Established in 1956, it was the first film studio facility in Hyderabad and was built by Yarlagadda Sivarama Prasad, the Raja of Challapalli.

The division produced several notable films, including Mala Pilla (1938), Raithu Bidda (1939), Mayalokam (1945), Rojulu Marayi (1955), Kalasi Vunte Kaladu Sukham (1961), Aatmiyulu (1969), Annadammula Savaal (1978), Radha Kalyanam (1981), Moodu Mullu (1983).

[2] At an event celebrating the film's success, the then Revenue Minister of Andhra Pradesh K. V. Ranga Reddy asked Telugu filmmakers to shift to Hyderabad from Madras.

[2][4] In March 1956, Raja of Challapalli, Yarlagadda Sivarama Prasad, the producer of Rojulu Marayi heeded to Ranga Reddy's call and acquired 11.5 acres of land with a building in Hyderabad.

[10] It was reported in October 2016 that a part of the Sarathi Studios will give way to a commercial mall, multiplex and hotel spread over 97,442 square metres built up area.

Murali Krishna Raju, the COO of the studio said that while the original building with floors for indoor shooting will be intact, the outdoor area will be converted into a thematic mall.

[5] It produced many notable films like Mala Pilla (1938), Raithu Bidda (1939), Mayalokam (1945), Rojulu Marayi (1955), Kalasi Vunte Kaladu Sukham (1961), Aatmiyulu (1969), Annadammula Savaal (1978), Radha Kalyanam (1981), Moodu Mullu (1983).