Shemaroo Entertainment Ltd (SHEMAROO) Q3 FY23 Earnings Concall Transcript

Shemaroo Entertainment Ltd (NSE: SHEMAROO) Q3 FY23 earnings concall dated Jan. 19, 2023

Corporate Participants:

Amit Haria — Chief Financial Officer

Hiren Gada — Chief Executive Officer

Arghya Chakravarty — Chief Operating Officer

Analysts:

Anuj Sonpal — Valorem Advisors — Analyst

Viraj Mehta — Equirus PMS — Analyst

Dhwanil Desai — Turtle Capital — Analyst

Shikha Mehta — Equitree Capital — Analyst

Nitin Sharma — MCPro Research — Analyst

Maan Vardhan Baid — Laurel Advisory Services Private Limited — Analyst

Unidentified Participant — — Analyst

Hiral — Individual Investor — Analyst

Rahul Shah — Individual Investor — Analyst

Animesh Modi — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Conference Call of Shemaroo Entertainment Limited hosted by Valorem Advisors. [Operator Instructions] I now hand the conference over to Mr. Anuj Sonpal, CEO at Valorem Advisors. Thank you, and over to you, sir.

Anuj Sonpal — Valorem Advisors — Analyst

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors, and we represent the Investor Relations of Shemaroo Entertainment Limited. On behalf of the company, let me thank you all for participating in the company’s earnings call for the third quarter and nine months ended of financial year 2023.

Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs, as well as assumptions made by, and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings call is clearly to educate and bring awareness about the company’s fundamental business and financial quarter under review.

Now let me introduce you to the management participating with us in today’s earnings call and hand it over to them for opening remarks. We firstly have with us Mr. Hiren Gada, Chief Executive Officer; Mr. Arghya Chakravarty, Chief Operating Officer; and Mr. Amit Haria, Chief Financial Officer.

Without any further delay, I request Mr. Amit Haria to start with his opening remarks. Thank you, and over to you, sir.

Amit Haria — Chief Financial Officer

Thank you, Anuj. Good afternoon, everyone, and thank you for joining us today for our earnings call. Let me first start off by giving you some of the key financial highlights for the third quarter and nine months ended of financial year 2023, after which our CEO, Mr. Hiren Gada, will give you some of the operational highlights.

For Q3 FY ’23, the operational income stood at INR150 crores, which has witnessed a robust growth of 66% on a Y-o-Y basis. EBITDA for the quarter was INR9.4 crores, which has declined by around 4% year-on-year. EBITDA margin stood at 6.31% and net profit was reported at approximately INR1 crore. For nine months ended of financial year 2023 financial income stood at INR392 crores, representing a growth of 36% year-on-year. EBITDA stood at INR30 crores which was up by 12% year-on-year. EBITDA margin stood at 7.75%, while net profit was INR4.5 crores, which grew by 40% year-on-year.

Speaking further on expenses. For the new initiatives in Q3 FY ’23 amounted to INR22 crores, while for the nine months ended, it was INR53 crores, which if you were to adjust this investment in the new initiatives. Adjusted EBITDA from existing operations in Q3 and nine months ended FY ’23 would have been approximately INR32 crores and INR83 crores respectively.

Let me now take you through the traditional media and digital media division highlights. Traditional media revenues for the third quarter stood at around INR58 crores, which was up 23% year-on-year, while for the nine months ended, it stood at INR170 crores, witnessing a growth of roughly 26% year-on-year. Traditional media revenues for the third quarter stood at INR91 crores, which was up by 115% year-on-year, while for nine months ended, it was INR222 crores, witnessing a growth of 45% year-on-year.

Now I would request our CEO, Mr. Hiren Gada to brief on the operational highlights for the period under review.

Hiren Gada — Chief Executive Officer

Thank you, Amit, and good afternoon, everyone. Firstly, I’m happy to inform you that the company has surpassed its last financial year’s revenue in the first nine months of the financial year 2023 itself, which is a clear reflection that our new initiatives are on the growth track as per our strategic plan. In the third quarter, the advertising spend across the media entertainment industry were muted, primarily on account of lower spend by new age advertisers and digital and due to inflationary pressures on the traditional advertisers. This trend, unfortunately, is expected to continue for the visible short term.

The growth in revenues can largely be attributed to a lower base of last financial year. Viewership growth in broadcasting, as well as the addition of a new channel, Shemaroo Umang. As you are aware about our strategic transition from a traditionally B2B business to a modern B2C business, I’m happy to inform you that the contribution of B2C revenue in the total revenue has doubled in the nine months FY ’23 versus the same period last year. And today, it accounts for more than a quarter of our total overall revenues. Unfortunately, the tepid advertising spend affected the margins of the company.

Now talking a bit more about the broadcasting vertical. In Shemaroo TV, we renewed our content strategy, which has helped Shemaroo TV deliver higher ratings versus the previous quarter. Both the Shemaroo GEC channels have a combined viewership share of 10% in the overall Hindi GEC genre and have consistently been among the top 3 in the free-to-air GEC genre. The ratings of Shemaroo MarathiBana have remained steady during the quarter.

On the digital media front, we released 14 new titles under ShemarooMe Gujarati during this quarter with content across movies, web series and plays. We released an original web series called Yamraj Calling Season 2, which was a follow-up season of our hit web series and that was very well received by the audience. We also did a digital world premier for the blockbuster movie, Fakt Mahilao Maate, which was amongst the top grossing blockbuster Gujarati films of the year.

On other digital updates, we partnered with Amazon Audible for exclusive podcast series like Chanakya Speaks, et cetera. On YouTube, Shemaroo Filmi Gaane reached 63 million subscribers and continues to be the 21st most subscribed channel in the world.

