Shemaroo Entertainment (NSE:SHEMAROO) Q2 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to the Q2 H1 FY twenty twenty seven Conference Call of Shemaroo Entertainment Limited hosted by Valorum Advisors. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. I now hand the conference over to Ms. Purangy Jain from Valorum Advisors. Thank you, and over to you. Thank you. Good afternoon, everyone, and a warm welcome to you all. My name is Purangy Jain from Valorum Advisors. We represent the Investor Relations of Shemaroo Entertainment Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and the first half of the financial year 2027.

0:54 Before we begin, may make a cautionary statement. Some of the statements made in today's call may be forward looking in nature. Such forward looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Hirin Ghada, CEO and Mr. Ashish Gupta, CFO.

1:45 Without any delay, I request Mr. Ashish Gupta to start with his opening remarks on the financial highlights. Thank you, and over to you, sir. Thank you, Prahwangi, and good afternoon, everyone, and welcome to our earnings call for the second quarter and the first half of the financial year 2027. Let me first start by giving you some of the key financial highlights, after which our CEO, Mr. Hiren Ghara, will give you some operational highlights for the quarter under review. For the second quarter of the financial year 2027, revenue from operations stood at approximately INR 141 crore, reflecting a marginal two year 2% year on year decline.

2:31 The company significantly narrowed its EBITDA loss to around INR 2 crores compared to INR 55 crores in the corresponding quarter last year. Net loss also reduced materially from INR 45 crores in quarter two FY 'twenty six to approximately INR 8 crores in quarter two FY 'twenty seven. Now for the first half of the year ended 2027, the revenue from operations stood at around INR $2.73 crore. The company significantly narrowed its EBITDA loss to around INR 4 crore compared to INR 110 crore in the H1 of FY twenty twenty six. Net loss also reduced materially from INR 91 crores in H1 FY 'twenty six to approximately INR 16 crores in FY in H1 FY 'twenty seven.

3:26 The reduction in losses was primarily attributable to the completion of accelerated amortization two quarters ago, along with the benefits of strategic cost optimization and investment initiatives undertaken by the company. With regards to the new initiative, the expenses in the second quarter of financial year twenty twenty seven amounted to INR 20 crore. Adjusting for these investments, the EBITDA from existing operations for the quarter would have been around INR 18 crore. The same expenses for first half of the financial year 2027 amounted to INR 40 crore. Adjusting for this investment, the EBITDA from existing operations for the first half of the financial year 2027 would have been around INR 35 crore.

4:17 The digital media revenue for the second quarter stood at approximately INR 76 crores, resisting an year on year growth of 26%. Additional media revenues for the quarter were around INR 66 crores, down by 21% year on year. For the first half of the financial year 2027, Digital Media revenues grew by 3% year on year to INR 131 crores, while traditional media segment saw a degrowth of 9% year on year to INR 142 crores. Now I would request our CEO, Mr. Reengada, to give you the operational highlights for the period under the review. Thank you, Ashish, and good afternoon, everyone. Let me take you through the key operational development and business performance for the quarter.

5:06 To begin with, just to add to what Ashish just mentioned, Q2 FY 'twenty seven marks another quarter of progress in our ongoing transformation journey, While the overall operating revenue declined marginally by 2% year on year, we have continued to make meaningful progress on profitability with EBITDA improving by 96% compared to the corresponding quarter last year. The improvement this improvement reflects our continued focus on operational efficiencies, cost rationalization and a disciplined approach towards investments. Coming to the segment wise performance. Our Digital Media business delivered a strong performance, registering a year on year growth of 26% during the quarter. This growth was primarily driven by B2B licensing deal and improved YouTube advertising revenues, supported by healthy consumer engagement across our digital platforms.

