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Saregama India Ltd

| Q3 FY26 Conference Call Transcript

NEUTRAL SENTIMENT

Report Source

⬤16th Dec 25

Summary : Saregama acquired a minority stake in Bhansali Productions to secure a premium music pipeline, control content costs, and enhance overall business margins.

Management Perspective positive : I am very happy to share with you the much talked about... our restructuring of looking at our video business. Today, we people did a strategic equity deal with India's most respected and more importantly the most financially robust film production house... What I am very happy about is the way this deal has been structured. Yes, we really respect the equity of Bhansali Productions and the absolutely terrific work these guys have done in the past.

Concall Report Analysis & Insights

Business Overview

  1. Saregama announced a strategic equity deal with Bhansali Productions Private Limited.
  2. Saregama will acquire 28% to 49.9% stake via Compulsorily Convertible Preference Shares (CCPS).
  3. Initial payment of Rs. 325 crores, with a potential additional payment in September 2028.
  4. Bhansali Productions will exclusively sell all its future film music to Saregama.
  5. The investment is entirely funded through Saregama's internal funds.

Future Growth Prospects

  1. Secures a steady pipeline of premium film music, eliminating competitive bidding.
  2. Anticipates 30-40% of Hindi film music content from this deal, increasing market share.
  3. Fund infusion enables Bhansali Productions to self-fund films, improving their margins.
  4. Investment is expected to be EPS accretive for Saregama by FY27, improving overall margins.
  5. Bhansali Productions has a pipeline of 10 movies/series expected over the next 3-4 years.

Management Insights

  1. The deal is structured to value future performance of Bhansali Productions, not past glory.
  2. Bhansali Productions exhibits strong financial discipline and creative excellence.
  3. Saregama will have complete financial control over Bhansali Productions' business plans.
  4. Exiting Saregama's own low-yield video production to invest in a financially robust partner.
  5. This strategic move secures the music pipeline and is expected to improve Saregama's margins.

Signs of Skepticism

  1. Analyst questioned the significant revenue variation for Bhansali Productions (Rs. 10 cr to Rs. 304 cr).
  2. Management did not provide specific EPS accretion numbers for FY27.
  3. Analyst inquired about the impact of Sanjay Leela Bhansali's age on the deal's long-term viability.
  4. Analyst asked if there was pressure to do a deal after a previous unsuccessful transaction.

Risk Factors

  1. The final stake percentage (28-49.9%) depends on Bhansali Productions' financial performance.
  2. Potential for an additional payment in 2028 if Bhansali Productions performs exceptionally well.
  3. Lumpy nature of content amortization, as costs are charged off in the release year.
  4. Analyst concern regarding Sanjay Leela Bhansali's age (62) and creative continuity, though management cited checks and balances.

Good To Know

  1. Bhansali Productions reported FY25 revenue of Rs. 304 crores, EBITDA of Rs. 60 crores, and PAT of Rs. 45 crores.
  2. Saregama's existing video business has approximately Rs. 200 crores in working capital.
  3. The total valuation range for Bhansali Productions is estimated between Rs. 650 crores and Rs. 1,590 crores.
  4. Saregama's music acquisition strategy aims for a 5-year payback period.
  5. Music rights acquired will be in perpetuity and cover global territories.

Key Drivers

  1. Exclusive access to Bhansali's film music.
  2. Reduced music acquisition costs.
  3. Improved video and music segment margins.
  4. Strong pipeline of Bhansali films.

Key Analyst Discussions

Competitive Environment

  1. Saregama will continue regional music acquisitions alongside the Bhansali deal.
  2. The partnership secures a significant portion of Hindi film music without competitive bidding.
  3. Bhansali Productions will exclusively provide its future film music to Saregama.
  4. The deal helps control music acquisition costs by avoiding bidding wars for marquee content.

Market Trends & Consumer Behavior

  1. Audio OTT subscription revenue is increasing for Saregama and the industry.
  2. Per-stream yield is expected to improve, despite a slightly slower subscription growth pace.
  3. Management noted the positive impact of marquee albums like Dhurandhar on Spotify streams.

Financial Highlights

  1. Management expects improved margins but did not specify EPS accretion by FY27.
  2. Bhansali's revenue fluctuation was attributed to COVID slowdown and project timelines.
  3. The deal structure involves an initial payment and potential additional payment based on performance.
  4. Music acquisition cost is a pre-agreed percentage of film production cost, avoiding bidding wars.
  5. Saregama is reallocating Rs. 150-175 crores from its own video business to this investment.

Product Composition

  1. Bhansali Productions' pipeline includes 10 movies/series over the next 3-4 years.
  2. Expected output is 2-3 non-Bhansali directed films and 1 Bhansali-directed film every 18-24 months.
  3. Saregama will acquire music IP for all films produced by Bhansali Productions, not just those directed by SLB.

Strategic Considerations

  1. The rationale for choosing Bhansali Productions was its strong financials and creative discipline.
  2. Management stated no pressure to do a deal, emphasizing strategic fit over urgency.
  3. Concerns about Sanjay Leela Bhansali's age were addressed by mentioning deal structure checks and balances.
Saregama India Ltd (SAREGAMA) Concall Report Analysis & Insights | Dhanarthi