Shemaroo Entertainment Limited (SHEMAROO) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q2H1FY2027 conference call of Shemaru Entertainment Limited, hosted by Valoram Advisors. As a reminder, all participant lines will be in the list only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. I now hand the conference over to Ms. Purwangi Jain from Valorim Advisors. Thank you, and over to you.

Thank you. Good afternoon, everyone, and a warm welcome to you all. My name is Purwangi Jain from Valorim Advisors. We represent the Investor Relations of Shimadu Entertainment Limited. On behalf of the company, I would like to thank you for participating in the company's earnings call for the second quarter and the first half of the financial year, 2027. Before we begin, a cautionary statement. Some of the statements made in today's concord may be forward-looking in nature. So, forward-looking statements are subject to risk and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Or it is a caution not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now, I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Hirin Gada, CEO, and Mr. Ashish Gupta, CFO. Without any delay, I request Mr. Ashish Gupta to start with his opening remarks on the financial highlights. Thank you and over to you, sir.

Thank you, Prabangi, and good afternoon, everyone, and welcome to our earnings call for the second quarter in the first half of the financial year, 2027. Let me first start by giving you some of the key financial highlights, after which our CEO, Mr. Hirin Gada, will give you some operational highlights for the quarter under review. For the second quarter of the For financial year 2027, revenue firm operations stood at approximately INR 141 crore, deflecting a marginal 2% year-on-year decline. The company significantly narrowed its Kibita loss to around INR 2 crore, compared to INR 55 crore in the corresponding quarter last year. Net loss also reduced materially from INR 45 crores in Q2 FY26 to approximately INR 8 crores in Q2 FY27. Now for the first half of the year ended 2027, the revenue from operations stood at around INR 273 crores. The company significantly narrowed its EBITDA loss to around INR 4 crores compared to INR 110 crores in the H1 of FY2026. Net loss also reduced materially from INR 91 crores in H1 FY26 to approximately 16 crores in H1 FY27. The reduction in losses was primarily attributable to the Thank you. The same expenses for the first half of the financial year 2027 amounted to INR 40 crore. Adjusting for this investment, the EBITDA from existing operations for the first half of the financial year 2027 would have been around INR 35 crore. The digital media revenue for the second quarter stood at approximately INR 76 crore, resisting an year-on-year growth of 26%. Traditional media revenues for the quarter were around INR 66 crores, down by 21% year-on-year. For the first half of the financial year 2027, digital media revenues grew by 3% year-on-year to INR 131 crores, while traditional media segments saw a degrowth of 9% year-on-year to INR 142 crores. Now, I would request our CEO, Mr. Hain Gada, to give you the operational

Thank you, Ashish, and good afternoon, everyone. Let me take you through the key operational developments and business performance for the quarter. To begin with, just to add to what Ashish just mentioned, Q2 FY27 marks another quarter of progress in our ongoing transformation journey. While the overall operating revenue declined marginally by 2% year on year, we We have continued to make meaningful progress on profitability, with EBITDA improving by 96% compared to the corresponding quarter last year. This improvement reflects our continued focus on operational efficiencies, cost rationalization, and a disciplined approach towards investment. Coming to the segment-wise performance, our digital media business delivered a strong performance registering a year-on-year growth of 26% during the quarter. This growth was primarily driven On the other hand, our traditional media business continues to face challenges, registering a 21% decline year-on-year. The prolonged Bach rating blackout has impacted advertiser sentiment and weighed on television advertising revenues. Additionally, certain broadcasters have deferred Looking ahead, we remain cautiously optimistic about the business outlook. The coming festive season is expected to support advertising demand. However, persistent geopolitical uncertainties and increasing input costs faced by advertisers may continue to influence their spending decisions. Furthermore, the continuation of the bar-creating blackout remains a near-term challenge for the television industry and therefore the traditional media revenues. In this environment, our focus remains on strengthening the digital business, rationalizing costs across the traditional business, and maintaining disciplined content investments. We are also continuing to drive operational efficiencies across the organization with the objective of improving profitability Moving to some of the key developments across our businesses, Shemarumi Gujarati. During the quarter, Shemarumi Gujarati continued to strengthen its content offering and regional presence. We released nine new titles during the quarter, spanning movies, web series, and plays. Some of the key releases included movies, Lalo, Krishna Sada Sahayate, and Zindagi, once more. Along with web series such as Chaskela Season 1, Sada Charni Bus, Tuition, and OK Boss. These editions reflect our continued focus on strengthening our regional content library and delivering relevant entertainment for audiences. YouTube. Coming to our YouTube business, we continue to achieve strong audience engagement across our channel portfolio. Our flagship channel, Shemaru Filmi Ghanai, surpassed 75 million subscribers, While Shimaru Entertainment crossed the milestone of 62.3 million subscribers during the quarter. Across our entire portfolio of channels, we garnered approximately 9.6 billion views during the quarter, demonstrating the continued reach and popularity of our content across digital platforms. On the syndication front, we continue to strengthen our distribution partnerships and expand the reach of our content. During the quarter, we became the worldwide digital and satellite distribution partner for Telugu film, Rambha Urvasi Menka. To conclude, while the operating environment continues to remain challenging, particularly for traditional media, we believe that the structural opportunity in digital entertainment remains encouraging. Over the last few quarters, we have been consciously realigning our business towards digital opportunities while rationalizing investments in traditional media and strengthening our operational efficiencies. Our focus remains on driving sustainable growth, improving profitability, and ensuring that our investments generate meaningful long-term returns. We remain confident in the strength of our content library, our distribution capabilities, and the digital platforms we Thank you very much.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, to ask a question, please press star and 1 on your phone now. We'll take a post question from the line of Gaurav Patel, an individual investor. Please go ahead.