6:00 On the other hand, our traditional media business continued to face challenges, registering a 21% decline year on year. The prolonged Baq rating blackout has impacted advertiser sentiment and weighed on television advertising revenues. Additionally, certain broadcasters have deferred their content investments, resulting in delays in the closure of television related B2B licensing deals. Looking ahead, we remain cautiously optimistic about the business outlook. The coming festive season is expected to support advertising demand. However, persistent geopolitical uncertainties and increase in input costs faced by advertisers may continue to influence their spending decisions.

6:46 Furthermore, the continuation of the bark ratings blackout remains a near term challenge for the television industry and therefore, the traditional media revenues. In this environment, our focus remains on strengthening the digital business, rationalizing costs across the traditional business and maintaining disciplined content investments. We are also continuing to drive operational efficiencies across the organization with the objective of improving profitability and building a more sustainable business model. Moving to some of the key developments across our businesses. Shemaroo Me Vilhati. During the quarter, Shemaroo Me Vilhati continued to strengthen its content offering and regional presence. We released nine new titles during the quarter, spanning movies, web series and plays. Some of the key releases included movies, Lalo, Krishna Sadas and Jindagi once more, along with web series such as Chaskela Season one, Sadashani Bus, Tuition and Okay Boss.

7:49 These additions reflect our continued focus on strengthening our regional content library and delivering relevant entertainment for audiences. YouTube. Coming to our YouTube business, we continued to achieve strong audience engagement across our channel portfolio. Our flagship channel, Shemaroo Filming Surpassed 75,000,000 subscribers, which was a very big milestone for us, while Shemaroo Entertainment crossed the milestone of 62,300,000 subscribers during the quarter. Across our entire portfolio of channels, we garnered approximately 9,600,000,000 views during the demonstrating the continued reach and popularity of our content across digital platforms. On the syndication front, we continue to strengthen our distribution partnerships and expand the reach of our content.

8:37 During the quarter, we became the worldwide digital and satellite distribution partner for Telugu Film, Rambha Urvaci Mainka. To conclude, while the operating environment continues to remain challenging, particularly for traditional media, we believe that the structural opportunity in digital entertainment remains encouraging. Over the last few quarters, we have been consciously realigning our business towards digital opportunities while rationalizing investment in traditional media and strengthening our operational efficiencies. Our focus remains on driving sustainable growth, improving profitability and ensuring that our investment generate meaningful long term returns. We remain confident in the strength of our content library, our distribution capabilities and the digital platforms we have built. With that, I now open the floor for question and answer session.

9:27 Thank you very much. We will now begin the question and answer session. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Gaurav Patel, an individual investor. Please go ahead.

10:56 Sir, revenue was down slightly in Q2 as well as in H1. What main factor guide the performance? How are you looking to grow for the second half of this year? Okay. So there are two parts to the revenue growth or degrowth aspect. One is structurally, there is a shift happening from traditional to digital. So if you see the business if you see the underlying business, the digital business has been growing and continues to grow. It is a traditional business, which is in the base, and therefore, it is kind of degrowing. So combination of that is giving the challenge of top line growth.

11:54 But interestingly, just to give you a sense that digital business is now at so in this quarter itself, digital has been 54% of the business. And in the first half also, it has been it's been nearly so the trending wise, it's been 48% of the overall business in the first half of the year. So that Second, is on the traditional side, we have seen combination of bar blackout and advertiser spends lower because of the whole geopolitical challenges. So that is a whatever industry issue, which is happening. But yes, it impacts the top line.

12:47 Yes. That's it from my side. Thank you. Thank you. Next question is from the line of Pranal Seth, an individual investor. Please go ahead. Hello. Yes. Yes. Please go ahead. Am I audible? Yes. Yes. Yes. Yeah. So I had a question regarding the, you know, on the p two p licensing side. So, you know, there is, like, inherent lumpiness in this. So, you know, like, on the front of quarterly run rate, so what is like the sustainable quarterly run rate that you guys are seeing in the digital segment going forward? So yes, B2B business is lumpy. There is no doubt about it. And that is why we have been always asking the investor community to look at our business on a twelve month or a one year basis because that's when the lumpiness kind of evens out.

