Saregama India Limited

Saregama India reported an operating revenue of INR 260 crores and an operating PBT of INR 76.5 crores for Q3 FY26. After accounting for a one-time^📎, non-cash exceptional item^📎 of INR 7 crores related to the new Labour Code, the reported profit stood at INR 69.5 crores. The adjusted EBITDA percentage for the quarter was notably high at 46%, though management clarified this as an aberration and reiterated its medium-to-long-term consolidated guidance of 32-33%.

The music segment demonstrated robust growth, increasing by 29% year-on-year in Q3 FY26, contributing to an 18% growth for the nine-month period. Management is confident in achieving a 17-18% music revenue growth for the full FY26, with a medium-to-long-term guidance of 21-23%. This growth is primarily fueled by significant investments in newer content, with the company projecting a content spend of INR 275-300 crores this year and a total of INR 1,000 crores over FY25-FY27, maintaining a 5-year payback period for new acquisitions.

Saregama made a strategic minority investment in Bhansali Productions, with the transaction closing on January 30, 2026. This deal provides Saregama with exclusive access to marquee Hindi film music at pre-agreed cost structures, ensuring a guaranteed flow of content without competitive bidding. The valuation of this ownership is linked to Bhansali Productions' financial performance over the next three years, aligning incentives for prudent film production.

The Pocket Aces acquisition is showing positive momentum, with management expecting it to reach breakeven this year, compared to a loss in the previous year. The combined artist management and video content business under Pocket Aces is projected to achieve a 25% CAGR in the medium-to-long term. Saregama added 60 new artists this quarter, bringing the total to over 270, leveraging its 300 million digital footprint across platforms like Instagram and YouTube to promote these artists and their content.

The events business contributed INR 5.7 crores in profit during Q3 FY26, driven by successful shows with artists like Diljit Dosanjh and Himesh Reshammiya. While acknowledging the 'lumpy' nature of this segment, Saregama aims for a high single-digit margin percentage within 2-3 years. The company is also winding down its in-house movie business over the next 12-15 months, shifting focus to short-to-medium length video content, including the use of GenAI tools to generate music videos for older catalogue songs, reducing production time significantly.

YouTube revenue continued to grow as expected, and Saregama observes a gradual transition from free to paid subscriptions on audio streaming platforms. Management believes India holds significant potential for 100 million paid subscribers at INR 90-100 per month, supported by increasing digital consumption, robust digital infrastructure, and ease of online payments. This shift is expected to provide a booster to future revenue growth beyond current projections.