Saregama India Ltd (SAREGAMA) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (361 Capital Market Private Limited): Ladies and gentlemen, good day, and welcome to Saregama India Limited Q2 FY '27 earnings call, hosted by 361 Capital Market Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand this conference over to Kavish Parekh from 361 Capital Market. Thank you, and over to you, sir.
Kavish Parekh (361 Capital Market): Good afternoon, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Vikram Mehra, Managing Director; Mr. Abhishek Kapoor, CFO; and Mr. Pankaj Kedia, Executive Director, Investor Relations. I shall now hand over the call to the management for the opening remarks. Over to you.
Vikram Mehra (Saregama India Ltd): And a very good afternoon to everyone. This quarter saw our revenue from operations at 3,143 million with year-on-year growth of 37%. Our adjust, adjusted EBITDA of 1,180 million with year-on-year growth of 39%, and operational PBT at 858 million with year-on-year growth of 43%. Our quarterly numbers look very healthy, but I would on behalf of the entire management once again reiterate that please evaluate our performance only on a 12-month rolling basis, or a rolling 12-month basis. Music, the first vertical of ours, Global Recorded Music grew to US$31.something
Vikram Mehra (Saregama India Ltd): billion in 2025, according to IFPI, and India has just 1% share of that, in spite of housing over 18% of the world population. We, in India, are operating in the most under-penetrated large music market on Earth, and our entire strategy at Saregama is built around this next 20-year opportunity in front of us. On a quarterly basis, the overall music vertical, comprising licensing, artist management, and retail, recorded revenue of 2,513 million, registering a 35% year-on-year growth. Quarterly EBITDA stood at 1,540 million, with 37% year-on-year growth, and quarterly net margin at 1,165 million, with 46% year-on-year growth. Music vertical had a low base in the first half of FY25, FY26, which has helped us with such a strong growth number in this financial year. On a short to medium-term basis, we maintain our guidance of 20% to 23% CAGR for the music vertical revenue. On profitability, we had stated in FY24 that it would take us 2 to 3 years before the growth in EBITDA and profits begins to follow the revenue growth trajectory. We are entering that cycle now, where content that was bought 2, 3, or 4 years ago is starting to contribute positive margins. The first half of this year had greater focus on non-film music, like the I-Popstar albums in Hindi and Tamil, which threw multiple songs that trended on YouTube and Instagram, very strong-performing Haryanvi and Bihari songs, Punjabi superstar Nijjar's album. Our biggest film hit this quarter was the Telugu album Paradise. Its song, Yesha Nagulla, hit global number 1 position on YouTube on their Daily Music Video charts during this quarter. The second half of the year will focus more on the movie albums, prominent ones being: Sanjay Leela Bhansali's Love & War, Sivakarthikeyan's Sion, Dharma's Kartik Aaryan-starrer Naagzilla, and a Tiger Shroff movie, which is being produced by Sanjay Leela Bhansali. Our spend on new content this year will be between 300 to 350 crore. As shared earlier, we will now be going forward. We will now be increasing our content budgets at a nominal level, of say 10% per annum. So, assuming FY27 spends of say the midpoint of 324- 325 crore, we're now looking at, of FY28, '30 to '30, those 3 financial years, new content spends of around 1,200 crore. Another data point worth sharing, in FY26, 60% of all music revenue of Saregama came from music which was released post-2000. So, while we at Saregama proudly steward the musical heritage of India, we are now a new-age IP company, with a large part of our revenue coming from brand new IP. We continue with our guidance of a 5-year payback period for all new music bought, followed by 55 to 75 years of returns coming from that music. Music catalog is increasingly treated globally as an infrastructure-light, inflation-linked asset class, which is why institutional capital is now flowing into this space, either through JVs or direct catalog purchases. Our 180,000-plus song catalog, growing at 4,500 to 5,000 new releases every year, is exactly the kind of asset that compounds value over decades. Let's spend a moment on subscription. The push from digital platforms, like Spotify, YouTube, JioSaavn, to build paid subscription revenue continues, with labels working proactively alongside them to accelerate this process. We have already started seeing results coming, with courtesy all these initiatives being taken. A recent Indian consumer study done by EY and IMI stated that 64% of free music customers are ready to shift to a reasonably priced paid service if the free service stops.
