Shemaroo Entertainment Ltd. (SHEMAROO) Q4 FY22 Earnings Conference Call Transcript

Shemaroo Entertainment Ltd. (NSE: SHEMAROO) Q4 FY22 Earnings Concall dated May. 11, 2022

Corporate Participants:

Hiren Gada — Chief Executive Officer and Whole Time Director

Amit Haria — Chief Financial Officer

Analysts:

Shraddha Shekhawat — Prabhudas Lilladher Private Limited — Analyst

Viraj Mehta — Equirus — Analyst

Shikha Mehta — Equitree — Analyst

Dhwanil Desai — Turtle Capital — Analyst

Kranti Gada — Chief Executive Officer

Deepak Poddar — Sapphire Capital — Analyst

Nitin Sharma — NC Pro Research — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Shemaroo Entertainment Limited Q4 FY ’22 Earnings Conference Call hosted by Prabhudas Lilladher Private Limited. As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Shraddha Shekhawat from Prabhudas Lilladher Private Limited. Thank you, and over to you, ma’am.

Shraddha Shekhawat — from Prabhudas Lilladher Private Limited — Analyst

Hello. On behalf of Prabhudas Lilladher, I welcome you all to the fourth quarter FY ’22 earnings call for Shemaroo Entertainment Limited. We have with us the management represented by Mr. Hiren Gada, the CEO and CFO; Mr. Kranti Gada, the CEO; and Mr. Amit Haria, the VP of Finance and Accounts.

I would now like to hand over the call to the management for opening remarks, after which we can open the floor for Q&A. Thank you, and over to you, sir.

Hiren Gada — Chief Executive Officer and Whole Time Director

Hello, good afternoon, everyone. It’s a pleasure to welcome you to the earnings call for the fourth quarter ended financial ’22. I hope everyone is keeping safe and well. First and foremost, I’m very happy to announce that we have promoted Mr. Amit Haria to the position of CFO and he has been with the company for over 15 years, overseeing the Finance and Accounting Department. I will first request him to brief you on the financial highlights. And then I will take over to discuss the business highlights.

Amit Haria — Chief Financial Officer

Thank you. Hiren. Good afternoon, everyone and welcome to the call. Let me start by giving you the key financial highlights. I will be discussing the consolidated numbers. For the fourth quarter of the financial year 2022, the operational income stood at INR94 crores Y-o-Y growth of 21%. EBITDA for the quarter was approximately INR9 crores. EBITDA margin stood at 9.31% and net profit after tax was reported at INR2.2 crores with the pipe budget of 2.19%. For the financial year ended 2022, the operating income was INR381 crores, which has grown by 23% Y-o-Y. EBITDA reported was around INR36 crores, which has nearly tripled Y-o-Y. EBITDA margin stood at 9.4%, but the net profit after tax was at INR5 crores, with PAT margin at 1.38%. For Q4 FY ’22 expenses on the new initiatives were INR14 crores and for FY ’22, it was INR67 crores.

If you were to adjust these investments in the new initiatives, the adjusted EBITDA from existing operations would have been approximately INR23 crores for Q4 FY ’22 and for the year ended ’22, the adjusted EBITDA would have been approximately INR103 crores. For the fourth quarter, digital media revenues stood at around INR46 crores, which were up 26% Y-o-Y and for FY ’22, the digital media revenues stood at INR1.81 crores, which was up 21% Y-o-Y. Traditional media revenues in the fourth quarter stood at INR47 crores, which were up 16% Y-o-Y. For FY ’22, the traditional media revenues stood at INR200 crores, which was up 24% Y-o-Y.

Now, I hand over the call back to Mr. Hiren Gada.

Hiren Gada — Chief Executive Officer and Whole Time Director

Coming to the operational highlights for the quarter, so the year started, the quarter started in January with the Omicron-related locked down and in a way slowdown. So the lockdown on account of Omicron variant in the first month of this quarter definitely put pressure on the revenues as advertising trends were impacted. There was caution at that time.

Secondly, overall, this was amplified due to the triple threat of rising input costs, uncertainty in global economic environment and supply chain disruptions, primarily in many of the advertiser sector. However, on the positive side, we witnessed the return of advertisers who are absent during a large part of the COVID-19 pandemic. This partially offset the pressure on advertising revenues. On ShemarooMe front, we released 15 new titles during this quarter with content across movies, web series and plays, which has been well received by the audiences. We also partnered with BSNL domestically and Orange Telecom and Etisalat Telecom in Egypt internationally for the distribution of ShemarooMe.

On YouTube front, we crossed 59.7 million subscribers on our YouTube channel, FilmiGaane, and the channel continues to maintain its foothold as the 20th most subscribed channel in the world. Coming to the broadcasting side, in this quarter, we witnessed, which is the current quarter, which is April onwards, we witnessed the exit of the four big broadcasters from the GEC space on the DD Freedish once again. So they had exited during 2019 and they reentered during the pandemic, but again the top four broadcast, the GEC channels of the top four broadcasters have exited, thereby creating an opportunity for the FTA focused broadcasters to gain viewership.

