India ▾

Saregama India Limited — Q2 FY26 earnings call

Call held 16 Dec 2025

Management summary

Saregama India announced a strategic equity partnership with Bhansali Productions, involving an initial payment of Rs. 325 crores for a 28-49.9% stake, with an option to increase to 51% post-2030. This deal aims to secure a premium music pipeline, improve music margins by eliminating bidding wars, and is expected to be EPS accretive by FY27. Saregama will also exit its own video production business, redirecting capital to this high-yield investment, which reported strong FY25 financials.

Highlights

  • Strategic equity deal with Bhansali Productions, one of India's most reputed and financially robust film production houses.

  • Exclusive rights to all future film music from Bhansali Productions, ensuring a steady pipeline and eliminating competitive bidding.

  • Bhansali Productions' strong FY25 financials: Revenue of Rs. 304 crores, EBITDA of Rs. 60 crores, and PAT of Rs. 45 crores.

  • Expected EPS accretion for Saregama by FY27, improving margins in both video and music segments.

  • Saregama will gradually exit its own produced films, releasing Rs. 150-175 crores in working capital to fund this investment.

Concerns

  • Analyst concern regarding Bhansali Productions' past revenue volatility (FY23/24 figures around Rs. 10 crores vs. FY25 Rs. 304 crores).

  • Analyst concern regarding the age of Mr. Sanjay Leela Bhansali (62 years) and potential impact on creative output, though management stated checks and balances are in place.

Key financials

  1. Bhansali Productions Revenue ₹304 Cr
  2. Bhansali Productions EBITDA ₹60 Cr
  3. Bhansali Productions PAT ₹45 Cr

What they filed

Q1 FY27: revenue up 17.5%, net profit up 32.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue213 407 216 177 195 −8%210 −48%238 +10%208 +18%
EBITDA64 82 73 57 71 +11%91 +11%122 +67%91 +60%
Net profit49 61 56 40 48 −2%53 −13%74 +32%53 +33%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Debt Debt disclosed
    This investment is going to be funded entirely through our internal funds.
  • M&A Bhansali Productions Private Limited Acquisition · Announced · Consideration ₹[object Object] (cash)

    To secure a music pipeline, improve video business margins, and partner with a financially robust film production house with a strong track record.

    Initial payment of Rs. 325 crores for a stake between 28% to 49.9% (converting from CCPS) based on pre-agreed financial performance parameters over the next 3 years. Potential additional payment in September 2028. Saregama retains the right to increase stake to 51% after March 2030. Expected to be EPS accretive for Saregama by FY27.

    This investment is structured through primary issue of CCPS which will convert into equity in October '28, basis pre-agreed financial performance parameters of Bhansali Productions over the next 3 years. These CCPS converting into equity will result in anything between 28% to 49.9% stake for Saregama in Bhansali Productions. For this, Saregama will be making an initial payment of Rs. 325 crores and potentially an additional payment in September 2028. Saregama also retains the right to increase the stake to 51% after March 2030. This investment is going to be funded entirely through our internal funds.
  • Liquidity Liquidity disclosed The investment is funded entirely through Saregama's internal funds, indicating sufficient liquidity.
    This investment is going to be funded entirely through our internal funds.

Guidance & targets

Profitability

  • EPS Accretion Profitability · FY27 · High confidence EPS accretive
    This investment is expected to be EPS accretive for Saregama by FY27

    — Vikram Mehra

Content Pipeline

  • Bhansali Productions Film Releases Content Pipeline · next 3-4 years · High confidence 10 movies
    These 10 movies are expected to be released over next 3-4 years. One or two of these movies may also take the form of a series.

    — Vikram Mehra

  • Bhansali Productions Film Releases (Minimum) Content Pipeline · two years · High confidence minimum five films
    We are looking at minimum five films in two years.

    — Vikram Mehra

Market Share

  • Hindi Film Music Content from Bhansali Market Share · High confidence 30%
    Saregama anticipates that around 30% of all its Hindi film music content is now going to be coming from this deal. The number can even go up to 40%.

    — Vikram Mehra

  • Hindi Film Music Content from Bhansali (Potential) Market Share · Medium confidence 40-50%
    So, though I have said 30% of my film music is going to come from Bhansali, that's my commitment out here, but I think the number will be closer to 40%, maybe 50%.

