Saregama India Ltd: India’s premier music publishing label

Stock Opportunities Not-so-Hidden Gems
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RP Sanjeev Goenka group aquired foodball club MOHAN BAGUN. Not directly related to saregama but connecting dots, good publicity can be gained by marketing saregama products via MOHAN BAGUN.
https://www.outlookindia.com/newsscroll/atk-acquires-majority-stake-in-mohun-bagan/1709977

Disclosure:
Invested.

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Not a good sign

Football clubs are not very good profit making…

later siphoning will happen

Venky got into football, bought Blackburn Rovers…

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Notes from the Q3 concall:

  • 9M revenue growth is flat
  • Music business grew by 25% YOY
  • Company will be investing in Hindi and Tamil Music
  • Carvaan sales degrew
  • Company is reducing sales and marketing expenses, given the low growth in sales
  • Company launched carvaan lounge which a Tseries mix tapes kind of product for streaming platforms
  • No New movie releases this for the quarter, company seems to be less aggressive in producing new movies

Overall it seems, carvaan growth might be reducing, but the industry tailwinds for the streaming business continues. Carvaan lounge does seem like an interesting idea and should help increase streaming cashflows and extend the brand.

Q4 results will shed further light on carvaan sales.

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Saregama said in last concall, they will not spend on advertisement unless they are very sure about retail network fully open. Money lost on carvaan will not happen.
With recent licensing deals with face book , share chat and moj they are will get money which mostly flows to bottom line, as no new investment to be done.
Though, I miss to understand market is not giving it re rating. Invite views from all.


Disclosure: invested

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I found one more update for this company. They announced a movie with ZEE 5 on 25 July and now information coming, release date is 21 October. Approx. 2 month for a movie is awesome from turnover point of view. Now in addition to Netflix, Hotstart they have a project with ZEE 5, which is very good. I remember in one of concall Vikram (MD) said, they want MIRAMAX model of movie making. Where they made many movies with tight budget, where down side is kept limited and upside is considerable high.
Interesting to see, how next few quarters pan out, as music revenue is their strength. Burn fingers in carvaan. Looks they will not make same mistake again. Film making is have inherent risk but I come to see they have SOP for film making. Can be seen on their website.

I would like to have opinion from members, what valuation on average such companies should get?

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Very good results from saregama. Looks licensing deals are paying off. Never see before such a detailed presentation from any company.


Disclosure: Invested
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Concall updates:

  1. Have one time revenue in single digit core in this quarter.
  2. Carvaan will be break even this year. Profitable from next year.
  3. No business vertical is allowed to burn cash of other verticals, all businesses such as music licensing, carvaan, tv, film making has to sustain them selfs.
  4. Yoddlee will have 15 to 20% growth YoY with protected profits.
  5. Whenever a song played in any of app (45 apps), tv, you tube any digital platform, company get paid.
  6. 28 kids are are working only for to check if somebody is using unlicensed saregama IP, if found they move to legal and make persons to take license.
  7. No promotions will be done for carvaan, only rely on natural pull, 85k sold in Q2.
  8. In talks with many platforms for web series.
  9. Platforms are not interested in content business.
  10. Film business have multiple revenues one is to license to platform, others are like tv deals, remake licenses etc.
  11. Details about how industry work.
  12. Music companies vs radio, where music companies get 2% of revenue, court hearing is on 1st November. Where all music company is pushing for higher revenue ( 7-8 % ??) as analyst ask.
  13. Start investing in new content when bollywood re opens. Investing having now in regional contents.
  14. Open magazine will be status quo, it is on promoter to decide.
  15. Industry to grow at 10-12%, while saregama to grow at 18-20% (this fy) and 22 to 25% from next FY for music licensing business.

Listen here: https://www.researchbytes.com/webcast.aspx?WID=220155
Disclosure: Invested

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What looks most interesting is monetization of music IP

The approach for monetization of its music happens through licensing to 3rd party platforms including a) music streaming platforms (OTT) b) broadcast platforms like TV channels, brand advertising etc c) video streaming platforms like Netflix, PrimeVideo, Disney Hotstar etc d) social media platforms like Facebook, Youtube, Instagram, Tik-Tok etc and lastly e) copyright society IPRS.

Saregama music licensed to 45 Indian as well as global OTT platforms such as Saavn,
Spotify etc. OTT or over-the-top media service is a streaming media service offered directly to
viewers via the Internet. OTT bypasses cable, broadcast, and satellite television platforms,
the companies that traditionally act as a controller or distributor of such content. Third party
licensing of music on OTT is the largest segment and fastest growing as well for Saregama.

