Saregama India Q1 FY27 earnings call

Saregama India Limited reported robust financial performance for Q1 FY27. Revenue from operations stood at ₹263.6 crores, marking a 27% year-on-year growth. Adjusted EBITDA reached ₹112.4 crores, a significant 69% increase year-on-year, while operational PBT grew 38% year-on-year to ₹70.5 crores. Management emphasized evaluating performance on a rolling 12-month basis rather than single-quarter results due to industry volatility^🌐.

The music vertical, encompassing Licensing, Artiste Management, and Retail, recorded ₹230.6 crores in revenue, a 39% year-on-year growth. Its EBITDA was ₹139.8 crores (+36% YoY) and net margin ₹99.6 crores (+31% YoY). Management reiterated its medium-term guidance for the music vertical to grow between 20% to 23% year-on-year, with an annual EBITDA margin of 60% to 65%. A significant portion, 60% of FY26 music revenue, originated from content released post-2000, with 45% from post-2020, showcasing the company's strong new-age IP portfolio.

Saregama is actively experimenting with AI technology to optimize costs and enhance content creation. This includes using GenAI tools for neighboring audio content like podcasts and building new music videos around older songs at a very low incremental cost. The company aims to address the historical weakness of not owning original music video rights for its older catalog through AI-generated videos. Management expects to see the impact of these initiatives by the end of the year, with investments falling within the ₹300-350 crores new music content budget.

The company is expanding its Live Events vertical, including Carvaan Live, devotional formats, and international tours. It also launched a new vertical for brand partnerships, which has become a meaningful revenue contributor. Saregama represents 309 artists with over 440 million followers across Instagram and YouTube, leveraging these artists for live events, weddings, and brand endorsements. This strategy aims to diversify revenue streams and improve profitability, with the influencer economy seen as a significant beneficiary.

The video vertical's revenue declined by 52% to ₹17 crores in Q1 FY27. This decline is a conscious strategic decision to wind down the films business. Saregama plans to channel all future investments through Bhansali Productions, with the existing film pipeline being cleared. This move is intended to streamline operations and focus resources on core music and related ventures.

Saregama maintains a bullish outlook on subscription growth in India, noting that paid streaming penetration is only 3% of internet users compared to 18% in Brazil/China and 57-67% in developed markets. Management believes that if free content supply is curtailed and subscriptions are priced correctly (around ₹100), India could reach 100 million paid subscribers within 12-18 months. Studies indicate 64% of free music users are willing to shift to reasonably priced paid services, highlighting a significant untapped opportunity.

The company plans to spend between ₹300 crores to ₹350 crores on new music content this financial year, with most of it already committed. This investment is crucial for maintaining a strong pipeline of new releases and sustaining the music vertical's growth. Saregama views its music catalog, growing by 5,000 to 6,000 new releases annually, as a compounding asset that generates value over decades.