Multibagger: This small-cap stock turned ₹10,000 into ₹14.4 lakh in 10 years

In a highly volatile and unpredictable equity market, delivering consistent returns to shareholders over an extended period is no small feat. However, there are a handful of stocks that have shown remarkable resilience and stability, navigating through market uncertainties, economic downturns, and industry disruptions with ease.

Tips Industries, one of India’s leading entertainment companies is one such stock that has managed to maintain a consistent upward trajectory over the last five calendar years, delivering steady returns to its investors.

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The company's shares saw significant growth over the years, with a 47% increase in CY19, followed by a remarkable surge of 252% in CY20. This positive trend continued into CY21, with a return of 487%.

However, in CY22, the stock experienced some profit booking, resulting in a marginal drop of 5.44%. CY23 witnessed a strong rebound, with a gain of 93%, and the momentum has persisted in the current year (CY24), with the stock spiking another 52% so far.

Reflecting on the past decade, the stock has experienced a remarkable ascent, climbing from ₹3.60 apiece to the current trading price of ₹519, delivering an impressive return of 14,316% to its shareholders. For investors who remained invested during this period, an initial investment of ₹10,000 would have grown to ₹14.40 lakh.

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Tips has been engaged in the business of the creation and acquisition of audio-visual content for music and the digital exploitation of audio-visual content library digitally in India and overseas through licencing on various distribution platforms. One of the strongest assets of TIPS is its rich and evergreen music collection.

More Upside

In a recent note, domestic brokerage firm Ventura Securities has initiated coverage on the stock with a 'buy' rating and set a target price of ₹612 apiece. citing the strong growth in the Indian music industry. 

The brokerage said that the company stands out as a strategic player with a comprehensive approach to content creation, leveraging a library of 30,000 songs and a substantial subscriber base of 63.1 million vs. Saregama, which has over 1,50,000 songs but only a subscriber base of 38.9 million.

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TIL's commitment to innovation is highlighted by allocating 30% of revenue to new content investments. Notably, Tips Films plans to release 10–12 movies annually, featuring songs for sale to TIL. This integrated approach, as per the brokerage, will maximise monetization opportunities and emphasise TIL's dedication to content-driven revenue streams. 

In 2022, the Indian music industry experienced a noteworthy 19% growth, reaching a valuation of ₹22 billion. The music streaming sector amassed an audience of approximately 208 million, with paid subscribers constituting a modest 2.4%, numbering around 4-5 million.

The rise of subscription-based models

According to the brokerage, the trend towards subscription-based models is becoming more pronounced among streaming platforms. It highlighted Spotify's 40% premium subscriber base, contributing a substantial 90% to its revenue, in contrast to the 10% contributed by the 60% of free subscribers. 

This shift towards premium subscriptions implies that music labels have the potential to significantly augment their earnings beyond the customary ₹0.1 per stream, it added. 

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On the financial outlook front, the brokerage anticipates Tips revenues to grow at a CAGR of 27.4%, reaching ₹386 crore by FY26. It also forecasts EBITDA to grow at a CAGR of 35.6%, reaching ₹256 crore, boasting margins of 66.3% (an increase of 1170 basis points) by the same period. 

Additionally, net earnings are projected to surge from ₹76.5 crore in FY23 to ₹196.5 crore (a CAGR of 37%), with margins of 50.9% (an increase of 990 basis points).

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.