Digital Content Expansion In India Will Unlock Sustainable Opportunities

Key Takeaways

• Digital content demand, new paid models, and regional catalogue expansion are driving recurring revenue growth, higher margins, and improved earnings visibility for Saregama.
  
• Strategic moves into artist management, branded content, and international monetization are diversifying revenues and strengthening Saregama's long-term pricing power and market position.
  
• Rising content costs, shifting consumer trends, and platform consolidation threaten Saregama's revenue growth, margins, and long-term competitive relevance in a rapidly evolving media landscape.

Catalysts

Operates as an entertainment company in India and internationally.

• Accelerating digital content consumption, driven by rapid internet penetration and smartphone adoption in India, is significantly expanding Saregama's addressable market for music licensing, streaming, and digital video-expected to drive recurring revenue growth as the company leverages its diverse regional and language catalogue.
  
• Growing consumer willingness to pay for entertainment (evident in the gradual industry-wide shift from ad-supported to paid subscriptions on audio and video platforms) is increasing the average revenue per user (ARPU), which should support higher topline growth and improved earnings visibility over time as free platforms shut down or convert to paid models.
  
• Saregama's aggressive and data-driven investment in new content (across multiple Indian languages and genres) and targeted catalogue acquisitions (e.g., the NAV Records Haryanvi/Punjabi purchase) are expected to boost future market share while ensuring ROI discipline (5-year payback). This positions the company for sustained catalogue monetization, supporting long-term revenue and EBITDA margin stability.
  
• Expansion into high-growth verticals such as artist management and branded content creation (leveraging the company's influencer roster and digital engagement) is opening up incremental revenue streams, diversifying income beyond legacy music licensing and further supporting net margin improvement.
  
• Industry tailwinds like stronger IP protection, increasing demand from booming OTT/short-form video sectors, and growing international monetization opportunities for Indian content provide Saregama with long-term pricing/negotiating power, potentially resulting in higher licensing income and margin resilience going forward.

Saregama India Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Saregama India's revenue will grow by 12.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 17.4% today to 21.0% in 3 years time.
• Analysts expect earnings to reach ₹3.5 billion (and earnings per share of ₹17.12) by about August 2028, up from ₹2.0 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 49.7x on those 2028 earnings, up from 45.4x today. This future PE is greater than the current PE for the IN Entertainment industry at 32.2x.
• Analysts expect the number of shares outstanding to grow by 0.34% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 16.22%, as per the Simply Wall St company report.

Saregama India Future Earnings Per Share Growth

Risks

• Intensifying competition from global streaming platforms (like Spotify, Apple Music, and YouTube) and the shift away from minimum guarantee deals may reduce Saregama's bargaining power and compress music licensing revenue growth, impacting overall topline growth and margin stability.
  
• Rapidly rising costs of new content acquisition, especially in popular South Indian languages, risk eroding EBITDA margins-management cites the need to pull back from aggressively bidding to maintain their 5-year payback discipline, signaling potential lost market share and slower revenue expansion.
  
• Ongoing challenges in the video segment, including delayed profitability and capital employed volatility (amid persistent experimentation with newer formats and unproven verticals like Pocket Aces), could dilute overall returns and stretch management bandwidth, thereby impacting consolidated net earnings.
  
• Demographic and consumption shifts toward short-form content and direct-to-consumer models (influencers, podcasts, artists bypassing labels) threaten Saregama's traditional reliance on legacy catalogues and licensing, risking weaker long-term recurring cash flows and relevance with younger audiences.
  
• Consolidation among digital streaming and short-format platforms may grant greater leverage to platforms vis-à-vis rights owners, putting pressure on royalty rates and potentially reducing Saregama's income share from streaming and digital advertising, which directly threatens revenue and profitability sustainability.

Valuation

• The analysts have a consensus price target of ₹571.75 for Saregama India based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹630.0, and the most bearish reporting a price target of just ₹527.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹16.6 billion, earnings will come to ₹3.5 billion, and it would be trading on a PE ratio of 49.7x, assuming you use a discount rate of 16.2%.
  
• Given the current share price of ₹482.75, the analyst price target of ₹571.75 is 15.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.