In conclusion, despite external uncertainties, the company has showcased a strong top line performance. All business verticals have grown year-on-year, and our new initiatives are seeing very encouraging traction with the viewers. We are confident that when the tide turns in the industry, these initiatives will start reflecting good bottom line performance as well.

With that, I open the floor for question-and-answer session.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Viraj Mehta from Equirus PMS. Please go ahead.

Viraj Mehta — Equirus PMS — Analyst

Yeah. Hi, Hiren. Hiren, if I look at your commentary in Q4 of last year, you reaffirmed that commentary in Q1 of this year —

Operator

Mr. Mehta, sorry to interrupt you. The audio is very low from your line. Please increase the volume of your device.

Viraj Mehta — Equirus PMS — Analyst

Yes. Now I’ll talk a little louder. I am saying whatever the sir said in terms of the burn that the new initiatives will see in Q4 of last year, in Q1 of this year and in Q2 of this year, all of that has not proven to be right. And you said that at the end of Q2 results, and it is way off by a significant margin. Can you please explain that, Hiren bhai?

Hiren Gada — Chief Executive Officer

Sure. So let me take a step back and explain to you. So at any point in time, there is a certain equilibrium of revenue that we are targeting in terms of the revenue and cost, right? So we achieved that revenue cost equilibrium in the last quarter.

Now based on that, and we, at the same time, were seeing very strong operational metrics growth. So if you see what we have discussed about the revenue, the share of — viewership share on the GEC segment, okay, we were probably roughly at around 7% or 8% viewership share, and we saw the opportunity to take it up to 10%.

Okay, now that required investment, and this is something that I have shared in these same very earnings calls that it is — once we reach a certain equilibrium, we would be investing. And therefore, as a part of that, we launched two new shows on Shemaroo Umang in this quarter. We launched one show in September and two more shows in November and December on Shemaroo Umang, okay? Now all of that requires a certain amount of investment.

Now what happened, unfortunately, this year was that while all the operational metrics were completely on track, the revenue side took a massive hit because of the short festival period, it was a short Diwali festival period, the post-festival lull, and all the advertising challenges that we saw. So actually, the revenue has fallen short of what the commensurate operating traction has delivered, and that is really that difference that we could have otherwise generated. So we had targeted for the full year a INR50 crore investment at the beginning of the year is what I have shared, and I’m completely cognizant of that.

If this revenue would have kind of kicked in, that we were fairly well on track to achieve that INR50 crores is the — this thing. But that revenue shortfall in comparison to the operating metrics growth that we have seen. So we were — as I said, we were in the range of about 7 odd percent viewership share. The opportunity to dial it up further was available, and we really went for that because at 10%, please understand one thing that where we are today strategically in terms of the position in the industry, it changes significantly because you are now in the reckoning as a player. And so that is really what we have gone for.

Revenue of — has not supported with the external environment. The choice was should we scale down that and lose the momentum, or should we continue and press the advantage? We decided that we have to continue and press the advantage. And we are very, very confident that given the strong operational metrics, as and when things turn, we would be fairly — all of this will reflect. So I don’t — I mean, I understand what you’re trying to — where you are coming from, but these were — these are some of the operational realities.

Viraj Mehta — Equirus PMS — Analyst

And is the higher cost coming only from newer content, or is it coming because you are charging on some of the inventory? How has the inventory changed this quarter?

Hiren Gada — Chief Executive Officer

Inventory is marginally lower. We have charged off inventory. I’ll tell you, we were at March, we were at about — sorry, not March. September, we were at INR701 crores. We are currently marginally lower at INR697 crores.

Viraj Mehta — Equirus PMS — Analyst

So Hiren bhai, we have not even charged off the inventory. So this is just all costs, which are ballooning up.

Amit Haria — Chief Financial Officer

Other way of looking at it is the revenue has actually not matched up to the cost — incremental cost that we have incurred. And that is the reason what Hiren is saying that the shortfall of revenue is being pressured on the margin.

Viraj Mehta — Equirus PMS — Analyst

But sir, our revenue has grown 36% this year. I mean INR150 crores in third — and traditionally, we have always done lower revenue in third quarter compared to second quarter.

Hiren Gada — Chief Executive Officer

Correct.

Viraj Mehta — Equirus PMS — Analyst

We have actually surpassed our second quarter number in third quarter, and still, you are saying we have under delivered. I’m just a little lost here because this completely negates what you have been saying previously.

Hiren Gada — Chief Executive Officer

No, I don’t think so, Viraj. I have — this is something that has been consistently been shared that once there is a certain equilibrium that we achieved, there will be the next level of growth that we will be looking for, which is in terms of doing our original shows and growing from there. And that is — I mean, one can at any point in time, go back and refer to, this is what we have always shared. The gap what you are currently seeing or feeling or which even we have felt, I mean I’m not even denying what you are saying. The fact is that the revenue has fallen short and that is across the industry.

Viraj Mehta — Equirus PMS — Analyst

Right. And in terms of the loss for this year from new initiatives, what will be your new guidance now having already done INR52 crore loss or INR53 crores in the first nine months?

Hiren Gada — Chief Executive Officer

So I mean I can give a number, but given the whole external uncertainty on revenue, I, at this point, want to refrain from giving a number. I think more importantly, we are — we would look to maintain the strategic — or build on the strategic advantage and positions that we are continuously building.

Now as a result of that, the investment may go up or down or may get extended by a quarter or a couple of quarters. I don’t see — I mean when you are aiming for something, please understand one thing, that a 10% of viewership share in the GEC space, we are in every major advertiser’s media plan. We are now no more fringe player, and that’s really a very important position to build and to hold and to press an advantage when it is available. And that’s really what we believe because this business has a long tail of cash flow margin and profitability, which is available. And in fact, I’m actually very proud of what we managed to achieve and stabilize at these numbers.

