Why Saregama is betting on music, not movies, with Bhansali

MUMBAI: For years, Saregama flirted with the idea that making films was the best way to protect its music business. Now, it has decided that backing a master filmmaker is wiser than becoming one.

In a detailed investor call, the music major laid out why it is stepping away from producing its own films and instead tying up with Bhansali Productions, a studio it calls “one of the most financially robust film production houses” in the country. The goal, according to managing director Vikram Mehra, is simple and long overdue.

“We were in the video business to secure a music pipeline,” he said. “Rather than doing it ourselves, we are saying take those funds and put them into the most important production house of the country.”

The partnership marks a structural shift. Saregama will invest Rs. 325 crore as primary capital into Bhansali Productions through compulsorily convertible preference shares. These will convert into equity in October 2028 based on pre agreed financial performance metrics, resulting in a stake ranging between 28 per cent and 49.9 per cent. The company also retains the right to raise its holding to 51 per cent after March 2030.

What sets the deal apart, Mehra stressed, is how it is priced. “We are not giving the value for the past. The entire value is predicted by how this company is going to be performing over the next three years,” he said, adding that the structure protects Saregama if performance falls short and rewards it if the studio delivers.

The sharper edge of the strategy lies in music. Bhansali Productions will exclusively sell all its future film music to Saregama under a pre agreed formula, effectively removing competitive bidding from the equation. “This is a move which is going to ensure that a large part of our content is now going to be coming without getting into bidding,” Mehra said. “So our music acquisition costs are going to be under control.”

Saregama expects around 30 per cent of its Hindi film music to flow from this arrangement, with the potential to rise to 40 per cent. “Because it’s Bhansali music, our market share should start going up,” Mehra noted.

Equally telling is what Saregama plans to exit. The company will gradually wind down its own film production business over the next three to five quarters, releasing between Rs. 150 crore and Rs. 175 crore of working capital. “We get out of our low yield business and put those funds into one of the most financially strong and creatively one of the best production houses in the country,” Mehra said.

The capital infusion will also change how Bhansali Productions operates. Mehra explained that the studio will no longer need to pre sell digital or theatrical rights to fund films. “Now with this fund infusion, they should be in a good position to fund these films themselves, thus ensuring that they sell these rights at a later point,” he said, improving margins in the process.

Bhansali Productions reported revenue of Rs. 304 crore, Ebitda of Rs. 60 crore and profit after tax of Rs. 45 crore in FY25, figures Mehra described as “one of the strongest financials of any film production company in India”.

Creative control will remain firmly with Sanjay Leela Bhansali, who will work exclusively with his production house. Saregama, meanwhile, will oversee financial governance. “From the governance perspective and deployment of funds perspective, the control will be sitting with Saregama,” Mehra said.

The immediate slate includes Love & War, directed by Bhansali and starring Ranbir Kapoor, Alia Bhatt and Vicky Kaushal, along with Do Deewane Sheher Mein, directed by Ravi Udyawar. Around ten films are expected over the next three to four years, with some potentially developed as series.

For Saregama, the endgame is clearer than ever. “We have finally been able to crack what we have been wanting to do for the last five to six years,” Mehra said. “Secure a film music pipeline so that we are not susceptible to bidding wars.”

In an industry drawn to spectacle, Saregama’s pivot is notably restrained. By stepping back from producing films and doubling down on music ownership, it is choosing control over chaos and long term value over opening weekend noise.