Tips Industries Limited - Ready to RACE ahead!

[nageshkm]

@Karthisn1

Though can’t divide equally all songs can learn Tips is acquiring at higher cost. Saregama adds 5000 songs a yr viz a viz 1000 songs by Tips. Tips with Higher acquisition cost and accumulating with lower number of songs with nearly P/E of 27 vs P/E of 33.

This might not be the best way of understanding cost per song TIPS vs Saregama.

• TIPS outright acquires the song, once acquired there is no future liability to pay the artist. However, Saregama works on royalty model, they typically payout ~10% of their revenue as royalty.
• FY’ 23 TIPS cost of acquisition was ~7.4L, accounting for the royalty at Saregama, for just 1 year (this is a very conservative figure since Saregama’s revenue split spreads very evenly across decades), Saregama’s cost of acquisition becomes ~6.3L.
  Further discounting for perpetual royalty that Saregama pays, and given that 60% of their revenue comes from songs before 2000 I’d assume Saregama likely has a higher cost per song that TIPS.

[saikathalder]

Music streaming has a huge opportunity with GenY, Gen Z people. Spotify, Amazon, Apple music are here to stay and Tips will make profit out of it.

[praky]

But the valuations are stretched. (Holding)

[gurjeev]

Tips Industries Note.pdf (906.4 KB)

Short note on tips

[arjunbadola]

Compulsory licenses under copyright law only applicable to play songs on...

[SP5]

FII’s and DII’s have finally started to buy into TIPS Industries…!!

[abhikjha]

I think it’s set for a massive bull run

[SP5]

Wonderful Q2 FY24 results.

OPM at a mind bloggling 82%…!!

My Decision to Pick Tips ahead of SAREGAMA is proving right.

[praky]

Will it reach a pe of 100 if they properly start buying?

Honestly I think this is the peak valuation.

[rshankv]

[itsnitin]

Can someone post the Concall summary?
Apologies for being too lazy to listen to whole. I prefer reading concall but I guess it is not available yet.

[SP5]

Q3 (Oct-Dec) has historically been their best Quarter. Quite logical since it is the Quarter that is heavy on Festivals and New Year Celebration.

Am now confident of a Bumper Q3 Result and a good overall FY result.

Lets not forget that Tips is bringing in the Number with desi Music Streaming platforms like Hungama, Gaana and Wynk missing from its customer list. By the way these Platforms are running in the Red and might go Belly up anytime. Which means that TIPS Industries won’t be effected.

[valuelife]

Updated this list
Saregama has been growing the fastest albeit on smallest base, followed by TIPS

[lohiyaakshay08]

If we look at the TIPS revenue growth profile (just the music segment), we can observe that revenue growth grew more rapid beginning in FY18. Is it because they altered their monetization approach at that time? Or was it primarily due to India’s increased internet penetration (the Jio effect)?

Second, how sticky is revenue in the music business? We have witnessed a slight decrease in FY17 and FY21, so is volatility the thing in music industry too?

Lastly, while the company has guided for 30% CAGR for the next 2-3 years, how is the company attempting to achieve that rate of growth? Will they do so by adding more partners like Instagram and Wynk? or the next level of growth will be because of new albums they are adding to their library now?

[Karthisn1]

In Q2fy24 con call mgnt said per song cost Avg Rs 6L-7L (spent ₹52 Crore for 900 songs). 3 Y cagr expected for Top line 30% ,bottom line 40%( cy(e) 50%). Sooner or later will get into Instagram which will spike bottom line.

[praky]

Correction: after latest results the pe dropped back to 40. Instagram deal is yet to happen and management continues guidance for 30% bottomline growth. I remain invested.

It can still rerate upwards but usually the returns comes in just a few sessions for this stock - atleast over the past 2-3 years.

[modiankush]

Tips has done extremely well over the last few quarters and provides a very strong guidance for the next 2-3years with 30% Topline and Bottomline growth. However, what puzzles me is the answer to few questions during the Q2’FY2024 Concall.

1. Capital Allocation along with sustainability
   
   
   
   The company has made a turn around with going digital approach. What is next for sustainability ? Giving dividends and buybacks is good for shareholders but where is the growth strategy ? SImilar was the case in ITC where dividend payout was extremely good but with a missing growth strategy, the stock price was sideways for over 4years.
2. Management Change w/o clear R&R
   
   
   
   The top slot in the company has been changed and 2quarters are needed to clarify R&R ? Not a very convincing response in my view. A strategic position needs have a clarity on R&R before head hunting and the execution of plan or transfer of responsibility can definitely take few months. This makes me think why TIPS went out in the market to fill the position and not elevate someone internally ?