Viraj Mehta — Equirus PMS — Analyst

Right. Just one last question, Hiren bhai, is on finance cost. If you look at our balance sheet is also deteriorating every quarter, reflecting in the finance cost going up every quarter from INR6.5 crores last year a quarter to INR7.2 crores, INR7.3 crores last quarter to INR8.2 crores this quarter. I understand the investments, but now, forget existing P&L, but it is starting to hurt the balance sheet now. Like how do you look at this?

Hiren Gada — Chief Executive Officer

So in the last con call, I had given our perspective that the way the interest costs are increasing, which is, again, beyond our control. The interest cost being increased by the RBI and that is actually spilling over out here.

Amit Haria — Chief Financial Officer

Also I would add —

Viraj Mehta — Equirus PMS — Analyst

So our borrowings have not gone up?

Hiren Gada — Chief Executive Officer

No. So September to December, our debt is the same, exactly the same.

Viraj Mehta — Equirus PMS — Analyst

Sir, but our borrowing this year has gone up from INR236 crores, INR237 crores to INR270 crores in first half.

Hiren Gada — Chief Executive Officer

So we — no, no, that we — that was in September. But I’m saying September to December, the borrowings have not gone up. Last quarter, we had a discussion on why the borrowings had gone up, right?

Viraj Mehta — Equirus PMS — Analyst

I understand on payables and on traditional media, there is the payable as a large, and I understand that.

Hiren Gada — Chief Executive Officer

Yeah, receivable.

Viraj Mehta — Equirus PMS — Analyst

Okay, okay. Well, yeah, receivables. Thank you. Thank you so much and best of luck.

Hiren Gada — Chief Executive Officer

Borrowings have not gone up.

Operator

Thank you. [Operator Instructions] The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.

Dhwanil Desai — Turtle Capital — Analyst

Hi, Hiren bhai. Good afternoon. So, just continuing on this revenue part where you said that we have fallen short. So I mean, typically, you have a visibility of a quarter in terms of the commitment from advertisers because I think — no? Okay.

Hiren Gada — Chief Executive Officer

No. In fact, many advertisers, we don’t have visibility beyond three days.

Dhwanil Desai — Turtle Capital — Analyst

Okay. So in the middle of October, you were not expecting this kind of environment for media industry.

Hiren Gada — Chief Executive Officer

Not at all, because Diwali because it was — it was, in fact, expectation was and everywhere we were hearing sounds that it’s a very good Diwali and stuff like that. But the advertising space took a severe beating during that period. And not only that, it actually continued in that whole trajectory and even, for example, YouTube in already December traditionally is a high month. Even that did not materialize.

Dhwanil Desai — Turtle Capital — Analyst

Okay. Okay. So essentially, what you are saying and when you say that we have fallen short on revenue, but operational metrics, we grew stronger, so essentially, what you are saying is that the translation of these operational metrics to higher year has not happened is what you’re saying.

Hiren Gada — Chief Executive Officer

To combination of higher year and even, I would say, in some period also the fills have been shorter.

Dhwanil Desai — Turtle Capital — Analyst

So that is on the digital side. I’m saying —

Hiren Gada — Chief Executive Officer

So it’s a non-traditional side.

Dhwanil Desai — Turtle Capital — Analyst

Okay. So that means that we are not even 100% utilizing total inventory in the traditional side.

Hiren Gada — Chief Executive Officer

In the last quarter. This quarter, it has. So how it works is, we — our ratings had bumped up over the last two or three quarters, and we’re in a good trajectory. Commensurate to that, there is a certain ER benchmark that the market kind of works at with those kind of ratings. And we decided to hold those higher ER benchmarks, at which rate the fills were not happening. At lower rates, the fill could have happened, but then we would have compromised on profitability further. So we — and raising the ER over a period would have been difficult.

Dhwanil Desai — Turtle Capital — Analyst

Okay, okay. So I mean, how — I mean, again, from a very novice perspective, but how do we adjust that this the reluctance of given higher ER is a function of industry dynamics and not because our viewership share in somehow is not as expected by the advertisers. I mean how do we decide that’s an internal thing or an external thing.

Hiren Gada — Chief Executive Officer

I am not able to understand the question.

Dhwanil Desai — Turtle Capital — Analyst

So I’m saying that — you have said that we raised the ER, right, so, but then there was some pushback because of which our fill rate suffered. So essentially, that means that —

Hiren Gada — Chief Executive Officer

Our fill rate not suffered only because of the pushback. It was also because of a tepid advertising environment.

Dhwanil Desai — Turtle Capital — Analyst

Okay. So what you’re saying is even if we had lowered the ER, we may — you might have…

Hiren Gada — Chief Executive Officer

So, across the board, fill rates were low across the entire ecosystem. And that is visible. I mean, the data is available. One can go and verify that.

Dhwanil Desai — Turtle Capital — Analyst

Okay. Got it, got it. And second, since Arghya is on the call and probably I think he in one of the interviews, had talked about that we want to double our ad revenues by FY ’24. So one is that what is the strategy around that? And then secondly, in the context of the chain scenario, do we still think that is possible? And how do we look at that?

Arghya Chakravarty — Chief Operating Officer

So let me answer that, can you hear me? Am I audible?

Dhwanil Desai — Turtle Capital — Analyst

Yeah, you’re audible.

