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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Conference Call of Shemaroo Entertainment Limited, hosted by Valorem Advisors. [Operator Instructions]. I now hand the conference over to Ms. Chaiti Gujarati, Assistant Vice President at Valorem Advisors. Thank you, and over to you ma'am.
Good afternoon, everyone, and a warm welcome to you all. My name is Chaiti Gujarati from Valorem Advisors. We represent the Investor Relations of Shemaroo Entertainment Limited. On behalf of the company, I would like to thank all of you for participating in the company's earnings conference call for the first quarter of the financial year 2023.
Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's con 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 beliefs as well as assumptions made by an 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 to only 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 in today's earnings conference call and give it over to them for their opening remarks.
We have with us Mr. Hiren Gada, the CEO; and Mr. Amit Haria, the CFO. Now I would like to hand over the call to Mr. Amit Haria for the opening statement.
Thank you, Chaiti. Good afternoon, everyone, and thank you for joining us today for our earnings call for the first quarter of the financial year 2023. I hope everybody is keeping safe and well. Let me give you some of the key highlights for the first quarter of financial year 2023. For the financial -- sorry, for the first quarter of the financial year 2023, the operational income stood at INR 96 crores and has witnessed a strong growth of 28% on Y-o-Y basis. EBITDA for the quarter was approximately INR 8 crores, a growth of 14% on a Y-o-Y basis. EBITDA margin stood at 4.8% -- sorry, 8.4%, and net profit reported at INR 20 lakh with PAT margin of 0.2%.
For the first quarter, the expenses on new initiatives were INR 14 crores. And if you were to adjust purchasing investment in new initiatives, the adjusted EBITDA from the existing operations would have been approximately INR 22 crores for the Q1 FY '23. For the first quarter, the digital media revenue stood at around INR 48 crores, which were up 19% Y-o-Y. Traditional media revenues in the first quarter also stood at INR 48 crores, which were up 39% Y-o-Y.
Now I would like to hand over the call to Mr. Hiren Gada to brief on the operational highlights for the quarter.
Thank you, Amit, and good afternoon, everyone. In the quarter gone by, the ongoing challenges in the media sector continue to persist, but I'm happy to announce that despite all these challenges, the company has delivered strong revenue growth on a year-on-year basis. And maintain positive bottom-line trend during the quarter. The challenges faced have largely been driven on 2 counts. First is due to increased mobility on account of COVID unlocking period affecting the overall media viewership and consumption across traditional and digital platform.
Additionally, advertising spend for traditional advertisers were affected due to rising input costs, uncertainty in global economic environment and supply chain disruption, and this was amplified by the slowdown in start-up funding, which impacted the new age advertisers. Now to talk about each of our business verticals. Firstly, to start with the broadcasting vertical. In Shemaroo TV, we continued our focused efforts on content creation, distribution and marketing, which have resulted in higher ratings for the channel versus the previous quarter. We have also launched an original show, Waah Bhai Waah, during the quarter. In Shemaroo Umang, we opened a second position among the existing free-to-air general entertainment channels and continue to hold this position during the quarter.
We also started monetizing the channel through advertisements from July '22. Hence, please note that the current quarter, which is Q1 number, do not include any revenue from Shemaroo Umang. In Shemaroo MarathiBana, there were a few technical changes on the DD Freedish platform, which adversely impacted the ratings of many channels and including Shemaroo MarathiBana. But we changed programming strategy to include episodic content in addition to movies, which traditionally we had been showing. This helped us restore the channel ratings towards the end of the quarter.
On ShemarooMe front, under ShemarooMe Gujarati, we released 18 new titles during the quarter, with content across movies web series and plays. We released an origin we series called [ Desai Diamond, ] which was well received by the audience. And we also did the digital world premier for a blockbuster movie, Sonu Tane Mara Par Bharoso Nai ke. Lastly, we launched a telugu service on Shemaroome in U.S.A. Our YouTube channel, FilmiGaane, crossed 60 million subscribers, which was a very big milestone to have achieved, and the channel is now the 20th most subscribed channel in the world.
Lastly, I'd like to inform you of some major organizational development from our side. I'm happy to inform you that we have onboarded, Mr. Arghya Chakravarty, the position of Chief Operating Officer. Arghya comes with immense experience of over 25 years. And in his previous stint, he was with Disney Star India, where he was the Executive Vice President of Ad Sales for the Entertainment business. And Kranti Gada will now be the President of new business opportunities. Apart from these 2 major developments, we have also continued onboarding and strengthening our leadership team across various business verticals, which all works from the industry.
In conclusion, we remain committed, focused and confident of our long-term strategic growth plan despite all the headwinds faced.
With that, I open the floor for questions.
[Operator Instructions] The first question is from the line of Anil Desai from Turtle Capital.