13:45 In a given quarter, there is likely to be some lumpiness. But having said that, for example, if we see the first half of the year itself, the digital business has grown from INR 100 and sorry, yes, it has grown from INR 127 crores to INR 131 crores. So it kind of evens out on a longer period. Okay. Got it. Got it, sir. So another question that I had on the park rating. So are you seeing any indications on like what exactly the structural blackout impact or something or on the like on the broad cost advertising is?

14:35 I Yes. Don't know can comment on There are two ways there are two or three ways in which operating impacts the business. Firstly, since there is no measurement of any of the performance of the channel, so any new programming that we may introduce or even current programming, any changes that we make, how it is impacting the rating. And therefore, how is an advertiser buying? On what basis they are buying and measuring their own campaign performance is not known. So that is one big challenge because of which because of lack of measurement, the advertiser is hesitant to invest even in the existing channel or in any new impact property that one may so for example, if a channel is doing, say, world television premiere of a movie or some other impact property, say, maybe a sporting event or something, then there is a certain uncertainty about how much rating is going to get generated. Now in the absence of measurement, how do you buy and sell? As in how do you price the rate.

15:56 So that is what is the challenge. One that's a key challenge. And because of the because of that, the spend is lower because many of the advertisers may either price it conservatively or they may shift their spend to another medium, say, or print or some other medium. Second order effect of that is that for a channel whose impact property is not monetizing at the optimal level, for that channel also for them to invest further in content. So it becomes a challenge. And therefore, we have seen a tempering down of many of their channels investment budget. We have ourselves also for our channels have also tempered down the budgets because selling applies for us as a broadcaster. So two of the businesses, which on the traditional side, which are television dependent on whether it's broadcast or syndication, both are impacted by this rating blackout.

17:14 Pranav, you're done, right? Yes. Got it. Got it. Yes. Yes. Thank you. Next question is from the line of Shiloh Singh, an individual investor. Please go ahead. Yes. Thank you for the opportunity to ask the questions. So my question is regarding the given the intensifying competition in the OTT industry, how is Shemaroo positioning itself to retain like subscribers? Like is the strategy focused on building a broad market platform or is it strengthening its regional and like a niche content offerings? No. Our core focus has always been to build the Gujarati regional offering, regional language on the Gujarati side. And I'm happy to with the progress, and I think we have already gained a very strong consumer traction, very strong share of mind in terms of the brand recall or connect.

18:12 And very importantly, very good consumption metrics. We arguably, I believe we are literally like the larger default Villa, the entertainment platform on the digital side. So that is a strong market position that we have created. On the Hindi side, which is our other segment, we already have a very strong existing content library, which is being monetized, and we do invest partly in that to keep the library to refresh or to add some or the other content, whether it's catalog or whether it's new, both combination, we keep investing. But the bulk of the focus in terms of investment, marketing, etcetera, is on the Gujarati side.

19:13 Okay. So that was helpful. Just one last question from my side. Could the management provide a segment wise breakdown of content acquisition spending across like OTT, YouTube and other broadcasting businesses like during this quarter specifically? It's difficult to give that. But indicatively, what I can say is that bulk of the investment on content is on the digital side. And when we do when I am saying digital, we, by and large, buy a bundle of rights, which allows us to monetize it on the OTT platform, on YouTube or to license or syndicate that content, whether it's within India or internationally.

20:00 So that is the overall approach. In fact, that is the approach for all content that we buy. But in the last few quarters, our focus has been and the value driver or investment driver for any content acquisition has been on the digital monetization led acquisition. Next question is from the line of Dhaniya Shah, an individual investor. Hello? Yes, we can hear you. Please go ahead. I just wanted to ask this. Is the company exploring opportunities to leverage artificial intelligence and content creation, localization and distribution to improve monetization and operational efficiency?