Hello, sir. Can you hear me? Yeah, I can hear you. Sir, revenue was down slightly in Q2 as well as in H1. What main factor is the performance, sir, and how are you looking to grow for the second half of this year?

Okay, so there are two parts to the revenue growth or degrowth aspect. One is, structurally there is a shift happening from traditional to digital. So if you see the business, if you see the underlying business, the digital business has been growing and continues to grow. So, it is a traditional business which is in the base and therefore it is kind of de-growing. So, combination of that is, you know, is giving the challenge of top-line growth. But interestingly, just to give you a sense that digital business is now at, so in this Water itself, Digital has been 54% of the business, and in the first half also, it's been nearly, so the trending wise, it's been 48% of the overall business in the first half of the year. So that is one. Second, on the traditional side, we have seen combination of Bark, Blackout And advertisers spend lower because of the whole geopolitical challenges. So, that is a, you know, whatever industry issue which is happening. But, yeah, it impacts the top line.

Yeah, that's it for myself. Thank you.

Next question is from the line of Pranav Seth, an individual investor. Please go ahead.

Please go ahead. Yes, yes, yes. Yeah, so I had a question regarding the, you know, on the B2B licensing side. So, you know, there is like inherent lumpiness in this. So, you know, like on the front of quarterly run rate, so what is like the sustainable quarterly run rate that you guys are seeing in the digital segment going forward?

Yes, B2B business is lumpy. There is no doubt about it. And that is why we have been always asking the investor community to look at our business on a 12-month or a 1-year basis because that's when the lumpiness kind of evens out. But in a given quarter, there is likely to be some lumpiness. But having said that, for example, if we see the first half of the year itself, the digital business has grown from 127 crores to 131 crores. So, it kind of evens out on a longer period.

Got it, got it, sir. So, another question that I had on the park rating. So, are you seeing any implications on, like, what, like, that very structural blackout thing or, you know, on the, like, on the broadcast advertising is?

So, there are two or three ways in which bar rating impacts the business. Firstly, since there is no measurement of any of the performance of the channel, so any new programming that we may introduce or even current programming, you know, any changes that we make, how it What is impacting the rating, and therefore, how is an advertiser buying, on what basis they are buying and measuring their own campaign performance is not known. So, that is one big challenge because of lack of measurement. The advertiser is hesitant to invest even in the existing channel or in any new impact property that one may... So, for example, if If a channel is doing, say, a world television premiere of a movie or some other impact property, you know, say maybe a sporting event or something, then, you know, there is a certain uncertainty about how much rating is going to get generated. Now, in the absence of measurement, how do you buy and sell, as in how do you price the So, that is what is the challenge. That's the key challenge and because of that, the spend is lower because many of the advertisers may either price it conservatively or they may shift their spend to another medium, say digital or print or some other medium. Second order Another impact of that is that for a channel whose impact property is not monetizing at the optimal level, you know, for that channel also for them to invest further in content becomes a challenge and therefore we have seen a tempering down of many of their channel's investment budgets. We have ourselves also, for our channels, have also tempered down the budgets because, you know, same thing applies for us as a broadcaster. But two of the businesses which, on the traditional side, which are television dependent on whether it's broadcast or syndication, both are impacted by this ratings blackout.

