Tips Music Plans Buyback | Why Margins Fell Despite Strong Revenue Growth: Management Explains

[00:00:00]the back of earnings and this is Tips Music. You heard their music. Now, let's talk about their financials and the stock is up as much as 9 and 1/2% The question is why and what do they intend to do in the rest of FY27 and beyond?

[00:00:13]Mahima joining in to set up the conversation before we go to the management. Mahima?

[00:00:17]>> Right, Alex. So, the stock as we can see is hitting the high notes, right? And that's on the back of a strong Q1 earnings that they've posted because overall the revenue has seen a good jump of 21% on year-on-year basis and this is driven by both their digital and non-digital growth.

[00:00:31]The content investment, of course, has surged quite a bit, almost 90% 90% year-on-year basis and that's caused the pressure in terms of their profitability goes and also margins. But overall, I think the key development in terms of corporate action is going to be that they're going to consider buyback on 5th of August. The board meeting is going to be on 5th of August. The YouTube subscriber base has also gone up now to around 158.3 million. In terms of numbers, of course, like I said, revenue was up 21%, EBITDA down 5%, margins at 50.3% versus that of 60 4.2% earlier and net profit was down by about 400%. In terms of operation highlights, I think they released [snorts] 73 songs during the quarter and overall healthy contribution has happened from both digital and non-digital business. In terms of management commentary, I think they've said that um the company has increased content investment to strengthen future catalog.

[00:01:21]That was the key takeaway for me. So, this is the overall view of how Q1 has fared and of course, we're seeing a good uptick in the counter today.

[00:01:28]>> Counter is seeing good uptick, but what is the outlook and what is the profitability outlook? Kumar S. Taurani, chairman and MD of Tips Music with us this morning. Mr. Taurani, thank you so much for your time to us here at NDTV Profit. I want to actually ask about your content investment, which is surging 90% and of course, it's had its impact on your profitability numbers and your EBITDA and your margins, etc. But how are you deploying this money for content investment? What are you picking? Because this is a very tricky space, isn't it?

[00:02:03]>> Actually, it's not for us. Actually, we always said to our investors and people like you, we will invest around 22 to 25% in our content. Whatever our top line will be, revenue will be, we'll invest 22 to 25%. See, one movie of this Hedge Fund Corner, a very expensive movie. It was supposed to release last quarter. I already said the last quarter was we had a very bumper profit because this movie was not come and that has shifted to this quarter. So, that why that's why we have a content increased. So, our budget for content was increased this year. And please remember we write off entire content cost in the same quarter. So, that also we are taking hit.

[00:02:49]So, >> Mr. Mr. If you can just explain this, which movie was this and because if I understand correctly, because this movie is releasing this quarter, that's why you've taken that content hit this quarter. That means next quarter this will not be the case.

[00:03:06]>> Yes, absolutely. I'm saying that. That was a Hedge Fund was supposed to film was supposed to release in March-April, but we shifted to June. So, we can't release so early music. For music, we need 6 to 8 weeks before we release our music. So, that's why we have seen this content suddenly going up.

[00:03:27]>> Are you looking at margins going back to for quarter two?

[00:03:32]Are you looking at going back to your 64% odd? Are you looking at EBITDA coming back as well once this one movie's you know, right off goes out of the window? Or do you have another big one next quarter?

[00:03:47]>> No, no, big ones will come and go, but Uh, let me assure you and I always said to please consider us as a yearly kind of a company. So, this year our projection is 20% top lines and 20% PAT.

[00:04:02]So, this this will remain.

[00:04:05]>> You know, another thing that I'm I'm finding interesting and I want to understand is what is your revenue breakup now on digital and non-digital?

[00:04:17]>> Around Around 75% is digital. 1 2% here and there it fluctuates. And around 25% is non-digital.

[00:04:26]>> How does this work? If you can just give us a little more detail because you mentioned in your presentation also your YouTube subscribers, etc. So, what are the sources of these digital income streams?

[00:04:37]>> So, in digital there is a three major major things, YouTube, Spotify, and Instagram.

[00:04:42]>> Mhm.

[00:04:42]>> And in non-physic non-digital there is a publishing and then there is a public performance and broadcasting. There are three, four major things.

[00:04:54]>> And if you can give me that breakup on the digital because you're saying digital is 75% of the revenue. You mentioned YouTube, Instagram, and Spotify. What is the breakup there?

[00:05:05]>> Around I think it's it's it's a calculator of whole. Around 40 Around 45% is uh, YouTube and balance 25% will be Spotify and Instagram and and sorry, 30 32% will be that and balance three, four percent other small small apps and all those those things.