21:01 Yes, absolutely. There is a very big AI adoption and acceleration track that is going on. We believe that AI is a very big force multiplier on many fronts. In fact, it's actually far beyond what you have even spoken about. So creation and all, there is a lot of work happening at an industry level, multiple players are doing. And we are also engaged in that in a strong way. In fact, just to give you a sense of what we do so or the level at which we are. So one of our corporate things that we did was last year in December, which kind of in June won an award for the best use of AI.

21:56 So that's the level at which we have already landed ourselves and obviously deeply engaging and growing the AI aspect. In fact, this award part we had shared in the last quarter. So there is a strong and deep AI work happening. And there is a lot of work, I would say, below the surface, which is happening, but not yet at a stage where we can share much more about it. So and as I said, the impact the AI impact, particularly on the business front and all, there is a whole AI transformation initiative and multiple teams are looking doing many things. So AI is a very big focus area for us.

22:53 Okay. My last question is what is the company's strategy and growth outlook for the Malayalam market and its expanding digital content? So we started the whole South regional journey about three years ago approximately. And I would say we have it's been a very interesting and rewarding journey. And in a way, so we were we got the opportunity to associate with Maher Alam's biggest theatrical movie ever called Loka. And that movie is now being distributed across various international platforms and continues to generate revenue.

23:50 Apart from that, there are many movies that we have participated. So Malayalam, to give just to give a flavor is that it's been one of the fast growing theatrical markets in terms of box office collections. So that gives a sense that it is itself in a growing market. And secondly, Malayalam also has a lot of international appeal and business potential. And that was one of the key reasons also to do that. And yes, we will have a slow and steady we will continue to grow in this space overall. Thank you. Thank you.

24:40 Next question is from the line of Ayush Jalan, an individual investor. Please go ahead. Hi. Good afternoon. Thank you for the opportunity. Just a few questions. The first one is, in the last call, you had guided that FY 'twenty seven should be EBITDA positive and 'twenty eight should be cash positive. Do you still stick by the guidance or is there any change, sir? So just to clarify, we do not give any guidance. This is an ambition or aspiration that we have spoken about. And I think we are still very much working towards this aspiration. If you see even the first half itself, we are just marginally at a negative EBITDA. So if things work out well, and particularly Bark and all that, if things improve, I think there is a good probability for us to aim towards that.

25:44 And of course, various initiatives that we had taken over the last few quarters has been helping us improve the overall cost, cash flow, etcetera. And this will continue the improvement we are seeing on a literally on a quarter on quarter basis will continue. So which is why we are fairly confident of even the next year. Plus, I would add one more thing that as digital itself crosses more than 50% of the revenue, then it goes in it's a different tipping point for us. So hopefully, that also helps us improve on the margin front.

26:37 But you mentioned digital, but in H1, we've only seen a 3% growth. So is there some reason that the growth has been slowing down? Because I think that also you're hoping for double digit growth in digital, but that also seems to be slowing down. So can you sort give Yes. A little So we have so this has if you see the overall environment and context, as I was mentioning earlier, is that there is a overall ad issue going on with the whole international geopolitical situation and all of that. And that is definitely and has an impact on as planned on the digital side also. Traditional is impacted additionally more in fact, overall traditional is impacted more, plus there is a VAR issue. So it's more pronounced in the traditional side.

27:29 But as a result of this, definitely on the licensing syndication side, etcetera, the business flow has been relatively slower. In fact, we called it out in the last quarter. We have seen a resumption. So last quarter, in fact, digital revenue had actually come down to 4240% to 58 digital and traditional. This quarter, we have seen a 25% growth because many of those B2B deals kind of translated. So there is a as I shared earlier, there is a lumpy nature of the digital of the B2B business deal. Understood, sir. Thank you so much for that. And just one last question, Is there any further clarity on how we may end FY 'twenty seven with our net debt?