    — Vikram Mehra

Working Capital

  • Release from Own Produced Films Working Capital · next three to five quarters · High confidence Rs. 150-175 crores
    Our endeavor now is that over the next three to five quarters we will completely get out of our own produced films which are going to release anything between Rs. 150-175 crores working capital.

    — Vikram Mehra

Valuation

  • Bhansali Productions Valuation (Lower End) Valuation · after 3 years · High confidence Rs. 650 crores
    total range of the valuation of the company will be anywhere on the lower end at Rs. 650 crores and on the higher end at Rs. 1,590 crores.

    — Vikram Mehra

  • Bhansali Productions Valuation (Higher End) Valuation · after 3 years · High confidence Rs. 1,590 crores

    — Vikram Mehra

Music Margins

  • Music Margins Improvement Music Margins · short to medium run · High confidence improve
    We believe, in a short to medium run basis, this will help us improve our music margins. Because we will be getting the music without getting into a bidding war by competitors.

    — Vikram Mehra

Content Cost

  • Content Payback Period Content Cost · for music bought in a financial year · High confidence 5 years
    a block of content which is bought during a financial year, that means all the music that we buy in FY26 will have a payback period of 5 years.

    — Vikram Mehra

Subscription Revenue

  • Subscription Revenue Growth Subscription Revenue · High confidence going up
    All our subscription revenue for us is going up. You are getting into very specific. I cannot. They are my partners. I cannot comment on their strategy. But subscription revenue is going up for the entire industry, including Saregama.

    — Vikram Mehra

What to watch in Q3 FY26

Bhansali Productions Film Releases

next 2 years
Current 10 movies expected over next 3-4 years, minimum 5 in two years
Target Progress towards 5 film releases within two years

Why it matters

Tracking the actual output from Bhansali Productions is crucial for the music pipeline and revenue generation.

We are looking at minimum five films in two years.

Risks & concerns

  • Bhansali Productions' past revenue volatility

    medium

    Analyst noted Bhansali's revenue was ~Rs. 10 crores in FY23/24 compared to Rs. 304 crores in FY25. Management attributed this to COVID slowdown and project timelines, stating the new investment will stabilize future output.

    Analyst downplayed

  • Key man risk related to Sanjay Leela Bhansali's age

    medium

    Analyst questioned the risk given Mr. Bhansali's age (62 years). Management stated there are 'enough checks and balances' in the deal structure but declined to elaborate on specific details.

    Analyst not addressed

  • Rising content acquisition costs in the industry

    low

    Management acknowledged that content costs can rise but stated this deal is specifically structured to control music acquisition costs by securing an exclusive pipeline without competitive bidding.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Bhansali Productions' film pipeline and acquisition strategy Direct
These 10 movies are expected to be released over next 3-4 years. One or two of these movies may also take the form of a series. ... What really attracted us towards this studio is the financial discipline with which these guys go back and attack their films.

Clarifies the expected volume of content from the partnership and management's rationale for choosing Bhansali based on financial discipline and track record.

Asked by Pallavi Deshpande

Rationale for choosing Bhansali Productions and EPS accretion Partial
We have done our homework on all the production houses of the country. ... Creatively it's known for some of the best films and music coming out, and this kind of financial discipline is there. ... At this juncture, this is all I can go back and share [on EPS accretion].

Explains the selection criteria for Bhansali (creative and financial alignment) but defers specific EPS accretion details, indicating it's a future target.

Asked by Shlok Mehta

Bhansali Productions' revenue variation (FY23/24 vs FY25) Direct
They come out with movies only if they believe right now, they will be able to go out there and have a healthy enough operating margin coming out of it. So, they had gone slow during the COVID time. ... But with this kind of money infusion coming in, and we have seen the pipeline that's working on, we believe that the numbers are going to be reasonably big as we go forward.

Addresses concerns about revenue volatility by explaining project timelines and the impact of new funding on future output, while highlighting the deal structure's protection.

Asked by Shlok Mehta

Valuation and stake acquired for initial payment Direct
No, sir. You are not. The amount paid is Rs. 325 crores. And if everything goes at the topmost level, then there may be an additional amount of money that we may have to pay in September '28. ... The valuation of the company after the end of three years can be anything between Rs. 650 crores to Rs. 1,590 crores.