[00:05:29]>> I I just want to understand. So, So, Mr. Thorani, the streaming service and essentially the the revenue model for for music has changed over the last couple of decades, right? It's moved from that royalty model to the streaming model and so therefore your Spotify becomes more important to you going forward as well. But, I'm just wondering about Apple Music. Do you not get a revenue stream from there?

[00:05:53]>> See, actually yes, we are we are getting revenues from three three three things. One is subscription, whatever subscription subscriber pay money to the Spotify, we will get share.

[00:06:05]And then there is the advertising model, and there is a per stream also where there is no advertising or no subscription, we still we we get money from that.

[00:06:15]>> Okay. Uh Mr. Tarani, good morning. Here all you will indicated that 90 to 100 odd crores is what that content spend could look like in terms of FY '27, right? Now, on the back of the release pipeline that you have, what's that what will that convert to in terms of profitability and margins for FY '27?

[00:06:35]>> See, we can't calculate that individually. See, whatever in content we invest, we we we tell people like you we will recover those money in next 4 to 5 years.

[00:06:48]Actually, majorly 15% we collect from new releases, and you can say 85% is the catalog earnings.

[00:06:55]>> And Mr. Tarani, my last question is I think in the month of August, you have a board meeting to consider a buyback.

[00:07:02]What's the rationale with regards to where the buyback goes?

[00:07:05]>> We have always done buybacks, and we we are the very we do many buybacks previously also. We feel the small shareholders must get some exit route and must have some profitability. Now, government is coming with the this market buyback.

[00:07:24]So, we are waiting for the 1st August what government is announcing, accordingly we will take a call.

[00:07:29]>> Tarani, just checking. And of course, buybacks are a great way to reward small shareholders, but will the promoters be participating in the buyback?

[00:07:37]>> No, promoters won't participating in this. Also, let me tell you whatever we do profits in our company, we give 100% dividend or a buyback in the next year.

[00:07:48]See, in 2025, we did around 166 was our bottom line. We entire we paid entire money to our shareholders in 2026. So, this year also, we are we are going to distribute around 217 CR this year. Think that will include dividend and buyback.

[00:08:08]>> That's very interesting and that takes me to the long-term earnings profile of the company.

[00:08:12]Is the revenue mix then shifting towards subscription versus advertising? Because if the shareholders are being rewarded, that mix and that shift becomes very interesting to see now.

[00:08:24]>> See, this subscription business, it will be very very huge. Spotify is a projected in next 10 to 8 to 10 years, they will have around 15 crore subscribers. And if they are paying 100 rupees a month, you can imagine what kind of money we are talking here.

[00:08:40]So, I think I think this music business only will maybe one or two years will grow 20%, 15%, 20%, 25%.

[00:08:47]But then suddenly there will be a big jump jumps will come. The way there was a big jump came in the TV industry, there suddenly their distribution model has given them so much money. So, I think this subscription and that small that short content plus this public performance, you have seen that Diljit Dosanjh shows happen. So, these three things I I feel they will be a big big earners for for entire music business.

[00:09:14]>> Slightly broader question, Mr. Taurani.

[00:09:18]Because you've spoken about so much in your space, what is the impact you're seeing of AI generation of music?

[00:09:25]Because a lot of individual content creators are going out there creating music themselves. They don't have to pay you any licensing. You're not the only one in the game, right? There was a time when you had to be with a label to create music. Now, anyone can do whatever they want and there's a huge amount of AI generation. Do you see this as long-term threats?

[00:09:43]>> No, no, no. This These are not threats.

[00:09:45]My my In India, we have been protected by law.

[00:09:50]Nobody can touch my content. My content is my exclusive property. So, nobody will touch and we are talking >> I'm not talking about IP. I'm not talking about IP. I'm talking about the flood of content that is coming.

[00:10:01]>> No, actually Spotify has removing so many so many I think in millions of content they have removed. So, nobody is interested. Which which content maybe in in one crore one one content can be successful. It's no no threat and whatever songs belongs to me for last 40 years we have collected or we have purchased. We have acquired. We have created. It's exclusive property and see please understand whatever music you like, you like that for forever for for lifetime and you will include new releases new song again you like this year from all the songs you like one or two song you will add to your list. So, you'll keep repeating and listening to those songs.

[00:10:40]So, we have that should we are in a safe and best business I feel.

[00:10:45]>> Okay. Thank you so much for speaking with us. That is Mr. Taurani Kumar S.

[00:10:49]Taurani of Tips Music speaking with us on their quarterly results. But, an interesting business uh