Chalti Ka Naam Gaadi– this movie name perfectly goes with India’s largest IP company -Saregama. A treasure house of intellectual property that closely tracks the evolution of Indian cinema and playback singing right from its start.
Saregama is constantly reinventing itself to serve the changing preferences of Indian audiences worldwide and continues to be India’s leading content generation platform. Under the flagship of RP-Sanjiv Goenka Group, the company continues to grow and stay relevant amidst the rapid pace of digital content delivery. Saregama share price has given a whopping CAGR return of 109% in the last three years, making it the top-performing stock in the media & entertainment sector. Saregama share price made an all-time high of ₹550 in January 2022, rising from ₹41.50 in January 2019.
In this Saregama share price analysis article, we will review the fundamentals of the company and its future growth potential that will help you make an informed investment decision.
History of Saregama
Saregama is one of the few companies operating in India before independence and can constantly transform itself in this continuously changing environment and preferences.
Incorporated as The Gramophone Company (India) Pvt Ltd. in 1946 in Calcutta, the company’s main objective was to manufacture, sell, and deal in gramophone records, radio receivers, record players, record producers, and other allied products.
In 1986, the RPG Group acquired the company, and in 2000, the company started retailing products under the “Saregama” brand. Since then, the company has added many business verticals, including TV serial production, a film production house, investing in non-film music, etc.
Saregama holds music IPs of over 142,000 songs, including the first recording of an Indian song in 1902 and all the classic hits, making it India’s most prominent music IP company. The company’s market cap as of 18 November 2022 is ₹7,279 crores. Total revenues from operations in FY22 came in at ₹580.60 crores, of which a large part of revenue came from licensing revenue or monetizing existing IPs.
As the company deals with intellectual property, it reports OIBCID- operating income before content charge, interest, and depreciation instead of EBITDA. As a result, Saregama is a debt-free company.
Saregama Business Performance
Being a media and entertainment company, Saregama constantly faces the risk of changing trends and consumption patterns impacting its operations. However, over the years, Saregama has managed to ring-fence its businesses from operational uncertainties with new investments and monetization of IPs that are helping to deliver superior business performance. Saregama has three business segments- Music, TV & Films, and Publication. We will look into each business segment and closely analyze their performances.
The music segment of the business primarily deals with music IP creation and monetization. Saregama has a catalogue of over 142,000 music IPs acquired over the years, ranging from all classical hits to modern music. And it has now started enhancing its music IP catalogue through new film and non-film music creation in different Indian languages.
The second part is monetizing this massive music IP collection, which it does effectively by licensing to third-party platforms, including music streaming platforms, TV channels, brand advertisements, video streaming platforms, and social media platforms, and retailing directly through Carvaan.
Carvaan was launched in 2017 with preloaded 5,000 songs, which let the person listen to their favorite music anytime without any ad-break.
Saregama earns every time a user listens to a Saregama-owned song on a music streaming platform like Spotify, Gaana, or any OTT app. In FY 2022, Saregama’s music IPs got used over 140 billion times, and the revenue from the music segment was ₹473.8 crores. As a result, the segment generated close to 81% of the income for company. And, in Q3, FY 2023, the segment reported 24% y-o-y growth in revenue to ₹150.9 crores.
Video/ TV and Films
The company’s video segment focuses on producing video content for third-party digital platforms like Netflix, Disney+Hotstar, ZEE5, etc., under the production house Yoodles Films. Saregama also has a presence in the video broadcasting segment through serials for Sun TV and creates 15-16 hours of weekly content, which it also monetizes on YouTube.
The company is focusing more on creating regional content to capitalize on the increased demand for regional content on OTT platforms. As a result, in FY 2022, the segment generated ₹102.4 crores in revenue, almost 17.6% of the total revenue. For Q2, FY 2023, the revenue for the segment came in at ₹341 crores, which is 53% higher compared to Q2, FY 2022.
It is the print segment under which the company publishes the weekly current affairs magazine “OPEN.” In FY 2022, the segment generated ₹44 crores in revenues, and in Q2, FY 2023, delivering a growth surprise with revenue coming in at ₹42 cores, posting 250% y-o-y growth.
Saregama Management Team
The company is led by Vikram Mehra, an industry veteran with diverse experience managing different businesses. He joined the company in 2014, is a Tata Administrative Service (TAS) alumni, and holds an MBA from IIM Lucknow and B.Tech in Computer Science from IIT Roorkee. Before joining Saregama, he was with Tata Sky as Chief Marketing Officer and Commercial Officer. His earlier stints in companies include Star TV, Tata Motors, and TCS.
Mr. Pankaj Chaturvedi is the Chief Financial Officer (CFO). He has over two decades of experience in various industries and verticals across organizations such as Go Airlines, Vodafone, Reliance Jio, and Hitachi.
