Does anyone have any update on the land the company holds ?
Where is the land located ?
How does the company plan to unlock it’s value ?
Hi - I had recently started reading on the company. I had some doubts - thus would request that those tracking the company for sometime if they can share their learnings or perspectives around those:
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Now that the company will start actively investing in new music - would that not adversely and severly hamper the cash flow profile due to the streched timeline associated with monetization of new music content or in other words the streched working capital cycle associated
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Last few years the views were driven by Gaana/Saavan incentivizing new user acquisition. As some of these platforms face pressure or go behind paywalls that would eventually lead to a drop in views. While I agree that views will not just go away but might move to Youtube (where I think payout on a free view is lower). Is that a headwind ahaed as some of the VC funded user acquisition for music platforms comes to an end
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There is incresed realization amongst producers that music companies (likes of Saregama and Tips) are making more money of music than 4-5 years ago - that should lead to them demanding higher payouts
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Last few years were unbeliveably great as the company monetized on the goldmine it was sitting on. However the next few years seem much tougher for the reasons listed above
To that extent is it a good time. PE looks reasonable but given the “discretion” involved around amortization of content costs…hard to know the true E of the business especially given cash flows are suboptimal.
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Hi Saket,
I am invested in saregama so i know a bit about the business but it is a biased view.
- Yes correct, this gap is typically 1 to 3 years so average 2 years. The music they purchased the music rights of in say 2021, will actually come out in 2023. So content acquisition goes in different PnL and Sales come in different year PnL statement.
- I do not have a clear answer. I think no one has. This is my perspective.
Right now huge investments are going into 5g by Reliance and Airtel. User acquisition is still happening in telecom and will continue for next 2-3 years. Whatever platforms they telcos have like Jio saavan or Airtel Gaana (Youtube is independent). Consumers will consume content (Music) as long as cost of data is low in India. - Yes, This has started happening. Content acquisition cost will only rise.
- I do not know. I guess unless Saregama mess up capital allocation should be ok. They are very old company, they have experience on their side.
Yes hard to know true E but easy to know that this is high margin business. We can check other competing businesses (Tips)
Saregama margins should improve with time as the contribution from music increases over other segments. More users and better margins i guess should support atleast 20% earnings growth for next 3-4 years unless again they mess up capital allocation.
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Thank you Saurabh for the response and explaining these in detail. Your thoughts on point 2-4 make sense to me as well. I do still worry about point 1 - as the revenue recovery per my understanding happens over 3-4 years on cost it would put strain on cash flows. That makes me a bit worried about valuaeing the company as RoCEs etc might come under pressure.
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Any idea behind the reason for this upthrust in stock price?
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Music rights for supposedly top film sold for 36Cr. If I assume 10p/view rate, it would mean that this film songs would need 3.6B views for T-series to breakeven? Since this number is quite high, does this mean unit economics is poor in acquiring big film music. Hence, labels can only be good business if they keep on finding small to mid sized music?
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To hit those big numbers with the 'same 'music but another small to mid sized movie would not be realistic. But this is a well known rule to us all. If they command a premium, there is a reason for it, just like the Stock market.
I feel that we should consider breaking down this number further. If there are 5 songs and lets say 1-2 of them have been received very well. These songs are not just played on Youtube or Audio streaming platforms recurringly, but also used in the Reels and Shorts. Then there is also stage shows, although the profit margin here is low and also is clubbed together with other songs. While I do think that it is a big number, I do not think that this is an unbeatable number. Considering the recent Pathaan music video numbers, a single original video song has nearly 600M views and another one around 466M views on youtube alone. And if you consider other sources, I think they might get less margin but they will have the advantage from having premium music.
I believe that the Film Industry is observing the explosion that has been happening in the digital space and are catching up. The operating margin will be adjusted for that reason but since the mobile usage keeps moving up and when the audio platform free listeners turn subscribers, which is also increasing, the volumes then would balance it in my opinion.
PS: open for another point of view. Invested and could be biased. Please do your own research.
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In south the film music is the only thing. New-age artists in the south are very much out of the scene.
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Lets look the business from Michael porter’s 5 forces lens -
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Competition in the industry
- Industry seems to be competitive as management itself said that music rights of catalogue are sold at very high valuations. They said they want to capture 30% of music produced in India in some concall but capex numbers do not indicate this.
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Potential of new entrants into the industry
- Big labels might be limited and film music might be going into fewer hands but lot of independent music goes into plenty of smaller, regional channels on youtube dedicated to artists or group of artists
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Power of suppliers
- At the moment with most of big film music in hands of big production houses, suppliers also seem limited. Hence this might be driving cost of music up.
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Power of customers
- This also does not seem favourable to me for music labels. If I actually think that music platforms are consolidating, this would mean they could dictate the music label share in the value chain as these platforms like Youtube, Spotify have users in their hands. This could somewhat neutralize the paid streaming kicker that is expected to come.
Some of other things I am observing -
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Since this notion is gaining some prominence that big film music might not be accretive thing, can management play smart and acquire regional or small-mid size film music. Most top punjabi singers clock similar or sometimes better views, and their content would be available at fraction of big film music cost. I am sure similar model would be applicable in other regional music. Can that be somehow an engine of growth? Management did hint at this when they said that they are gonna acquire minority stakes in regional/smaller music labels. But I don’t know if this business model gives them any long lasting competitive edge or is just a short term profit enabler?
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Management also said they started stage events business and did shows with Diljit. His upcoming album should be coming sooner. Has relationship become strong enough that he lets his album go live on Saregama?
Disc: Invested from around Oct 2020, holding some still and observing what can happen.
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what happened to these allegations? any update?
Saregama has set 27th as a record date for demerger. Tips saw a lot of selling before the demerger. Is this demerger shareholder friendly? I do not like the eCommerce business personally.
Definately, demerger is resultant in focus entity!
Where low ROCE business separated from High ROCE business!
Also bust profitability and value of business.
Disclaimer : invested from low level, may my views are biased !
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Loss making entity is being demerged from the company. In my views it’s positive only.
+recently SAREGAMA is back on resso which is India’s largest streaming app
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Definitely good for Saregama in the long term. Still not pure play music but atleast they have put 15% bound on movie business.
My question was actually for the short term. I have been waiting for the demerger to enter. So the question becomes enter now or post demerger date. Existing long term investors please ignore my question. 
Hi, can anyone explain which entity is being demerged?
Is there any other news media that has talked about this Demerger? I am unable to find any other article talking about this
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Check exchange notifications
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Hi
I have a very basic question.
Record date is 27th July.
I want to add more stock of SAREGAMA, should I add now or after 27th July when Digital Business is demerged (there will.be some price correction).
I am already invested.
After demerger either SAREGAMA will get treated at higher level or Tips will get lower valuationz
Here’s a question to all long term investors, what would you do with the stocks of demerged entity once the demerger is done?
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