Saregama taps Karan Johar’s Dharma Productions for a majority stake

RP Sanjiv Goenka-owned music label Saregama India Ltd is in talks to acquire a majority stake in Karan Johar’s Dharma Productions, three people familiar with the development said.

The deal, however, hasn’t reached final stages and may still not go through, they said on the condition of anonymity.

With the box office’s volatility, reduced reliance on satellite and digital rights and rising star fees, it has become increasingly difficult for a production house like Dharma to operate independently, they said.

Actively seeking investments

Dharma Productions has been actively seeking investments for a while, engaging in talks with several large conglomerates and industrialists.

Meanwhile, Saregama, which has already acquired a majority stake in digital entertainment company Pocket Aces Pictures, is looking to strengthen its content and movie catalogue.

Saregama declined to comment, while queries sent to Dharma remained unanswered till press time.

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“Saregama has been betting aggressively on content over the past few years, but it hasn’t really been able to make a mark as far as movie or OTT production goes. That said, thanks to its music catalogue, the company enjoys high valuation and has the wherewithal to acquire a stake in one of the top film production houses in the country,” said one of the persons mentioned above.

Leveraging relations

The person added that it makes business sense for Saregama to try and leverage Dharma’s relationships in the industry and its ability to easily put together projects with top stars. “Given that nobody other than Jio Studios is really green-lighting new films right now, it is a good time for a new player to partner with producers with equity to roll out some cost-effective films. Thanks to Dharma’s reputation, they will also find OTT buyers for post-theatrical deals easily,” the person added.

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According to Dharma's latest financial available from financial intelligence firm Tofler, its revenue in FY23 stood at ₹1,044.16 crore, with a profit of ₹10.69 crore. In the same year, Saregama had a revenue of ₹7,90.3 crore, while net profit stood at ₹1,85.1 crore.

The second person mentioned above said it has been a tough time for producers after the pandemic, and it would make sense for Dharma to become part of a larger cash-rich network. “They don’t have the scalability that say, a listed company has. Even though they have enough projects on the floors, some of the recent films haven’t really fired at the box office,” the person added.

Theatre releases

To be sure, Dharma Productions which mainly produces and distributes Hindi films, has released Kill, Bad Newz, Yodha and Mr & Mrs Mahi in theatres over the past few months. Its Alia Bhatt-starrer Jigra will arrive in cinemas this week. In 2018, the company launched a digital content arm Dharmatic Entertainment which has produced OTT originals such as Call Me Bae (Amazon Prime Video), Fabulous Lives of Bollywood Wives (Netflix) and Koffee With Karan (Disney+ Hotstar), among others.

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In September 2023, Saregama acquired a majority stake in digital entertainment company Pocket Aces Pictures, which included 51.8% shares for ₹174 crore, with a clear path to further acquire another 41% stake in the next 15 months at pre-agreed multiples. The transaction was an all-cash deal.

Further, the company is betting big on live shows and concerts to improve the monetization opportunities for its owned intellectual properties. On the film side, however, Yoodlee Films, the movie production arm of Saregama, is focusing solely on regional cinema, primarily Malayalam and Punjabi, but also Tamil and Telugu.