Saregama spurts 7% on acquiring leading digital entertainment entity

Shares of Saregama India in early trade on Friday gained up to 6.57 per cent to hit a day’s high at Rs 393.35 apiece on the BSE. Shares of the company closed at Rs 369.1 per share on Thursday. 

The company’s shares advanced after it bought a majority stake in the country’s leading digital entertainment company, Pocket Aces. 

Saregama acquired a 51.82 per cent stake in Pocket Aces Pictures in a deal valued at Rs 174 crore. Pocket Aces is primarily a youth-targeting digital content creator as well as publisher. Its portfolio comprises more than 3000 content pieces spanning over web series, music videos, sketches and reels on its Ips such as FilterCopy, Nutshell and Gobble, and releases more than 30 new content pieces on a daily basis. 

The acquisition of the leading digital entertainment company will provide a whole new dimension of IP as well as distribution network of more than 95 million followers that Saregama will capitalise to promotye its music library. 

"This acquisition signifies the confluence of tradition and innovation. While we have always been leaders in the realm of music and media, this partnership with Pocket Aces will add new dimensions to our business as we tap into the burgeoning young digital audiences,” Avarna Jain, Vice Chairperson Saregama, said. 

Saregama will also acquire 41 per cent stake in the next 15 months at pre-agreed multiples. 

“The valuation for first trance implies P/Sales of 3.2x, a tad high in our view and will be margin dilutive in first few years. We highlight that Pocket Aces have a distribution network of over 95 million followers, which Saregama will leverage to further popularize its music library among the 18-35 audience segment. I t will also create synergies across the artiste and influencer management and long-format video creation businesses,” domestic brokerage ICICI Direct said while maintaining a neutral view on the transaction. 

In the last 1-year, shares of Saregama have delivered just 4.7 per cent return in comparison to Nifty 50 which gained 16.2 per cent during the same period. 

The stock’s 52-week high and low prices are Rs 476.23 and Rs 294.81, respectively. 

Saregama India formerly known as The Gramophone Company of India owns the country’s largest music archives. The company’s segments entail Film TV serials, music, digital content publication as well as marketing support services.