Vikram Mehra (Saregama India Ltd): we continue with a bullish position on subscription growth in the country. Globally, the music industry is now growing both on both subscribers, paid subscribers, and pricing. If we see Universal and Spotify's latest quarter results, even after so many years, subscription revenue is still growing steadily for both Spotify, which is the platform, and Universal, that's a label. In India, the growth is still coming entirely from the new subscriber. There's just only one trigger that we have for growth, which is addition of new subscribers. Pricing is a second growth engine that is still ahead of us, which will start kicking in, hopefully, 2 to 3 years from now onwards. Let's talk about AI. Saregama's position on AI remains that it will be beneficial to the company in the long run, both in terms of cost reduction and speed to market. But while we support licensed innovation, we at Saregama will constantly fight against unlicensed exploitation. All our new digital licensing agreements are building protection against dilution of our rights and potential fraud. As of now, data and consumer research seems to be indicating that AI-created music is winning primarily on volume and not on consumer listening. Whatever little that has popped globally are AI versions of existing hits. For a catalog owner, the bigger near-term issue is probably unlicensed AI covers and remakes of our songs and not AI songs competing with our new releases. We have invested in technology that is able to track these cover versions on various streaming platforms, and we either buy them out or pull them down. We are also opening dialogue with, proactively with AI creators so that we on our own can own and distribute the AI versions of our biggest songs. The global industry is converging on the stance that we have held. Universal has called for an AI-generated filler to be paid less than the human artistry, and Spotify is building licensed remix and cover features with right holders consent, credit, and compensation. This is exactly the model we are pushing for AI versions of our catalog, licensed, credited, and paid. As shared earlier, we have created two AI dedicated teams in Saregama to optimize cost and speed. One is a content team that is using GenAI tools to create neighboring audio content like podcasts, using Saregama's songs and building new-age music videos around our older songs. We will be releasing around 100 hours of podcast content in Q3 using these tools. The second team is looking at every process within the company with the end objective of optimizing these processes using AI tools. This has already resulted in marginal savings in manpower cost. We will be in a position to see the full impact of these initiatives over the next few quarters. While global music majors are now talking about expanding artist brands beyond streaming, we have been quietly building this over years, and it's already a meaningful EBITDA contributor through our artist management, live events, and brand partnership verticals. The artist management vertical of music works by making artists popular through our IP releases, and then monetizing them via bookings for live events, wedding, and brand endorsements, from which Saregama earns a share. At the end of this quarter, we represent 340 artists with a more than 450 million follower base on Instagram and YouTube combined. As our investment in new content grows, these artists are also going to become bigger, and with digital advertising growing at over 14% per annum, if I go by the latest EY report, we believe that the artist and the influencer economy is going to be the biggest beneficiary of this growth in digital advertising, which means we get our share from that revenue, straightaway contributing to our bottom line. Let me talk about live events now. Financial year '27 started with us expanding our live vertical into multiple formats, helping us diversify our risk. We extended the Carvaan brand into smaller concerts under the Carvaan Live banner, targeting middle-aged and older audiences that enjoy sit-down premium music listening experiences. 54 such shows were
Vikram Mehra (Saregama India Ltd): quarter two, serving around 10,000 audience. The other big highlight of this quarter was our Ilaiyaraaja's US tour across 11 cities, serving 20,000 audiences. We further built our our devotional format with 17 shows featuring Manoj Muntashir's Krishna, Bakte siblings, and Jaya Kishori. Globally, music labels are increasingly focused on monetizing superfans. Luminate research shows superfans spend over 100% more than an average listener and 73% of them buy physical merchandise. Carvaan Live and our diaspora tours target exactly this segment in the Indian context: older, financially comfortable, willing to pay a premium for curated experience with the artist they grew up listening to. Our long-term belief in the potential of live events keeps getting reinforced every quarter and we will continue increasing our investment here. The focus will be over time to go to lean more and more towards IPs that we people own and reduce our dependence on artist-based concerts. As I think I've been sharing with you guys over the last couple of quarters, we have put in place a new vertical around brand partnerships building an additional high margin revenue stream along with our licensing business by maximizing revenue that we get from brands across music, live events, and short-format videos. This quarter, we did over 20 brand deals with partners like Apple, Airbnb, Google, Cadbury, Tanishq, etc. The video vertical. Revenue