Good day. Welcome to Saregama India Q1 FY 2022 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode. 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 and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhupendra Tiwary from ICICI Securities. Thank you. Over to you, sir. Good afternoon, everybody. On behalf of ICICI Securities, we welcome you to the Q1 FY 2022 results conference call of Saregama India Limited. From the management, we have Vikram Mehra, who's MD, Mr. B. L. Chandak, who's Executive Director, and Mr. Pankaj Kedia, who's from Investor Relations. Without much ado, over to you, Vikram. Everyone. Wanted to confirm right now my voice is coming out loud and clear with you guys. Yes, sir. Okay, lovely. The shadow of COVID-19 continues both on our daily life and the businesses that we people run. All of us are finding various ways to work around this. The good part is that COVID has accelerated the digital adoption in our country by at least four to five years. Jury's still out. Some people say it maybe accelerated 10 x. God only knows. Yeah, I think it would be safe to say that it has accelerated the adoption by at least four, five, six years. Companies like Saregama are getting a great benefit out of it because the age group that were scared to adopt digital also started adopting digital in a big fashion sitting at home. They did not have much of an option. They were with their children or grandchildren who taught them how to use various digital apps, which mean more and more people were consuming content digitally. Every time you consume content, some content owner ends up getting the benefit, whether it's a music guy or the film owner or a TV series owner. After a relatively solid financial year 2021 performance, we have started this year also on a very, very strong note. Quarter one revenue from operations grew around 37% in this quarter, and our PAT grew by 73% in this quarter. If I look at our income by another criteria, which we have started announcing from last year onwards, which is operating income before the content charge interest and depreciation, then at INR 42 crore, it's almost double of what we people made in a corresponding quarter one last financial year. Do keep in mind this number doubled in financial 2021 over financial year 2020. I'm not committing to you guys that we're going to double for the entire financial year 2022, the quarter one has been a good solid quarter for us. Especially keeping in mind that Q1, over seven years I've been there at the helm of the company and I've been seeing this, quarter one is typically the weakest quarter for us as a company. Our cash flows are based that way. A lot of our incomes actually come in quarter three, quarter four. Carvaan sale is more seasonal in nature, peaks in quarter three. Keeping all those parameters, quarter one is the weakest of the four quarters. This year, a combination of some good performance plus some of the overflows have come in quarter one rather than coming in quarter two. We have been able to increase the income substantially. In fact, if you remove the other income part and just look at revenue from operations, then our profitability in quarter one is comparable to quarter four of last year, which actually never happened before. The biggest revenue and profit spinner for us continues to be music licensing. That has been the trend for the last three years, and this quarter is no different. We have grown on a quarter-on-quarter basis right now by the same 20% rate. I keep on maintaining this as on a short- to medium-term basis. I see no reason why our music licensing growth is going to come down. We people shared our intent to invest in new content, what, I think close to two years back. For the last couple of quarters, because films were not getting released, we started focusing more and more on Hindi original songs. These are non-film songs. Quarter one saw the release of our biggest song so far. There's a song called "Paani Paani" that's sung by India's biggest pop star, Badshah. That got released in quarter one. The success of this song honestly has surprised us also. It has trended at the number one position across YouTube globally, all major music streaming applications, and social media platforms. As I talk to you, there's a sixth week of that song going on. It is still there at the number one or the number two position almost everywhere. We also released, it's not just one movie or song wonder. We also released multiple songs in Bhojpuri, Tamil, and Gujarati during this quarter, plus more Hindi songs. What gives me a lot of comfort is that if I look at Gujarati language, or for that matter, Bhojpuri language also. If we see the share of Saregama's new content over overall new content, I'm not doing catalog-to-catalog mapping. We just got into Gujarati and Bhojpuri. I saw the number right now, say, of the content that was released over the last 90 days in Gujarati and in Bhojpuri by the entire industry versus Saregama. Our share on YouTube in these new two categories has already started exceeding 20%. That's very heartening news. I had indicated to you people as part of my past talks and presentations that our intent is to acquire 20%-25% share of the new content coming out. The only places where we have been able to manage it aggressively were these two languages, because rest of them are very film dependent, and we are already reaching the numbers that we people spoke about, not just in terms of amount of money spent, but also more importantly, in terms of the consumer listenership of the newer content. Overall, in this quarter, we released 56 songs across multiple languages. We also acquired rights of some of the very big Bollywood, Tamil and Telugu films. Unfortunately, none of these films could get released at this time because of lockdown. Theaters are still shut in the Maharashtra territory in Delhi, because of which films are not getting released, but the deals are all locked with us. This also meant a good or the bad part, that since none of the film music could get released and "Badshah" song was the only very big song that we were able to release during this quarter. April, most shoots were not happening. Our content charge continues to remain small, which I acknowledge it is also one of the reasons right now why quarter one performance is looking good. Even at our charge for the quarter is INR 6.8 crore, and if I start comparing it with the corresponding number, because the right part to compare it is with the Q1 number of last year. If I do that part, that number was only INR 3.4 crore. It is not that we spent less money on content than last year the same quarter. At INR 6.8 crore is still far lower than what we would have liked to spend had normalcy come back. Our focus on cash management continues. Post the dividend payout rates that happened, which was declared in March and paid out in April and some of the content advances, our cash at the end of the quarter stands at INR 138 crore. Our digital licensing business is going very steady. As more and more people start consuming content sitting at home, and once they get in the habit of consuming content digital, we are realizing as markets are opening up, the content consumption is not coming down, it's going further up. Because more and more people got exposed to digital consumption. Our licensing business is growing in sync with that. During this quarter alone, if I'd share some of the names, "Tikli and Laxmi Bomb" was released on Netflix, ended up using our content. "Phone Bhoot" got released, ended up using our content. Various brands like a Dream11 or an ITC or a Spotify ended up releasing their ads during this quarter, all of them licensed music from Saregama. Every quarter, I share with you people names of