Shikha Mehta — Equitree Capital — Analyst

So I think as Hiren spoke quite a bit around it. I think the input metrics is around driving our viewership share of position where we are a relevant player right now, is in the work, and it is already happening. A 10% plus viewership share means we are a relevant player in the market. Our ER benchmarks have also been now — are now according to what the market operates at these kind of ratings at this kind of viewership shares. So and that — and hence, what we talked about the fill rates, the fill rates as an overall industry level have been down.

But going forward, it’s a matter of time while we foresee that the next quarter will still remain a bit soft in terms of advertising revenues. But we are focusing continuously on in keeping the operational metrices up and running and going in that direction. We are focusing continuously on viewership share. And getting our — so I think we are already a relevant player in the ad market. If you look at how the industry overall ad industry has been in this quarter, it has been soft. But from our point of view, we are keeping our internal operating metrices up running and efficient. And I think we are very much on in terms of whatever I had talked about in the interview.

I think we are very much on in the game. And the tide, once it turns, we should — we are in a position to milk the revenues which are going to be there. So I think we are fully on to that. The strategy is right up and there in place in terms of creating the right infrastructure in terms of our operating metrices, as well as beefing up the right teams — with the right teams.

Hiren Gada — Chief Executive Officer

I would add one more point. The traction on the content and the traction with the viewers also. I think that is very much in place.

Viraj Mehta — Equirus PMS — Analyst

Okay. Got it. Got it. I have more questions, but I will join the queue.

Hiren Gada — Chief Executive Officer

Yeah.

Operator

Thank you. [Operator Instructions] The next question is from the line of Nitin Sharma from MCPro Research. Please go ahead.

Nitin Sharma — MCPro Research — Analyst

Yeah, hi. Thanks for taking my call. First of all, I would like to understand in detail how the overall ad market has been doing in third quarter? And what are the early indicators this month? I understand that it might be very early, but just some color on it will be helpful.

Arghya Chakravarty — Chief Operating Officer

This is Arghya here. I think from all reports and from all indications that we get from the market, and this is a result of some companies here and there. I think — and obviously, we are connected to all the advertising agencies. I think from an overall ad market point of view, I think in the broadcast space as well as in the digital space, there is a softening compared to last year. And while there has been some movement in sports, but from an entertainment ad revenue point of view, there is definite softening compared to last year.

And that is primarily because of two reasons. I think one is the traditional advertisers have been seeing those inflationary costs, inflationary pressures because of input cost. And the new age advertisers, I think there is a stress in the part of ecosystem that has also put pressure on ad revenue, which comes at a higher price, at a higher yield. So it has been a double whammy. And of course, the season has been — the season was shorter compared to last year same quarter.

Nitin Sharma — MCPro Research — Analyst

So correct me if I’m wrong, you are saying that the FMCG’s ad spend continues to remain at least where it was last quarter or last six months, have you seen improvements there?

Arghya Chakravarty — Chief Operating Officer

It is under pressure compared to even last year at the same quarter. Last year, same quarter, Q3 on Q3, I think I would be — it would be at the same levels or maybe even a little softer than that.

Nitin Sharma — MCPro Research — Analyst

Understood. Understood. And second question, so on the next 12 to 24 months, some understanding that what would drive your traditional and digital revenues, apart from what is happening with the macro side of the things. And how do you see your content cost going ahead on the same timeline.

Hiren Gada — Chief Executive Officer

So I think there are two, three overall levers that we are working on. So one is the opportunity to further gain viewership share is very much available. And we are pursuing that. Of course, in a way that kind of supports our cash flows and things like that. So not really going out of whack, which is why I even said earlier that quarter-on-quarter, our debt has not gone up. So but at the same time, those levers are available on both television and on the digital side and those will definitely be drivers for growth. New initiatives further, and this is again something that we have in the past alluded to, which is adding more TV channels, adding one or two — I mean adding some more cohorts on ShemarooMe. Those would be —

So I would put the levers in three existing businesses to be dialed up further in terms of their own offerings and market share kind of a thing. Within the existing thing, newer opportunities, newer segments, newer cohorts that we would address. And third would be, of course, the overall improvement in the environment, which we believe — I mean, if India has to turn a INR5 trillion economy in a certain time frame, the GDP has to pick up steam again. And with that happening, the media entertainment sector should be [Indecipherable] beneficiary of the overall GDP growth. So I think that — all the three levers are available and which is in fact exactly why in this quarter also, we continue to push the gains that we have been making.

Nitin Sharma — MCPro Research — Analyst

On the content side, so your operation costs have actually gone down — gone up, rather, this quarter, right, pretty much doubled over the last year. So some idea how it will play out? Will it remain the similar level for, say, next 12 months? Some understanding would be very helpful.

Hiren Gada — Chief Executive Officer

So as I said earlier also, so we launched — actually, we launched three TV shows, three more TV shows. So we had two earlier and now we have five daily shows amongst two channels put together. So we launched two more shows — sorry, these three shows have added to the content cost. While they have delivered on the viewership, the commensurate revenue did not kick in. So I believe that — so if we have to grow and invest in growth, there is an attendant content investment that is obviously going to happen. It’s just that once a business crosses its breakeven equilibrium, then the operating leverage kicks in. And for that, the lever is definitely one of the lever is going to be — are we making commensurate revenue to the operational metrics, which this quarter has fallen short.

Arghya Chakravarty — Chief Operating Officer

So I’ll just add one more thing. I think when you’re comparing costs of last quarter to this quarter, remember last quarter, we had one channel left. In the last year at the same quarter, we did not have Shemaroo Umang, whereas in this year, this quarter, we have Shemaroo Umang. So obviously, there is a completely — the story on the asset base is also very different, right? We have a different channel. We have a new channel, and a new channel having three new shows, of which two shows of that out of the three shows have come in this quarter. And also remember the shows — the two new shows in this quarter have come in the month of November and December. The viewership shares coming out of that are coming out, are coming up, and it will keep going up. The shows keeps strengthening, if you know how it works.

When you launch the show, the strengthening of the viewership keeps happening over a period of time. And if you look at all the big players in the industry, they are the best shows, are running over two years, three years and so and so forth. Whereas our shows started in a month, one month back. So the costs have come in, the viewership shares have gone up, but it will significantly more go up, and we will keep maintaining that trend.

Monetization is something which, as Hiren said, we have very strong belief in the economy. These are momentary trends which have been swapped in the last quarter, and we expect some softness to continue going forward in this quarter as well. But we have strong belief that it will all come back.

What we are doing is in terms of investing and making ourselves future ready to pick up those investments in — pick up those ad spends in the market really turns. So that’s where we are, actually, if I can just add. So the costs of last year quarter and this quarter are not really apple-to-apple because we have a new channel, which was not the last year’s same quarter.

Nitin Sharma — MCPro Research — Analyst

Understood. Thank you. I’ll get back to the queue.

Operator

Thank you. [Operator Instructions] The next question is from the line of Maan Vardhan Baid from Laurel Advisory Services. Please go ahead.

Maan Vardhan Baid — Laurel Advisory Services Private Limited — Analyst

Thank you for the opportunity. Just wanted to understand, do we have an intent to add more channels, or are we done with adding channels?

Hiren Gada — Chief Executive Officer

No. I think every network keeps adding channels on a regular basis, and so will we. So definitely, in fact, it’s a stated intent. Every quarter I have reiterated that we would be adding more channels. But to kind of add to that, this addition of channel is only when, A, cash flow permits; B, within an overall investment discipline that we have seen. I mean if you overall see the way we have built this business and as I said earlier, our B2C revenue is now more than a quarter of our top line. This entire thing has been built over the last two, three years in spite of all the COVID challenges and everything. Channels have been launched, et cetera. Our overall balance sheet has not kind of gone out of whack, or we’ve kind of maintained that financial discipline. And that, I think, is something that we are very cognizant of and we’ll continue. I don’t think that mindset or thought process changes.

Arghya Chakravarty — Chief Operating Officer

I just wanted to add something here. I think one is, as Hiren said and has been saying, we will definitely be looking at adding channels coming in the future. It will be of course prudent and well thought out from a financial prudent point of view. At the same time, it has to also gel in with our overall operating strategy. To be relevant and continue to become more and more relevant as a broadcast player, you need to have a network and the network needs to be a combination of multiple things and how. So, any addition of channels will be only to complement our current bouquet and add to our strength overall as a network in a very prudent and thoughtful manner. But yes, definitely we will be adding channels in the future.

Maan Vardhan Baid — Laurel Advisory Services Private Limited — Analyst

What has been the ROC of our channels? I mean if one looks back four years, three years, two years, one year; I mean as the content ages, how would you break that up from a channel to channel perspective?

Hiren Gada — Chief Executive Officer

So. I don’t think one can look at it at a channel to channel level. I think it’s the overall business that one has to look at because broadcasting, we were never a broadcaster. We entered this business to literally…

Maan Vardhan Baid — Laurel Advisory Services Private Limited — Analyst

So, actually what happens is the overall business that gets diluted because of one portion of the revenue coming from maybe the social media side or that kind of thing. So — and what I want to understand is the return on the incremental investments that you’re making.

Hiren Gada — Chief Executive Officer

No, I was alluding to that only. So, therefore I’m saying one should not look at it at a channel to channel level. One has to discuss it or look at it at an overall business point of view. I think what this does is so let’s take a step back and understand the context of why this investment was made and what was the thought process and where we are in that whole journey. That kind of will give a better understanding of where things are and what is going to happen or how to look at the whole thing. So, I mean we were largely a B2B aggregating content kind of a player and what it ended up doing was created lumpy revenue streams and also it had a heavy balance sheet impact in terms of the investment that were needed to make to acquire stock for trading the content.

And very importantly, the brand which was many years back a significant B2C brand, that was a call that we have taken and this we have I mean shared consistently through the quarters that this has been a journey of transition from B2B into the B2C business and which is where I today shared also that now more than a quarter of the revenue is coming from various B2C revenue streams. So TV business we identified as an opportunity that has scale, that has a national footprint for the brand, it has a financial scale, it’s a large revenue pie in terms of advertising spend which is at about INR35,000 odd crores — sorry, INR25,000 odd crores estimated growing to about INR35,000 crores in the next about three years. And therefore, that’s a business that we cannot stay out of and we have to do the business.

Now how to do it in the most cost effective possible way and how to do it in the most prudent and best possible way, that’s how we set about setting it up. We obviously got badly hit by COVID so that set us back by quite some time because literally our channel, we launched the test signal and within a week the world went into a lockdown. So, we obviously got heavily or badly impacted by that. Having said that, I think happy to see the progress that we have seen of this business. And if you see and compare the operating metrics of or the financial metrics of various broadcasters, I think you will fairly understand the potential in terms of the cash flow, the operating leverage, operating margin, and the scale that this business offers and that is something.

While I understand that there are big established broadcasters, we are a new player, etc. etc. and which is why the relevance of reaching a certain market share and a relevant — being a relevant player, the importance of that gets highlighted. And I think we are very much on the way to that whole aspect. And in that context, I think this has been a very, very low cost entry strategy compared to what a typical Hindi GEC would probably need to spend in this industry and I think that’s really where we are. We are at that point where we know that it is now reaching the payback time and from here onwards or at some point onwards — not here but some point onwards, the payback will be visible in many ways. Let’s also understand couple of more things only.