We took this opportunity to launch a new in the GEC focused FTA channel, called Shemaroo Umang. Our other FTA channel Shemaroo TV saw an improvement in rating due to our continued efforts on quality content creation and increasing reach. And Shemaroo MarathiBana ratings remain steady on the back of fresh programing. As you are aware, the last couple of years on the back of double whammy of COVID pandemic and its impact on the media industry as well as our investment strategy for transforming the company to much more B2C player, our financial performance was subdued, considering just it gives me pleasure to report you today that we closed the year with a very healthy turnaround despite the challenges faced during the year.

As per the industry reports on the way forward, the India’s media and entertainment sector is expected to be one of the fastest growing globally in terms of both consumer and advertising reaching $3 trillion by 2025. And as we are focusing now more towards the B2C strategy, we are confident on capitalizing on this opportunity by us who are strong brand presence. With these positive tailwinds and most of the world returning to normal in the aftermath of the COVID pandemic, we are witnessing a significant revival across all our business segments as well and we are confident in our strategic plan for the long run. Although we understand that in the short-term, the challenges for the economy do remain and this could result in volatility in business conditions and revenue.

With that, I I’ll open the floor for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Viraj Mehta from Equirus. Please go ahead.

Viraj Mehta — Equirus — Analyst

Hiren, congratulations. Just one question on. Our channels, we have launched two channels and we ran into straight away into trouble due to COVID and shutdowns and we were losing significant capital quarter-on-quarter on this.

Hiren Gada — Chief Executive Officer and Whole Time Director

Yes.

Viraj Mehta — Equirus — Analyst

The whole idea in the last call you explained is that we at least one of the channels will reach breakeven in the latter half of this year as in FY ’23. And before that even happens, we have launched now a third channel.

Hiren Gada — Chief Executive Officer and Whole Time Director

Yes.

Viraj Mehta — Equirus — Analyst

So we’ve kind of confused, right. I mean like we have not even reached a breakeven for the two channels, but we’re now doing third one. So can you please explain the rationale for that?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yes. So there are two parts to this. Firstly, one is a short term opportunistic aspect and other is a long-term strategic aspect. So in the short-term, we saw and knew the exit of the big four broadcasters from the — their general entertainment channels from the FTA space. Now if you map the FTA ecosystem, there is approximately INR2,500 crore to INR3,000 crore advertising pie, and which, I would say probably around maybe one-third or thereabouts, would have been taken up by the GEC channels of the big four broadcasters. Now, the moment they are exiting that advertising buyers revenue kind of becomes available to the existing channels who are there. And therefore, we clearly saw this as a tactical opportunity to actually get in and encash or participate in the pie that kind of opens up for this. So that is one and that is, as I said, there is a short-term tactical part of it.

There is a long-term on a more strategic part to it, which is that ultimately over a period, the broadcast business works on a network effect. And this is something we’ve discussed many times in the past few calls also that the broadcast business works on a network effect. So the more channels you have, that much more you’re able to gain captive audiences, move captive audiences within the network, that much more your other operational efficiencies we are able to drive, that much more your pie with the advertiser you’re able to drive. So that is the, in fact, originally also we had a multichannel plan right to begin with. And of course, due to pandemic and many other things which right now I don’t want to really get into that past aspect, so it was never that we were to launch only two channels.

To bridge one more question or one more aspect of the question that you asked that when we expect to breakeven and before that we’ve launched this, so what has happened is that, so there are two parts to this. Firstly, that breakeven what we’ve discussed is fairly on track. So we do have visibility towards that. So we know that that investment is kind of tapering off. Secondly, the DD Freedish platform does their auctions only once in a year. So if you are participating in that. you are in. If you are not, you have to wait for one year. So, in the scenario of the before exiting, there was opportunity available to actually do that. I think, said that I would add two things over here. The focus for the Shemaroo Umang right now in terms of distribution is extremely narrow in terms of trying to keep the primarily the distribution onto DD Freedish and maybe just a few networks where the cost structure could be low. It’s only once we reach a certain revenue threshold on that is when we may look to scale up distribution. So, in a way we kind of try to keep the overall cost structure as low as possible, but within that create the opportunity to encash on the event that’s kind of happening.

Viraj Mehta — Equirus — Analyst

Right, right. So then, is it like what you had mentioned is that our losses on new initiatives should come down to INR30 crores, INR40 crores this year we are on track for that in spite of the new channels?

Hiren Gada — Chief Executive Officer and Whole Time Director

As far as the broadcast business is concerned, I would broadly say, yes. We are fairly on track for that.

Viraj Mehta — Equirus — Analyst

No. Hiren, it’s INR70 crores to INR80 crores is the total loss on the entire new initiative, including the OTT. This has not only for channels.

Hiren Gada — Chief Executive Officer and Whole Time Director

Correct.

Viraj Mehta — Equirus — Analyst

So, the overall thing should have or the whole new initiatives or only for the channels?

Hiren Gada — Chief Executive Officer and Whole Time Director

So the way I would look at it is that we should be looking at this year in terms of investment. So because of this, there is definitely some amount of additional investment that would go in, because there is a period of breakeven that is expected or whatever investment, as I said, the overall investment outlay, we have kept it minimum. In fact, there’s a lot of content synergy from the existing earlier content, which we have already showcase. That’s what we are kind of working out. So the overall investment that for the year if I were to kind of discuss is approximately in the range of about INR50 crores.