So Hiren bhai the first question is if I look at the traditional media numbers, it has now INR 34 crores has gone to INR 47 crores, INR 48 crores. Can you give us some sense as to -- compared to last year, what would be the breakup between the syndication and the broadcasting part? I mean is this growth primarily driven by broadcasting part or the syndication business has contributed to this too?
Primarily, this growth has been driven by the broadcasting part.
Okay. And can you share the some breakup on that, what will be the syndication?
We have not shared it in that way. But I can tell you that overall, we don't expect syndication to be a significant contributor in the way forward. In fact, even here, it's not that big a contributor. So I think it probably as we go along, more than 70% of the traditional media will be contributed by the broadcasting business.
Okay. Okay. Got it. Second question is, I mean, this quarter, our run rate is around INR 14 crores. And as you said, that Umang has -- I mean, in the last call also, you had mentioned that we'll be charging off some content for Umang, while we won't be generating revenue for that. So to that extent, our run rate compared to last quarter has come down despite of launching new channels, and we have said that this year, we expect INR 40 crores, INR 50 crores kind of a run rate or investment in new initiatives. So going forward, this -- is it safe to assume that this run rate will come down as we monetize Umang and things pick up on the other two product channel?
Yes. I think -- I mean, that's the line on which we are working on. And if I have to, in fact, add in the last quarter also, shared -- discussed that the target investment for the year is approximately INR 50 crores. And at that time also, we had said that it's likely to be more front ended because Umang monetization is only likely to start towards the end of June or July maybe. And in a way, that has played out on those lines only. And I expect that for the rest of the year, the investment should -- overall investment should be lower compared to this quarter.
Okay. Okay. Third question is on -- so I mean, again, wanted to get some sense. So Shemaroo in terms of viewership, in terms of TRP, has done quite well, right? I mean you have mentioned progressively it has gained in terms of ranking. So can you give us some sense, at least for MarathiBana and Shemaroo, if not in absolute numbers but in terms of your ad rate, how it has moved up in the last year or so because of this improved rating? I mean you may not share the exact numbers, but some sense on whether it has resulted into some incremental rate for us or not. And if not, is it likely to happen in future?
Sure. So I'll break it up Shemaroo TV and MarathiBana, both have followed different trajectories. So Shemaroo TV, if I have to look at over the last about -- almost 10 to maybe 12 months, 10 to 11 months about, the ratings have grown by probably where -- say, where we were at the bottom, maybe around 10 to 11 months back. From there, we are up by more than 70% in terms of the ratings. And there is broadly approximate maybe 6 to 8 weeks lag of translation of that into better revenue. And revenue broadly is directly linked to ratings growth or absolute ratings per se. So -- and we've had a steady growth, steady which has given obviously a lot more predictability and stability to the revenue trajectory also.
So to that extent, Shemaroo TV has been on a decent growth point. Of course, now with Umang -- sorry, with Waah Bhai Waah being launched, we have added more original flavor to the overall programming. MarathiBana the other hand had, I would say, a couple of factors play out. One was, as we -- as I shared earlier, there was a technical change on the Freedish platform due to which the channel number of many channels change because they had to migrate from one transponder to another. And therefore, China LCN number, as it is called, local channel number, they changed it for many channels. And all those have kind of got hit. So we lost reach and viewership because the viewers had to retune their boxes and many of them are not savvy enough to retune and things like that. So it took us a while to kind of even reach 70% to 75% of the reach that we had prechange.
And so that was one factor. Other was -- as far as the landscape is concerned also, we had a couple of Marathi channel launches in the landscape. So Star launched a movie channel called Pravah Picture. And obviously, become Star Marathi GEC channel is the highest viewed channel. So they have a large audience base, which they can kind of pushed their movie channel towards. So that also was another factor.
So Shemaroo MarathiBana was, to that extent, affected. We -- what we did during the quarter and to an extent we had already started to work on it prior to the quarter, but we brought in episodic content and reduce the dependency on movie programming. And what the episodic content did is that it created again a certain amount of appointment in and improve the time spend significantly, and it stabilized the rating not only stabilized, actually brought in growth to the rating. So we kind of, in fact, surpassed the pre-change ratings in the last 2 or 3 weeks, meaning, which is in the first couple of weeks of July. So we're now actually back to a decent trajectory. Of course, as I said earlier, this translation of that -- this to the revenue may take -- may have a lag of 6 to 8 quarters. And -- sorry, 6 to 8 weeks. I'm so sorry, not quarter, I'm very sorry. Yes.
So that -- so with this, at least, we were now getting a decent appointment viewing audience, too, for the channel. And we have some exciting programming lineup in episode itself as well as -- what it also did is it helped us to give -- to space out some of our better performing movies who -- because of that, those movies ratings also kind of went up. So all put together, we were -- MarathiBana is kind of, by the end of the quarter, was on a decent revival part.
The next question is from the line of [ Harsh Beria, ] a professional investor.
Can you give the breakup of your digital revenues this quarter? So how much came from YouTube, telco versus ShemarooMe?
