Saregama reworks playbook -- steps away from film production, banks on Bhansali

Saregama

Saregama is reworking its content strategy--- it is exiting film production amid its tie-up with Sanjay Leela-promoted Bhansali Productions for a steady music pipeline.

"We will completely get out of our own produced films, which is going to be releasing anything between Rs 150-175 crore working capital," Vikram Mehra, Managing Director, Saregama said during an investor call on December 16.

He said that they are getting out of the video segment as over the last 4-5 years, they found it was a very low-yield, low-margin business.

"We were in the video business to secure a music pipeline. Rather than doing it ourselves, we are saying take those funds and put it in the most important production house of the country, which also has the best track record in terms of financial performance," he added.

Also read: All 11 Dhurandhar songs top Spotify charts; 'a first', says Saregama’s Vikram Mehra

Mehra anticipates around 30 percent of the company's entire Hindi film music content now coming from the deal with Bhansali Productions. "It can even go up to 40-50 percent. So, we are secure to that extent of the pipeline."

Bhansali Productions will exclusively sell all its future film music to Saregama, only based on a pre-agreed formula. "That means, we are guaranteed a steady pipeline of premium marquee film music, eliminating any competitive bidding," he added.

The intense bidding war for marquee film songs was the reason behind Saregama starting its video business.

The scenario was such that some of the company's competitor music labels, over time, had taken a position in the film's business. "So, whichever films they were producing or financing, music of those films were not coming out in the open market for bidding."

This bothered Mehra, pushing them into starting their own video production business. However,  the business turned out to be unsuccessful. Hence, they are winding down the video business and counting on the new partnership.

Additionally, Mehra said that Sanjay Leela Bhansali's studio has delivered some of Indian cinema's most iconic films and songs which includes Hum Dil De Chuke Sanam, Devdas, Ram Leela, Bajirao Mastani, Gangubai Kathiawadi, and the recent super hit Netflix series Heera Mandi.

Also read: Saregama strikes the right chord with Pocket Aces; musicals, bigger titles in the making

"His (Sanjay Leela Bhansali) music has a long shelf life," Mehra said.

Saregama now has access to Bhansali Productions's upcoming pipeline of around 10 films, including immediate releases like Love and War, directed by Sanjay Leela Bhansali, starring Ranbir Kapoor, Alia Bhatt and Vicky Kaushal; and Do Deewane Shehar Mein, a romantic drama directed by Ravi Udyawar, starring Siddhant Chaturvedi and Mrunal Thakur.

"We are looking at three years for the 10 films to come out," the MD said.

Saregama India's Board of Directors, at its meeting held on December 16 approved subscription of 9,960 compulsory convertible preference shares (CCPS) by the company in Bhansali Productions Private Limited (BPPL) for a consideration of Rs 325 crore.

Mehra noted that CCPS converting into equity will result in anything between 28 percent to 49.9 percent stake for Saregama in Bhansali Productions.

Saregama also retains the right to increase its stake to 51 percent after March 2030.

Mehra noted that at the end of three years, the valuation of Bhansali Productions can be anything between Rs 650 crore and Rs 1,590 crore. "If they (Bhansali Productions) go up to Rs 1,590 crore kind of a number, our stake will be close to 28 percent."