Viraj Mehta — Equirus — Analyst

Okay. So then is it fair to assume that whatever EBITDA you did this year, net of that plus the reduction in that cost plus the growth of this year should be our EBITDA next year. That’s a fair assumption?

Hiren Gada — Chief Executive Officer and Whole Time Director

Broadly, yes. So what I, currently, I’m not able to fully commit or comment on it. So, conceptually or I would I say, arithmetically, what you are saying, it should, that’s how it should be playing out. There is only one difference in that which is the amortization of the content library, that could have some changes on the EBITDA, but I think in terms of cash flow, I think, yes, that’s how it should be playing out.

Viraj Mehta — Equirus — Analyst

Can you throw some light, are there any changes in accounting that you’re doing, which would mean higher amortization?

Hiren Gada — Chief Executive Officer and Whole Time Director

No, no, there is no change in accounting. But based on the consumption of the content, so right now, I don’t have full visibility on the content consumption and that impact on the amortization and therefore, there may be some marginal impact linked to that.

Viraj Mehta — Equirus — Analyst

Okay, thank you and best of luck.

Hiren Gada — Chief Executive Officer and Whole Time Director

Thank you.

Operator

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

Shikha Mehta — Equitree — Analyst

Hello for all. I just have a couple of questions. So in the presentation, we said that our ratings have improved on GEC channels. So can you just throw some light on how that affects our ratings, like how much into new we see look at because they’ve been in the sector?

Hiren Gada — Chief Executive Officer and Whole Time Director

Sure. So our Shemaroo TV ratings, the GEC channel, which you referred to, which is Shemaroo TV, the overall viewership numbers have approximately doubled in about roughly 9 months and that actually with a certain lag, it kind of broadly translates into the revenue number assuming the overall advertiser sentiment remains the same. So, if we factor in for a slightly lower advertising demand also, the correlation of rating improvement or increase or decrease to advertising is normally 1:1.

Shikha Mehta — Equitree — Analyst

Okay. Okay. Until we mentioned that the advertising pie is around INR2,500 crores to INR3,000 crores, and one product that was taken up by the four big broadcasters. Now, with them exiting the pie by itself to reduce a bit to some of the advertisers with towards the future of that, how does it work?

Hiren Gada — Chief Executive Officer and Whole Time Director

So it’s very early days yet because of two or three reasons. I mean, one is the consumer is also kind of coming to terms with the fact that some of the key channels that they were consuming are no more on the platform and therefore trying to adjust and discover the new content. Secondly, so what was happening was that in the last roughly 1.5 years or so that the four channels had in present on the platform. There was a certain shift from paid platforms such as DTH and cable launched the Freedish platform, because very rich content offering was available there. So there is — there could be some reverse migration to some extent for people who may we used to and may want to follow up on that content, that extent, yes, the pie of the advertiser also will move. At this point, we are not. We think that ultimately believe especially as a platform itself over the next maybe 2, 3 years will continue to grow because platform as new and new consumers are coming in the entry, this is our first entry point for the consumers. So we don’t expect that to really change. And to that extent, we expect that the pie will to a good extent remain. There could be some amount of shift back. Finally, the advertiser follows the consumer or the viewer. So if the viewer shifts back or to the extent that issue, it will affect, the revenue could affect.

Shikha Mehta — Equitree — Analyst

All right. So you said, Vijraj, your total investment in new business initiatives should be around INR50 crore. So that means an average of around INR12.5 crore per quarter, is that close to what we’re doing currently INR14 crore?

Hiren Gada — Chief Executive Officer and Whole Time Director

Total of full year is INR67 crores.

Shikha Mehta — Equitree — Analyst

Yes. So I mean, this quarter we’ve done INR14 crores, right?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yeah. This quarter we did INR14 crores, but in the current quarter now the new channel has been launched. So the current quarter is definitely likely to see additional, I mean slightly higher investment overall. So the way I am it is that we said we invested about INR67 crores in the last financial year. This year, we expect that number to be down by 15% roughly.

Shikha Mehta — Equitree — Analyst

Right. And we’re expecting the breakeven by around some part of half year this financial year, right?

Hiren Gada — Chief Executive Officer and Whole Time Director

In the first two.

Shikha Mehta — Equitree — Analyst

In the first two there.

Hiren Gada — Chief Executive Officer and Whole Time Director

Yeah.

Shikha Mehta — Equitree — Analyst

And our cost has already been booked. So that means that we should just see revenue improvement, which is not the fact today, so that is the right, should I say?

Hiren Gada — Chief Executive Officer and Whole Time Director

So cost is a continuous thing, right. Every month we spend on pushing content, on marketing, on people, etc. So cost is the revenue expenditure which happens on a regular basis. It’s when the revenue on that business overtakes that overall or surpasses that overall cost is when the breakeven happens.

Shikha Mehta — Equitree — Analyst

Right. Sure, sure. Earlier we looked at our business from an 18% IRR point of view with the B2B business. Now, is there a similar metric to see the B2C business or what kind of margins that IRR should we be looking at, because that would be more relevant when we breakeven?

