Saregama — A 124-year-old catalogue, spending hard to own the next one

The Pulse

Saregama owns the deepest catalogue of recorded Indian music there is — roughly 180,000 songs stretching back to 1902 — and rents it out to every streaming platform, film, ad and reality show that needs a song. That catalogue is a near-perfect annuity: it cost nothing new to make and earns royalties forever, which is why the music business runs at a ~47% margin and throws off cash. The interesting tension is that reported profit has gone almost flat — earnings per share has barely moved across FY24–FY26 (₹10.25 → ₹10.74) even as operating profit climbed — because management is deliberately front-loading a ~₹1,000 crore spree to buy the next generation of music IP, and the amortisation of all that new content (₹82 crore in FY26, up from ₹3 crore six years ago) is eating the gains in the near term. The whole investment case is a bet that this front-loaded spend, underwritten at a strict five-year payback, converts into decades of high-margin royalties — and that India’s barely-begun shift to paid music streaming eventually pours fuel on owned IP. At ~45× earnings on flat EPS, the market is already paying for that future to arrive.

The Business

Strip away the history and Saregama is a royalty machine wrapped around the largest library of Indian sound recordings in existence. The Music vertical — licensing the catalogue to Spotify, YouTube, JioSaavn, Netflix, Sun TV, advertisers — is ~80% of revenue and essentially all of the profit, running at a 44–47% margin. It owns something like half of all recorded Indian music, holds both the 60-year master and the publishing copyright tails, and adds roughly 5,500 new songs a year. You cannot replicate a 20th-century catalogue; you can only rent it. That is the moat, and it is a real one.

Everything else orbits the catalogue. Carvaan, the retro music player that made headlines in 2017, is being deliberately shrunk from a volume product to a thin premium one. Yoodlee Films and the in-house film/series business are being wound down entirely. Live events (artiste-led concerts plus owned-IP festivals) and artist management are newer legs — events briefly ballooned to ₹285 crore in FY25 from ₹13 crore, which is what inflated that year’s headline revenue to ₹1,171 crore even as profit barely moved, then normalised. The signal underneath the noise: management keeps everything that isn’t high-margin music capital-light and disposable, and protects the one engine that compounds.

Promoters (the RP-Sanjiv Goenka group) hold ~61% and have been quietly buying. More striking is the institutional churn over the last two quarters — foreign funds cut their stake from ~17% to ~12% while domestic institutions roughly doubled to ~7%. A handover, not a stampede, but worth noting.

How Management Thinks

Vikram Mehra has run Saregama since 2014, and the strategy bears a single, consistent fingerprint: treat owned IP as inflation-linked infrastructure and refuse to overpay for it. The discipline is unusually explicit. Every new music acquisition must clear a five-year payback, after which, as he puts it, come “55 to 75 years of returns” — and when peers pressured them to back a sequel to a hit film soundtrack (Dhurandhar 2) at a price that broke the rule, they walked, and later called themselves “vindicated.” That is the tell of an operator who means the hurdle rate.

The capital-allocation logic is coherent and, importantly, backed by what they’ve actually done. The cash war chest built over years was spent down into catalogue buys (standalone cash fell from ~₹147 crore to ~₹13 crore in FY23 as the strategy went from talk to action). The loss-making film-production business is being shut and replaced by a cleverer structure: a ₹325 crore performance-linked stake in Sanjay Leela Bhansali’s studio, framed not as “paying for past glory” but as buying guaranteed, below-market access to marquee Hindi film music for the next several years — and freeing up ₹150–175 crore of working capital trapped in their own films. The balance sheet stays debt-free, dividends run at a ~42% payout, and weak segments (events, Carvaan) are kept on a short capital leash.

On candour, Mehra grades well. He concedes the things a promotional CEO would bury: that EPS has plateaued, that events is “hit and miss,” that the 46% margin in one quarter was “an aberration,” that the Punjabi-music push “never worked out” twice, and — when an analyst pointed out that a 2021 IPO buyer had underperformed a savings certificate — he conceded the point and committed to better rolling disclosure rather than spinning it. The honest knocks: he flatly refuses partner-level numbers (how fast YouTube is growing, what a Spotify price hike does), the company currently has no CFO in the seat, and the favourite “judge us on a rolling twelve-month basis” mantra, while fair given genuine content-timing lumpiness, is also a convenient shield. Net read: a thoughtful, disciplined, slightly didactic operator who mostly does what he says.

Where It’s Going

The forward story has two layers. The base case is the music vertical compounding at a guided 20–23% a year at a 60–65% EBITDA margin, funded by the tail end of the ₹1,000 crore FY25–27 content programme — after which management says the heavy spending stops and only inflation-linked top-ups continue, which is when the amortisation drag should ease and reported earnings should finally catch up to operating profit. FY26 already hints at the mix healing: revenue fell to ₹985 crore (the low-margin events bulge rolled off) but operating profit rose to ₹337 crore at a 34% margin, and the March 2026 quarter was a record on nearly every line (₹287 crore sales, 42% margin, ₹74 crore profit).