YouTube is -- so I'll give you the approximate breakup, YouTube is more than 60%, telco is less than 10% and the rest comes from a combination of syndication and ShemarooMe.
Okay. And also the debt numbers, has it gone up from last quarter and the inventory numbers?
The debt number -- inventory is higher from last quarter by INR 4 crores, so [ 7 14 ] was a March inventory and June inventory [ 7 18. ] Actually, if we were to round it up [ 7 15 ] versus [ 7 19. ] And that has -- that was INR 2 crores to INR 3 crores in March. It has gone up by INR 14 crores to INR 268 crores.
Okay. I have a question about your MarathiBana episodic content. So what do you mean by episodic content or the movie channel, what does it mean?
So when we started the channel, the starting point was our own library, which basically contain movies. And therefore, movie channel was a natural starting point for us. But there is obviously no, how do I say, no restriction for us to show other content right, within the language, within the framework of the Marathi language. So the experimented -- firstly, we experimented with the devotional content, which delivered very good rating and had very good traction with the audiences. Then we further did research that where the audiences were missing out on content, which was episodic or serialized in nature. So therefore, we experimented with some serial, to say that, okay, let's try 1 hour of a serial to see whether it kind of gets any traction or not.
So we put up -- in fact, we put up -- the Ramayan, which is the old Ramananand Sagar Ramayan, which we got it dubbed in Marathi and we showed that on the channel, and that delivered very well and it gave us the confidence that if we mix up the programming with a combination of episodic serialized content and movies, sometimes we gave up movie programming. But the overall nature of the channel in terms of content mix is a combination of movies, periods and divisional content. So that is what is currently the programming, and that is kind of delivering reasonably well.
So in the episodic, you are mostly targeting religious or devotional content. Are you also targeting general entertainment now?
So there is no restriction to target devotional or episodic. We started with devotional. So the hypothesis was like since we -- there is a lot of traction on our devotional content which we run on the channel. Like kind of, in a way, mythology becomes an extension of that devotional content, which having worked well for us now gives us more confidence that we could extend 1 or 2 drama shows to that extent.
Okay. That makes sense. My last question is on your telugu services, I think, that you launched in U.S.A. Can you talk a bit more about it, so it's on your ShemarooMe application?
Yes. So it's -- this is only for U.S. So we've tied up with a large telugu content partner, India-based telugu content partner. They needed this in U.S. We already have ShemarooMe in U.S., and we have a team in U.S., which is already distributing, selling and marketing ShemarooMe. So adding one more category of content to sell to the Indian Discover there was an easy thing to do. And when we map the overall audience base, telugu is a very, very large community and it's a very well-to-do community. So telugu speaking, expect rates in U.S.
So in a way -- I mean this has just been launched, so we also are in the process of setting the marketing and selling aspects of that. But the content mix is very potent and there is a large audience base. In fact, we've offered it free until 15th of August for trials. So for free trials. So yes, that's...
The next question is from the line of Anil Desai from Turtle Capital.
Sorry, I got disconnected. So two more questions. So I think our employee cost has gone up again from INR 15 crores, INR 16 crores to INR 18 crores. So is this -- and I think in Q3 when the costs had gone up, there was some one-off, and then it has come down in Q4 again. So now is it the new run rate that we should look at in terms of employee cost?
Yes. So Q3 always is -- we'll have a one-off in each year because that's when we pay out our performance-linked incentives. So every year, if you go back, you will find Q3 we'll be having the one-off. Having said that, to answer your question, yes, this is the new normal for 2 or 3 reasons. One is we've, obviously, April onwards, the appraisal cycle kicks in. So there is some normal increment, which we have done on our steady base. And secondly, as you -- as I mentioned also in my opening remarks that we've now been strengthening up our team with a lot of new talent and infusion. So there is -- and as we are now headed into a very strong growth opportunities.
The idea is how can we play this on the front foot and as is a people business, so building our whole talent pool and leadership team much more strongly. I think that has been the third process, and we've been doing it for now about 2 quarters. In addition to that, of course, with the launch of Shemaroo Umang also, there is more people that needed to be added over there.
Okay. Understood. Second question is on Shemaroo Umang. So I think I mean, it's commendable that in the launch in 3 months, we are the second-most viewed FTA GEC channel. And I think if I understand correctly, we had not put a lot of effort in terms of distribution yet, right? I mean you had mentioned in the last call that maybe it will be more organic and we may not want to go full hog in terms of increasing distribution reach. So without that, if we are able to achieve that, are we planning to increased the effort on distribution reach to kind of main forward? How do you think about that?
Yes. So you are absolutely right. We've not gone full hog in terms of distribution reach. So to that extent, Umang is not present on any of the DTH platforms yet, which whether it's data play, Airtel, Dish TV, et cetera. We have done a few ground tie-ups slowly but steadily and try to keep the overall costs relatively low. In many places, we've tried to leverage our relationship for MarathiBana and Shemaroo just on some certain incremental costs if we could add Umang. So we try to keep it as reasonable and low as possible. And so happy that the audience traction for Umang has been very good, in fact.