28:20 So as we have shared earlier, we aspire it to be lower than where we are. And if you see, we have kind of held it at even in this quarter. We have held it at where we were. So in terms of cash flow, it continues to remain a strong cash flow position. Okay. Thank you, sir. That was all from me and wishing you and everyone a very happy Diwali and best wishes. Thank you. Same to you. Thank you. Next question is from the line of Daksha Shah, an individual investor. Please go ahead. Hello? Yeah. Hi. So I had a couple of questions from my side. Am I audible clearly?

29:05 Yes. Yes. Yes. Hello? Yes. Yes. Can hear you. Hello? Hello. Go ahead. Yes. So my first question was on the festive season. With the festive season coming up right now, we see a lot of increase in terms of consumer companies increasing their ad spend over the over this quarter, over the next two months. So are you seeing any demand uptake in this part of the third quarter? So yes, I'll break it up into traditional and digital. Digital side, yes, definitely, we have seen a good demand uptake. No doubt about it. Traditional side, also, the demand has grown. It is the back blackout, which is making the revenue and spend suboptimal because the measurement is not there, so everyone is conservatively spending or some campaigns are not spending on TV itself. So but yes, in spite of that, there is definitely a festive uptick. So I can say that compared to, say, the last festive season, this year I mean last year, festive season has seen a degrowth also because of the whole GST cuts and various other logistical challenges that are going on. Compared to that. This year, there is a growth across both traditional and digital.

30:34 Sure, sir. So my next question was on the YouTube side. So you see I'm seeing that your YouTube subscribers are growing strongly quarter on quarter. We have now increased up to 75,000,000 subscribers. So how do you see YouTube as a platform for long term growth? Because we see a lot of competition coming in terms of newer social media apps and newer OTT platforms. So does YouTube still be a major part of your revenue going forward? And what's the growth opportunity there? So YouTube, in fact, right now, globally, we see a few we've been tracking developments across the global spectrum. Actually, there is a whole narrative or not even a whole discussion around many of the large platforms actually have seen lower growth in engagement and YouTube has actually overtaken significantly and continues to grow. And YouTube has been doing many, many innovative partnerships and a lot of innovations on many fronts. So I believe that YouTube carries a very strong advantage with the kind of network effect it has. It has a number of users as well as content.

32:02 It's a kind of a virtuous cycle in terms of engagement. And there are quite a few growth drivers on the YouTube side across various different platforms, like, say, Connected TV, on many other fronts, YouTube has growth opportunities. So yes, on certain platforms, on certain parts, there may be competition or there may be other potential places where consumers spend time. But in terms of the revenue mix and where the advertiser is moving, I think YouTube is strongly present overall.

32:54 Okay, sir. And just one last question from my side. We are seeing lot of other OTT players spending or doing heavy CapEx, not just in terms of content acquisition, but in terms of trying and producing their own movies or CDs. We also started, I guess, a small venture in the Gujarati cinema side. So any update in terms of what we are doing there and how we are trying to, you know, get in towards producing movies or series on a smaller scale at least? So, yes, I mean, web series is something that we've been working on and producing since some time. In fact, this year, we have already added two on the Gujarati side and two on Hindi side, which have been, I would say, more on the most prominent investment side. And we continue to consider web series as an important part of the whole offering that we have booking of offering that we have to the consumer because it gives variety as well as it gives additional ability beyond just movies for us to tell more interesting and exciting stories.

34:16 Daksha, does that answer your question? Thank you. Next question is from the line of Roshani Shukla, an individual investor. Please go ahead. Hello. Am I audible? Yes. Yes. So I had two questions. So firstly, is that the company is spending approximately INR19.9 crores on new initiatives, right? So what are the key initiatives and when can we expect returns on these investments? There are two key new initiatives that we've been investing for last few years that we have been sharing. And when we talk of investment in new initiatives, it refers to those two, which is television broadcasting and Shemaroo. These are the two initiatives.

35:02 Out of that, on the television broadcasting side, I think, of course, we've been impacted by these developments as we shared earlier. But in general, I think we are now there has been a significant rationalization of on many fronts in terms of the portfolio, in terms of the relooking at the various channels, etcetera, etcetera, programming strategy, content strategy, etcetera. So with that, we believe that we are on a strong footing on that business. And as and when some form of television ratings or television measurement kind of comes in place, I think we stand a very good opportunity over there.

35:56 On the digital side, which is Shemaroo, me, I think OTT business overall is still in an investment mode as far as the entire industry is concerned. So we also continue to do that. What we have been doing, two or three things. I think one is keeping the investment tempered and in a controllable kind of a manner and not making not doing it in a prudent manner, I would say, which is not kind of burning a hole on the P and L balance sheet or cash flow. Second, while doing all of that, have a smart spend in terms of and directed towards key aspects of content, towards consumer proposition and the brand connect.

36:48 So I think over there, as I said earlier, we I believe we have created a lot of value in the with the consumer in terms of the offering. And that as in when the digital OTT business scales and turn profitable at an industry level, I'm sure we will also have that beyond that front foot also. Okay, okay. Understood. And next question is that in quarter two, our finance cost has been increased despite the borrowings remaining stable. So what is still driving this increase and how are we taking initiative to control it? Yes. So I'll take this up. So basically, it is a moment of when we temporary movement of funds. For example, we have ODMCC limits.

37:44 And when we use these to buy some content in a respective quarter, the finance costs technically tend to move slightly here and there in respective months or respective days. So if we see the finance cost, technically, it has risen only by approximately 45 lakh on overall debt of INR 300 crores, which is a very marginal increase. And this happened, as I said, because of the use of funds. So we are not in Visa debt. It's just a moment of funds. Next question is from the line of Aman Sheikh, an individual investor.

38:34 I just have two questions. First is, so once you acquire a particular content title, what is the typical timeline for monetizing it across platforms, you know, like television, OTT, and YouTube? Yeah. So are you saying in terms of deployment or are you saying in terms of payback? Both. So deployment depends on the commencement of the rights. So many times we acquire forward rights, so which may be two years, three years ahead. Many times we acquire immediately commencing rights.

39:19 So deployment depends on that. And then based on that, its commencement, we do the respective business. We also do windowing based on what we believe is the best way to optimize the monetization of that title. So that is on the deployment side. On the payback side, typically, the TV licensing part is lumpy as in lumpy more than lumpy, it's a upfront kind of a business, it's a fixed fee business. So we do a fixed fee deal with a five year kind of, right? So that gives a that part is the cycle is very short in terms of the payback for that particular, right? Digital is again, within digital, there is a licensing syndication part where we may be selling two year, three year kind of rights, one year rights or something. So that is one part. And then on YouTube, on Shemaroo or on many other platforms where we have continuing monetization, variable arrangements. It's overall monetization, which happens on like typically on a month on month basis, which kind of comes to us on a monthly basis.

40:51 Okay. Got it. Got it. And the second question I have is, given the significant improvement in the operating profitability, when do you expect to achieve a consolidated EBITDA breakeven? As I said in the earlier question also, we are the aspiration which we have put out at the beginning of the year, right, we are still working towards it be EBITDA breakeven by the end of this year at least and move further from there in the next year. Okay. Got it. Thank you. That is from my side. Thank you so much, and all the best for the future. Thanks, Praveen. Thank you. As there are no further questions, I now hand over the call to management for closing comments. Over to you, sir.

41:42 Yes. Thank you, everyone, for participating in today's earnings call. I hope we have been able to answer your questions satisfactorily. If you have any further questions or would like to know more about the company, please reach out to our IR managers at Valorum Advisor. Thank you, and wishing everyone happy Diwali and a prosperous New Year. See you next quarter. Thanks. Thank you, sir. Thank you, members of the management. On behalf of Shemaroo Entertainment Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines.