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Shemaroo hopes to grow at 38% CAGR over the next few years

For the last three-four quarters, Shemaroo has been guiding for softer margins

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MUMBAI: For the last three-four quarters, Shemaroo Entertainment Ltd has been guiding for softer margins due to investments in multiple initiatives. Among other initiatives, the new streaming service ShemarooMe and device business have also left an overall impact due to the higher investment. However, the company hopes to reap benefit from the new initiatives both in terms of margin and top-line. Despite some cyclical issues, the company hopes to grow at 38 per cent CAGR or higher over the next few years.

“If you see even for this quarter, the people expenses are up by about 40 per cent. Other expenses are up by 50 per cent. So, there is a certain investment that is being done. There are certain cyclical aspects, how long they will last? We do not know. So, it is very difficult for me to guide for the rest of the year because the economy is in a certain state,” Shemaroo Entertainment CEO Hiren Gada commented in an earnings call after Q1 FY 19 results.

But he also noted that over the last several decades of being in business, they have seen many cycles which have been regarded as opportunities to actually build longer-lasting and better return businesses.

While new media growth also slowed down to 25 per cent from 35 per cent, the telecom segment contributed 40 to 45 per cent to the overall revenue and the rest of the contribution was equally split between YouTube and syndication having 27 to 30 per cent. Though YouTube and syndication both continue to grow more or less equally fast, Gada hopes that over the next few quarters, ShemarooMe also will kick-in in terms of monetisation and revenue.

“Telco piece is now in a phase where that business is transitioning from a feature phone product to the smartphone; the market itself is transitioning from feature phone to smartphone. So, that is the whole aspect of that business. So, that business in a way you can say will be shrinking over the next few quarters,” Gada added.

Despite overall growth in the YouTube segment, the growth in revenue has been significantly lower compared to viewership growth as the realisations on a CPM basis, the ad rate basis continue to fall.

“So, this quarter, definitely YouTube has at least grown or come back into the growth trajectory or rather, I would say remained in the growth trajectory which it was towards the end of last year that has continued. So, that is one thing, in terms of the overall growth of digital media, I think one is that the base is now significantly higher. So, definitely that base effect is bound to kick in. That is one reason for the slowdown,” Gada added.

Shemaroo recently launched its over-the-top platform ShemarooMe in a market where more than 30 players are trying to win over consumers. Rather than creating web series or acquiring the latest and greatest movie blockbusters, Shemaroo has focused on segmenting the audience based on consumer needs.

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