Hiren Gada — Chief Executive Officer and Whole Time Director

So when we set up the broadcast business project, the project IRR actually was northward of 21%. Obviously, the COVID has had some impact on that. But expect that the overall effect of the business on the cash flow, margin — on the margin, cash flow and the overall IRR, we have been very strong.

Shikha Mehta — Equitree — Analyst

All right. And sir, do you have any sort of division between how much revenue we’re doing from B2C and B2B as of now?

Hiren Gada — Chief Executive Officer and Whole Time Director

And at this point, I’m not in a position to give that, but I hope that will. We’re just working out on a few more numbers that we should be, we would be kind of sharing over the next few quarters.

Shikha Mehta — Equitree — Analyst

All right. And so, is that only the inventory from, is it, is that inventory fully tangible or on certain amount is just for B2C, certain amount is for B2B or how does that work?

Hiren Gada — Chief Executive Officer and Whole Time Director

So the content that we have is finally multiple rights. In fact, the whole strategy when we’re investing in the content was to be acquiring multiple rights, all rights, enough situation including a lot of the perpetual rights, etc. And that extent, we definitely have the quality of the inventory. So it may be linked to the fact linked to commencement of right because we may have existing licensing agreement with some other partners and when those open up, yeah, the availability of that content is likely to be there.

Shikha Mehta — Equitree — Analyst

Right. And due to our new investment…

Operator

Sorry to interrupt Ms. Mehta. We request that you return to the question queue. There are participants waiting for their turn.

Shikha Mehta — Equitree — Analyst

Okay. Sure.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.

Dhwanil Desai — Turtle Capital — Analyst

Hi, good afternoon, Hiren. So, Hiren, the first question is, so if I look at quarter-on-quarter for Q3 versus Q4, two costs have come down. One is our employee cost, which I think you had indicated there were some one-off in terms of increment, etc.

Hiren Gada — Chief Executive Officer and Whole Time Director

No, not one. I’ll just re-clarify.

Dhwanil Desai — Turtle Capital — Analyst

You’re leasing that.

Hiren Gada — Chief Executive Officer and Whole Time Director

Typically in the, around the Diwali period is when we pay out our annual PLI performance, so every year this is a quarter where you will always see the, I think the highest employee cost.

Dhwanil Desai — Turtle Capital — Analyst

Right, right. But my question is that it has come down by almost INR5 crores. And I think we had done moving sharing investment of around INR20 crores last quarter, which has come down by other types of crores this quarter. So, almost INR10 crore, INR11 crore of savings and our EBITDA almost remains the same and our operations cost has gone up. So can you help me understand in which cost item has actually gone up significantly to kind of cost, kind of our increase in operational costs?

Hiren Gada — Chief Executive Officer and Whole Time Director

Partly, so one is, I would say that part of the investment reduction that you’re seeing your double counting over there, I would say, firstly. Because that investment itself also includes salary paid out to all the businesses where the investment is happening, right.

Dhwanil Desai — Turtle Capital — Analyst

Okay.

Hiren Gada — Chief Executive Officer and Whole Time Director

So the part of the — so what I’m saying is that the difference is not as stark as you are imagining. That’s the first point. Secondly, on the operational side, definitely so one is, there has been additional cost on content. So, for example, during this quarter, we introduced a new original show on Shemaroo TV. It’s a crime show. So there is additional creation cost linked to that. There is, even on the Marathi side, there were few new shows that we have launched. There is some content cost that has one that. Plus, on the digital side also, there has been some additional content investment. So, there is one content investment part which has gone up. There is some additional marketing cost also that we have incurred during this particularly on the Gujarati side and on, in fact, Gujarati, Marathi, all are B2C initiatives that they have added up to that. So there is additional operational investment itself that kind of, I would say, kind of taken up.

Dhwanil Desai — Turtle Capital — Analyst

And, is that one in spite of increase in topline, so that the increase our bottom line? I mean, almost all parameters remain the same except for maybe employee cost. Our investment also even value-wide was almost the same. So my question is that if we grow at 15%, 20% on topline basis, will we see growth on the incremental content investments, will continue to drive our margins?

Hiren Gada — Chief Executive Officer and Whole Time Director

Okay. Definitely we are looking forward to the margins being improving only then and in a way if few arithmetically also look at it, as and when the channel breaks even, the arithmetical aspect of it is a higher margin. So that is definitely what has to play out over the next 3 to 4 quarters. So there is absolutely no doubt about that, which is why even in the first question, so the only issue or challenge of question in that is the amortization part which I said to the first question also, that if there is any additional amortization on based on burden consumption and that could have some nominal impact on the content cost or the operational cost.

