Saregama: Recreation of His Masters Voice HMV

Saregama after wandering aimlessly for a long time seems to have found its mojo with the success of its new blockbuster product Carvaan. Today Carvaan is spearheading the company’s topline and profitability. And this is very distinctly visible in the numbers declared over the last few quarters.

Saregama result.JPG

Saregama’s quarterly revenues have been growing at a blitzkreig since the launch of Carvaan. Particularly in Q1FY19, revenues grew by 79.3% YoY to Rs. 111.2 crs despite a steep decline in TV & Films segment reported a decline of 30% YoY to Rs. 11.6 crs. This was courtesy the music segment growing at 119% YoY to Rs. 99.7 crs, thanks to Carvaan sales. In line with the strong top line performance both Ebidta and net earnings have shot up by 93.7% YoY to Rs. 16.2 crs & 160.3% YoY to Rs. 8.6 cr respectively. This has been possible due to gross margins of Carvaan improving to 23%.

Carvaan is tilting our sentiment towards becoming bullish on Saregama

After almost a decade of no growth on account of low activity, the company suddenly figured a way to monetize its strong library of over 120,000 songs, 4100 hours of television serials and 20 movies. We are not complaining that smusic streaming services and the rise and rise of OTT platforms is also contributing to the bullish propsects of Saregama.

It all began with the launch of Carvaan in Q2FY18

The B2C music segment of Saregama launched  a revolutionary product called ‘Carvaan’ in Q2FY18 and sold 95,000 units in the first quarter of its launch. It ended Q1FY19with 164000 units sales and targets to sell 700,000 units by end of FY19.


This is far more awesome than what we thought the company would achieve in FY21.

What makes Carvaan a blockbuster in the days of streaming services ? 

In Q2FY18, the company with an intent to monetize its rich music IPR collection launched ‘Carvaan’. The ultimate USP of the product being 5,000 pre-recorded songs assorted by various artiste. Further, by the looks Carvaan looks like a radio of the ’80s but comes with all the modern features such as bluetooth, USB and FM radio. The company has positioned this as a gifting product aiming at population over the age of 40 years.

carvaan product.JPG

What is the growth outlook on  Carvaan?

Carvaan has been positioned as a nostalgic music player which is being sold through a network of more than 12,000 dealers across 300+ cities. The company has also been continuously upgrading the product since its launch with new variants and also launched a Tamil version in Q3FY18.

Carvaan is currently available in Hindi, Tamil and Marathi language. The product is also now being made available to the Indian diaspora in the US through Amazon US. We expect further geographic market expansion once the product gets established in the existing markets.

Invigorated by Carvaan the DNA od Saregama is changing

Bouyed by the success of Carvaan, Saregama has taken several strategic decisions to revert to the growth path

  • Saregama plans to be a pure play content company by retaining the IPs of the content created
  • Launch more B2C products like Carvaan to enable higher monetisation of its strong content library.
  • Production of short thematic films targeted at youth that are a good appetizer for theatrical and digital release
  • A&P spends have been increased significantly to support Carvaan growth

B2B revenue streams bouyed by OTT platforms and streaming services

Advent of online streaming platforms viz: Gaana, Saavn, Reliance Jio etc., radio channels and YouTube have bouyed the revenues of the B2B Music Segment. In Q1FY19, Music OTT revenue grew by 41% YoY and Youtube grew by 29% YoY. The management expects the OTT and Youtube to continue to report double digit growth and the acquisition of new content will help beef up the publishing business further.

OTT revenue.JPGYoutube revenue.JPG





TV & Films segment given a new direction

Saregama has been producing TV serials for Sun TV for the last 10 years and has IPR of over 4100 hours of Tamil serials (the company has been conspicuous by its absence in other language TV serials as they dont have ownership of the content IPR).

In keeping with the changing tastes of the Indians demographic profile (with ~65% of the population is below the age of 35 years), the company has recently started enhancing its films IPRs to target the young audience through the various OTT platforms. For the same a a film production banner ‘Yoodlee Films’ has been launched.

Under the banner the company has released four movies and nine more are under production with planned release over a period of time. The management plans to release ~12 movies in a year and 50 movies over the next four years across different languages under this banner.

The first of these movies, ‘Ajji’ has been nominated in an international film festival ‘Busan’ under the ‘New Current’ category.


Current valuations are at mouth watering levels

Based on our internal estimates we believe that the business prospects of Saregama (CMP: Rs. 668, Market Cap: Rs. 1165 crores, FY2020 P/E: 12.8) are on an upward trajectory driven by the overwhelming success of Carvaan and the new growth drivers – OTT and music streaming services. Recent news report indicate that in the UK OTT viewership has crossed that of the traditional idiot box and if global digital trends are to be relied on the same is not very far off in India as well. Given the fertile landscape and the company changing course to cater to the new opportunities we believe the company is at an inflection point. The current valuations of the stock making it an attractive investment opportunity.


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