One is the content pipeline that is getting there — that is getting added in terms of creation. It has a multitude of monetization. If we see the reports of — various industry reports, one of the highest category of content consumed on the digital platforms, on OTTs or even on many other including YouTube, is what is called catch-up TV. So TV shows because of various reasons when people are not seeing on TV, that those shows are actually consumed heavily on digital media. Now this is all optionality that is getting created for us as we progress on this. So in fact in a way, it actually helps us cement the whole digital future far more strongly. So I think one has to look at it in that context and where we are in that context, I think we are fairly in a very, very strong position in terms of the journey.

Maan Vardhan Baid — Laurel Advisory Services Private Limited — Analyst

Fair enough. So, I understand the qualitative aspect and the rationale that you have put forward. So I also wanted to weigh this with the quantitative aspect especially from an ROCE angle that when we approach the, let’s say, setting up a channel or when we approach. So, what is the payback period or what is the — because I mean see this is — such is the nature of the business. I mean it’s almost like a child in a candy store; one is spoiled for choice, one can keep spending on content. And to achieve that number, to be in the books of advertisers which are for that and it’s kind of a — that kind of a thing. So what happens is in this whole scheme of things, one has seen many broadcasters not just in India, globally also fail. So, that prudence and that sort of how do we quantitatively look at it? I mean at the end of it, one also wants to see that one can spend and achieve a certain market share in terms of — with the volume of content, etc. But there is also that frugality angle where one looks at a lot of broadcasters that spend a lot less and are able to achieve and that kind. So even that aspect is something what one wants to understand and one would like to see that come in because see the beauty or the sort of…

Arghya Chakravarty — Chief Operating Officer

Hey Maan, can I just answer that. This is pretty long question. So, I think there are two things and while as an organization, we have started this business two years back and especially, as Hiren said, three years back. And we started at a time when actually the second — the channel that came up first channel after the signal came out, we were hit by COVID. So given forgetting all of that, I think one thing if you — I think we have as a stated objective, we would definitely want to reach a certain level of profitability in this broadcasting business before we start moving very, very aggressively into getting deeper into it. So I think that is one thing, which one has to understand very clearly. At the end of the day you are right. People can achieve broadcasting businesses, can achieve good margins by investing there, but not in the beginning. I mean we are in the setting up process and we are playing in one of the most competitive and the biggest space also which is Indian GEC.

And hence, we are in that growth phase and, as I said, I mean a lot of the investments that actually happened of late in the last couple of quarters, I mean three shows have come in in the last two quarters, of which two has come in November-December, it is as recent as that. So, obviously the monetization of that happens over a period of time. It takes a couple of two, three months for the monetization to start kicking in. So despite the tepid environment that we are there, we are very, very confident that the revenues will start kicking in. And as an organization, we are very clear in terms of the prudence — financial prudence which we see around to start investing. Otherwise you are right, by now we could have — we had the wherewithal and we had the pipeline, we could have added five more shows also and that 10% viewership share could have been at 20% also. So, that’s not how we’re intending it. We are taking careful steps.

We are aware of what the situations are otherwise we would have — we could have added new channels by now also. Our objective is not that. Our objective is to grow steadily, but also be aware that it’s a large market, there are a lot of players, and we need to keep investing at a certain pace at least to stay relevant. That’s the way we are looking at it. Definitely not being — we are not going to be a kid in a candy store and invest left, right, and center. So, that’s not the objective very clearly. And also if you look at — I’ll just add one more thing. There are easy ways of gaining — there are other ways of gaining viewership share. We could have — we could invest in a non-fiction show. We have not invested in non-fiction shows which are more expensive. So, we have been very prudent and careful in terms of our choices so that it yields us the right returns in the right period of time. Unfortunately, the market is and has been a little tough in the last couple of quarters and I expect it to be so in the next quarter also. But we are very confident that things will rebound and our investments are being graded accordingly.

Maan Vardhan Baid — Laurel Advisory Services Private Limited — Analyst

Fair enough. One last observation from my end. So from the feedback that I have got from the call so far; the environment is outside our control, to that extent — to some extent, the topline is outside our control, and that expenses on the other hand are controllable. So given this equation, do you think there is a need to increase the targeted spreads that you have sort of thought of in the past and going ahead because this might keep happening that the environment might remain tepid, maybe the environment changes for some reason, maybe spends don’t come or spends come with a lag, or something on those lines. So do you think there is a need to increase that spread given that we’ve experienced this particular sort of — we’ve gone through sort of this, let’s say, the margin not meeting our estimate in this quarter or do you think you will wait for some more time before taking this call?

Amit Haria — Chief Financial Officer

No, I didn’t understand what you mean by spread.

Maan Vardhan Baid — Laurel Advisory Services Private Limited — Analyst

Of revenue to cost. That is controllable.

Amit Haria — Chief Financial Officer

What do you mean by spread? Are you talking about the gap between revenue and the costs?

Unidentified Participant — — Analyst

Yes, from an operational cost perspective. I mean in terms of creating content, that is the only cost that is kind of controllable.

Hiren Gada — Chief Executive Officer

I mean to be honest at this stage of the journey, I think I would — I mean we would definitely go for building market share at this stage of the journey. We still are not in that top league to say that you can control your levers to reduce cost here and there and thereby improving your margin to protect profitability. But at this stage, the journey is still ahead of us significantly and I think we would definitely wait. Of course if things really really don’t turn up — turnaround in another quarter or reverse, then of course we will also be taking calls according to that no doubt. I mean so if you see our history of plus even during the worst of the pandemic and all of that, we controlled our whole — all our cash flows and all of that through internal accrual etc. extremely prudently and I don’t see any reason to change that orientation for us. So, I think that is a given. In fact I would — since you are talking about various broadcasters and globally and all of that, please do a check around to see how much it costs to setup a Hindi GEC channel and compare that with how much we have spent. I can assure you that we have been extremely, extremely frugal about setting up this business.