Dhwanil Desai — Turtle Capital — Analyst

Okay, okay. And my second question is, so we launched Shemaroo Umang, which is in the same DD, DTH, right. We already have a channel in that space, so, and I remember some earlier conversation that our plan was to launch some kind of a Hindi movie [Indecipherable]. So, I mean first wild Hindi GEC second channel and do we still have plans to launch more channels, if you can clarify upfront even if two countries will the exact details as you clarify for people, I mean investors will have some kind of understanding as to what kind of investment horizon we are looking at?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yeah. So as I said earlier also that this was, I mean so the strategic part of this is the fact that we have always had a plan for more channels and we shared that earlier also. The tactical part was related to the fact that there is the exit of four large broadcasters because of which the GEC consumer is kind of becoming underserved for their content needs or their entertainment needs and that tactical aspect kind of was far more compelling for us to launch the second — launch the third channel as a GEC. I would on the other hand say that, in fact, there have been in the last year or two, quite a few movie channel launches that have happened. So we kind of actually were looking at the competitive space on the movie channel and trying to see what is if at all we have to do a movie channel and what would be the — what would be our edge or segment or niche or those kind of things. But while our team would have been evaluating or examining those kind of options is, clearly this opportunity came up which we kind of it’s hard to look at. Kranti wants to…

Kranti Gada — Chief Executive Officer

Hi, Dhwanil. I’d also like to help you understand that how the two channels acquisition, so Shemaroo TV we’re positioning it and we have already started positioning it earlier just slightly more male skewed TV. We have two prominent crime slots, which are doing very well for the channel. We have a very strong My4 slot also on the channel, which does well and Shemaroo Umang is a female TG-oriented channel and so very, very inclined towards drama shows around female audiences. So that’s where we are also positioning both the channels separately. What we also see is that content availability wise, this better suited the plan right now. And already Hiren mentioned the movie space we saw was getting a little crowded at the moment. So overall when we work that, we saw that this was thus far better space with to be in, in our journey at this point.

Hiren Gada — Chief Executive Officer and Whole Time Director

And to answer your second question on what is the roadmap and plan. See I have said this in the past and I’m repeating this that clearly the move towards our network has to happen. There is no doubt about that. What we have always maintained and that I even within this current channel launch also that thought process and overall, I would say, financial discipline was that, how much we can minimize the investment and manage the overall investment outlay with a certain cap. So we have put in an internal cap on how much we would invest on that and we will not let any new channel or new opportunity put a strain on the balance sheet. So that part we are very clear about and we’ve kind of even when we’ve done this launch, we’ve been very, very mindful of that aspect. And clearly, we see that discipline in the approach in the way forward. So that part is very clear. Secondly, in terms of what else will happen, when it will happen, right now it’s too early days. I think I’ll first challenge obviously is to, in fact, it’s very early days for Umang itself. So we have to see the numbers and see where it opens in terms of the ratings and revenues and what is the path to profitability for Umang itself. And it’s only after stabilizing the operations here that we could even look at or think of something.

Dhwanil Desai — Turtle Capital — Analyst

Okay, understood. Thanks.

Operator

Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead.

Deepak Poddar — Sapphire Capital — Analyst

Yeah. Thank you very much sir for the opportunity. Sir, I just wanted to understand, now you mentioned that the losses on the investment on new initiatives in FY ’23 is likely to be around INR50 crores, which was INR57 crores in FY ’22, right?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yes.

Deepak Poddar — Sapphire Capital — Analyst

And so, sir, can you provide some breakup of this INR50 crores, so how much you’re expecting from my existing two channels, Gujarati and Marathi as well as how much, what quantum can be from the third channel in this year?

Hiren Gada — Chief Executive Officer and Whole Time Director

Well. I would — it’s very difficult for me to give you that breakup. But what I can indicatively share that or at least based on our internal plans is that a large part of this is going to be invested overall. Well, more than 50% of it is going to be invested in the broadcast business overall. And significant next level is going to be invested in ShemarooMe, which is the OTT business, and there are couple of smaller initiatives where probably less than maybe 10%,12% — 10% to 15% would go.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Okay. But, sir, earlier we were of the view that at least Marathi will breakeven, right, maybe next couple of quarters. So, is that what we are still holding onto?

Hiren Gada — Chief Executive Officer and Whole Time Director

Overall, as I shared in earlier also that we are fairly on track for the overall breakeven, which we’ve timeline that we have discussed. I mean, give or take a month or two here or there, but I would think that we are reasonably on track for the overall breakeven of these two channels.

Deepak Poddar — Sapphire Capital — Analyst

By FY ’23 end?

Hiren Gada — Chief Executive Officer and Whole Time Director

No. By around the middle of this year, as in we love this current financial year.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Okay. Okay. And sir, just last thing like for the full year, we are guiding for INR50 crores of losses. So anything by, by year-end exit run rate maybe what’s on the quarterly one may look at vis-a-vis INR14 crores that we have done this fourth quarter?

Hiren Gada — Chief Executive Officer and Whole Time Director

So one thing considering that Umang has just launched and there is right now no revenue on that account, on that channel because in the numbers come and stabilize and the revenue kind of start coming in. I mean I would say that a certain part of the investment is definitely bound to be more front-ended because of this, also the fact that till the existing also don’t breakeven a certain part of the investment is likely to remain in this, in the first half of this financial year.

Deepak Poddar — Sapphire Capital — Analyst

Yeah, yeah, because the reason I was asking because since we are fairly on track or breakeven on the two channels. So the third channel only which would be a drag by fourth quarter end, right? So ideally one can expect that INR5 crores to INR10 crores would be the maximum quarterly expenses on the new initiatives that you might be looking at by fourth quarter, right?

