Ullu Digital Case Study: Business Model, Financials, and SWOT Analysis

What is your preferred weekend activity: hanging out with friends, going out to parties, or staying in and watching movies? If you enjoy watching online content, this blog post will introduce you to a digital company that creates video content and plans to go public.  

The business, called “Ulu Digital.”, in February 2024, submitted a DRHP to SEBI but subsequently found itself the subject of an inquiry into the content they are providing.

Let’s get right into the blog with a brief company introduction. 

Overview of Ullu Digital

In 2019, the Mumbai-based business “Ullu Digital Private Limited” was established. The company’s primary goal is to offer, distribute, display, market, and promote a variety of content on its Over-The-Top (OTT) platform, which is dubbed “Ullu.” 

Promoters

Vibhu and Megha Agarwal own around 95% of the business and are promoters. Vibhu Agarwal, the principal owner, owns 61.75%, and 33.25% is held by his wife, Megha Agarwal. Zenith Multi Trading DMCC owns the remaining 5% of the business.

Business Model of Ullu Digital

Ullu’s business model can be split into two distinct segments: the original content model and the content licensing model.

The company has production service agreements within the licensed content segment with multiple independent production houses that handle creating content, scripts, and storylines. Some of the licensed content the company has access to are Mallika, Mastram, Riti Riwaj, and others. 

On the other hand, independent production firms handle the production of original content models once an in-house script writer creates the storyline and script. The completed post-production material is made available on their “Ullu” app. Original content models include Hotspot Charlie, Nancy, Mini Bomb, and others. 

Revenue Model

The business makes money through five distinct services: subscriptions, advertising, YouTube-based income, intellectual property rights, and services linked to coupons. Their primary source of income is derived from a subscription-based model, in which users pay a platform fee to access its content.

Revenue Drivers

Particulars	March 2023	March 2022	March 2021
Subscription	9051.17	4655.08	2507.97
Youtube	6.58	24.63	11.26
Advertisement	175.98	–	–
Intellectual Property	0.93	–	237.5
Coupon Related	9.53	2.98	–
Other	70.35	–	–
Total Revenue	9,314.54	4,682.69	2,756.73

Financial Highlights of Ullu Digital

Balance Sheet

Particulars	31st March 2023	31st March 2022	31st March 2021
Non-Current Asset	241.12	183.14	209.24
Current Asset	6,914.84	4,529.39	2,681.75
Total Asset	7,156.05	4,712.54	2,890.97
Equity	2,075.9	566.33	170.02
Long Term Liability	193.29	82.12	94.61
Current Liability	4,886.85	4,064.09	2,626.33

The aforementioned data shows that the company’s total assets saw an exponential increase in FY 2023, rising from 4,712.54 lakhs in FY 2022 to 6,914.84 lakhs in FY 2023. Additionally, the company’s equity increased by almost 266% in FY 2023 compared to FY 2022.

Income Statement

Particulars	31st March 2023	31st March 2022	31st March 2021
Revenue from operations	9,314.55	4,682.68	2,756.73
Total Income	9,369.86	4,700.39	2,763.36
Total Expenses	7,244.98	4,145.91	2,586.50
Profit before tax	2,124.88	554.48	176.86
Profit after tax	1,511.06	392.89	125.71

The company’s operating revenue has nearly doubled over the last three fiscal years. The profit after taxes has also increased by approximately four times in FY 2023 compared to FY 2022. 

Cash Flow Statement

Particulars	31st March 2023	31st March 2022	31st March 2021
Cash flow from operating activities	167.68	582.01	386.13
Cash flow from investing activities	(133.83)	(44.63)	(125.65)
Cash flow from financing activities	(53.87)	35.20	24.13

The company’s cash flow from investing activities has been negative for the last three years. Another noteworthy point is that their cash flow from financing activities was negative by 53.87 lakhs in FY 2023. The company’s cash flow from operating activities decreased by almost 71% in the most recent fiscal year, which may be a cause for concern. 

Analytical Ratios

Particulars	31st March 2023	31st March 2022	31st March 2021
Debt-Equity Ratio	0.12	0.48	1.16
Net Profit Margin (%)	16	8	5
Return on Equity Ratio (%)	114	108	117
Current Ratio	1.41	1.11	1.02
Return on Capital Employed (%)	95	92	95

Based on an analysis of the company’s key performance indicators, we can infer that it has improved its debt-to-equity ratio by repaying its debt promptly. The company’s net profit margin has also increased over the last three years.

SWOT Analysis of Ullu digital

The Ullu Digital SWOT Analysis highlights its strengths, weaknesses, opportunities, and threats, showcasing its market position and growth potential.

Strengths

• The company caters to a specialized audience interested in adult-themed content by offering a wide variety of content on their OTT platform, including web series and short films. 
• Ullu has leveraged digital platform technologies and reached a broad audience.
• The OTT market is expanding faster than the overall economy, eventually propelling the company’s growth.
• The business attempts to create content based on customer preferences and adjusts to changes in customers’ needs.

Weaknesses

• Ullu Digital has a narrow target audience that is less appealing to mainstream platforms.
• Some critics have questioned the website’s material regarding its topics, storyline, and quality.
• The business is up against fierce competition from well-known OTT platforms.
• Ullu’s posted content may be subject to censorship, age restrictions, and other legal challenges.

Opportunities

• Ullu can offer a wide range of content genres, which will diversify their library.
• By providing its services to a global clientele, the business will be able to grow its subscriber base.
• To increase the scope of their content inventory, they can work with production companies and other streaming services.

Threats

• The business faces competition from well-established competitors in the industry, which could reduce its profitability, pricing power, and market share.
• Their revenue may be impacted by the quick development of technology, the creation of new platforms, or shifts in customer attitudes toward alternative types of entertainment.
• Legal charges pertaining to indecency or obscenity may result in fines or maybe a firm ban.
• Since the company targets a smaller audience than other OTT platforms, any preference shift may affect its success.

Reason For Trouble For Ullu IPO

The company filed a DRHP with SEBI in February 2024 to raise 150 crore through the issuance of shares. The money raised from this issue will be used to create content for large screens and distribute it to smaller ones.

At the request of the National Commission for Protection of Child Rights (NCPCR), regulatory bodies such as SEBI, the Ministry of Corporate Affairs, and the Ministry of Electronics and Information Technology (MeitY) have opened an investigation against Ullu.

The complaint brings up the fact that youngsters can access incredibly offensive and indecent content on their apps. The NCPCR chairperson added that the app is simple to download from the Google and Apple stores and that there doesn’t appear to be a KYC need for any content made available to the app’s private group.

Conclusion

With its aggressive expansion plans, Ullu Digital hopes to go public and take advantage of India’s rising demand for digital content. The company has reported impressive results in recent years, but even though everyone is concerned about the fall in cash flow from operating activities, their profit margins are steadily increasing. The public criticizes them for the explicit and pornographic content on their site, which caters to a specific niche market. Thus, with a clear growth trajectory, the company wants to improve its position in the cutthroat OTT market by utilizing the revenues from the IPO. 

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