newer people who are coming on board and taking license from Saregama for using our music either in their brand ads or their films or their digital series. What this is doing, it's giving us this big kick in terms of our revenue growth. This 20% number of growth that we keep on talking about primarily comes out of the growth in the music industry, which is what? 11%-12% and increase in our market share. The pie grows by 11%, 12%, the remaining comes out of our share going up. Why is the share going up? Two parts. The retro music popularity world over. Various articles being written on this. In the digital world, the catalog music is getting more and more popular because it's very easily available at the click of a button. Earlier, it was difficult for me in the world of a cassette or a CD to go and suddenly listen to a Raj Kapoor song if I don't have the cassette. Today, when I'm sitting there on a Friday evening and I want to listen to "Pyar Hua Iqrar Hua," it's very easy for me to just click a button and the music will start. The retro music consumption is going up, and second, as we invest more and more in new content, we're already seeing in the Bhojpuri or Gujarati or Hindi side, our market share is going up. Last year, from Dussehra on-roads, as the retail network had started opening up, Carvaan's sale had started showing up immediately. Our product being part of a new category still is the kind of product where customer is demanding to touch and feel. Retail network is crucial to the success of that product. It did well in the quarter three and the quarter four last year. March was a bad part once again when the lockdown started. Same trend continued this quarter. Majority of the retail network was shut. Sales did take a beating. If you ask me, in spite of for over two months, the complete lockdown was there in the country in April and May. We were still able to manage to sell 45,000 units of Carvaan. The focus, as promised to you quarter after quarter now, I think for five quarters, that we will not be doing any experiments with Carvaan till the time the retail network is not fully open. Our entire focus is on controlling cost, both in terms of manpower and marketing, and it continues. Last year was a break even. In this year also, I'm committing to it that our worst-case scenario will be a break even. We will obviously try right now. We can improve the performance of it. Our focus on moving Carvaan from a standalone product to platform, there's constant work that's going on there. We all do it on the backend side rather than doing on the frontend, because even the product is looking very good, we don't think this is to blow marketing money to educate people about it. Once market opens up, that's the time we will start pushing the Carvaan, the platform business. On the Yoodlee side, there is no new film that got licensed in this quarter. More of a phasing issue than anything else. Since April, May lockdowns were there, we could not finish the shoots of some of our films. According to me, the moment we start looking at the entire year basis, Yoodlee should see a better year this year compared to last year. Last year was also a breakeven year. This year we should see growth both on revenue side and hopefully on the profitability too. The good part is one of our films called "Collar Bomb." We had licensed it to Hotstar and booked in our books in the Q4 of financial year 2021. Hotstar finally released the film. If I look at the external data, which is released by Ormax, which are regarded as the best tracking agency in the country for digital. That data seems to be indicating that in the first week of "Collar Bomb" release, which is 12th to 18th of July, it is the most watched OTT content in India. There are very big Bollywood films that got released on Amazon around the same time. Still, "Collar Bomb" in terms of viewership fared far higher than the big Bollywood films. Our TV part, I am very happy to see that TV part, our shoots did not get affected. We found ways to change our storyline so that the shoots could happen in bubbles. We continued nonstop with the film production, film and OTT production business. That's why our revenue has been very steady during the quarter. Also, Roja, a program which was the number one program when COVID started, it's still maintaining to retain its number one position after 15 months too. At this moment, we developed three of our programs running on Sun TV. All three of them are also getting monetized on YouTube as well as on Facebook. Overall, if I may say quarter one, we are happy with our performance. Our core business of music remains steady and grew at 20%. Carvaan, in spite of the setback, was able to do some kind of a recovery in the later part of the quarter when the retail networks opened up, and we believe the future quarters are going to be better. Our TV business was steady. Our film, just an aberration. We didn't release any film, but the acclaim we people have received for the film we released is very heartening. We hope right now the remaining quarters are going to look even better than this. That will be all. Happy to take questions from you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, use the star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press the star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the questions will be sent in. The first question is on the line of Amit from 2Point2 Capital. Please go ahead. Hi. Hi, this is Savi. Hi, Vikram. My question is on the royalty expense. I just wanted to understand the way it is calculated and paid out, especially because I was looking at one of your competitors who is also listed, and they seem to have no royalty expense whatsoever. I also ended up asking them this question, and they said that, "In our acquisition model, we don't have any future payouts to anyone." I just wanted to understand whether this is different for different players or I thought it was standard, so I just wanted to understand more on the royalty bit. I think it's a very fair question. There are two parts to it. One, when HMV or The Gramophone Company of India, which is the erstwhile form of Saregama. The deals that were done in 1970s and 1980s had a royalty component. At that time, music used to be sold on a royalty basis. There used to be no upfront payment. Came an era of mid-1990s to, or more 1990s, where the deals started getting happening here on outright buyouts, and there were no royalty element connected to it. From a pure royalty, no upfront payment, it became all upfront payment, no royalty payout. Our royalty payout for the older content is in the range of 10%-15%. Came the era of 2000s onwards. Now, every Hindi deal that happens, every Bollywood music deal that happens here has got a royalty component to it. Those of the players who are just making money off catalog and are not acquiring any new content, obviously may not have a large royalty payout. For us, when you see it's not just the catalog content. A lot of new content that we people are acquiring right now, there's a royalty component connected to it. Does this answer your question? Will it be a situation right now where if a new Sanjay Leela Bhansali picture is coming out or some other movie is coming out, if I buy, do I have to pay royalty? Can the other guy get away? Nobody can. That's the structure of the industry now. Is it still in the range of 10%? No. Now the royalty payouts are higher than that. Just related to this question, I was looking at the U.K. market and some other developed markets. I'm sure you're also following, that there's a lot of backlash from the artists against labels and the platform because they believe they are not getting their fair share of revenues. Because of that, there's an expectation