is Corporate governance issues are done away with, paves way for higher conviction, both for retailers and stronger hands.
Lot of us has Vikram mehra has keyman in thesis and promoter intent was getting low score prior to this demerger, this act is reassuring on that front. Due credit to promoter group for this step, clearly shows their intent to unlock value, long overdue - esp Magzine draining cash.