Clarifies that the initial Rs. 325 crores is not for a fixed 28% stake but is part of a performance-linked valuation, with potential for additional payments and a wide valuation range.

Asked by Kunal Bhatia

Structure of music acquisition deal (fixed cost vs. percentage) Direct
The music now will be a percentage of the cost of the film. And we have negotiated a deal which we believe right now is great value for us. ... we will be able to reduce our cost of content.

Details how music rights will be acquired (percentage of film cost, pre-agreed formula) and the expected benefit of reduced content acquisition costs due to no bidding.

Asked by Kunal Bhatia

Impact on Saregama's music margins and working capital release Direct
We believe, in a short to medium run basis, this will help us improve our music margins. Because we will be getting the music without getting into a bidding war by competitors. ... we are going to wind that down as films keep on getting released. There is enough in the pipeline at this moment, so we cannot shut down this part.

Explains the expected positive impact on music margins and confirms the strategy to release working capital from existing video projects as they conclude.

Asked by Jyoti Singh

Number of films/songs per year from Bhansali Productions Direct
I think the right way for you to look at should be two to three non-Bhansali films and one Bhansali directed film coming every 18-24 months. ... We are looking at minimum five films in two years.

Provides a clear expectation of the content volume and frequency from the partnership, which is crucial for revenue visibility.

Asked by Harshit Toshniwal

Risk associated with Mr. Sanjay Leela Bhansali's age Evasive
I cannot get into these specific deal details. But all I can go back and say that there are enough checks and balances also to the deal structure. Beyond that, I cannot comment on this.

Highlights a key man risk for the creative output of Bhansali Productions, with management providing a general reassurance without specific details.

Asked by Pallavi Deshpande

2 min read 6 chapters

Detailed narrative

Strategic Partnership with Bhansali Productions

Saregama India has entered into a strategic equity deal with Bhansali Productions Private Limited, one of India's most respected film production houses. This partnership involves an initial payment of Rs. 325 crores, with a potential additional payment in September 2028. The deal is structured through primary issuance of Compulsorily Convertible Preference Shares (CCPS) that will convert into equity in October 2028, resulting in Saregama holding between 28% to 49.9% stake, with an option to increase to 51% after March 2030.

Financials and Deal Structure of Bhansali Productions

Bhansali Productions reported strong financials for FY25, with revenue of Rs. 304 crores, EBITDA of Rs. 60 crores, and PAT of Rs. 45 crores. Management highlighted the financial discipline of Bhansali Productions. The valuation of the company after three years is projected to be between Rs. 650 crores (lower end) and Rs. 1,590 crores (higher end), depending on performance. The deal ensures Saregama's financial control over the company while Bhansali Productions retains creative control.

Music Content Pipeline and Cost Efficiency

A key benefit of the deal is the exclusive access to all future film music from Bhansali Productions, eliminating competitive bidding for premium content. Saregama anticipates that 30% (potentially 40-50%) of its Hindi film music content will now come from this partnership. The music acquisition will be based on a pre-agreed formula as a percentage of the film's cost, which is expected to improve music margins and control acquisition costs.

Saregama's Exit from Own Video Production

Saregama plans a gradual exit from its own produced films over the next three to five quarters. This move is expected to release Rs. 150-175 crores in working capital, which will be redirected to fund the Bhansali Productions investment. Management stated that their own video business has not been very successful, and this strategic shift aims to improve returns by investing in a more financially robust and creatively aligned partner.

Future Outlook and Valuation

The investment is expected to be EPS accretive for Saregama by FY27. Bhansali Productions has a pipeline of 10 movies expected to be released over the next 3-4 years, with a minimum of five films in two years. Management emphasized that the deal structure protects Saregama, as the final valuation and stake are performance-linked, meaning a lower valuation would result in a higher stake if performance is weaker than anticipated.

Addressing Analyst Concerns and Risks

Analysts raised concerns about Bhansali Productions' past revenue volatility (FY23/24 figures around Rs. 10 crores compared to FY25's Rs. 304 crores), which management attributed to project timelines and COVID-related slowdowns, assuring that new funding will stabilize future output. The key man risk associated with Mr. Sanjay Leela Bhansali's age was also brought up, to which management responded that 'enough checks and balances' are embedded in the deal structure, though specific details were not disclosed.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Media, Entertainment & Publication earnings calls