So ultimately, based on the monetization, we will slowly ramp up the distribution. And we'll also test [ waters ] to see whether that additional investment is building any additional rating and revenue translation and what is the ROI on that. And accordingly, we will go about it. We will try and be much relatively more measured about it. Also, on the other hand, there are certain audiences, which are, I would say, low hanging fruits available on other platforms also. If we are able to put that together, what it does is it increases the overall viewership base and which, in a way, helps attract maybe some different kind of additional advertisers also. So that finally helps push up the revenue pie.
Okay. Okay. And last question Hiren bhai from my side. So all these 3 channels put together, I mean, how do you look at the overall revenue potential of these 3 channels put together? Is it in the range of INR 300 crores, INR 400 crores or more? How should we think about that?
No, no. INR 300 crores, INR 400 crores for the 3 channels. No, no, definitely not, at least at this point in time. But I would say, not this year, at least, maybe...
No, I'm not saying from this year perspective. I'm saying, let's say, 2, 3 years out...
Oh, that way. Yes. I mean, see -- again, if I were to take a step back and have an overall understanding of [ 3, 5. ]. One is the GEC pie, which is about INR 7,000 crores to INR 8,000 crores. And actually, contrary to popular belief, there is limited competition for such a large pie. And if you have a channel -- in fact, you have 2 channel offerings, it kind of -- you can play a lot of things on that in a certain way, which gives certain potential.
Marathi pie has also been growing. We looked at it at around 800 to 1,000. I would imagine that it would have grown by about 15%, 20% from there by now. So we are talking of roughly maybe INR 900 crores to INR 1,100 crores. Again, with -- so that's the second pie in a different way if we were to look at it. Third pie, of course, is the FTA pie, the free-to-air. With Freedish numbers having expanded significantly. I think they are actually -- that pie, I think, is on a -- will be growing significantly more because newer set of advertisers, et cetera, are coming. A lot of users have migrated from platforms like DTH and cable into Freedish and the advertiser is kind of -- a lot of advertisers are losing out on those audiences. And if they are to target that, they have to come on to Freedish. So that's the pie. So if I were to -- in terms of you're seeing potential of next 3, 4 years, yes, I mean those kind of numbers are very, very much possible. I thought you are me asking this year.
No, no, I'm not asking you this year. I think that overall from company perspective and...
Yes. Overall, there's possibility.
[Operator Instructions] The next question is from the line of Nitin Sharma from MC2.
A couple of questions from me. First of all, I would want to understand any update on how OTT syndication/ShemarooMe did in terms of numbers. Some color on it.
Syndication, I would say, if I were to say, trend-wise, it's upward. Within that, there could be 1 or 2 quarters up and down because it is a relatively more deal-based business. But the underlying consumption trends for most of the platforms has been reasonable. As I said earlier that -- so COVID put everyone into a new normal. Post-COVID, there was some tempering on consumption because of unlocked and people going kind of back to work or back outdoors kind of a thing.
But still there is a new normal, which essentially means that there is a certain consumption, and therefore, a certain content need is there. I mean, we've seen YouTube consumption grow, all our other consumption. So to that extent, the syndication business, trending-wise, is reasonable and healthy.
On ShemarooMe, unfortunately at this point, we are not -- at least for this quarter, we are not in a position to share numbers. All I can say is that the mind share that we've now managed to garner as far as Gujarati is concerned is huge. And literally, we've become a large and virtually a default service or player for Gujarati entertainment on the digital side, which is ShemarooMe Gujarati. And in a way, it is reflected in the content, in the programming.
The good thing is that it has also reflected in the consumption metrics and the revenue trends. So I think we are in a very good place. The -- I would surely tempering or caveat, I would say is that overall digital OTT business is a slightly longer time frame game. In terms of the real scale and maturity, we believe will take probably another about 2 years for it. But then you have to start building the mind share and consumer traction, content, you're offering everything from now so that when it scales up, you are in a leadership position, which really is very difficult to [ degrow.]
Okay. Okay. So a small bookkeeping question. Can you please provide the breakup of digital revenue segment? And how much was the cash balance at the end of the quarter?
I just gave all these numbers, actually.
I was disconnected. If it's possible....
I'll repeat it. Don't worry. No problem. So YouTube has been -- is more than 60% of digital, telco is less than 10% and the rest of it is combination of ShemarooMe and syndication.
Okay and the cash balance?
Cash balance, so total debt has grown from INR 254 crores in March to INR 268 crores in June. And inventory from 715 in March by INR 4 crores to 719 in June.
Okay. And cash number?
Cash. I mean, we work on a CC cycle, so it's -- the debt is what is more important to track.
