Saregama connects with consumers, hits the right notes
By Rajesh Naidu
According to the company, this product has a gross operating margin of 17-18%, which analysts believe provides good scope for further increase in prices. For FY18, the company expects 300,000 units of Caravan to be sold. This is one of the efficient ways of monetising its library of more than one lakh songs across all Indian key languages. It owns the
ET Intelligence Group: Business-to-consumer (B2C) appears to be the soothing sound of music for Indian investors. Saregama India, known more popularly as HMV in its earlier avatar, has risen about four times in the past six months as it relies increasingly on music lovers in the country to enhance its brand salience.
Such interest in the company’s stock, which closed Wednesday at Rs 881, is explained by the company’s calculated switch away from the business to business (B2B) revenue stream, which analysts read as the right step in Saregama’s journey toward staying relevant.
Saregama, whose predecessor cut the first record produced in India in 1902, has now launched a portable digital radio product that has pre-loaded 5,000 classic songs. With USB and Bluetooth facilities, this device is targeted at 40+ listeners, and is priced in the range of Rs 6,000-6,500. Advertised largely through references, this product recorded sales of 95,000 units in the first quarter.
According to the company, this product has a gross operating margin of 17-18%, which analysts believe provides good scope for further increase in prices. For FY18, the company expects 300,000 units of Caravan to be sold. This is one of the efficient ways of monetising its library of more than one lakh songs across all Indian key languages. It owns the Intellectual Property Rights for these songs.
Analysts have welcomed this shift away from earning traditional license fees from B2B sources, such as telecom service providers and Over the Top (OTT) platforms.
Furthermore, Saregama also launched a film production division, Yoodlee Films. This is expected to produce low-budget films, costing less than Rs 4 crore and made in less than a month. The production division has completed eight films. It plans to monetise these films through cable and satellite and exclusive sales to platforms such as Amazon Prime. The company already owns 3,000 hours of Tamil content (serials), which it plans to monetise by selling to OTT players.
These B2C ventures have come at a time when the company is debt-free.
Considering its FY19 estimated earnings, according to Bloomberg consensus data, Saregama is trading at a price to earnings multiple of 38.9. According to Bloomberg’s consensus estimates, its net profit is expected to grow by 50% until FY19 toRs 39.4 crore. Even though this indicates strong earnings’ growth, the company’s present market price offers little upside potential.
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Via:: Economic Times – Stocks