Rana, you're done, right?

Yes, of course, of course, yes.

Thank you. Next question is from the line of Shilok Singh, an individual investor.

Thank you for the opportunity to ask the questions. So my question is regarding, given the intensifying competition in the OTT industry, how is Shamaru positioning itself to retain subscribers? Is the strategy focused on building a broad market platform or strengthening its regional and niche content offerings?

Our core focus has always been to build the Gujarati regional offering, regional language on the Gujarati side, and I am happy with the progress, and I think we have already gained a very strong consumer traction, very strong share of mind in terms of the brand recall And very importantly, very good consumption. Arguably, I believe we are literally like the larger default Gujarati entertainment platform on the digital side. So that is a strong market position that we have created. On the Hindi side, which is our other segment, we already have a very strong existing content library which is being monetized, and we do invest partly in that, keep the library to refresh or to add some or the other content, whether it's catalog or whether it's new. Both combinations we keep investing, but the bulk of the focus in terms of investment,

Okay, so that was helpful. Just one last question from my side. Could the management provide a segment-wise breakdown of content acquisition spending across like OTT, YouTube, and other broadcasting businesses during this quarter?

It's difficult to give that, but indicatively, what I can say is that bulk of the investment on content is on the digital side, and when When I am saying digital, we by and large buy a bundle of rights, which allows us to monetize it on the OTT platform, on YouTube, or to license us to indicate that content, whether it's within India or internationally. So that is the overall approach. In fact, that is the approach for all content that we buy. But in the last few quarters, our focus has And the value driver or investment driver for any content acquisition has been on the digital monetization led.

Okay, so that was helpful. That's it for my son. And all the best for your future numbers.

Thank you. Next question is from the line of Tania Shah, an individual investor. Please go ahead. Yes, we can hear you.

Please go ahead. I just wanted to ask this. Is the company exploring opportunities to leverage artificial intelligence and content creation, localization, and distribution to improve monetization and operational efficiency?

Oh, yeah, absolutely. There is a very big AI adoption and acceleration track that is going on. We believe that AI is a very big force multiplier on many fronts, actually far beyond what you have even spoken about. So creation and all, there is a lot of work happening at an industry level, multiple players are doing. We are also engaged in that in a strong way. In fact, just to give you a sense of, you know, what we do so, or the level at which we are, one of our corporate films that we did was last year's in December, which kind of in June won an award for the best use of AI. The level at which we have already, you know, landed ourselves and this part we had shared in the last quarter. So there is a strong and deep AI work happening. And there is a lot of work below the surface, which is happening, but not yet stage where we can share. As I said, the impact, the AI impact, particularly on the business front and all, there is a whole AI transformation. And my last

question is, what is the company's strategy and growth outlook for the Malyadam market and its expanding digital content?

So, we started the whole South regional journey about three years ago, approximately, and I would say we have, it's been a very interesting and rewarding journey. So we were, we got the, you know, opportunity to associate with Malayalam's biggest theatrical movie ever called Loka, across various international platforms and continues to generate revenue. Apart from that, there are many movies that we participated. Malayalam, just to give a flavor, is that it's been one of the fast-growing theatrical markets in terms of box office collections. So, that gives itself in a growing market. And secondly, Malayalam also has a lot of international appeal and business potential. And that was one of the key reasons also to do that. And yeah, we will have a slow and steady, we'll continue to grow. Thank you so much.

This is from the line of Ayush Jalan, an individual investor. Please go ahead.

Hi, good afternoon. Thank you for the opportunity. Just a few questions. The first one is, in the last call, you had guided that FI27 should be EBITDA positive and FI28 should be cash positive. Do you still stick by the guidance or is there any change, sir?

So, just to clarify, we do not give any guidance. This is an ambition or aspiration that we have, you know, spoken about, and I think we are still very much working towards this aspiration. If you see even the first half itself, we are just marginally at a negative EBITDA. So, you know, if things work out well, and particularly, you know, Bark and all that, if things improve, I think there is a good probability for us to. And of course, the initiative that we had taken over the last few quarters, you know, has been, it will continue. We are seeing on a quarter-on-quarter basis, which is how we are confident of even the next year. Plus, I would add one more thing that as digital itself crosses more than 50% of the revenue, then it's a different tipping point for us. So hopefully that also helps us improve on the market.