of this vertical declined 16% to 183 million. This follows our conscious decision to wind down our film business and invest in Bhansali Productions instead. And revenue in this vertical may decline further in the coming quarters as the transition plays out. But we will continue investing on video content, which is Gen Z focused. That means short-format content that is talking to Gen Z and also a TV and web shows. The good part about the formats that we people are invested in that most of them first are low ticket items and secondly, we have an advertiser or a platform that comes on board before any video is shot. Regarding the two investments, Pocket Aces reached breakeven in financial year '26 and is moving towards profitability this year. Bhansali Production is all geared up for their biggest release, Love & War in quarter four, and is actively working on the slate for financial year '28. Over the next few years, we will continue investing in new music content. This will contribute not only to the immediate growth, but also set the company on a long-term growth path. We maintain our guidance of 20% to 23% revenue CAGR and 60% to 65% EBITDA margin for music vertical over short to medium run. Saregama's growth narrative will remain steady over medium to long-term driven by rising digital consumption, both in new customers entering the market and existing customers consuming more. With over 950 million internet users in India, basis the latest IAMAI report, our cash reserves, professional managerial depth, a a board that thinks long-term and is ready to back the management, and access to the soundtracks of the best films, we can drive earnings not just for next 2 to 3 years, but for the next 20. India is at an earlier stage of the global streaming curve, which is actually a feature, not a bug. On Spotify's latest earning calls in October, their co-CEO Alex Norstrom pointed to India's 1.4 billion people and several and 7% to 8% GDP growth over the many years, and he said that he sees no better market for Spotify to grow its business than India. The proof of the pudding is in eating it. Spotify is backing this by making changes to its free tier in a market like India by increasing the ad load adjustments in order to drive conversion to paid. They are even looking at windowing of content where newer content goes first to the paid side and at a later stage only come to the free people. As platforms like Spotify grow in India, owners of premium Indian music IP will grow with them and Saregama is the best-placed company amongst them. And it isn't just
Vikram Mehra (Saregama India Ltd): forms. In the latest quarter, Netflix reported, India viewers are up 24% and revenue are up nearly 20% driven by strong local content. Indian consumers are increasingly paying for premium local entertainment and is a local IP that wins. To summarize we operate in the world's most underpenetrated, large music market with a high margin structure, and own IP catalog growing at 4.5 to 5,000 releases an year an unmatched in-house entertainment flywheel and a strong balance sheet. Every global trend, subscription growth, ARPU expansion, super-fan monetization and anything beyond streaming diversification have a long runway in India than anywhere else. Saregama may be the cleanest listed way to own this thesis. Thank you. And we'll be open to questions, now.
Moderator (361 Capital Market Private Limited): Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Govindarajang from CSIM. Please go ahead.
Govindarajang (CSIM): Yeah. Hi. Hi. Good afternoon. I have two questions.. Hi. Two questions. First one is on on the event side, I know it's a small number but we we have had reasonable revenues this quarter and but but it's still you know the profitability of it, we made a loss during the quarter. So I just wanted to understand that. And second, this is a question that I think we discussed in the previous calls as well. Could you explain why the unallocable expenditure is going up again. It's 27 crores this year versus 18 crores last year. What contributed to this increase? Thank you.
Vikram Mehra (Saregama India Ltd): Okay. Let me answer the first one. Events, we are at a stage, as I mentioned in my opening statement, where we are moving consciously our dependence from artists-based concerts to IP-based stuff. And an IP-based stuff, for example, we have a Un44V, which is a music festival of ours. There is Haahaakaar which is a stand up comedy festival of ours. There is Krishna which is a devotional concert IP of ours. Carvaan Live, again, an IP of ours. As you, in all the IP based concerts in the initial run there will be higher investments that are going in. We are not capitalizing any of that. Majority of that is all getting charged off. So you are seeing that kind of a number impact here. The moment we go only and only an artist-based concert, the profitability will look a little better, but in the long run, we have no control on our destiny. So, this is a part of a conscious game plan that is getting unveiled in the market. On unallocated, Abhishekh, will you take that?
Abhishek Kapoor (Saregama India Ltd): Yes Vikram, I'll take that. So, Govind, if you notice from our segment results, the unallocable cost is netted off out of the unallocated, the other income. So, other income if you see it's a decline of 55% year-over-year. That's the only reason because of which you see that there is a bump up in the unallocated cost. If you back that off, otherwise, apart from the other income impact, it's flat versus last year.
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