Saregama India: An Analysis by Nuvama

Nuvama Institutional Equities has a strong positive view of Saregama India, recommending investors to “Buy” the stock. They believe Saregama’s business is well-protected from economic downturns. This means it will likely continue to grow even when the economy is struggling.

Key Points

• Nuvama suggests buying Saregama India stock.
• Saregama’s business is strong and resistant to recessions.
• Stock target is ₹585, with a 61.6% potential gain.
• Saregama generates money from various sources, like music sales & events.
• The company plans to spend ₹1,000 crore on making new music.
• Strategic partnerships help ensure a consistent supply of popular songs.

Currently, Saregama’s stock costs around ₹362 per share. Nuvama thinks the stock price could rise to ₹585. This means investors could make a good return on their money.

Long-Term Strategy

Saregama’s plan is to use its existing music recordings for many years to make more money. They will invest a lot of money—about ₹1,000 crore—to create new music over the next few years.

Experts predict that Saregama will slowly move away from free music downloads to selling music subscriptions, like a streaming service. They also expect Saregama to grow about 1.7 times faster than other music companies in the industry, which is predicted to grow at a rate of 15% over the next few years.

The Deal with Bhansali Productions

Saregama is partnering with a movie production company called Bhansali Productions. They’re investing ₹325 crore in the company to get exclusive rights to Bollywood music. This means Saregama will get first dibs on all the music from the new movies made by Bhansali Productions.

This deal is expected to save Saregama a lot of money because the price for the music will be lower than what’s typically paid. Saregama could end up owning between 28% and 49.9% of Bhansali Productions by 2028.

Exiting the Video Business

Saregama is also getting rid of its video business. They’ve been losing money on this part of their company. Selling off the video business will free up around ₹170 crore that they can use for other investments that will likely give them higher returns.

Transaction Details & Content Pipeline

Under the deal, Bhansali Productions will make ten new movies over the next three years, including a big movie starring Ranbir Kapoor, Alia Bhatt, and Vicky Kaushal. This will provide Saregama with a steady supply of popular Hindi music.

Saregama will have control over the money and the movies, while Bhansali Productions will be in charge of creating the films. Saregama will buy the preference shares over time, and the new movies will help make the company more profitable.

Smart investors should consider Saregama’s long-term growth potential and strong financial position.