Shemaroo Entertainment

Stock Opportunities Untested - but worth a good look
592

Very good rampup in sales, with co reporting highest quarterly sales. Profitability is still elusive, and will likely remain elusive in the foreseeable future. Concall notes below

FY23Q4

  • Expenditure on new ventures was 1.1 cr. in this quarter (FY23 expense ~ 54 cr.). This is slightly higher than projected 50 cr. for the entire year. This will increase to 75 cr. in FY24 (will be front ended like in FY23) and will be funded via internal accruals
  • Focus for FY24 will be on free cashflow generation to reduce debt. Idea is to operate at a much larger scale with same inventory
  • Contribution of B2C revenues in total revenues has doubled in FY23 (FY22)
  • Higher revenues this quarter is partly due to ramp up of advertising in TV channels + syndication deals
  • Advertising demand will remain muted in Q1FY24, this coupled with continued investments in B2C initiatives will keep margins under pressure
  • Shemaroo GEC channels have 9% of Hindi GEC viewership (reduced from 10%) with Shemaroo TV and Umang being amongst the top 5 in FTA GEC channels (was earlier in top 3)
  • Broadcasting business is lower margin vs syndication but more capital efficient. Receivable cycle is around 90 days in broadcasting
  • Planning to launch more TV channels
  • Inventory has increased to 735 cr. (from 701 cr. in H1FY23 and 715 cr. in FY22). Inventory is near peak
  • ShemarooME has taken a poll position in Gujarati segment
  • In last 3 years, have invested 175 cr. in new initiatives out of which 143 cr. was invested from internal accruals. This internal accrual was generated out of the 700 cr. inventory, so inventory is getting monetized
  • PPE increased from 21.5 cr. to 35 cr.
  • Have hired a number of industry people across profiles
- Digital revenue breakup (53.3 cr.):
o Ad rates have been impacted by lower spends from newer companies due to funding winter
o Youtube + Facebook: 50-60% (26-32 cr.). Views and monetization has been impacted recently
o Telco: 10% (5 cr.)
o Syndication & ShemarooMe (remainder): 16-22 cr.

Disclosure: Invested (position size, no transactions in last-30 days)

3 Likes
593

Another good quarter in terms of sales, margins will continue to remain elusive for the foreseeable future. Concall notes below

FY24Q1

  • Expenditure on new ventures was 12.5 cr. in this quarter (vs 14.4 cr. in Q1FY23)
  • Traditional and digital platforms experiencing decline in viewership due to availability of IPL for free on digital along with record viewership on linear television
  • Shemaroo GEC channels have 7% of Hindi GEC viewership (reduced from 9%)
  • Launched forth TV channel ‘Chumbak TV’ in May 2023 where monetization commenced in July 2023
  • Current focus is on scalability and gaining market share and not so much on margins. Broadcasting is a high operating leverage business and there will be good margins available at scale
  • Advertising demand will remain muted in Q2FY24, this coupled with continued investments in B2C initiatives will keep margins under pressure
  • Debt has peaked and is expected to reduce in FY24
  • Debt: 341 cr. vs 313 cr. in March 2023
  • Inventory: 723 cr. vs 735 cr. in March 2023
  • Have invested significantly on employee front, with very senior hiring. Employee costs should increase to 115-120 cr. in FY24 (vs 85 cr. in FY23)

Digital revenue breakup (57.5 cr.):

  • Youtube + Facebook > 60% (34.5 cr.+)
  • Telco: 10% (5.7 cr.)
  • Syndication & ShemarooMe (remainder): 17 cr.

Disclosure: Invested (position size here, no transactions in last-30 days)

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594
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595

@harsh.beria93 - any thoughts on the latest news on GST/Tax fraud.

596

Another very good quarter in terms of sales growth, no improvement in margins and management is clear that margins wont revive in next 4-5 quarters (atleast). I find it impressive that they have spent 225 cr. in last 3.5 years to pivot from B2B to a B2C model, and have somehow not blown up (yet). Concall notes below.

FY24Q2

  • Expenditure on new ventures was 30.1 cr. in this quarter (vs 16 cr. in Q2FY23). These will keep margins under pressure
  • Invested 225 cr. in last 3.5 years on B2C
  • Shemaroo GEC channels have 7.4% of Hindi GEC viewership (vs 7% in FY24Q1)
  • Advertising demand remains subdued due to sluggish consumer sentiment, slowdown in new age startup funding, and world cup taking up a large part of ad pie
  • TV opportunity
    o Will take atleast 4-5 quarters to become cashflow positive
    o Very high operating leverage
    o Lower working capital cycle than syndication
    o Tier 2 GEC channels that are well established for 8-10 years do 400-800 cr. annual revenue with EBITDA margins of 25-50%
  • Launched OTT in Indonesia via Excel
  • GST case: related to ITC for FY18-20, deposited 12 cr. under protest (not expensed, but put under advance paid to government)
  • Launched new DTH service (Bollywood Masala) with Bollywood 90s movies on Tata Play in September 2023 (finally something where they can use own library)
  • Debt: 324 cr. (vs 341 cr. in June 2023 & 313 cr. in March 2023)
  • Inventory: 738 cr. (vs 723 cr. in June 2023 & 735 cr. in March 2023)
  • Digital revenue breakup (62.5 cr. down 2% YOY):
    o Growth rates of 20-25% is a thing of the past
    o Youtube is a bit under pressure due to lower views on the platform (change in preference to shorter form videos)

Disclosure: Invested (position size here, no transactions in last-30 days)

597

Horrible quarter for the co, sales only grew by 4% and they had invested massively in hope of advertising growth resulting in operating losses of 18 cr. this quarter. Business remains highly unpredictable even for the management. Concall notes below.

FY24Q3

  • Expenditure on new ventures was 28.4 cr. in this quarter (vs 22 cr. in Q3FY23). Large part was towards TV broadcasting business

  • Shemaroo GEC channels have 7.6% of Hindi GEC viewership (vs 7.4% in FY24Q2)

  • Advertising demand remains subdued due to rural slowdown, slowdown in new age startup funding, and world cup taking up a large part of ad pie. Planned investments in content, people and marketing pressurized margins. Have started cost rationalization measures

  • Shift towards professionalization of company and hiring has peaked out and dont foresee any big jump in employee costs

  • Expect digital viewership to improve, but its monetization is something that they are not confident about in next 1-2 quarter

  • Have embarked on an aggressive plan of international syndication (buying and selling content it global markets)

  • Debt : 362 cr. (vs 324 cr. in September 2023)

  • Inventory : 727 cr. (vs 738 cr. in September 2023)

  • Digital revenue breakup (65.2 cr. up 8.2% YOY)

Disclosure: Invested (position size here, no transactions in last-30 days)