Okay. Okay. Understood. And just one last question. So your traditional media revenue typically grows in the second quarter, roughly grows around 30% to 40% more than the first quarter historically, minus the COVID period. Do you think a similar trends can be expected? I know it's a small window, but generally, do you think, given all the macro headwinds, similar should -- execution would be fair?
Traditional media, you're asking?
Yes, yes, yes.
Too early days to say because July -- we literally into 2 weeks of July. But definitely, some of the macro headwinds have hit the advertiser. We are hopeful that -- so obviously, there is one additional factor over here, which is the broadcasting business, which is driving our growth. So this year, at least we are hoping that since Shemaroo Umang monetization has just begun, we should be having a certain revenue visibility.
The next question is from the line of Shikha Mehta from Equitree Capital.
I just had a couple of questions. Most of my questions have been answered. Sir, does the total expenses, is any part of inventory that has been written off?
Sorry?
Out of our total expenditure, is any part inventory that has been written off?
Written off? So you mean to say over and above normal charging off, is what you're saying?
Yes.
No, no.
And can you give me the figure of the normal charging off?
It's part of the operational cost. So give it a minute. I'll come back to you on this in a minute. Shikha?
Yes, sir. So given our new business in the panels and everything, has there been any change in our reporting policy or in our write-off policy?
Not yet. But as I have shared earlier also, we are formulating the new policy based on -- because there is a new income stream, and obviously, that -- it changes some of the consumption pattern. So we're just observing some of the trends in terms of consumption and income before we formulate a policy which is robust enough to hold the test of time.
All right, sir. Congratulations on Umang being #2. Can you just help me understand this entire business a little better? So of the total ad pie available to Umang Shemaroo TV and MarathiBana, how much percentage does each channel get, if you can tell us the current market share of all 3?
Try to look at the overall addressable pie, we would, I guess, be less than maybe 2% or 3% or maybe even -- yes, maximum within 5% of the addressable pie.
And this is for -- this holds true for all 3?
Combined. I'm saying if I have to combine the addressable pie for Shemaroo TV, Umang and MarathiBana, we'll be at less than 5%.
Okay. Can we -- do we have anything in mind of how this is to move or what we expect over the next year?
No. Obviously, our effort is to grow it. There are multiple players in this and I don't believe anyone has a significantly high market share more than me. I mean, very few people may be having double-digit market share itself in this. And yes, I mean, definitely, we are working towards growing the market share because only then the revenue share will increase.
Okay. And sir, out of the total ad time available to Umang, Shemaroo TV and MarathiBana, how much is currently being utilized?
Inventory on air, more or less 100%.
For all 3, even Umang?
We are still building up. So I think it may take 1 or 2 months more to reach there. And we may hold some of the inventory for -- to be able to garner better realization rate. So that's going to be tactical, I would believe. But Shemaroo TV and MarathiBana are currently at 100% fill rate.
Okay. Okay. So what is the current cash conversion cycle?
Yes, Amit will be able to give you that. So the cash conversion cycle, if you mean to add inventory, then it's obviously long-ended. And secondly, each business has its own -- what I mean what you will see at the aggregate level is for the entire company. But if I were to -- that will probably be more than 900 is because of the inventory. But each business has its own cycle. And those are significantly lower because inventories and asset base, if you look at it in a different way. So I think the cycles are pretty normal. I mean, most of our debtors, they pay us.
So receivables is around 60-odd days and payables in 70 days.
Yes.
Okay. Okay. So are we on just breakeven?
Yes.
And at what levels do we break even at like INR 100 crore, INR 120 crores, INR 130 crores, what level can we assume?
That's not something -- which business are you talking of, Shikha?
Of at least the new 2 -- the 2 channels not counting Umang as of now?
As you will appreciate, I'm not in a position to give you absolute numbers on what is that level and all of that. But yes, as we have shared or discussed in the past, we -- towards the end of this quarter is when we are targeting to break even, and we are fairly on track for that.
Okay. And sir, could you also help me with what tax rate we'd be looking at for this year, assuming last year, we might have had some losses carried forward and all of that?
Could you please come again?
What tax rate should we be looking at for this year?
Tax rate would be in the region of around 25%.
No. She's saying considering, maybe about less.
Yes.
Do we have any losses that we can set up?
I'm sorry, to interrupt Ms. Mehta, you will have to join the queue again as we have other participants waiting for their turn.
Yes, I'm just meeting for the answer to my last question.
Okay, Ma'am. That would be your last question now.
Okay. Like I said, we are considering all the pensions available, if the tax rate would be in the region of around [ 725%. ]
Okay. Considering everything, considering setups we might have, et cetera?
Yes, yes.
The next question is from the line of [ Ankit Gutka ] from Bambu Capital.
On the broadcasting side, do you think do you now have 2 channels during -- the results, do you have some plans to add 1 or 2 channels over the next year or 2? Or do you think we want to first all 3 channels and then see when we take the next step forward?
So the question, what you're asking actually itself is the answer because they are both in different time frames. So obviously, in the short term, we want to stabilize and reach a certain traction and operating level financially and operationally both. But yes, over the next year or 2, there will be more channels as we add to the network. And the network effect of having more channels, obviously, has its own advantages in many ways. And we'll definitely be driving towards that. But yes, in the short term, stabilization of the current operations is an important target that we are working towards.
Okay. But let's say, over the months, this year [indiscernible] we may be looking to add few channels towards this?
So see, what we would like to do is look at -- so we still believe that there are many underserved opportunities in this space and audiences are looking for new and interesting offering. And we want to essentially look at serving the audiences with that. And to that extent, yes, we would be looking at adding channels, but what we are very clear is that we don't want to spend above a certain level in terms of the investment that we want to do. So it's going to be a prudent cash flow and ROI-focused thing as well as something where we have other synergies to monetize the content, say, digital platforms or building some additional advantages strategically.
Okay. On the next question more on the digital side. If you look at our digital media revenue, they have broadly been in the line of around INR 45 crores to INR 48 crores per quarter over the past 3 quarters, and there hasn't been any significant jump in that. So what is happening on that front and over the next...
I would beg to differ, because the -- if you see the number by itself -- there's definitely the number, for example, in Q1 of last year itself was INR 40 crores, which has gone up to INR 48 crores. So 20% growth we are seeing even this year. It is a business which has a certain amount of seasonality, so quarter-on-quarter is very difficult to look at. It's more year-on-year kind of a thing. For example, because of, say, ad spend, et cetera, is seasonal. So quarter-to-quarter, sometimes maybe giving an optical impression that it's stagnated, but you really need to see year-on-year. I mean, if you see FY '21, it was INR 150 crores, which is grown in FY '22 to INR 181 crores, which is a 21% growth. And this quarter also on a year-on-year basis, it's up by nearly 20%.
So do you think FY '23 and '24, we can really grow by 20% in annual digital media revenue?
There are -- as I said in the opening remarks, there are 2 headwinds overall that advertising is facing. One is something that the overall advertising pie revenue spends are facing, which is all the inflation and demand challenge that many of the advertisers are facing. Second, headwind, which a lot of the digital advertisers or new edge advertisers are facing is the full funding challenge in the start-up ecosystem. So they have definitely been some of the large vendors in the -- on digital media. And there is some amount of slow down or pull back from their source of funds.
So that is definitely likely to be a bump for -- speed bump for maybe a couple of quarters overall. The trend, if I had to project like a 3-year trend. I think digital is easily at a 20% CAGR for 3 years. Now a couple of quarters, speed bump may happen, but it I feel will cover up subsequently because the consumption -- underlying consumption growth is growing very strongly.
Okay. Okay. So there might be some short-term challenges, but do you expect that the growth will be good over -- once there's the whole thing intuition and does the start-up coming to stablize this?
Yes. Because see, it's not that all startups are not funded or are not rating. Many startups are getting the funding. At the same time, if we, again, map it over a 3-year period, a lot of this will kind of get addressed and even out and move to next level end of a thing.
Sure. Sure. And on the retail side, how is then are the CPM performing? And has it improved over the last 1-year?
So this quarter, the CPMs have been challenged because of these factors, definitely. We have, in fact, grown quite nicely on the viewing side, which has helped us grow the overall number, but the CPM this quarter has been challenged.
Okay. And over the last -- prior to the quarter, has it improved? Or how is that trending?
So what is happening is that YouTube is the -- views on YouTube is growing at a humongous rate. So I would say that CPM has been trending down probably for the last 6 years, okay? But what is happening is, obviously, the fill rate keeps growing because the spends are going. And secondly, if I have to add also, YouTube itself innovates a lot. So introducing a second 2 ad instead of 1, having more mid-rolls and things like that. So the overall revenue pie has obviously jumped up significantly. But yes, because of the huge addition of numbers and views the inventory available grows, keeps growing and which, in a way, impacts the CPM since the denominator keeps growing.
The next question is from the line of Rishikesh Oza from RoboCapital.
Sir, previously, you said about breakeven in Q2 end, is this from MarathiBana and Shemaroo TV?
Yes, yes.
Okay. And you also said that for the broadcasting part, you have maybe within 5% market share of the addressable market?
It depends. I mean I actually -- I'm not in a position to give you that number, but it's nothing significant. I mean, okay, sorry, that's not the right way to put it. It's relatively low, obviously, which means that the headroom available is much more.
Okay. So what is the addressable market there?
So Hindi GEC addresses ad pie is at around INR 7,000 crores to INR 8,000 crores. Marathi is estimated at around INR 900 crores to INR 1,100 crores. So if we combine the 2, we are at about INR 8,000 crores, INR 9,000 crores ad pie between Hindi GEC and Marathi.
