Saregama India advances 13% on strong December quarter results

Shares of Saregama India (SIL) moved higher by 13 per cent to Rs 1,011 on the BSE in the intra-day trade on Thursday after the company reported a three-fold jump in net profit at Rs 31.6 crore for December 2020 quarter (Q3FY21). The company had reported a profit of Rs 10.5 crore in the year-ago quarter. On quarter on quarter (QoQ) basis, net profit grew 9 per cent from Rs 28.9 crore logged in September quarter (Q2FY21). In the past three months, the stock has rallied 76 per cent, as against a 23 per cent rise in the S&P BSE Sensex.

The company's turnover during the quarter under review grew 3 per cent at Rs 133.9 crore, while the growth was 24 per cent on sequential basis. Ebitda (earnings before interest, taxes, depreciation, and amortization) margins expanded to 32 per cent from 13 per cent in the corresponding quarter of previous fiscal. On sequential basis, margins contracted from 37 per cent in Q2FY21.

The company said the fast growing digitisation-of-India, buoyed by the present Covid-19 situation, is the key driver of change in content consumption habits. This trend is expected to continue for a long time, and Saregama has aligned its content strategy to ride on this digital wave.

SIL's licensing fee has been increasing at CAGR of 26 per cent in the last three years with y-o-y increase of 21 per cent in FY20. The increase has been a result of the company transforming its business model.

"With gradual phasing out of physical music contents, the company's changing business model has been capturing newer and profitable ways to monetize its existing music content through Over the Top (OTT) Players, radio and mobile. Revenue from OTT platforms and YouTube which contributed to a significant share in the licensing revenue have showed an increasing trend marked by QoQ as well YoY increase in quarterly views, indicating better prospects for the licensing business," CARE Ratings said in a recent rating rationale.