Music plays a critical role in the lives of Indians from Tansen of the Mughal era to popular singers including Kishore Kumar, Mohammad Rafi, Manna Dey, Asha Bhosle and Lata Mangeshkar to these days Arijit Singh, Shreya Ghoshal, Armaan Malik among others. Over the years, music companies like Tips Industries have been the bridge between music artists and lovers, and now with the advent of music streaming apps and other content lead platforms such as YouTube, the bond has grown.
Tips Industries posted a 22.82% in revenue to Rs 60.87 crore in Q2, FY24 from Rs 49.56 crore during the same quarter in the corresponding year. The company posted a 90.44% increase in net profit to Rs 39.65 crore in Q2, FY24 from Rs 20.82 crore in Q2, FY23. In a conversation with BrandWagon Online, Kumar Taurani, managing director, Tips Industries talks about running a profitable company besides his plans for the company. Tips Industries is one of the oldest players in the music industry since 1975. (Edited Excerpts)
The company has posted a net profit of approximately 18.54% to Rs 76.52 crore in FY23 from Rs 64.56 crore in FY22 while posting a 76.06% increase from FY21 to FY23. What has been the reason for this increase in profit and what initiatives have increased net profit?
The second quarter was exceptional. The cost of content came down since we were supposed to launch a film but it got delayed which affected the results of the second quarter. We released musical content in the same quarter while last quarter, there was not much content to be released contributing to the increase in profit. Despite that, we are doing good. Earlier, I used to say that the bottom line would be 15% on a year-on-year basis, but this year, last April I had said we would grow 30% even in the bottom line. But after the second quarter’s results, we will grow by 40% this year, compared to last year.
YouTube has been one of the biggest platforms for the company. What percentage of the overall revenue is earned from the video streaming platform? Can you give us a split of earnings from YouTube and Music streaming platforms?
YouTube is the biggest platform for the entire industry, whether in India or the International market. YouTube continues to be approximately 45-51% of the business of all the companies and we also fall within the same category. 75% of our business comes from digital platforms like YouTube, Spotify, JioSaavn, Amazon, and Apple Music and the rest of the 25% comes from non-digital platforms. YouTube accounts for approximately 60-65%, Spotify contributes approximately 18-20% while the rest is split among other platforms.
The company recently started producing regional music. How has that worked out for Tips? What is the split of earnings from Hindi songs and regional songs? How are licensing deals bringing in revenue for the company?
We did a lot of original music in the ’90s and between 2004 till 2020, we focused majorly on Hindi music. Then during Covid, it was the ideal time for us with people confined in their homes, working from home to re-enter all markets. We started approximately 10-12 YouTube channels as well. For each channel, we did many recordings, while only a few did well. We recorded a Bhojpuri song with Pawan Singh and in Punjabi, we did a few films with Diljit Dosanjh, Siddhu Moose Wala, and Ammy Virk. We also worked with Sargun who is a top star in the Punjabi genre. We will keep doing this as our venture into regional music is doing good.
In terms of earnings, approximately 80-85% of earnings come from Hindi music while the remaining 15-20 comes from regional since we entered the regional market recently and we have majorly been a Bollywood company from the beginning.
The company’s cost of content has significantly come down. Is there any particular reason for cutting the cost of content?
There’s a project that we are working on, a film called Merry Christmas by Shriram Raghavan, and Vijay Sethupathi and Katrina Kaif are starring in this. It was supposed to be released around October or November but then we delayed the film and decided to release it in December 2023 because of the delay, there was a big write-off that could have happened, but it will happen in the current quarter. Our revenue shot up because of that. Moreover, we have budgeted the cost of content acquisition. We have targeted that every year about 30% of our topline will be invested in content. I believe we’ll achieve that target as well by March.
The company is aiming for a 30% y-o-y topline while maintaining a 30% bottom line which can also go up to 40%. How is the company generating such profits and what does the company intend to do from those profits?
We are a very conservative company in terms of cost and our repertoire is doing well. As a result of this, our top line is increasing which is affecting our bottom line as well. We have some management costs apart from that and we have a content cost. We have a lot of surplus cash and we have done approximately 300% interim dividend. We try to give them to give interim dividends or buybacks to our shareholders.
How many movies have Tips Films released this year and what has been Tips Films’ contribution to the earnings of Tips Industries? Are there any potential acquisitions or mergers in terms of music or films?
Tips Films contribution at the moment is nothing. We recently acquired the film Merry Christmas and there are one or two other movies as well. I always maintain that it will take approximately three to five years to recover cost. We’ve already acquired Balaji Films’ two forthcoming films, Buckingham Murder starring Kareena Kapoor directed by Hansal Mehta, and there’s another movie called Crew, starring Kareena Kapoor, Kriti Sanon and Tabu alongside Diljit Dosanjh. We have the music rights to those films. We recently released a non-film song by King.
Additionally, we have another two to three songs in the pipeline. We are also going to release a few party songs, we have recreated those songs. To add to the film’s line up, we have signed David Dhawan and Varun Dhawan and are making a film with them.
As for the business, we expect the next quarter also will be good. Our catalogue is doing well. Whatever music we have made from 1988 till date, everything is selling.