Thank you, sir. But you mentioned digital, but in H1, we've only seen a 3% growth. So is there some reason that the growth has been slowing down? Because I think that also you're hoping for double digit growth in digital, but that also seems to be slowing down.

So, if you see the overall environment and context, as I was mentioning earlier, is that, you know, there is an overall ad issue going on with the, you know, with the whole international geopolitical situation and all of that. And that is definitely and has an impact on ad spend on the digital side also. Traditional is impacted, traditionally more, in fact, overall traditional is impacted more, plus there is a work issue, so it's more pronounced in the traditional side. But as a result of this, definitely on the licensing, syndication side, etc., the business flow has been relatively slower. In fact, we called it out in the last quarter. We have seen a resumption. So last quarter, in fact, digital revenue had actually come down to 42%, 40 to 58% digital and traditional. This quarter, we have seen a 25% growth because many of those B2B deals kind of translated. So there is a, as I shared earlier, there is a lumpy nature of the digital, of the B2B business deal.

Understood, sir. Thank you so much for that. Just one last question, sir. Is there any positivity on how we may end FY27 with our net debt?

So as we have shared earlier, I mean, directionally we aspire it to be lower than where we are. And if you see, we have We have kind of held it at, even in this quarter, we have held it at where we were. So in terms of cash flow, it's, you know, continues to remain a strong cash flow position. Okay.

Thank you, sir. That was all from me and wishing you and everyone a very good day. Thank you. Thank you. Same to you.

Thank you. Next question is from the line of Daksha Shah, an individual investor. Please go ahead.

Hello. Yeah, hi. So I had a couple of questions from my side. I'm audible, really? Yes, yes, yes. Yes, yes, I can hear you. Hello. Yeah, so, my question was on the festive season, with the festive season coming up right now, we see a lot of increase in terms of consumer companies, increasing their ad spend over this quarter, over the next two months. So, are you seeing any demand uptake in the start of the third quarter?

So, yeah, I'll break it up into traditional and digital. Digital side, yes, definitely we have seen a good demand uptake, no doubt about it. Traditional side, also the demand has grown. It is the blackout which is making the revenue and spend suboptimal because the measurement is not there, so everyone is conservatively spending, Some campaigns are not spending on TV itself. But yeah, in spite of that, there is definitely a festive update. So I can say that, you know, compared to say the last festive season, this year, I mean, last year festive season has seen a degrowth. Also because of the whole GST cuts and various other logistical challenges that are going on. Compared to that, this year, there is a growth, both traditional and digital.

Sure, sir. So, my next question was on the YouTube side. So, you see, I'm seeing that YouTube subscribers are growing strongly quarter on quarter. We have now increased up to 75 million subscribers. So, how do you see YouTube as a platform for a long-term growth? Because we see a lot of competition coming in terms of newer social media apps and newer OTT platforms. So, does YouTube still be a major part of your revenue going forward, and what's the growth opportunity there?

YouTube, in fact, right now globally, we've been tracking developments across the global spectrum. Actually, there is a whole narrative or not even a whole discussion around, you know, many of the large platforms actually have seen lower growth in engagement. And YouTube has actually overtaken significantly and continues to grow. And YouTube has been doing many, many innovative, you know, partnerships and a lot of innovations on many fronts. So, I believe that YouTube, you know, carries a very strong advantage with the kind of network effect it has in terms of number of users as well as content. And it's a kind of a virtuous cycle in terms of engagement. And there are quite a few growth drivers on the YouTube side across various different platforms like, say, Connected TV. On many other fronts, you know, YouTube has growth opportunities. So, yes, on certain platforms, on certain parts, there may be competition or there may be other, you know, potential places where consumers spend time. But in terms of the revenue mix and where the advertiser is moving, I think YouTube is strongly present.

Okay, sir. And just one last question from my side, which, you know, we are seeing a lot of other OTT players spending or doing heavy capex, not just in terms of content acquisition, but in terms of, you know, trying and producing their own movies or series. We also started, I guess, a small venture in the Gujarat cinema side. So, any update in terms of what we are doing there and how we are trying to, you know, get into or produce any movies or series on a smaller scale at least?