The call option on top is India’s streaming economics. The country has among the lowest paid-music penetration and per-user pricing in the world; management explicitly does not bake a subscription hockey-stick into guidance, treating it as free upside if and when Spotify, YouTube and JioSaavn raise prices and convert free listeners to paid — at which point Saregama’s ~50% revenue share on owned IP scales with almost no added cost. That’s the genuinely asymmetric part of the thesis.

The tensions are equally real. Reported returns are still only ROE ~13% / ROCE ~18% — respectable, not spectacular, and Mehra himself says he’s “not happy” with the ROE. The business is #2 in music revenue behind T-Series, and new music (where the growth spend goes) is competitively bid, so the pricing discipline that protects returns also caps how much share they can buy. Revenue is chronically lumpy because film-music release timing swings quarters around. And the platforms that distribute the catalogue are concentrated counterparties. The catalogue moat is durable; the question is whether the new-IP reinvestment earns its promised returns at scale and whether the streaming tailwind shows up before the multiple has to be justified on today’s numbers.

The Four Checks

Quality & moat (gate) — 7/10. A genuine, durable content-IP moat. Owning the largest, oldest library of Indian recorded music is irreplaceable — you cannot manufacture 20th-century culture — and it earns annuity royalties at ~47% margins with structural pricing tied to streaming growth. It falls short of the very top band because it is not a monopoly (T-Series is the larger music house), the growth engine of new music is competitively auctioned, and Saregama is a price-sharing partner to concentrated platforms rather than the platform itself. Strong and durable on the back-catalogue; contested at the margin where growth is bought.
Returns on incremental capital & runway — 6/10. The runway is the best part: India’s sub-3% paid-streaming penetration is a multi-decade tailwind on an asset that needs little incremental capital to monetise. Management underwrites new IP at a five-year payback (~20% implied IRR) with decade-long tails. But the proven blended return is still only ~13% ROE / ~18% ROCE, depressed by front-loaded amortisation, and the steady-state economics of the current ₹1,000 crore spree are a promise, not yet a track record. Good runway, disciplined underwriting, moderate demonstrated returns — a 6 with genuine upside if the IP vintage performs.
Capital allocation for the stage — 7/10. Rational and consistent. Reinvest hard into IP while the runway is open, enforce a real hurdle rate (and walk from deals that miss it), shut the loss-making film business, replace it with a performance-linked Bhansali structure that aligns risk, keep weak segments capital-light, stay debt-free, and pay a steady ~42% dividend. The quibbles are the persistent dabbling in events/Carvaan, the EPS plateau the spending has produced, and the missing CFO. Textbook-adjacent for a reinvestment-stage compounder.
Price — 3/10. Demanding. ~45× earnings and ~5.7× book on EPS that has been flat for two years, with a 0.9% yield, near the top of its range. The quality and the long runway justify a premium; this multiple goes further and prices in both the successful conversion of the content programme and the streaming tailwind firing. Little margin of safety if either disappoints or merely arrives late.

Engine score: 20/30 (moat 7 + reinvestment 6 + allocation 7). Price 3/10 — a high-quality compounder whose price already assumes the compounding.

Sources

Concall transcripts read (4): Nov 2025 (Q2 FY26 — baseline, music guidance cut to 19–20% on album slippage), Feb 2026 (Q3 FY26 — Bhansali deal closed, 46% margin “aberration”), May 2026 (Q4 FY26 — record quarter, FY27 content budget ₹300–350 cr, music guided 20–23% CAGR), plus a special non-quarterly call on 16 Dec 2025 convened solely to explain the ₹325 cr Bhansali Productions strategic stake.
Annual reports read (3): FY25 (four-segment re-cut; events spike; OCR extract was thin on the MD letter and IP-spend quantum), FY24 (music ~81% of revenue at ~46% margin; ₹515 cr net-cash war chest), FY23 (the year the cash war chest was spent into catalogue acquisition — strategy turning to action).
Screener snapshot: consolidated, fetched 2026-06-29 (logged-out/public). Source of all headline financials, ratios and shareholding.
Note on disclosure: management gives growth rates freely but withholds clean absolute segment rupees, old-vs-new catalogue splits, and subscription-linked revenue %, pointing analysts to the filed deck; the “~50% of recorded Indian music” share figure comes from the company profile and was notably not repeated in the recent calls. Revenue is genuinely lumpy quarter-to-quarter on film-music release timing.
Research dumps: vault/Sources/Earnings/Saregama India Ltd/ (not published).