Okay. Okay. And sir, can you give any idea on your breakeven on our ShemarooMe OTT?
As I said earlier also, the overall OTT business seems to be a slightly more longer drawn business for the -- as far as breaking even or scaling rather is concerned. And with our scale, breakeven is going to be a challenge. We expect that the industry's real scaling or growth may take probably about 2 years more to actually start kicking in. Having said that, what I also added is that we have to obviously create our own care of mine and manage the whole so within reasonable cost, so that we don't end up overspending for the -- in this whole process.
So that's what I would say balance we've been trying to achieve, which is maintaining a healthy offering on the service, in fact, exciting offering. It's not just healthy, it's an extremely exciting offering, which in a way helps us push and grow the share of mind. And on the other hand, doing all of that within reasonable cost so that we don't end up running significantly high.
The next question is from the line of Shikha Mehta from Equitree Capital.
Yes, I just have one follow-up question. Earlier, you said that our inventory on air is currently being used at 100% in this Shemaroo TV and MarathiBana. So from where are we expecting growth then, just let me understand that better?
Growth is always from the ad rate going up, which comes from viewership growth.
Okay. So as viewership growth...
I understand on the TV business, we were about -- inventory fill, you will find very high for most channels because no one will accept a perishable commodity or perishable goods. So you need, every inventory not filled is revenue lost, which we will never regain. So everyone -- all channels always fill up inventory fully. The growth always comes from growth in the effective rate of the 10 seconds, which is called the ER, which comes from the growth of viewership or TRP as it is considered. And this is something that, at the beginning of the call, I kind of shared the fact that in the last, say, 10 months or so, the Shemaroo TV viewership has been trending up, and we are currently at 70% higher TRP compared to where we were 10 months back, which obviously, with a certain lag translates into a 70% higher revenue for the same pill. So fill generally doesn't change any significant number.
The next question is from the line of [ Dr. Rohit Trivedi, ] an Individual Investor.
So my first question is about ShemarooMe. With ShemarooMe, we have got 2 spins of revenue, which is telco partnership and individual subscription. Now when industry trends and kind of like across other countries, telco partnership gives revenue but is not kind of prior to very much profit, it's the individual subscription that moves kind of fine players are now focusing upon since last few quarters. So what have we observed in ShemarooMe assets or kind of is, let's say, last 3 or 4 quarters, how the telco versus individual subscriptions are shaping up? And what is the trend that we see going forward, please?
Sure. Very, very good question. And I'll just tell you how our thinking has been, I would say, literally from the day one of when we started ShemarooMe's whole B2C journey. What we said is that there is absolutely no alternative to bring building mind share, because unless and until we build mind share, we cannot build wallet share. So we've been very clear about the fact that all our key monitorables internally are key success factors or key performance indicators are all linked to what the paying customer is doing and how that is growing.
Okay. Having said that, as I was alluding to one of the earlier questions also, is the fact that considering that this is a slightly longer drawn game, there is a certain revenue, which is available through the telco partnerships, which we can pick up, which can help us fund some of the investment that we intend to do. So what we have done is try to optimize that to help us, obviously, subsidize some of the investment that has been going into it. But as far as our core monitorables, our core effort, et cetera, the whole transition, in fact, of this business to a significant B2C offering right from the GUI, graphic user interface to call center to virtually every aspect, this is something that we have been similarly focusing on.
And which is why, as I even earlier said that I'm very happy with the kind of response we've received. And it's an extremely exciting offering for the consumer. So our consumption traction, et cetera, is very strong.
But I was -- so rather than referring to your own efforts and product, I was referring to individual consumer traction. So my question specifically is not about the product, not about the efforts of the company, but the actual output that we are -- that we're seeing on the street. It's not in terms of number, that's perfectly fine, I can understand. But let's say that has the needle moved significantly from telco to individual subscribers over the last 3, 4 quarters? Have you observed that? Or is it still...
Telco is not something that we have significantly focused on, and therefore, the movement -- and something that I've just discussed with sometime back on this call also, is the fact that the overall traction that we have seen, thanks to these efforts and from individual users and the final ultimate consumers, the paying consumers, the growth has been quite significant. And we are well and truly interested in this space as far as the consumer is concerned, and that is reflecting in virtually all the consumption metrics that we are monitoring. And definitely, the growth over there is significant.
That's really, really heartening to know because I think kind of, right, that could be a blue over a period of time. So my second question kind of is I was looking at the annual report of last kind of 7 to 8 years. Now what has happened is from the footnote, ad purchase plus work cost, which is your cost of material purchase. So let's say, in 2019 and 2020, it was INR 390 crores and INR 440 crores. Now in last 2 years, it has come down significantly to INR 230 crores. That means, on one side, we are buying a lot less inventory as compared to 2018 and '19?
I know it's kind of like [indiscernible] change in our business model from B2B to B2C and less focus on the syndication business and everything. So I'm attending the call for last 3, 4 years, right? So I know that part of it. But I was wondering that is this purchase of kind of, right, close to INR 230 crores a year, sustainable, looking at the business model that has been now setting up? And where kind of right this figure is expected to move? Because this figure, to a greater extent, will determine operating leverage over the next 2 to 3 years.
So let's say, if our revenue jumps, and along with that this INR 230 crores then comes to INR 400 crores, then there is no chance of operating leverage, right? While if this figure stays stable, that is cost of material purchase to INR 230 crores, INR 250 crores, and revenue jumps up significantly, then and then there is a possibility of operating leverage, right? So what is happening over there if you can -- and what is the thought process of running it over there, if you can help us understand?
Yes. So I'll try and address it in a slightly different way. So the direct answer to that is that it's -- it will ultimately be a combination of both. Okay. There is -- to grow beyond a certain level, obviously, one needs to invest. So that is -- there is a certain investment that it will take. The question or the -- the real thing to understand is that, is that new growth or the new investment or the new initiative that we are talking of or is that in operating positive environment financially. And once that happens, then the operating leverage kind of kicks in. So one cannot grow -- say, supposing hypothetically, if I have to scale up from, whatever, X to, say, 1.5x, that cannot happen with the same cost structure. There will be additional cost structure involved in that.
But the whole idea is if the new initiatives can be operating positive contributing, then the operating leverage kind of kicks in. Therefore, in a journey of, say, going from x to 1.5x, possibly the cost on the investment on content may not necessarily grow from Y to 1.5, while it may grow somewhere to 1.3 or 1.25y. Therefore, I said, it's a combination of both. One cannot have a black or white situation on this. So to give you a different example, we launched Umang, right? So Umang will need content for programming. Now the question is will Umang break even and make money? If it does, then I'm kicking in operating leverage. And that's really the effort that we are overall working towards. And that -- I mean, that has been the conversation of the last 3 to 4 quarters, that how we -- how this business breaks even and generate the positive cash flow.
Perfect. So to that, my last question would be, Hiren, just one thing. So in the inflationary environment that we have already entered into now globally, right? And I believe the same thing will be there in India. So how are we seeing the content cost shaping up? Kind of like has it gone up along with the kind of like inflationary trend? And what do we see forward, let's say, for next 3 to 4 quarters and the effect of that on the business?
I think overall, we can expect the inflation on content cost to kind of be in the line of what the overall inflation trend is. In short term, it may be higher also or lower also. But I think trending, if you ask me a medium-term trend would be fairly in line with the inflationary trends. If I have to kind of further break it up, there are 2 aspects. The talent cost will probably go higher than inflation. But then there are many other costs which may be counter trending, certain due to, say, technology, better technology availability, et cetera. Some of the processing costs, et cetera, actually may stagnate or be better optimized or be lower, et cetera. So -- but net-net, put together, I think it will trend with the overall inflation trend.
Perfect. So to add on to that side, just wondering, so going forward, are we looking to acquire more of the content from outside or more help in-house kind of, right, content development or collaborative content development cost? So where the cost kind of like would lie more, is it acquiring perpetual content or developing the kind of required content in-house for our broadcasting channel?
So we are not content producer. So we don't intend to really be a big time in terms of producing content. What we, for example, even for couple of shows that are currently original shows, which are on air also or what we may have put up for ShemarooMe also, everything is commissioned content. So that is something that will continue. And all of that, what we are commissioning, we are owning 100% perpetual copyright to that. And so to that extent, in fact, the library is obviously growing and building up.
As far as [indiscernible] is concerned, obviously, the [indiscernible] model because the film IPR ownership is a different ecosystem. And that anyway -- I mean, we are well versed with that. It anyway, it's a core domain for us. So that anyway, film library acquisition would continue on the similar lines. We currently don't intend to get into film production. I mean we've not done it, and that's really not our...
Yes, yes. So basically, you didn't [indiscernible] my question. So let me rephrase it. Are we leaning more towards mining the movie IPR content or more towards going for the collaborative what kind of, right, you said that content outsourcing for our in-house captive needs going forward. So what is the...
No, our focus is on the consumer. So whatever goes through the consumer is something that we will go. So if we have to build our B2C offerings, whether it's ShemarooMe, it's the channel, either way the consumer is dictating what we are showing them. And therefore, in the back end, that's what is dictating what we will do with it. And to that extent -- I mean, I'm sorry, I'm not able to give you a direct answer. It will be different from -- for each business. Because what is the consumer looking for versus what is available and what needs to be created will be different for each of the offering or each of the business.
[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Hiren Gada from Shemaroo Entertainment Limited for closing comments.
Thank you, everyone, for joining us for the earnings call for Q1 of FY '23, and looking forward to seeing you all next quarter. Thank you. Bye.
On behalf of Shemaroo Entertainment Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.