I would definitely like to revisit the Concall after a couple of quarters and see a growth strategy charted out which can result in company’s growth strucutrally. No concerns observed for meeting the targets for FY2024 but makes me think if this is already priced in over last 6months.

Disc: Not invested

[Abhay_Srivastava]

Stance: Invested and bullish, hence biased. Looking to invest more.

What I understand from concalls - Management is risk averse. They have seen an industry phase when music labels were barely surviving when piracy was at its epitome.

Now the business model has completely changed in the music industry. However, management is still cautious. They are keeping 200 Cr for the same reasons I guess. For a typical business, it might look like the promoters are going horribly wrong and they are not investing the capital for growth.

But this business is different. The income is coming from the past 30 years’ repertoire, which management got it cheaply when the music industry was at its bottom. Also, the cost of acquisition of music has become increasingly difficult because of its higher value. Everyone has realized the gold mine it is. You buy music and earn forever.
Hence, the return on investment for present music won’t be that high.

Plus, growth is not entirely in the hands of management also. This is a business model where growth is driven by industry growth. Mostly an autopilot business like other digital businesses. Suddenly, no customer will stop listening to music from Tips. The more collaborations that will happen with paying platforms (Wynk, Instagram, etc.), the more will be the revenue.

There is oligopoly at the downstream side also. Lots of music platforms are fighting with each other - Amazon, Spotify, Resso, Wynk, etc.
Hence, no single platform has ability to arm-twist music label like Tips to reduce copyright fee in such a competitive industry.

Further, Tips expenses acquisition cost as a normal expense, not like depreciating assets - A practice followed by Saragama. So if they buy music this year. They will clear the expenses this year. There is no backlog.
This also shows how risk-averse management is. I feel they can be a bit forthcoming.
However, the key to win in this industry should be smart management of money. It’s like picking undervalued stocks (music). Don’t pay too much for “Quality music”. I feel the management can do so because of being risk averse.

Being risk-averse is great in this industry at this time. And remember the moat is fully expensed cheap past library, which is impossible to replicate.

[SP5]

@modiankush

Capital Allocation along with sustainability

90’s - 2000’s : Golden Period for Tips Catalogue
2000’s - 2010’s : Medium Impact Decade for Tips
2010’s - Current : Mediocre Years for Tips

I am a 90’s kid and I understand the Irreplaceable Songs from TIPS Catalogue that has defined my childhood.

Thanks to the Digital Revolution, Piracy is no longer an issue and the Music Label brands with good Catalogue is on an Auto Pilot Mode. But I don’t think its possible for the Music Labels to grow faster than the streaming business.

TIPS has around 30,000 songs in its catalogue. Unless it goes on a inorganic acquisition spree (My dream would be if TIPS acquires another star label from 90s VENUS (rebranded as ISHTAR now), it’s impossible to suddenly increase its song library/revenues. But it will be very costly now and very difficult to crack.

The best TIPS can do is to Minimize its Operating Expenses, Strike Business Deals with Streaming Apps that are missing from its list (like Wynk, Gaana, Hungama), keep a look out for inorganic acquisitions, slowly keep adding songs from its Sister business TIPS FILMS to its Catalogue, or wait for the Music Streaming business to make a breakthrough.

I expect Slow but Steady Growth at TIPS INDUSTRIES

@modiankush

Management Change w/o clear R&R

According to me the recruitments has been done to Negotiate agreements at good rates with Existing Streaming Apps / Crack deals with Apps that are missing from TIPS portfolio.

Experienced professionals from the industry with experience would be more suitable than promoting internal talent.

WHAT I AM VISUALIZING

According to me the promoters are now Bullish on TIPS FILMS, having understood that the Music Label Business will generate steady income. Recently the promoters have sold around 6% of their stake in TIPS INDUSTRIES with the intention of the Capital to be invested into TIPS FILMS.

Keep an eye out for the Box Office returns of “MERRY CHRISTMAS”

Disc: Invested both in TIPS INDUSTRIES AND FILMS

[Abhay_Srivastava]

The only thing I don’t understand is why management sell equity in Tips industries and put money in tips films.

My understanding says that music is the best media form out there. It takes less money to make. It has a higher velocity. There are more buyers.

I personally didn’t like management stake sale and getting money to Tips films. Any counter views here? Want to understand and learn.