Saregama Fundamental Analysis
The company offers unique value propositions and has a distinct advantage in the music and entertainment industry because of its extensive music IP library. In FY 2022, total revenue came in at ₹580.6 crores, of which it earned ₹358.5 crores from music licensing. In Q2, FY 2023, total revenue from operations came in at ₹1,892 crores, up by 30% compared to last year.
EBIT stands for earnings before interest and taxes. In FY 2022, revenues from music segments stood at ₹225.19 crores, while the two other segments made a loss. Loss reported for the video segment stands at ₹14.92 crores, and for the publication business, it stands at ₹11.71 crores.
OIBCID and PAT
OIBCID stands for operating income before content charge, interest, and depreciation. In FY 2022, OIBCID came in at ₹223 crores, and the margin to revenue is 38%. And, in Q2, FY 2023, OIBCID is ₹699 crores.
The company posted ₹152.5 crores net profit in FY 2022, and the net profit margin is 26%. And, in Q2, FY 2023, PAT came in at ₹461 crores, recording 36% y-o-y growth, and the net profit margin for the quarter is 24%.
Key Financial Ratios
Interest Coverage Ratio
In FY 2022, the interest coverage ratio improved to 572 times from 558 times. In addition, due to zero debt in its book, the company can easily cover any of the interest expenses on its book.
The current or liquidity ratio as of 31 March 2022 stands at 5 times compared to 2 times in FY 2021.
Earning Per Share (EPS)
In FY 2022, EPS improved to ₹8.4, from ₹6.5 in FY 2021. For FY 2023, EPS may improve on superior H1, FY 2023 financial performance.
Saregama Share Price Analysis
Shares of Saregama are one of the top-performing stocks in the market and created massive wealth for its shareholders in the last 10 years at a CAGR return of 46%. Saregama share price in the last three years has increased from the low of ₹18.75 (made on 23 March 2020) to hit an all-time high of ₹550 on 3 January 2022.
In April 2022, the stock was split in the ratio 1:10, and the new face value was ₹1. Saregama is a consistent dividend-paying company and last paid a dividend of ₹30 on the pre-split stock.
Since January 2022, the Saregama share price has corrected by almost 40% from its peak, and the stock reflects broader market sentiment, which is impacted by inflation and geopolitical tensions.
Saregama Share Price Target
Saregama is one of the few companies in the market to have a net profit margin in the range of 20s and is consistently maintaining it for the last 10 quarters, which has helped in the growth of Saregama share price.
Strong income flow from music IPs monetization and strengthening its play in the regional video content delivery supports growth in Saregama share price. The video segment (TV and Films) has also shown a good growth potential, registering 250% y-o-y growth in revenue in Q2 FY 2023. The media & entertainment industry is expected to grow by 11% by 2024 to reach ₹ 2.32 trillion. Saregama has substantial leverage to benefit from the sector’s growth and drive higher revenue.
Saregama Future Growth Potential
Mirroring the global trend, the Indian music industry has been growing at a surreal rate since 2015 due to increased digital revenues and the government’s anti-piracy measures. Saregama has converted all 142,000 songs from its music libraries to digital records, helping drive digital revenue from streaming platforms.
Investments in new music under the brand “Saregama Originals,” non-film music, are helping to grow OTT streams and YouTube views. In FY 2022, the company acquired video and audio rights to 436 new films and non-film music worldwide.
In the new initiatives, Saregama forayed into Live Music events, providing a platform for artists to directly engage with fans and the company to earn revenue from ticket sales and sponsorships. And the second vertical is the Artist Management vertical to identify and groom rising new talents.
Being a non-cyclical business, Saregama share price is less likely to show high volatility during a slowdown compared to stocks involved in the core functions of the economy. Therefore, it gives comfort for higher price growth in the future.
Disclaimer: The numbers mentioned in this article are for information purposes only. He/she should not consider this a buy/sell/hold recommendation from Research & Ranking. The company shall not be liable for any losses that occur.
How has Saregama share price performed in the last 10 years, 5 years, and 3 years?
In the last 10, 5, and 3 years, Saregama share price CAGR growth is 46%, 33%, and 109%. At the start of March 2020, Saregama share price fell to ₹18.75level due to widespread panic selling caused by the pandemic. However, the share price has recovered since and has given investors returns of over 1000%, and it made an all-time high level of ₹550.
What is the market capitalization of Saregama?
At the current Saregama share price of ₹ 374 (17 December 2022), the market capitalization is ₹7,279 crores.
What are the business segments of Saregama?
Saregama has three business segments: Music, Video, and Publication. It earns over 80% of the revenue from the music segment.
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