Operator

Thank you. Mr. Baid, may we request that you return to the question queue for follow-up questions. Ladies and gentlemen, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. [Operator Instructions] The next question is from the line of Hiral [Phonetic], an Individual Investor. Please go ahead.

Hiral — Individual Investor — Analyst

Thank you for the opportunity. Well, couple of questions have been already answered in detail through other investors’ call. Just a specific question on how do we look at the debt reduction? Hello. Sir, how do we look at the debt reduction plan going forward as we also need to focus on building content and spending on that? So, any light on that and any monetization plan to — for any segment or any division, which can help in that reduction — debt reduction?

Hiren Gada — Chief Executive Officer

So, I’ll answer your second question first. At this point, there is no such monetization for any of our segment or this thing. To answer your first question, couple of things I mean. So firstly, we have been comfortably carrying this debt for last few years, okay. I don’t see our cash flows have been supportive and servicing. Even in the worst of the pandemic etc., we never delayed any of our servicing by even one day for that moratorium or any of that. So, I really don’t see what is the — why should there be so much hue and cry about the debt. Still I understand and agree on the need of having a overall downward trend on the debt or at least grow the business commensurate to the debt. So, that I don’t deny. I think both of that is happening. So already in terms of the scaling back to our pre-COVID levels, I think we are — hopefully we should be well on our way if we see the trends of the first nine months. Secondly, the second part in terms of on the debt reduction side. So, let’s understand one thing and we have been the reason — one of the reasons why we have been also sharing the investment that is being made in the new initiatives.

So obviously this year plan was to or target rather and plan was to invest or restrict that investment over INR50 crores. Given the external circumstances, that number has been overshot. Let’s understand that there is a strong internal accrual of existing businesses happening. So once that investment is getting contained within that level and once these new initiatives are reaching that breakeven and operating leverage, I think there is a natural cash flow availability to reduce the debt. Also the — so for example as we shared last time also, there is a — as this television business is scaling up, there is a certain debtor reflation etc. that is happening that has — last quarter it has caused the debt to slightly inch up. All of these are according to transitionary trends. I don’t see that as a trend because we are not — I mean we have been extremely prudent about it and I see that as and when this revenue shortfall kind of starts addressing itself, I think there is a natural cash flow which is there from other existing internal accruals available.

Hiral — Individual Investor — Analyst

So Hiren-ji, just on the same context, what the objective was to understand where the margins will improve so either the debt reduction can help through interest cost reduction or some spend where we have reached some peak on spending. So definitely it will not reach a peak, but…

Hiren Gada — Chief Executive Officer

There is, as I said, the commensurate revenue for this quarter actually should have been higher. That is what we’ve been trying to say. Okay. Compared to the operational metrics that the business has achieved in terms of the viewership ratings and all of that, the revenue should have been higher. So, that would anyway give a margin availability, right.

Operator

Thank you. Mr. Hiral, may we request that you return to the question queue for follow-up questions. The next question is from the line of Rahul Shah [Phonetic], an Individual Investor. Please go ahead.

Rahul Shah — Individual Investor — Analyst

Yeah, hi. Thank you for taking the question. Well, it’s a repeat question. But just on the objective side like do you have a number in mind when I ask you about the forecast for the revenue and EBITDA margins for the next financial year? Any sort of target or number you have to achieve and also the same for the new channel and when will they breakeven? Yeah, just that.

Hiren Gada — Chief Executive Officer

So, the second question I have in fact spoken about earlier so I don’t want to repeat that. The first question I think that so the annual operating plan for next year is currently being drawn out by various businesses and divisions. So unfortunately at this point, I’m not able to give you much of visibility on that. But given where the operational position has reached, I think we definitely see a continuation of the growth — of a decent growth into next year so even purely on the operational. basis. Now if the market is supportive obviously or if the industry is supportive, I think that will add further.

Rahul Shah — Individual Investor — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Animesh Modi [Phonetic], an individual investor. Please go ahead. Mr. Modi, your line is in talk mode. Please go ahead with your question.

Animesh Modi — Individual Investor — Analyst

Yes. Actually I wanted to ask regarding one thing. How many users we have in ShemarooMe app? There is no number reflecting anywhere in the presentation so I thought let me take an opportunity and ask. And what is the growth percentage in terms of subscribers of the ShemarooMe app? Can you highlight?

Hiren Gada — Chief Executive Officer

So unfortunately right now we are — we have not been sharing that number. I can only give a qualitative view that the growth of consumption and revenues has been fairly strong and we continue to have an extremely strong position in the Gujarati subscription market. So unfortunately at this point beyond that, it’s difficult for me to put out those numbers.

Animesh Modi — Individual Investor — Analyst

Yeah, it’s fine. And one more question in excess of this that there are subscription plan like one-year plan or two-years plan. So let’s say if any one subscriber pays for two years, do you recognize the revenue split between two years or in the year itself of the subscription?

Hiren Gada — Chief Executive Officer

It’s divided by number of months.

Animesh Modi — Individual Investor — Analyst

Okay. By number of months. Perfect. Fair enough. Thank you so much.

Operator

Thank you. The next question is from the line of Shikha Mehta from Equitree Capital. Please go ahead.

Shikha Mehta — Equitree Capital — Analyst

Hi, sir. I just have a few questions. Sir, there was an article in the newspaper around 10th of Jan saying ad volumes on the TV side have grown by 26% and our revenues for the nine months have also grown by 36%, but Q-on-Q it’s 66% and we’re still saying that we saw a shortfall in revenue, which is why the new business burn has hit us. So, what trajectory are we looking for on the revenue side? Are we expecting higher revenue growth to sort of reduce that burn or is that even sustainable? How do we look at this?