Hiren Gada — Chief Executive Officer and Whole Time Director

I hope that is the way it plays out and I mean I’m not able to fully give visibility right now on that, but yeah, I mean logically what you say makes sense.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Okay, understood. Yeah, that’s it from my side, all the very best, sir.

Hiren Gada — Chief Executive Officer and Whole Time Director

Thank you.

Amit Haria — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Nitin Sharma from NC Pro Research. Please go ahead.

Nitin Sharma — NC Pro Research — Analyst

Yes, hello. Hi, thanks a lot for taking my questions. Two questions if I may. First of all, can you provide any commentary on what are the broader trend you’re seeing in the advertisement market and improvement and how the coming year looking like from an industry perspective?

Hiren Gada — Chief Executive Officer and Whole Time Director

Sure. So overall, as I said earlier, so see as far as TV is concerned, the largest advertising segment is the FMCG sector followed by some of the other sectors. Now definitely FMCG sector is going to remain challenged for at least I believe 2 quarters, maybe even slightly more than that. And to that extent, there spends are likely to remain tepid as they all are grappling with high-rise fast-rising input costs and a level of demand challenge on particularly in many, I mean, pockets like rural pockets, etc. So that is definitely going to be the — that is the challenge that this sector is facing. Couple of other sectors, which are prominent advertisers like or automobile or even mobile handsets, etc., there the semiconductor issue has kind of come to the four in terms of the supply chain. So that has been a challenge. The good thing is that a few sectors, which had kind of scaled down on advertising during the pandemic, have kind of come back or has started scaling back. Also some of the sectors which were virtually absent or say travel and leisure or even entertainment for that matter, I mean. Movie releases were not happening. So there was very little movie-related advertising, for example. So I think a lot of those sectors are clearly also coming back, so partly offsetting this. On the digital side, I think key advertising sector is a lot of the new age tech, consumer tech and digital tech kind of company, I think there are the broadly, I mean at an aggregate number, at an aggregate level, I think the spends are fairly in place. I think the outlook is reasonably robust because there is a fair amount of funding that is kind of still going in. Also a lot of the businesses have scaled up and are breaking even or near breakeven. So we are seeing reasonably good trend on that front. Yeah, so broadly this is how I would look at the advertising outlook. Only thing I would add here is that this is still a medium term, I mean just a two-quarter, probably maximum three-quarter headwind. I think if we zoom out or look at 2 to 3 years, I think we are headed for really great times on the advertising spend front because economy is expected to be extremely robust in terms of the growth. The India is a consumer economy and every new product launch, every new, every brand, existing brand or new brand, has to reach out to the consumer and media is the medium through which it will reach out. So to that extent, lot of expansion plans of many companies, many product expansions, many segment expansions are being announced. Finally, a lot of that will have marketing and advertising expenses linked to it. So I think from that point of view, I think the outlook is really, really very good. Yes, two quarters or maybe three quarters, there could be some volatility or headwinds.

Nitin Sharma — NC Pro Research — Analyst

Understood, understood. And then the second question is that can you provide the breakup of digital revenue and the traditional revenue for either for full quarter or the full year FY ’22?

Hiren Gada — Chief Executive Officer and Whole Time Director

Digital revenue — so you want the digital revenues breakup.

Nitin Sharma — NC Pro Research — Analyst

Yeah. That’s helpful for specifically every quarter you mentioned the revenue was breakup for digital in terms of YouTube, Telco, and the OTT syndication plus others?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yeah, Kranti?

Kranti Gada — Chief Executive Officer

Yeah. So I would say that it is pretty similar to what it was last quarter, whereby YouTube is upwards of 50% to 60% and I would say Telco is below 10% level, so no much change from quarter to quarter, I would say.

Nitin Sharma — NC Pro Research — Analyst

And any color on the broadcasting side, any breakup delusion?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yeah, Nitin. I think we will not be able to answer that question now. But over the next couple of quarters, we will be giving different color on the overall revenue pie over the next quarter.

Nitin Sharma — NC Pro Research — Analyst

No issue. Thanks a lot. Thank you, Nitin.

Operator

Thank you. The next question is from the line of Rohit Robotti, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Hi, herein in Kranti, just my first question is about ShemarooMe. So if you can help us understand two things, number one, competitive landscape that is emerging in ShemarooMe Gujarati and number two, content cost, please?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yeah, sure.

Kranti Gada — Chief Executive Officer

On the competitive landscape, I would say that currently in terms of national app and organized player providing consistent quality Gujarati content, I’m happy to share that we would be the leader over there. We have over Gujarati, which has been around now for roughly one year, but what we have seen is that till now the content that they have put out is limited in terms of number of amount of content that has been put out. So therefore, we feel and none of the national apps are focusing on Gujarati content in the same way, so we track all our competitors very closely. So currently I would say in terms of solving that Gujarati consumer in terms of variety quantity and quality, I think we are registering both in terms of mindshare and our attention share of the consumer over there. In terms of cost of content, I’m not sure I can share right now.

Unidentified Participant — — Analyst

I mean I don’t want exact cost, but if you can just share the trajectory that say in last 2 years, for example, if we take an index value of 100, then whether content cost has significantly increased the kind of high 220-230 or is it fairly in the same range or the kind of content that we are sharing our liquid strategies?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yes, sure. This is really — so there is two type of content. One is acquired content and one is created, so web series kind of things, which we are creating. So I would say that broadly if I have to index as you were asking on a like-to-like basis, the costs are broadly in a similar range. However, I would like to add that as our own numbers are growing and the response from the audience is etc., traction has been growing, we are slowly and steadily scaling up the investment on the web series to kind of make it more richer in terms of production values [Indecipherable] and those kind of things to kind of, because otherwise at the beginning, it was probably much more smaller and bare bone, I would say, comparatively. But at least to bring it to a certain level, so that if someone — so that the consumer kind of gets richer and better experience. So to that extent, the outlay maybe slightly going up, but like-to-like the structure is roughly in similar lines.

Unidentified Participant — — Analyst

Thank you. And my second question is about traditional syndication business. So, I am aware that we are not focusing a lot on that that is not our kind of right key growth area, so to say, but at the same point of time, it could contribute I believe kind of right some significant amount also in at least next year or two. So if you can’t share the number, can you just tell us the demand trajectory that is kind of right there in the traditional syndication business or there also let’s take kind of right an index with run rate for 2019-2020 and how is it shaping up right now and what is our expectation kind of like for at least next year or two? Thank you.

Hiren Gada — Chief Executive Officer and Whole Time Director

I would say demand trajectory over there, at ’19, if it was 100, we probably are actually very difficult to say, but I would think we should be in the range of about 60% to 70% of that where we would have been in 2019-2020. And I expect that this year we should broadly the back to somewhere near about 90% of where we were in ’19-’20 on that in terms of the underlying demand trajectory there. The fact that we have refocused and not invested significantly on that front and we have — and/or in some cases, we may have held back content also for our own consumption on our platform, kind of doesn’t mean that our business on that front will kind of return back to 60%, 70% or 80% of where we were. In fact, we have consciously to be focused the capital allocation, so that I just want to add to the point.

Unidentified Participant — — Analyst

Perfectly understandable. Thank you. Hiren, just kind of an add-on question over there. So in the recent deal that we made in the traditional syndication business, are we still kind of quite nearer to the IRR of 18% or has it gone down significantly or how is it shaping up?

Hiren Gada — Chief Executive Officer and Whole Time Director

No. I think 18% is something that is happening well on the content. One of the trends that I do see in the way forward is that it’s possible that so the 18% finally is at the aggregate level. Now what digital has done, definitely that it has to an extent help scale the digital component and maybe to that extent partly reduced the tradition, so that’s little bit offsetting that may happen in terms of the mix, but the overall 18% IRR on the investment, I think it, should be fairly, in fact, that I don’t see any challenge at all.

Unidentified Participant — — Analyst

Perfect, thank you, Hiren and Kranti.

Hiren Gada — Chief Executive Officer and Whole Time Director

Thank you.

Kranti Gada — Chief Executive Officer

Thank you.

Operator

The next question is from the line of Harsh Bhatia, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Hi. Can you guys talk a little bit about competitive market dynamics in your Marathi TV venture, so in MarathiBana?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yeah. So there two ways to look at it. One is on the Marathi movie side, what is there and other is on the Marathi FTA side, what is there. So Marathi movie side, there are two channels, there were five Marathi movie channels at this point in time. And sixth one is round the corner, which is to be launched and I think from what we understand probably at the end of this week or maybe within a couple of weeks, it will launch. And so, this includes the three channels from these stable Shemaroo MarathiBana and one more channel right now. And then there is a fixed channel, a fixed movie channel that is to be launched, that’s on the movie channel side. Now coming to the free-to-air side. Free-to-air, there are currently four channels in the Marathi language overall, and we are of course one of them, and one of them is of GEC channel and others are all movie channels.

Unidentified Participant — — Analyst

Okay and I remember you guys had mentioned that this made revenues of like the market size was about INR800 crores to INR1000 crores the advertisement pie. How much would you think that the FTA channels would get out of this market size?

Hiren Gada — Chief Executive Officer and Whole Time Director

My sense is that the FTA pie, so what is happening now slowly, slowly because as we discussed earlier that there was a certain migration happening from pay platforms through the free-to-air or Freedish platform. My sense is that the FTA pie probably should be in that range of approximately around 20%.

Unidentified Participant — — Analyst

Okay. And would you say that..

Operator

Sorry to interrupt, Mr. Bhatia, may we request that you return to the question queue, so the participants waiting for the IRS.

Hiren Gada — Chief Executive Officer and Whole Time Director

Madam, because it there is a trail-up, I mean there is a thought trail on Marathi

Operator

Sure, sir.

Hiren Gada — Chief Executive Officer and Whole Time Director

Then maybe, yeah, so I mean I hope that’s okay with you, Mr. Bhatia.

