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Last Updated : Nov 27, 2015 04:43 PM IST | Source: CNBC-TV18

Like content cos with IP; buy Shemaroo: Religare Cap Mkts

According to Gautam Trivedi, MD & CEO, Religare Capital Markets companies like Shemaroo Entertainment, which has got lot of video content and Saregama India with lot of audio content of songs will gain hugely from 4G penetration going forward.

 
 
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From the sidelines of Content and Communication Day Conference,
Gautam Trivedi, MD & CEO of Religare Capital Markets says it is a once in a lifetime opportunity for companies that are going to hugely benefit from broadband penetration and 4G implementation. Companies having content with IP (intellectual property) are likely to benefit majorly from this going forward, says Trivedi in an interview to CNBC-TV18.

According to him companies like Shemaroo Entertainment, which has got lot of video content and Saregama India with lot of audio content of songs will gain hugely from 4G penetration going forward. These sorts of companies will get a new lease from 4G, coupled with increasing penetration of smartphones. The content would be literally into the users’ hands with 4G, says Trivedi.

As of now only one player, Bharti Airtel has started with 4G, Reliance Jio is coming out soon, and other players too are aggressively planning to do so.

Although Shemaroo has already given around 65 percent returns this year, it is still not late to get in because there huge upside potential, says Trivedi. This is just the beginning of 4G penetration and as it becomes more widespread within next 12 months, the content download will go up ten times and companies will gain huge revenues.  

When asked the reason for the recent rally seeing in PSU banks, he says it could because banks have seriously looking at recovering their NPAs.

On the goods and services tax (GST) front, he says the street is factoring in a low probability of the passage of GST in this session. The whole issue is too political, he says.

Below is the transcript of Gautam Trivedi’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: Before we get to the content in communication space, there is yet another space that is running away at this point in time, the public sector undertaking (PSU) banking space. Just what is happening there, one can post-facto do a lot of analysis and say that a lot of bad loans are now on the fringes turning out to be less bad, but why such a rally?

A: The fact is that there has been a spate of special drawing rights (SDR) that have taken place where investors are clearly impressed that the PSU banks are finally cracking down on companies that have errant and they have not been able to pay back their debts. So, the fact is that this is finally becoming a reality and banks have been threatening investors in return investors in these banks have been telling the banks to do so. And finally, it is happening.

You heard about Kingfisher Airlines assets being now auctioned, so that is clearly a positive sign. It is baby step, but it is definitely a positive sign that the banks are now finally serious about a recovering their non-performing assets (NPA).

Latha: So, more to go?

A: Definitely, more to go, because the fact is once the big bank which is State Bank of India (SBI) starts doing it, the others will invariably follow and it is a very positive sign. The fact that Mr Jaikumar at Bank of Baroda has also been pretty quick in kitchen sinking the NPA issue and then going aggressively after defaulters is a very positive sign.

Sonia: Tell us a little bit about this content and communications day, we have been speaking with a lot of your analysts and colleagues through the course of the day but how has the day progressed and what have the key takeaways been?

A: I think the fact is that this is I think once in a lifetime opportunity for stocks and companies that are going to usually benefit from the upcoming broadband penetration and the 4G implementation. As you know Airtel has already launched their 4G product, Reliance Jio will be out pretty soon which I think among all of the telecom operators seems to be the most ambitious and the biggest in terms of capex and the breadth and the scope. You have got Vodafone potentially launching in December and then Idea Cellular I guess sometime middle of next year. So, what I think is really the essence of this entire 4G revolution and best way to play this is look at content companies that have Intellectual Property (IP).

So, we have two companies in particular today meeting investors, one is Shemaroo and the other is Saregama. Shemaroo has got a lot of video content, Saregama has got over 3 lakh audio content, 3 lakh songs. So, I think this is content that is sitting there and has been utilised for mostly television purposes. However, now we will get a new lease of life with the implementation of 4G coupled with the increasing and quick penetration of smartphones. So, this basically brings content literally into your hands and it is just more easily accessible once 4G penetration increases as well.

Sonia: But for investors or viewers who are watching you right now, what kind of potential do you see in these two stocks because a stock like Shemaroo has already given you a 65 percent returns this year? Is it too late to get into this game or do you think there is a lot more potential?

A: There is huge potential. I think this is only the beginning. Just because the stock has gone up 65 percent, does not necessarily mean it is too late. The reason I say that is because a 4G penetration has not even begun yet. We have only seen one operator launch and again, we have heard mixed things so far with respect to the penetration of Airtel’s network. And the quality of the network in different parts at least in the city of Mumbai for example.

So, as this becomes a more widespread and again more of the operators launch aggressively LTE based 4G services, within the next 12 months, the content download is going to go up just 10x. And as a result of that, you will see revenues of these companies going up significantly and growing significantly. So, this is just the beginning, it is the tip of the iceberg for both these companies and not just these two companies that have a lot of content and will hopefully start to monetise them.

Latha: But which are these exactly. I mean I get your point on Saregama and Shemaroo if they play it well, but which else and would it be disruptive for some other types like broadcasting companies or for that matter arrival of payment banks harming someone else. Who would be the other advantaged and who would be the disrupted companies?

A: Like I said, companies within the content space, that are sitting on content and that have IP on the content will significantly benefit. So, at the same time, there will aggregators like Saavn or gaana.com that will benefit. They are not listed unfortunately, but a lot of these aggregators in the private equity (PE) side of the business will clearly be huge beneficiaries. But the fact is the other thing I was discussing with investors today, is the travel time that is increasing significantly because of ongoing traffic, the advent of so many cars So, for example, for me personally, it takes me in the morning at 7:30 about 10 minutes to get to work but takes me an hour and 10 minutes to get back home.

So, what am I doing on a lot of days, I am actually downloading music or movies and actually watching it on my way back home. And that will intensify as I get 4G and as 4G penetration and the speeds to download significantly improve. 

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First Published on Nov 27, 2015 03:57 pm
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