Arghya Chakravarty — Chief Operating Officer

Let me answer this. This is Arghya here. I think when you’re looking at growth of revenue, I know this we are getting a little colored by the growth of revenue over last year. Remember, it is not on like-to-like asset base. Last year we did not have a channel, there is a new channel in this year. So the growth — just hang on. So, the growth may be a little confusing in this. Thus what we are saying is the revenue is not commensurate with what we expected in terms of the investment phase. Because the new channel has come up in this year from April onwards and that channel is up and running in this quarter, our revenue expectation was much higher.

Shikha Mehta — Equitree Capital — Analyst

Sir, what was our expectation if you can quantify that?

Arghya Chakravarty — Chief Operating Officer

No, I will not be able to quantify it. But I’m saying despite a 66% growth which you are seeing, it is not the only metric to be looked at because there was one channel which was not there, which is there today. So we need to — I mean if the market would have been as per our — what we had hoped it would have been, which it has not turned out to be in terms of the industry aspect, that’s where the gap is and we will continue on our journey. I mean I think it’s not something which you said is not — there is no unrealistic thing in it. It’s absolutely realistic in terms of what is going to happen. We don’t have an option of not making that happen, it will happen, I mean a few months here and there, plus the trajectory is there. So I think for two years’ growth and what is expected, we should just keep that separate.

Shikha Mehta — Equitree Capital — Analyst

So sir, is this the peak level of our burn or how should one look at it? Because as we mentioned earlier on the call, it’s already been three years since we started this journey towards our channels, etc. and when do we expect this to normalize because the burn is just continuing? Is this the peak?

Arghya Chakravarty — Chief Operating Officer

I mean I think it’s — see there are two, three things in this. One is there is — we need to while we are at 10% plus — around 10% viewership share today, there is a road towards being — continue to be relevant in the space. I’m talking about clearly in the broadcast space. Yes, we are there for three years. But remember that three years — out of three years, there was 2.5 years of COVID. Okay. It’s not a real three years in real terms that one can say. It is actually last six months only when things have been normal. So hence we need to — it’s very difficult to say which is the peak burn or not burn, but at the end of the day we are sure that the monetization of whatever we have invested in is in the right direction. The matrices are correct. The viewership shares and the commensurate benchmark rates is something that we are able to achieve. It’s a matter of when the tide will turn and the fill rates will also match-up and how things will even out over a period of time. But it’s very difficult to say which is the peak burn. The investments will continue. We need to keep staying relevant. It’s not that we are the only ones who are investing in content so are others. But the market has not been as supportive, but we expect it to turn over a period of time. It’s a matter of time. We have belief that the economy will rebound.

Operator

Thank you. Ms. Mehta, may we request that you return to the question queue for follow-up questions. We’ll take the next question from the line of Dhwanil Desai from Turtle Capital. Please go ahead.

Dhwanil Desai — Turtle Capital — Analyst

Hi, Hiren bhai and team. Two more questions. Sir, the first question is so I think after listening to the entire commentary and answer, the only question in my mind is that we are kind of banking upon that we’ll continue to spend and we’ll get good operational metrics which will give us higher revenue and eventually will cover up the cost on the content side that we’re spending and other things that we are spending. Now what is our revenue — for whatever reason some contents don’t work as per our expectation and the revenues don’t shore up as per our expectation, then is there an upper limit? Is there a plan B? Is there kind of a level at which we will say that?

Hiren Gada — Chief Executive Officer

Dhwanil, let me do two things — let me say two things. One is a, failure is not an option. I think we are very confident. Given our experience and presence in the industry, I think we are very confident of making it happen, number one. Number two, we are — we have an extremely active team. Please understand one thing being a player, literally the last player to enter this and pitting against 20-year old players and still taking away a relevant market share. Obviously there is an intense level of capability, maturity, and execution skills that the organization has built and is carrying, right. So, we have a continuous daily hawk eye on what is working and what is not working. It’s obviously not been a smooth ride even to where we are. So things that have not worked, we have promptly junked those things and moved on to the next set of things. So, that is literally purging out what is not working is literally a daily exercise. It’s not even why would we wait for even a week to complete that.

Dhwanil Desai — Turtle Capital — Analyst

Okay. Second question is, Hiren bhai, I think you alluded to one thing in last call I think that you we may kind of change our amortization policy at some point in time to reflect digital traditional mix. So, I understand that we are currently at a stage where we are burning more money and we are not profitable. But even this higher amortization also will also mean that even after we kind of reduce our burn, the profit may still not be visible. Is that understanding correct?

Hiren Gada — Chief Executive Officer

I don’t think so because once — I mean one is the policy is not yet in place so I’m not able to comment right now. I would say two things. Once we have the operating leverage available, there is a cash flow available. Now that cash flow addresses many things including the long-asked question of debt, of stock, of many things. So, I think that automatically reflects or will reflect around. So, I don’t see that as much of an issue. I mean right now I’m not in a position to comment actually beyond a point.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

Hiren Gada — Chief Executive Officer

As we’ve discussed, I think there is a significant opportunity available in this space and we have clearly positioned ourselves to execute and take that share of the business and we are very confident that as the tide turns, we are extremely well-positioned to take advantage of that. With that, I thank everyone for joining the earnings call for Q3 FY ’23 and see everyone in the next quarter. Thank you.

Amit Haria — Chief Financial Officer

Thank you, everyone.

Arghya Chakravarty — Chief Operating Officer

Thank you.

Operator

[Operator Closing Remarks]