See margins at 23% -28% in FY16: CFO of Shemaroo

Currently focused highly on the fast growing digital area, Shemaroo Entertainment has seen a 30 to 35 percent growth in Q4.Hiren Gada, Wholetime Director & CFO of Shemaroo Entertainment, in an interview to CNBC-TV18 said the company has surpassed its own expectations -- seeing a total growth of 52 percent with topline growth at 74 percent last year. He said that company’s margins have improved 23.6 to 26 percent. Giving a digital account of revenue rate growth for the two segments, Gada said the traditional media has been growing at a rate of 12 -16 percent, while growth rate for digital media was at 30-35 percent.

Below is the edited transcript of Hiren Gada’s interview with Nigel D’Souza on CNBC-TV18. Q: A good set of numbers one must say, your new media in fact that one just going through the roof and also your traditional media and services both those two segments have done quite well. 60-70 percent growth on a year-on-year basis (YoY), can you keep up this momentum?A: Our whole endeavor is towards the growth on the digital media side. Overall as an industry the digital media has been seeing very handsome growth.

So, we ourselves have surpassed our own expectations because we have been seeing earlier around 30-35 percent growth but overall if we see the entire year, we have done 52 percent growth and particularly the last quarter the top line has grown by 74 percent. So, that has been really very encouraging for us.Q: That is right, if we just look at it, for the year your new media contributes roughly around 10-11 percent of your total revenue currently so are you looking at that figure moving up to about 20 percent or something?A: Focus of the organization overall is on this fast growing digital media and we would be looking at outperforming the industry growth and definitely as the time goes, over the next two to three years this will be a very significant part of the overall revenue pie.Q: I think the kicker was that your revenue went up by nearly around 60 percent for the past quarter, your Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) though jumped up by only around 50 percent and margins have come in around that 30 percent but you need to take in account that there was some change in inventory as well so going ahead what is a realistic margin that we can look forward to, going ahead is that 30 percent on the cards, do you see it dipping, do you see it improving, how do you view that?A: Overall I would rather look at the entire financial year and their margins have improved from 23.6 percent to 26 percent for the entire year. I would say a 23-28 percent is a good range of the margin that we overall expect on a full year basis and that is our endeavour to at least be in that range.

Another very important thing is that as the digital media business has been growing, the operating margin leverage at the digital media business is substantially higher because a lot of the costs are either fixed or for example content etc are historical costs as well as organisation costs etc, the operating leverage available is substantially higher.