Saregama, a leading player in the entertainment industry, is poised for significant growth as it navigates a rapidly changing music streaming landscape. With the recent shutdown of Airtel’s Wynk music platform, the industry is expected to accelerate its shift towards a paid subscription model, a move that could significantly benefit Saregama. The company anticipates increased licensing revenue as platforms prioritize paid subscribers who generate higher per-stream revenue than free-tier users.
While the immediate aftermath of Wynk’s closure may lead to a temporary dip in streaming volume due to fewer free users, the higher revenue per stream from paid users is expected to more than offset this loss. This shift is seen as a pivotal moment for Saregama, positioning the company to capture additional revenue in a more monetized music ecosystem.
Aggressive Content Investment to Future-Proof Growth
Saregama’s content strategy is also on track to bolster its market position. In the first nine months of FY25, the company released content worth approximately Rs. 235 crore and plans to invest over Rs. 300 crore in content for the full year. The company’s bold investment of Rs. 1000 crore in content over FY25-27 aims to future-proof its operations and reclaim the No. 1 spot in the industry. Though these investments may weigh on short-term profitability, the company expects revenues from this content to exceed costs in the coming years, supporting long-term growth.
Diversification Strategy Pays Off
Saregama’s transformation into a broader entertainment IP company is showing positive results. The company’s diversification into live events, video content, and digital platforms has reduced reliance on any single vertical and enhanced business resilience. The successful Diljit Dosanjh concert tour in Q3, as well as partnerships like MTV’s Hustle Season 4, reflect the company’s growing footprint in the live events and content creation sectors.
The company’s video vertical, which includes films, digital series, and short videos, is projected to grow rapidly, benefiting from the widespread adoption of smartphones and affordable data. Additionally, Saregama’s acquisition of Pocket Aces enhances its reach among younger audiences, further fueling growth.
Outlook and Valuation
Given its proactive content investment and strategic diversification, Saregama is well-positioned for strong growth in the medium to long term. The company’s revenue growth has already exceeded its FY25 guidance, and it remains on track to achieve a 21% sales CAGR and a 16% PAT CAGR over FY24-FY27. Saregama’s stock continues to trade at a premium, with a target price of Rs. 640, reaffirming the positive outlook.
However, risks remain, including rising competition, slower-than-expected subscriber growth, and increasing content costs. Still, with its diversified approach, Saregama is set to capture long-term growth potential in the evolving entertainment landscape.