that royalty payment will increase and it's already much higher than what it is in India. India also, do you think similar kind of stuff will happen because now you need. No, fair enough point here. Structurally, we are different. In other parts of the market, the deals are between the label and the artist because there is no concept called film music. In India, majority of the deals are between the film producer and the label, and film producer has his own private deal going on with the artist, if there is any. When we pay royalties, we actually are not paying royalties to the artist on sound recording. We are paying to the film producer. The structure is very different. Coming to the bigger question, in India, we have a very smooth working relationship going on there with the composers and the lyricist. All of us have formed a society called IPRS, and all of us sit on the board of it. I believe different countries are different in terms of structure. We have a stable working relationship going on here. You mentioned about the movie, paying to the producers, but for something like that Badshah deal, you would be paying directly to Badshah, right? The majority of the content in India is film content. Right now, yes, on a Badshah deal, I'm with you. Non-film music in Hindi is still relatively small. The big stuff is all. Just wait for Bollywood to open up. We also have an Akshay Kumar movie called "Bell Bottom." We have Ajay Devgn movie called "Maidaan." We have two of Sanjay Leela Bhansali films. We have a Ranveer film with Shankar. We have an Ayushmann Khurrana film. There are enough of our own film's music that we people have acquired, and as theaters open up, all that music is going to come out. Okay. Just my concluding question. I get a feel that the overall share of the pie for the artist in India is significantly lower than, say, in developed markets. In India, the platform, the label, and the producers end up taking a significantly larger proportion of the total revenue pie as compared to, say, in the developed markets where the artists really make a lot of money. Is that true? This is not the forum for me to discuss this, please. Okay. It's the wrong part to discuss an industry issue in a Saregama investor call. I can take this question offline. Sure. Thank you for your reply. Thank you. Next question is from the line of Arpit Shah from Stallion Asset Management. Please go ahead. Hi, Mr. Mehra. Congratulations on your quarter numbers. I just had a couple of questions regarding the licensing revenue. I just wanted to understand the split between the fixed and the variable parts. How much money do we get from per stream revenues, like from that kind of contract, and what kind of revenues have we had from fixed kind of contracts? If you could just elaborate. Majority are variable. I'll give you a very rough idea. Our biggest two sources of revenue will be the music streaming apps, which are all variable, with a minimum guarantee. It's not a fixed fee. It's a variable with a minimum guarantee. Players like YouTube. These form bulk of our revenue, and this is all variable in nature. We may have a minimum guarantee to take care of our downside. The upside is all sitting with us. Got it. Suppose, let's say if in any year that you do not produce any new music, what will be the growth of the old IP that you have? If you see the annual presentation, which is there on our website. We have shared some data there. We are seeing a steady increase in the catalog music consumption year- on- year, and it's not only Saregama. If you see any of the global guys, they all are saying the same thing. Because the catalog music is becoming so easily available, more and more people are accessing it with a greater ease. If I see any R. D. Burman song, and we track it as a song-by-song level for 130,000 songs of ours, that song would have done better in 2020 compared to 2019, better in 2019 compared to 2018, better in 2018 compared to 2017. From 2015 onwards, we are seeing right now every song is making more money in the subsequent year than in the previous year. This is all catalog I'm talking about here. Got it. Suppose let's say we have signed up with Badshah for "Paani Paani" or if you sign up for a large star for any of our songs for non-film Hindi music, what would be the typical cost for the production? What would be the typical cost that we'll be paying? You're not seriously thinking I'm going to share these specifics on a song- by- song. I think it's unfair right now. It's competitive advantage, these issues. The bigger thought is that, and I've shared this in the past, when we do content investment in any financial year, our internal policy is very clear about it. The total amount of money we people have spent on the content acquisition and marketing of it in a financial year on new content, we should be able to recover that entire thing within five years. No, I just wanted to understand what kind of ROICs we have for some of these large artists or larger songs. Like for songs that you're producing, this is of course, going to be an expensive song. Badshah is producing it with Jacqueline. These will be expensive songs. What will be a typical ROIC for these kind of songs? I'm telling you, my answer will be that the payback period right now of all content investment during our financial year is five years. I cannot, please understand, I cannot get into specifics of a particular song or an expensive song or a cheap song. We obviously do a combination of flagship properties, smaller properties, film song, non-film song, indie songs, regional songs, and then come out with a structure to decide that what's the best way to go and invest content with a clear understanding that the payback period cannot go longer than five years. The bulk of the payback comes from streaming, YouTube, and doing other kind of licensing deals for that content, for those songs. Got it. Got it. Just one last question that I had for you. How are our revenues from radio licensing? We are having a discussion with the radio industry for the royalty for the music industry. Right now we have some cases with them. I will not be able to comment on radio at all. We are in court with them. Today, radio forms a very small part of our revenue streams. Okay. they can move up potentially 4 or 5x, right? If the court case goes through. If there's anything, there's an upside, there's no downside because it's already very low. Radio has not been a substantial chunk of revenue for any of the music labels in India. Beyond that, because it's in court, won't be able to comment. Got it. Thank you so much. Best. Thank you. The next question is from the line of Devanshu Sampat from YES Securities. Please go ahead. Yeah. Hello, sir. Good afternoon. Hi. I had a few questions on both the divisions, the music licensing as well as Carvaan. Please. Music licensing, we have invested about INR 17 crore, INR 18 crore, in terms of content in the past two years. We've still been able to grow at about a healthy 20% pace. I guess a lot of that to move it, you know, the tie-ups, and the business development effort achievement. If I remember correctly, in your previous call, you had mentioned that all the efficiencies have been brought in and now growth will largely be driven by new music that we acquire. This is sort of a continuation with the previous participant also. If because of lack of availability, if you're not able to buy or reach INR 100 crore sort of target, will we be able to manage the 20%-25% envisaged growth this year? Sure. That is one. Secondly, if no major releases of Hindi film music happens, will our content charge be INR 17 crore-INR 18 crore, or in the same range, basically, is that a budget for the regional music that comes out every year? Sure. You asked me questions, let me try to see if I can answer this. Our content budget is not a hard number that we are saying we have to spend come what may. This is our intent to spend, assuming there is enough content in the market. If tomorrow, for whatever reason, there is a lockdown happening in our country, for nine months, nothing is going to be shot. Even if we want to spend, we can't spend. Obviously we are going to be constrained by the supply. Going by whatever we people have been able to do in the last six months, we are reasonably hopeful that we should be able to release a good amount of content in that remaining three quarters. Many of the songs have already been shot. It's just a question of releasing them. This is the non-film song. Some of the films are all ready, they're just waiting for Maharashtra and Delhi territory to open. If they release, the music's gonna get out. The regional music is still being shot, and we are releasing that music out. I have no idea right now whether we'll go back and invest the entire kitty as such, because there's no kitty. We are saying of the music that gets released in the market, we will acquire 20%-25% of that. If the total music that comes in the market is very little, we will acquire 20%-25% of that little music. Will we be able to go back and grow at 20%+? Yes, what I'm confidently telling you here is, market share-wise we will be able to go and keep the 10% that's coming because of market share increase, we will manage that. If the industry closed down, which I found very doubtful, then it's a different issue. If everything gets locked for whatever reason. Looking at the current signs in the economy and whatever we are seeing right now on the entertainment overall growth rates, I see all likelihood that we should be able to touch the 20% growth number. Okay. Is there a strategy for us to remix or re-release any of the songs that we already have? As an effort to keep our content growing, which is maybe a strategy that you all listed, [Peyot] has cited in a situation where content acquisition becomes a challenge. Is that something that we are thinking of, or is it not something that can really get the engine moving for us? See, typically what happens is, I'm assuming you're talking about remixes and reinterpretations of old songs. Yes. Somebody needs to produce them, reimagine them. Somebody needs to do a brand-new video with them. Doing that is as simple or complicated as doing an original song. You with me? Okay. Yeah. At any time, we keep on doing this part, that majority of our focus primarily is on new content because when you create new content, you not only get a new song, you get the rights to a new set of lyrics and a new music composition. When you do a remix, basically it's a derivative of the rights that you anyway owned. There always has to be a balance between remixes and originals. Originals, both in terms of independent music and film music. You will see from our side both coming out, like they did last year. This year also, you will find a few remixes coming out from our side. Okay. Can you help me understand a bit between the dynamics between the music license revenues in India versus abroad? Because even the international revenues have also been growing at a healthy pace, and I assume that there would be a higher proportion of paid-up subscribers abroad. The revenue or the economics will be a bit more favorable. Can you throw some light on this in terms of how you think this can play out? Will it be additional tie-ups that will grow the revenues for us internationally, or is it simply just higher usage? Internationally, when we talk about, we are talking about Indians consuming Indian content, Indians living in America consuming Indian content on various apps. Okay. A higher share of consumers there who are part of the paid economy. We anyway get benefit of that. I am personally more bullish on that in India, you will slowly see the transition happening from an ad-driven business or a free business to a subscription-based business. Globally, the number of paid subscribers for music streaming have grown up right now from a paltry 50 million to 450 million now. It is a large enough number. You have very significant numbers even in places like China. I see no reason why in India, over a two to three-year horizon, most of the platforms should not move towards paid economy. When we people make a projection of 20% increase in our music licensing revenue, we don't factor in transition to a paid economy. If that happens, the growth can be far higher. No, sir, I understand that. Okay, fair enough. If I may, I have a couple of questions regarding the Carvaan side of the business also. If you look at the price points, they vary anywhere between INR 2,000-INR 6,000. I assess you are essentially targeting a relatively affluent part of the society. To add to this, even your presentation also says that you're targeting people above the age of 35 and plus. I also fall in that age. I'm guessing people, because of the section of society you're targeting, they would generally be tech-savvy, having phones, earphones, or maybe wireless devices. I'm guessing we are betting big on the platform aspect of Carvaan to really take off and target these people. What are your thoughts on people who already are used to using their phones and wireless devices or Bluetooth speakers and those kind of things, versus having it originally only as an idea of gifting it for people who are technically finding it difficult to adapt to technology, which is basically the 50 or 60 + age category. I'll take you one of my trips right now to a Kanpur or a Jhansi or a Badayu and introduce you to people in the age group of 35 to 40 randomly. You will realize that there is a lot of difference in a typical 40-year-old living in Bombay, Delhi, Calcutta, Bangalore, Chennai, to somebody living in Kanpur. We people, typically, the world that you and I move in, we're a little more open to newer technologies. We are realizing that 35, 40 starts becoming the age in smaller towns where parents' first reaction to anything new is, [Non-English content] I can also assure you that of this entire 2.5 million odd Carvaans that have been sold, practically each one of those people will have a smartphone in their home. High probability may also have a smart TV with them. Who is buying Carvaan? People who have been buying Carvaan are the people who value convenience over control. They have all the devices in their life right now to control their life, to control the experience. They are yearning for that relaxed mood. [Non-English content] In the background, music is going on without any onus on them to decide which song to hear next. My 21-year-old son doesn't understand this philosophy. I think 15 years back, even I had a problem understanding this philosophy. With age, you start feeling right now convenience is more important than any kind of a control, which newer devices give us. That has been the mantra behind Carvaan the product. That's also the mantra behind Carvaan the platform. Whatever we have sold, we have sold based this customer insight only. We hope that it will hold us steady in the days to come. If for whatever reason we realize at any time that no customer has changed completely in our country, we will change our business strategy immediately. Okay. I have one more follow-up question to this, but I'll just, since you brought it up, if I can ask right now. Is there a risk mitigation plan here in the sense, what is it that will have to happen that will lead us to decide, okay, maybe this is not going as per plan. We need to scale back or maybe close down. Is there a sales number that? If you ask me right now, financial year 2021 was just a mitigation plan. We realized after the moment COVID hit us, that we believe in the product, but this is not the time to go back and put the accelerator. The risks are very, very high. We were able to again manage our breakeven. I'm still maintaining with you. This is in spite of us having our karaoke product ready. We are clear about it, till the time we are very convinced that the retail market is fully open and customers are happy to step out of their home and touch and feel the product and buy it, you will not see us spending any big bucks on Carvaan. We will just keep on going steady. Worst case scenario, do a breakeven. Thank you. We would request the current participant to please come back in the question queue for any follow-ups, as we have several participants waiting for their turn. The next question is from the line of Vivek Gautam from GS Investments. Please go ahead. Yeah. First of all, I would like to congratulate you on the retro music popularity. For example, this Ludo movie has become synonymous with that song, "O Beta Ji." I just wanted to understand. How big is this opportunity size for retro music, in films, ads, and even Alexa also uses, I think, our music? How big is that opportunity size for us there, and you can tell something? No, it's very difficult for me to size retro music as such. Yeah. Hello? Can you hear me? Yes, please. Music as a category is growing very rapidly. Digital happened, and the piracy destroyed the music industry completely. 2015 onwards, we are seeing globally a huge upswing happening on music. It's not just India alone. If you see the American market or the European market, everywhere there's a rapid growth coming in, and the reasons are very obvious. This time, the digital consumption is not browser-based. Earlier, we all used to go to www.xyz.com to do anything. In that world, it was very difficult for content owners to control piracy done by rogue operators sitting outside India. If somebody was doing piracy sitting out of Afghanistan, sitting out of Africa, there was no way we could have controlled it. In today's time, in 2015 onwards, as Apple and Android-based smartphones have become the way of life, more and more people consume content through apps. In the world of apps, it is difficult to do piracy because Apple and Google are extremely strict that none of the apps sitting on their platform should encourage piracy. Every time we are able to find somebody going and consuming our content without rightfully taking license, we reach out to these platforms, and they are very cooperative in ensuring that any app which is infringing will be pulled down. This is ensuring that all of us are getting bang for the buck for the IP that we people own. The primary reason why music-based licensing revenue is going up substantially. One question was about this congratulation I wanted to give for Sanjay Leela Bhansali. He's a master understanding of the music, and his music is really immortal for a long time. Are we paying very high cost, and would it be lucrative for us, after paying such high cost for the music rights? Again, all I can say, I give you a qualitative answer here. Let me first give you a more structured thought. How do we choose how much should we pay for any song? We have turned it into a part science. Every song which has been released in India in last 36 months, across languages in which Saregama plays, each of those songs enter a database. These are all competition songs. Behind every song, we know who was the director, who was the lyricist. We also know the performance of the song on YouTube. Since we have so many data points, we are able to now build models, predictive models, which help us identify that when a producer comes to us and says [Non-English content] We are able to predict what will be the potential of those songs over the next five years. It is not perfect science, but it is going and predicting it based on the last 36 months' performance of each of the people who are involved in it. We combine it with listening session. There are kids under the age of 30 in my company. As Managing Director, I don't get involved in that. Those kids go out there and listen to that music, because the music is more targeted to younger people than people of my age. They listen to the music, and they give their clear-cut answer about their views on the song. We then combine the quantitative stuff, which is thrown by the models, with the qualitative part and then take a call how much should we be ready to go back and pay. We make our utmost attempt right now that vanity does not come into play. We are also bound by the commitment we have made to board and investors that a block of music bought in a year overall should have a payback period going in five years. If we are going to be buying music by paying obscene amount of monies. We will not be able to live up to this. We are anyway writing off the cost of 48% year one itself. If we take silly decisions, it will start showing in our books immediately. Hopefully, this gives you comfort. Thank you, sir. Keep up the good work. Thank you. The next question is from the line of Ravi Naredi from Naredi Investments. Please go ahead. Hello, Vikram-ji. [Non-English content] Thank you very much for a nice result. Fantastic in all respect. Sure. Sir, how many song listen on YouTube, Facebook, Netflix, Spotify, Gaana? How we receive the revenue, from advertisement or per song cost? Sir, platform deals are different. If you are listening to the song on a Gaana or a Spotify, we get paid every time you listen to a song. It's a variable deal. Every time [Non-English content] Saregama will get paid. And how- On YouTube. Saregama will get paid right now by Gaana or a Spotify or Amazon or Apple or Wynk. If you are on YouTube and you listen to a Saregama song on YouTube will share 55% of the advertising revenue that they make by showing you the ad. Okay. If you are going to Star Plus or. Okay A Sony and watching a reality show in which Saregama music is getting used, for that, the channels typically pay us a fixed fee, and this fee gets renegotiated every one or two years. Okay. If Google or Dream11 is using a song in an ad of theirs, they pay us depending on what is the extent of usage of a song, for how many days the ad will run, and will it run only on television or also on digital medium. Will it run only in India or outside India, too? Okay. Sir, this Gaana or Spotify, how much pay will you disclose this? Sir, yes, we do give you a broad idea. On an average, all our deals are that we will get paid on an average INR 0.10 every time somebody listens to a song. INR 0.10. If you are a paid subscriber of a Spotify or a Gaana, we get a share of your subscription charge. Okay. All of this is governed by a downside, is protected by a minimum guarantee that they give us. Okay. Yes, minimum guarantee is there in film industries. Sir. That is there. Yes. The bigger labels are able to get minimum guarantees from everywhere. Okay. Sir, secondly, Yoodlee movie, first movie when we released, I think three years has been passed. Is it so? Sir, the licensing of the first movie, three years are just about to pass now. Just pass. After three years, the film will again come to us or five years after? Sir, depends right now. Some of our deals are for four years, some are five, some are 11, some are three. You are right. Principally, every time the licensing deal gets over, we get the movie back, and then it's up to us whom do we license it the second time. The good part is that the cost has been written off in the year one itself. Right. Whatever money this movie makes in the second round will straight move to the bottom line. Vikram-ji, that's why I would like to know any film, if the right has been lapses and again we have resold it or given the right to another person, how much money we receive? [Non-English content] Okay. Definitely. Sir, now it is about to complete three years. No if it is in- Sir, my deal right now of the movie is a four-year movie deal. Okay. Let that get over. Some of these deals that we did in 2019, some movies are three years. Right. Within a year or two, you will start seeing numbers coming in. Okay. More important part is, the good performance of those movies, we are getting many more movie deals and series deals now from these big platforms. Right. I have said it in my last quarter call, I'll maintain this, that we see Yoodlee reaching a triple-digit revenue number in next two to three years. Right. This year, how much movie we have planned to release in 31st March 2022 up to? Sir, COVID, if I can complete that. Right. No, definitely we understand you are doing very hard work and intelligent work. Working is quite different than talking on a phone call is a different thing. Just, you are doing fantastic. I knew it. I am fortunate enough, I am the shareholder of Saregama since long and getting a very good return also. Thank you. All the best, sir. Thank you. Carry on, sir. Thank you. The next question is from the line of Saket Mehrotra from Tusk Investments. Please go ahead. Hi, Vikram. Congratulations on a great set of numbers. Thank you. The first question I had, Vikram, is on the film revenue model. Typically, do these films that you license to, say, OTTs presently in the current scenario, do they have MRGs or is there some variable component just like music streaming based on the number of-? Flat fees. There's no upside. Secondly, Vikram, any concrete plans of reorganizing the publishing business? Recently we saw the group company also had two other publications. If this could be reorganized with that. At this moment, can I tell you anything about it right now? No. We people are looking at very closely and seriously. The Chairman, Mr. Goenka, himself is personally involved in it. We are looking at it. That's all I can say at this moment. We are fully aware of the feedback from all the investors on that particular topic. We hopefully will come back to you guys shortly. Okay. Vikram, I just saw that there is another song that is getting released by B Praak. Are these, the new artists that you are signing, are these going to be exclusive with Saregama or they are free to be with other labels as well? Remember, as I talk to you, we don't sign artists. We work with everybody in the market. We are not into artist management. That vertical doesn't exist in Saregama today. When you see our numbers also, you'll never see any revenue against artists. Our endeavor is that work with every artist in the market, whomsoever is doing pretty well, go and work with them and do some experiments with budding artists. We don't sign up the artists. Okay. Just a continuation of this, where you said that you think of working with say, new age artists and experimenting. Recently we saw there was this Canadian artist called Tesher, and his "Jalebi Baby" song, which got viral, that then went to UMG. Do we have a mechanism in place to keep finding, say, these viral tracks and maybe try and work with them to get the rights of those songs? Absolutely. You will find right now there are multiple of these things which are there in our country with 1.3 billion people. On entertainment side, we're extremely creative bunch of people as we as Indians. You have lot of talent here. We are constantly working and trying to work with these people and see that how do we launch and do music with them, not just limited to Hindi, but across multiple languages, because that's what gives us an edge over every competitor in the market today, that we are the only ones which have a multilingual presence in the country. Yes, short answer is to your question is yes. Okay. Thank you. Thanks a lot, Vikram. Thank you. The next question is from the line of Ankush Agrawal from DPI Research. Please go ahead. Yeah. Hi, Vikram. Thank you for taking my question. Vikram, personally, if you can give some color on what kind of split do we have in terms of revenue from, say, sound recording rights and publishing rights, some broad breakup, if you can give. We don't disclose sound recording versus publishing rights breakup, because both the rights are sitting with a single company, unlike some of our global counterparts, these rights sit with different companies. Yeah. The intention was to understand what kind of profitability each side gets, because on the publishing rights, I think we have to share 25% with the composer and 25% with the lyricist wherein in case of. I think the good part of it is that majority of the revenues made by our company were coming out of sound recording. Right. The publishing rights was something on which there were a lot of disputes going on in the entire music industry. It's only in 2017 that everybody came together, which is the publisher, in this case, Saregama, where we are both the sound recording owner as well as the publisher. The company Saregama, all the composers and lyricists, we came together, created a society called IPRS under the chairmanship of Javed Saab. We are now seeing that society slowly increasing its revenue. In fact, 2019 was a very good year, and they also got blocked under this entire COVID for last one and a half years. Right. Are we bullish? I think personally, I am very bullish that the publishing revenues in the days to come in India are going to go up substantially. They will be collected by IPRS, and 50% of whatever they collect comes to us because we are the owners of the rights. There are huge potential upside in future. We don't put a number to it. As and when the numbers start coming in, you will start seeing that hopefully they will push the growth higher than the proposed 20%. Right. Actually, my second question was on IPRS itself. You have mentioned in your annual report for last two years that you see it's a untapped market till now. What has actually changed over here? Like why was this right was not getting executed, and why were we not getting revenues out of it till 2017 or now? Till 2012, there was still lack of clarity on this right. There was a Copyright (Amendment) Act, 2012 that was passed, which very clearly specified that whenever you consume a song, these were two distinct rights, and you need to pay for both. After that, there was a lot of back and forth happening in the industry itself here. How should the monies be collected? There's a lot of back and forth that happened. Finally, the good part is that the industry came together in 2012. All the three stakeholders, publisher owners, composers and lyricists, and then started working together. It took us one year right now to get the society moving. We had a great year, and then COVID-19 happened. COVID-19 is just a matter of time. As the impact of COVID starts wearing off and life goes back to normalcy, you will see publishing rights valuation going up. All right. Just one clarification over here. In any public event, the entire right is about publishing rights, and there's no part angle of recording rights, right? No. Whenever there is a public event going in, if there is recorded music being played, then they need to clear both sound recording rights and publishing rights. Okay. Suppose you are doing a public event, you have a party of yours happening in a five-star hotel, and you start playing Badshah's "Paani Paani," you need to get your public performance sound recording rights cleared by a society called PPL, and then you also need to get your publishing rights cleared by IPRS. There is a live show going on where there is no recorded music, only live, then you only need to clear your rights from IPRS. Got it. That was very helpful. Just one last one. Can you tell me how much the total industry spends on new music, specifically the Bollywood? Sorry, I could not get you. How much is total annual spends on new Bollywood music every year? The industry spend. The number I can share with you, our understanding is that the total investment in new content across languages, across film and non-film, should be in the range of close to INR 550 crores-INR 600 crores. INR 550 crores-INR 600 crores. INR 600 crores. Okay. Got it. That was very helpful. Thank you. Thank you. The next person is on the line of Kashyap Javeri from Emkay Investment Managers. Please go ahead. Hello. Thank you very much for the opportunity, and congratulations for a great set of numbers. Just one question from my side. If I look at last two years, FY 2020 and FY 2021, because the content generation as well as acquisition was on slightly slower side, we could see significant positive upswing on the operating as well as free cash flows. In fact, we sort of paid out fairly hefty dividend also in FY 2021. Let's say in a non-COVID normalized year, when the content origination as well as acquisition goes back in full swing, what could be the impact on the cash flows and consequently our dividend paying policy? We will continue to be experience. I'll comment anything beyond that. On the first part, your understanding that the profitability of the last year was governed a lot by low content investment is partly true. I've said it in my last quarter call that when we were declaring a profitability of PBT around INR 150 crore, there was a component of, in that INR 150 crore, of the fact that we did not invest enough in new content because it was not possible to do it. Secondly, we had one-off income also that happened last year. Even then, the number should have been there in the range of INR 110 crore-INR 120 crore of profitability. Is that a number which is a sustainable number with the newer content investment coming in? Yes. As we people go forward, two things that are clear. One, the entire investment in new content has to come out of the cash that will be generated by the music business. We have a very clear-cut commitment given to the board that we will not be raising debt to do content purchases. If there's an inorganic purchase that we need to do from. Inorganic, does it mean library from somebody else? Pardon, come again. When you say inorganic, it is like acquiring library from somebody else. Picking up from other music labels. That's a different thing. Okay. Difficult to anticipate, but on a song- by- song or a movie- by- movie, entire thing is going to be funded by our internal accruals. Okay. Also keep in mind, we people take a charge of 48% of whatever we people, if we're acquiring a movie worth INR 1 crore, chances are INR 80 lakh will be towards content, INR 20 lakh will be towards marketing. Of this entire INR 1 crore, 48% is charged off to our books in year one itself. Sorry, could you repeat those numbers on marketing and- Roughly 80% of our spends typically are going towards content acquisition and 20% are the commitment towards marketing of that content. Okay. Say a film is costing INR 1 crore, chances are that the INR 80 lakh has gone to the content owner as an advance, INR 20 lakh has gone out there, commitment from our side on marketing of the music. Our kitty, 48% gets charged off in the year one itself. Of the total 100%? Of the total 100%. Okay. The remaining gets charged off over the next five years. It's a six-year period. We are giving you a commitment here is that whatever we people acquire will have a payback period of five years. Right. There may be a little bit of a phasing issue in the first few months. Right. It might so happen that we acquired the content, but the revenues for that right now, because our deals get renegotiated every year or two years. There may be a quarter or two quarters phasing issue. Overall, you will see the revenues flowing in sync or going up in tandem with the new content investment. Right. Just so you get it technically a bit more clear, then in that case, even if, let's say, you were charging, like you said, the charging to the P&L might be in a phased manner. If I look at your cash ROCE, that should reflect your IRR or let's say payback period, which you are very confident about. All I can say, listen, I'll take this offline with you, but yes. Sure. You need to keep these two parameters in mind right now that we charge it off over six years. Of this, 48 has a charge-off in year one while we expect to recover the cost both of the entire crore, which is both content cost and marketing cost over a period of five years, point number one. Point number two, the entire funding will be done through internal cash accruals. Sure. Not going to spend more than what we people earn. Sure. That's it from my side, sir. Thank you so much. Thank you. The next question is from the line of Rajesh Kothari from AlfAccurate. Go ahead. Good evening, sir. Sir, I have two questions. My first question is, can you give some color in terms of how is the competition intensity when you're buying the music rights or even if you are entering into an agreement. What is the competition intensity and globally, for example, the Sonys of the world and UMGs of the world, they themselves are so big. What kind of trends you are seeing from the competition perspective, the key competitors, and how aggressive they are? That's my first question. I'm saying right now, we should never dismiss competition. We are not the number one player in the market. We are the number two player in the market. There's clearly a formidable competitor sitting in. Where we differentiate ourselves with our competitor is our ability to market music. As a company which, one, run by professionals, second, has got very high-quality marketing talent. Also, courtesy Carvaan, we are the only music label who's got a retail business, and best of the marketing talent actually sits on the retail side and not on the B2B side. We are able to attract that talent and keep it in our system. This is of great value to our movie producer because most movie producers consider music that they release before the film to be the biggest promotion tactic for their movie. They want to work with people who are very marketing savvy. This is really helping us out. Second, Saregama has a very long track record of being very particular about its royalty payments. Our payments are always right and done timely, which is also helping us a lot in many producers are coming to us and saying that they want to work with us. For example, the Sonys of the world or for example, say, YouTube, do you think they can also compete you? I'm not talking about the traditional number one competitor. I'm talking about the new age competitor. Do you think they also compete or they do not compete at all? Again, the entry barriers in our industry are huge. You can tomorrow, technically speaking, start a label of your own. Remember the sheer size. When you acquire the music of one film, you get on an average four to five songs. If you go out there and have deals going with 100 different producers, which is a Herculean task for anyone, you get 500 songs in a year. You do it for a decade, you get 5,000 songs. You do it for 50 years at time, you get only 25,000 songs. Saregama is sitting on 130,000 songs. The other one or two big guys are also sitting on large libraries. Just because of the sheer size we people have, we are able to market our content much better, and we are able to get better deals from our partners. For a newer guy to compete in the long run is difficult. You may have a song being released on YouTube here and there, which did well, but a sustained basis to develop business around it is a difficult task. Globally also, music industry, this is the advantage that the players have, that the entry barriers are massive. They generally, typically, they do not compete, am I right? Sorry, my knowledge is limited in this industry. For example, whether YouTube actually competes with you at any point of time normally or players like that. See, none of the partners create content. Okay. There is a clear-cut distinction. We don't get into their space. We are not launching a Spotify or a Gaana or a YouTube or a Netflix equivalent. We are pure-play content IP company, while most of these guys are pure-play platforms. You will not find music being created by any of these guys. Understood. Sir, my second question is in the opening remark, I don't know, correct me if I'm wrong, you mentioned something that normally first quarter is weak, but this time it is strong because of preponement of revenue from 2Q to 1Q. I didn't understand that statement. Can you clarify, please? No. You have to get again a half part of my statement. My statement was quarter one anyway was pretty steady this time for us. It was also helped. We have a concept for overflows. I spoke to you about our various OTT deals, which are minimum guarantee-based deals. Our policy is that if there is an overflow coming on those minimum guarantees, it is booked only when it actually comes. We don't book revenue in an advance unless the revenue is hitting us. It so happens here that typically our overflows come in Q2, Q3. One of the overflows has come in quarter one this time. That can happen even in 2Q, right? For some other deal, I mean. That's a normal part of your business, right? I mean, it can overflow any time. No, it's a saving issue. What happens, some part of it is still going to Q2, some part of that has come out during Q1. Understood. Great, sir. I will take the question offline. Thank you, sir. Our principle has been right on the content side to get to be more and more open about our declaration so that you can understand our numbers better. Sure. No worries, sir. Great, sir. Thank you. Wish you all the best. Thank you. The next question is on the line of Vivek Gautam from GS Investments. Please go ahead. Yes. Could we just highlight the progress India is making regarding two factors? Number one is the paid subscribers for music in different channels, and number two, the increased litigation and cost for, in India, if you report some IP violation, like in China, it's almost 94%. How much is it in India, and how much is it looking like in future? Thank you. Let me put the second part first. Overall, we work with Government of India closely on the piracy issue, and I can tell you both across films and music, we are seeing a fall in the incidents of piracy in India. Is it any magic? It's just two principles at play here. One, it's becoming so much more easier for a customer to get access to legal music today. For that matter, even legal films. You can go to a Gaana or a Saavn or a Wynk or a Spotify and legally hear music. Why will you go out then and indulge in piracy? Second, even if you want to indulge in piracy, it's difficult to get access to pirated content because most people don't use browser any longer. They go to apps, and apps are not able to go and push pirated content. Same thing which I said in my initial statement. This is what is helping rates of piracy coming down in our country. Is it still very high? Still very high. The good news is that it is falling down. Also, we are seeing judiciary now getting very active and now acknowledging that the IP piracy is as good or bad as stealing right now somebody's physical products. There are a lot of livelihoods which are dependent on IP, and if somebody's right is getting stolen and other person is taking advantage of it, proper legal action should be taken. Which is helping overall IP getting its place under the sun. The first part that you asked me about subscription, this is my personal view. I think Indian customer may be ready to pay if the pricing is right. Most of the platforms which are there in OTT are still a little more keen on building their valuations than building their bottom lines. If the focus is on valuation, then you push more and more on monthly active users, which means you need to put your content free rather than do it on a paid basis. Eventually, all of the people are going to fall in place. All the international guys who have come in India, their focus is always paid. I see every reason to believe right now they will keep on pushing the paddle on the paid side, and a lot of Indian guys may just follow suit. Is it a very large number today? No, it's not. Do we expect this number to grow up substantially? Yes, we do. If that number grows up substantially, will we benefit a lot? Yes, we will benefit a lot. The judiciary comment of yours, because our courts are more famous for culture. How effective have been they? Hello? Yes, please. Could not get your question. That's our famous for famous by Sunny Deol, because judiciary basically keeps on postponing the decision, actually. I just wanted to understand how effective they have been for us. All I can say is this is serious. It's as good as [Non-English content] 20, 25 years back, [Non-English content] was never considered as a [Non-English content] Now, judiciary is coming out there to the rescue of the IP owners. The various treaties India has signed with global treaties they have signed are also putting pressure that the IP has to be protected. We are seeing the benefit flowing to every IP owner across audio and video. Thank you, sir. Thank you. Thank you. That was the last question. I would now like to hand the conference over to the management for closing comments. Thank you, guys. Long evening we had. We people are happy about the way company has performed in the quarter one, and we maintain our bullish stand as we people go to the remaining three quarters of the year. Music licensing, our projections have been 22%-25% growth on a short to medium-term basis, and we stick to those numbers. There's no change. We will keep on continuing with our investments in new content, Hindi film, Tamil film, Telugu film, Hindi non-film, Bhojpuri non-film, Gujarati non-film, Punjabi non-film, and couple of other regional languages non-film. We believe as markets start opening up quarter two, hopefully quarter three, you will see some of the bigger film releases out and many of those next bunch of big releases, especially the musicals, are all with Saregama. We see a big upside coming out of that. We continue with a cautious approach on Carvaan. Till the time the markets are not fully opened up and customers can't go freely, we will keep on controlling our costs, both on the manpower and the marketing side. Focus is going to be on margins and not on revenue. Films, our previous position continues. Our focus is going to be, one, on making movies on a pre-commitment basis. Second, we will focus a lot on making web series, and you will see us announcing our first web series shortly. Third, there will be focus going on the regional side. Regional language-based music film series is an overarching theme on which we people are working on. We want to invest out there heavily because we believe the next bunch of customers on the digital side are going to come from the smaller markets, and they are going to be much more comfortable consuming content in their language than necessarily Hindi alone. There will be a lot of focus while we are not going to take our eye off mainstream Bollywood. Overall, hopefully in quarter two, we'll come back to you guys with an equally positive news. Thank you. Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you everyone for joining us. You may now disconnect the line. Thank you. Bye.