Historically this segment has grown at 40% and company expects the growth at 25% to continue in foreseeable future.

With the kind of library Saregama has for songs ( +120k songs) any new competition will
take 120 years to build a similar library assuming it acquires 200 films ( with 5 songs each).
With such high entry barriers, rising penetration of internet and extended stay-at-home, the
segment is poised to grow in healthy double digit without much incremental investments.

Company has done Rs25 EPS in 1H. Even if we assume say Rs23 in 2H adjusting for one off company could do Rs48 EPS in FY21 which implies stock is trading 17.1x FY21E at current price of Rs825 which seems not that expensive to me.

Disclosure: Invested

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While searching for how IP company monetize their content, come across following articles.
As Vikram explained in concall, there are 3 ways IP company get paid:

  1. Subscription share
  2. Advertisement share
  3. Bundle model
  4. Licensing
    https://redseer.com/newsletters/ott-audio-platforms-tuning-into-profitability/
    As more people join audio platforms, more will be IP usage.

Indian Music Industry is looking for 10% of radio advertising revenue from 2%. This possible increase will directly flow to bottom line (as of now no hearing on this matter, it is status quo)

For video OTT, Yooddle made approx 17 films in last 3 years with mostly licensed to Netflix, Hotstar and recently to Zee 5 (comedy couple). As it is licensed, further monetization possibility is open when license renew, when renewal fees directly flows to bottom line, as cost is already accounted.
https://redseer.com/newsletters/originals-becoming-mainstream-in-ott-world/

For TV in south India, they also keep IP of their serial Roja. Which they put on Youtube which earns 2 to 2.5 million view per episode.

They also launched Carvaan Karaoke at price of 19990. Let us see how this product moves.

Invite views from others to collaborate for more in depth research.

Disclosure: Invested. Sell 50% last week due to fear of sharp correction in stocks.

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Saregama launches top end version of Carvaan
Carvaan Karaoke comes with 1,000 pre-loaded Karaoke tracks, 5,000 evergreen Hindi songs and 280 + music & non -music.

Betting on new technology and a 100 year legacy, Saregama turns a new leaf with the introduction of Carvaan Karaoke offering yet another entertaining and engaging product experience. Carvaan Karaoke comes with inbuilt screen which glides upon smoothly to display song lyrics, said the company. It does not require any external set up and is an easy plug and play.

Carvaan Karaoke comes with 1,000 pre-loaded Karaoke tracks, 5,000 evergreen Hindi songs and 280 + music & non -music based podcasts to suit interest of every member of the family. It supports other functions like FM/ AM/ BT/ Aux Out & HDMI connectivity as well. It comes with two mics with eco control. “If one wishes, the lyrics can be projected on TV or projector via HDMI. This comes at a perfect time where most people are still home restricted due to pandemic and missing out on party fun. Carvaan karaoke is just apt for house parties this festive season.” the company said in a press release.

It is extremely simple to operate, portable and looks premium in rich metallic red colour. Talking about the latest launch, Vikram Mehra, Managing Director, Saregama India said, “Carvaan Karaoke is a complete one stop solution for all retro music lovers . Not just listening to evergreen songs but singing along with family and friends from the comfort of your house is a priceless experience” Carvaan Karaoke is priced at Rs 19,990, available on saregama.com, amazon.in and Flipkart.

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latest management interview

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  1. Research shows (as mentioned by Vikram in one of the concall) people like to listen songs which they listened in young age say 14 to 22. So old music will be relevant to that people. Young generation who are listening current music is likely to listen same in their old age.
  2. Saregama had problem only for 1 quarter where they invested to too much on carvaan in 2019 and sales did not pick up. As per Vikram in concall they will not do any advertisement unless markets are fully open. Having burned his hand, he will be very careful.
  3. Film making is on miramax model means small budget with potential upside. However, it have too many wheels to move together.
  4. Good thing about company, they are not recklessly investing in music, they only invest in songs/videos where there is visibility of income.

All in all they have cash cow named music publishing. Consider a famous song (Roop teram mastana) what amount they have paid in 70/80/90.
I like to hear from anybody, what can be a cost of video song? where saregama investing now in gujarati, bhojpuri, hindi etc? As I learn they get 55% of advertisement paid to youtube. For other 55 music apps, may be 10 paisa per song played.
Disclosure: Invested. Sold 50% in recent correction of market.

