Nuvama calls Saregama a 'recession-proof' pick; bets on strategic tie-up

Nuvama believes the company's growth trajectory remains well positioned, supported by a diversified mix of revenue streams including music licensing, video content, artist management and live events

Brokerage firm Nuvama Institutional Equities has reiterated its bullish stance on Saregama India, maintaining a Buy rating on the stock, and describes the company’s business model as virtually recession-proof. The brokerage believes the company’s growth trajectory remains well positioned, supported by a diversified mix of revenue streams including music licensing, video content, artist management and live events, along with strong synergies and wide distribution reach.

 

At the current market price of ₹362 per share, Nuvama sees an upside of 61.6 per cent and has set a target price of ₹585 per share for Saregama India.

 

Saregama’s long-term strategy, Nuvama said, is centred on monetising its intellectual property portfolio over multiple years. In line with this objective, the company plans to invest ₹1,000 crore in content over FY25–27E. The brokerage expects the music industry to gradually transition from a free or ad-supported model to a paid subscriber base.

 

Analysts at Nuvama estimate that sustained investments in new content will drive music licensing revenue growth at a compound annual growth rate (CAGR) of around 25 per cent. This would place Saregama India about 1.7 times ahead of the broader industry, which is projected to grow at a 15 per cent CAGR over CY24–26E to ₹3,700 crore.

 

“We argue that SIL’s business model is virtually recession-proof, given strong growth across segments and the synergies among different verticals. These factors make SIL an attractive industry pick—an evergreen hit,” Nuvama said in a research note.

Strategic tie-up to secure music supply

Saregama India (SIL) has announced a ₹325 crore investment in Bhansali Productions Pvt Ltd (BPPL) through compulsory convertible preference shares (CCPS), funded entirely via internal accruals.  Depending on BPPL’s performance, SIL’s post-conversion stake is expected to range between 28 per cent and 49.9 per cent by September 2028, with an option to increase to 51 per cent by FY30. Under the deal, BPPL will exclusively sell all future film music to Saregama at a pre-agreed price, eliminating competitive bidding. Nuvama estimates savings of around 400 basis points compared with market rates, with nearly 30 per cent of SIL’s Hindi music (₹50 crore) expected from BPPL.

 

“This guarantees a steady pipeline of premium Hindi music and is likely to be EPS accretive while improving margins. SIL must maintain consistent growth and sustainable margins to support a re-rating,” said Nuvama.  CATCH STOCK MARKET LIVE UPDATES TODAY

Unlocking synergies and exiting video business

The deal consolidates Saregama’s market leadership in music licensing and aligns it with peers by securing a Bollywood production house for content. BPPL reported FY25 revenue of ₹300 crore, Ebitda of ₹60 crore, and PAT of ₹45 crore, outperforming many production houses struggling to remain profitable.

 

Meanwhile, SIL plans to exit its loss-making video business over the next four to five quarters, freeing ₹170 crore in working capital for higher-return investments. The move will not affect regional music acquisition, said Nuvama.

Transaction structure and content pipeline

BPPL retains creative control while Saregama provides governance oversight and financial discipline, including the right to appoint a CFO. SIL will subscribe to 9,960 CCPS by February 2026, with conversion in two tranches. BPPL has ten films lined up over the next three years, including marquee release Love and War starring Ranbir Kapoor, Alia Bhatt, and Vicky Kaushal, scheduled for early FY27, said Nuvama. 

(Disclaimer: The views and investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)