Unidentified Participant — — Analyst

Yeah, yeah, that’s fine. Thanks for the opportunity. My trail up would be, you guys had launched both your Hindi GEC channel and Marathi at the same time, which would you think is doing better as a business?

Hiren Gada — Chief Executive Officer and Whole Time Director

At this point, the Hindi GEC channel. So to begin with our initial phase, the Marathi channel actually started off exceedingly well, but the Hindi GEC channel has been far better growth trajectory in the last about 6 to 8 months. And two things in terms of the — so GEC is much more sticky and command overall better ad rate because there is a high level of appointment viewing. And secondly, the Hindi GEC by itself is very, very big compared to the overall Marathi language pie. So in that sense, I would, I mean, it’s a good development in a way that the Shemaroo TV is actually on a better footing right now. For that, MarathiBana is on a bad putting, but between the two if we were to compare, I would say, Shemaroo TV is on a better footing.

Unidentified Participant — — Analyst

Very thanks sponsoring the question. That’s it from my side.

Hiren Gada — Chief Executive Officer and Whole Time Director

Thank you.

Operator

Thank you. We’ll move on to the next question. That is from the line of Shikha Mehta from Equitree Capital. Please go ahead.

Shikha Mehta — Equitree — Analyst

Hello, sir. I just had a couple of follow-up questions. Can you give us guidance on when we can see ROE returning to 15% plus?

Amit Haria — Chief Financial Officer

Sorry, I was not even to understand the question. Can you please repeat?

Shikha Mehta — Equitree — Analyst

Historically, our ROE used to be north of 15%. Can you give us just some guidance on when we will be returning to that?

Amit Haria — Chief Financial Officer

So, if I were to, I mean if you were to really look at the, even today the EBITDA level without the investment, actually we even the margin and the overall structure, cash flows, etc., is fairly strong. It is the investment, I guess, as the investment phase and the existing channels start contributing significantly more, I expect this to be probably about 2 years out from now.

Shikha Mehta — Equitree — Analyst

Okay. And so, debt has reduced to some extent, with the new channel coming in again, do we expect it to increase slightly or remain flat or are we expecting a reduction?

Hiren Gada — Chief Executive Officer and Whole Time Director

So if I were to kind of answered this earlier also during the call that if we were to — so there is a certain amount of front-ending of the investment because Shemaroo Umang kind of has just launched and then not yet in the breakeven state, but if I were to take the full year part, the whole idea here is that the overall investment, we are looking at managing within a certain amount of financial exposure and therefore, (a) what can be managed with internal accruals within that, (b) once we have a certain level of breakeven, the effort to reduce the debt kind of open the other opportunity to reduce our debt opens up on a continuous basis, and that’s really the thought process.

Shikha Mehta — Equitree — Analyst

So, currently banks are receiving a larger sum of our earnings from the shareholders, so our finance cost is almost INR25 crore and our PAT is around 5%. So what kind of debt reduction will we be looking at over the next 2 years?

Hiren Gada — Chief Executive Officer and Whole Time Director

It is and that is likely to happen, right. Once the investment [Indecipherable] cash flow overall increases. The bank obviously would get paid off to that extent.

Shikha Mehta — Equitree — Analyst

So this again I’m getting what it takes 2 years, so as the situation, is that the right way to look at it?

Hiren Gada — Chief Executive Officer and Whole Time Director

Yeah, probably. I mean I cannot give a forward-looking statement on or for guidance on that, but if you look at the way we have kind of, what about on the business expansion front, we’ve managed it within the internal accruals. So if you see FY ’20 sees that we’ve not crossed that we’ve kind of hopefully some down from there. And still then annually investment in the range of about INR60 crores for 2 years, so that itself shows the strong internal accruals from the existing business and operations and still service all the banks on time and complete. So that kind of shows the strength of the content library itself and therefore, the internal accrual that are getting generated. Now, as and when these investments mature and start contributing, we are obviously going to use a significant part of that to repay the bank.

Shikha Mehta — Equitree — Analyst

Right. And so, do you have a base case scenario given the volatility in the market etc? What kind of base growth are we expecting for the next 2, 3 years?

Hiren Gada — Chief Executive Officer and Whole Time Director

Sorry, I’m not, I didn’t hear the question properly. Can you repeat that?

Shikha Mehta — Equitree — Analyst

Given that the situation in the industry is quite volatile right now, do we have a base case scenario where we’re expecting a certain amount of growth or something of that sort, if you could just add to that?

Hiren Gada — Chief Executive Officer and Whole Time Director

And I’m not in a position to give a forward-looking statement unfortunately right now. What I can definitely say is that we expect that if as and when this, I mean this year, we do expect both the traditional and digital businesses to grow at a certain pace because the investment in the, sorry, the growth revenue of the TV channels is likely to happen more in the current year itself, so that’s really the only thing I can currently talk about that.

Shikha Mehta — Equitree — Analyst

Okay, thank you.

Hiren Gada — Chief Executive Officer and Whole Time Director

Yes, thank you.

Operator

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

Hiren Gada — Chief Executive Officer and Whole Time Director

Sure. Thank you so much, everyone for joining in and we look forward to great year ahead. And with that, we’ll sign off. Thank you, everyone.

Operator

[Operator Closing Remarks]