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Hi, can someone share the article/ report etc. where I can check regarding the new music rights acquired and artists signed by the Company.

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check enil announcemet: ipab order is there

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Saregama come out with very good results. Another quarter with commendable PAT ( Cons. EPS of 18.25)

  1. I was eager about this result to make sure last quarter PAT was not only due to cost cutting. As I see from their channels, they acquired many regional music rights with Bhojpuri and Gujarati leading. So this matrix is sustainable and can be grown.
  2. 138K carvaan sales ( kids and karaoke new lauch) WITHOUT any advertisement is good. I believe as burned finger before, they will not indulge in extreme marketing spends. As it is written in latest investor presentation ( tight control to continue).
  3. Music consumption is going to increase, we see people are consuming music continuously even during walking, exercise etc.
  4. Company create IP and monetize them in different manners. One this strike me about IP is before 10 years, nobody can foreseen music IP can be monetize in Facebook, web series, MOJ etc. So, there will be always new ways to monetize old IP.
  5. Plan to monetize Tamil serials on face book.
  6. Launched new tamil serial “Anbe Vaa”. Other is Chandralekha and Roja. Zombivali movie can be released in next quarter.

Company is still not pursued by institutions, I am near to 100% sure, Vikram will not spend recklessly in marketing or IP aquitions.
Vikram is jokey of this company, my bet is more on him. He bring this company to life with only one quarter problem.
Read results and presentation here.Result and presentation

Disclosure: Invested.

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Concall highlights:

  1. Not only debt free, 150 cr of cash on books.
  2. Retro Music become famous on TV, music, films, web series etc. carvaan played big role to make retro music popular.
  3. No new hindi movie music rights taken. It will start when industry open.
  4. Road for Carvaan: Keep control on expense for carvaan for next few quarter unless everything is clear. Rely on consumer demand.
  5. Pushing more Carvaan 2.0, In next 18 to 24 months, once they are enough in market, podcast can be monetized.
  6. Once you have IP, monetize not only in one medium, it can be monetize in many ways like, put on TV, Youtube, face book, remake TV serial in Telugu, dubbing rights, Renew license movies etc.
  7. Bigger artist sold their IP rights in America, value of music rights going to roof.
  8. Carvaan will break even and minor positive.
  9. Yoddlle is projected 14% to 16% topline growth. Web series will be announced at right time.
  10. Radio pay to music company at 2%. still in court, it will better than 2%. Revenue from Radio is insignificance.
  11. Shelf Life of music is 60 years, rights taken in 60s/70s still generate substantial revenue.
  12. Efficiency seen in recent quarters will continue, Investing will happen with 5 yr payback period as maximum.

Disclosure: Invested.

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Q3FY21 Concall Audio
Interesting commentary by the management.
We are seeing prudent allocation of capital and an earnestness to bring in longevity to the business.
Imp will be to track how the next purchases with cash on books pans out as its very difficult to derive out monetary outcomes from a creative purchase.

Disc: Tracking

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“Saregama strikes licensing deal with India’s leading short video platform, Josh with over 77 million monthly active users. Link
One more good deal. As I said in my previous post, once you have IP, there will be always new ways to monetize it.
In there youtube channel, from last few days they are posting very old song video/audio, my guess is that after huge success of song " Kismat Ki Hawa" used in movie Ludo, they want more retro songs to be famous and monetise, original IP with newer generation.
I do not have knowledge about how short video platforms pays music IP companies. Any insight will be helpful.
Disclosure: Invested.

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Has done Rs44 EPS in 9MFY20. Extrapolating 3Q into 4Q, FY21 EPS likely to be Rs62/share. At Rs996 stock ar 16.0x P/E which is super cheap for a internet/ mobile monetization of music library theme.

It seems like there is very limited knowledge of this story amongst institutional share holders.

Disclosure: Invested from lower levels and continue to buy more even at current levels

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Saregama have cash cow of music publishing. Where IP get monetized on various channel. They was only one quarter where they spend too much on carvaan advertisement in 2019 and sales did not pick up. Now company made it clear from last 2/3 concall they will not spend on carvaan advertisement. Means, all cash generated by music publishing is/will follow bottom line. Even they guided for 20% more growth projection for publishing.
If they do not spend aggressively for carvaan sales, music publishing is self compounding story, as they invest only on those music which have payback of maximum 5 year payback ( Roughly RoI of 20%).
Disclosure: Invested.

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