So, yeah, I mean, web series is something that we've been working on and producing since some time. In fact, this year we have, you know, already added two on the Gujarati side and two on Hindi side, which have been, I would say, more on the more prominent investment side. And we continue to consider web series as an important part of the whole offering that we have, a book club offering that we have to the consumer because it gives, you know, variety as well as it gives, you know, additional ability beyond just movies for us to tell more interesting and exciting stories.

Yeah, does that answer your question? Thank you. Next question is from the line of Roshni Shukla, an individual investor. Please go ahead. Hello. Am I audible?

Yeah. So, I had two questions. The first thing is that the company is spending approximately 19.9% growth on new initiatives, right? So, what are the key initiatives and when can we expect returns on this investment?

So, our two key new initiatives that we've been investing for last few years that we have been sharing, and when we talk of investment in new initiatives, it refers to those two, which is television broadcasting and Shemarumi. These are the two initiatives. Out of that, on the television broadcasting side, I think, of course, we've been impacted by these Thank you very much for the development as we shared earlier. But in general, I think we are now, there has been a significant rationalization on many fronts in terms of the portfolio, in terms of re-looking at the various channels, etc., etc., programming strategy, content strategy, etc. So, with that, we believe that we are on a strong footing on that business. And, you know, as and when some form of television rating or television measurement kind of comes in place, I think we stand a very good opportunity over there. On the digital side, which is Shimaru Me, I think OTT business overall is still in an investment mode as far as the entire industry So, we also continue to do that. What we have been doing, two or three things. One is keeping the investment tempered and in a controllable kind of manner and not doing it in a prudent manner, I would say, which is not kind of burning a hole on the P&L balance sheet or cash flow. Second, while doing all of that, you know, have a smart spend in terms of, and direct it towards, you know, key aspects of content, towards consumer propositions, and the brand connect. So I think over there, as I said earlier, I believe we have created a lot of value with the consumer in terms of the offering. And that, as and when the digital, you know, OTT business scales and turns profitable at an industry level, I'm sure we will also have that beyond that.

Okay, okay, understood. And next question is that in quarter two, our finance cost has been increased despite the warrants remaining stable. So what is the driving this increase and how are we taking initiative to control it?

Thank you, sir. So, basically, it is a temporary movement of funds. For example, we have OD and CC limits, and when we use these to buy some content in a respective quarter, the finance costs technically tend to move slightly here and there in respective months or respective days. So, if you see the finance cost, technically, it has risen only by approximately 45 lakhs on overall debt of 300 crores, which is a very marginal increase, and this happens, as I said, because of the use of funds. So, we are not in visa debt.

Thank you. Thank you so much.

Thank you. Before we take the next question, we would like to remind participants, to ask a question, please press star and one on your phone. Next question is from the line of Aman Sheik, an individual investor. Please go ahead.

Hello. Am I audible? Yes. Thank you so much for the opportunity. I just have two questions. First is, so once you acquire a particular content title, what is the typical timeline for monetizing it across platforms, you know, like television, OTP, and YouTube?

Employment, I would say in terms of payback. In terms of payback. So, deployment depends on the commencement of the rights. So, many times we acquire forward rights, which may be two years, three years ahead. Many times we acquire immediately commencing rights. So, deployment depends on that. And then based on that rights commencement, you know, we do the respective business. We also do windowing based on, you know, what we believe Thank you. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, So, we do a fixed-fee deal with a five-year kind of rights. So, that part is, the cycle is very short in terms of the payback for that particular right. Digital is, again, within digital, there is a licensing syndication part where, you know, we may be selling two-year, So that is one part. And then on YouTube, on Shemarumi, or on many other platforms where we have continuing monetization, variable arrangements, it's an overall monetization which happens typically on a month-on-month basis, which kind of comes to us on a monthly basis. Okay, got it, got it.

And the second question I have is, given the significant improvement in the operating profitability, when do you expect to achieve a consolidated EBITDA break-even?

As I said in the earlier question also, the aspiration which we have put out at the beginning of the year, we are still working towards it to be EBITDA break-even by the end of this Thank you.

That is from my side. Thank you so much, and all the best for the future.

As there are no further questions, I now hand out the call to management for closing comments. Over to you, sir.

Thank you, everyone, for participating in today's earnings call. I hope we have been able to answer your questions satisfactorily. If you have any further questions or would like to know more about the company, please reach out to our IR managers at Valorum Advisor. Thank you, sir.

Thank you, sir. Thank you, members of the management. On behalf of Shemaru Entertainment Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines.