INTRODUCTION
Gaming Takes Centre Stage: The ~US$ 200 billion Future of Entertainment
The video game industry has undergone a significant evolution from its humble beginnings of pixelated arcade games in the 1970s to ~US$ 200 billion industry with cutting-edge graphics, immersive gameplay, and an ever-expanding audience. With an estimated 3 billion active players worldwide, the gaming industry has a massive and growing audience. In fact, approximately 50% of these active players are also active buyers of in-game assets, such as virtual goods and currency. This highlights the significant economic potential of the gaming industry and its ability to generate substantial revenue through in-game purchases and other related transactions.
Gaming is rapidly emerging as the future of entertainment, with its market size already surpassing that of the global music and movie industries. In fact, the gaming industry is currently 7 times larger than the global music industry and 5 times larger than the global movie industry, making it a major player in the entertainment landscape.
Betting on Indias Gaming Industry: Mobile Gaming Sparks Growth
Mobile gaming has emerged as a category winner in the overall segment by capturing 50% from the overall pie. As mobile devices become more prevalent and the demand for mobile games continues to grow, the mobile gaming industry is positioned to remain a dominant force in the world of gaming for the foreseeable future.
On the back of the convenience of mobile gaming, we are betting on the explosive growth of Indian gaming market. The Indian gaming market attained a valuation of US$ 2.6 billion by the end of 2022, and it is expected to expand at a CAGR of 27%, achieving a worth of US$ 8.6 billion by 2027. Also, we are witnessing a positive momentum in the monetisation potential of these applications. Pertaining to this, the global in-app market is expanding at a 24% CAGR to US$ 176 billion while the global in-app advertisement market advancing at a 20% CAGR to reach US$ 120 billion in 2023.
(Source: https://timesofindia.indiatimes.com/blogs/voices/5-trends-that-will-shape-the-gaming-sector- in-2023/; https://www.ibef.org/news/indian-gaming-worth-us-2-6-billion-in-fy22-will-grow-four-fold-by-2027-report; https://www.ibef.org/news/india-to-have-700-million-gamers-by-2025-report)
India is the Next Gaming Power Engine and the Destination
By 2027, the Indian gaming market is forecasted to increase to US$ 8.6 billion from US$ 2.6 billion currently. While globally India has captured only ~1.5% of the overall market in terms of market size, with 500 million gamers and 115 million paying users, it captures a significant share of the overall global player base. Over the course of time as younger generations become the key customers, the spending patterns and the market will also shift to become a core gaming market to 50% from the current 20% (Non-RMG).
Source: Lumikai analysis, Momagic Tech
• I ndian users downloaded 15B gaming apps in FY22 up from 10B in FY21
• India is the leading country in game downloads in FY22, more than mature markets such as China and USA
We also feel there is strong potential in building the gaming ecosystem in India - from great quality studios to eSports to infrastructure. India is expected to produce 2000+ gaming companies and 250K+ jobs by 2025. Total funding in the gaming ecosystem has also crossed US$ 3 billion from 2017.
eSports to Emerge as a Billion-Dollar Market by 2025
The Indian eSports market is still in its early stages of development, but it has the potential to become one of the largest eSports markets in the world. The Indian governments official recognition of eSports as a professional sports category is driving substantial progress. As a result, the value of the segment is estimated to surge to US$ 1.1 billion by 2025 from US$ 140 million in 2022. Additionally, the number of eSports players is anticipated to rise from 2,00,000 to over 1.5 million by 2025.
Gaming Spends have Doubled Since 2020
Roughly around 1/5th of gamers in India invest in gaming, with about 115 million gamers spending an average of US$ 13 annually. While this number is lower than the US$ 45 spent on real-money gaming (RMG), its important to recognise that it has doubled since 2020. This indicates a rising interest in gaming as an entertainment medium, comparable to movies and music. While much of this spending is focussed on a few specific games, increased awareness could drive greater expansion of hypercasual, casual, and midcore gaming in India.
We, at Nazara are bullish on the potential of gaming market in India and will continue to nurture this not just from a utilisation perspective but also from a build perspective by empowering budding talent.
(Source: Gameconomy, Primer on Indias Gaming Opportunity Jan 2023- Kalaari Capital; EY FICCI Report April23, Statista for eSports market sizing)
ABOUT NAZARA TECHNOLOGIES
Nazara is a diversified gaming and sports media platform headquartered in India, with a presence in both developing and developed global markets such as Africa and North America. The Companys portfolio includes interactive gaming, eSports, and adtech ecosystems. Nazara has several popular IPs within the gaming segment, such as Kiddopia and Animal Jam which are focussed on gamified early learning, World Cricket Championship (WCC) - a cricket simulation game focussed on 18-45 year olds and Classic Rummy in skill-based real money gaming (RMG). Within eSports, Nazara has leadership position through Nodwin, the dominant player in eSports in India and South Asia and Sportskeeda, a multi-sports content destination catering to the sports fan in India and the United States.
Only Diversified Player in India | IP Owned Assets |
• Geographically: Developed and Emerging Markets - 42% of revenue comes from North America, 40% of revenue from India and 19% from rest of the world | • The only player in India with licensed IP across all categories in gaming and interactive media |
• Only player in India with 100% in-house content development | |
• Business Model: Advertising, Subscription, Media Rights, In-App Purchases, Brand Sponsorships and Platform Fees | • Develops its own software and game engines |
• Business Segment: eSports, Gaming and Adtech | Strong Profitable Growth, Strong Capital Position |
Global Distribution Network | • Strong and profitable growth at Nazara - 75% revenue growth in FY 2022-23 |
• App store partnerships with Apple and Google | • History of scaling businesses within the Nazara Group - Nodwin grew by |
• SEO optimisation and social media distribution | 22.9x in the last 5 years, Sportskeeda and Kiddopia grew by 8.6x and 3.8x in last three years |
• Partnership with media platforms on digital OTT platforms (Glance, Loco, Youtube, Amazon Mini TV) as well as linear TV (Star Sports, Voot) | • 6,283 million of cash and cash equivalent including current investment and fixed deposits with bank |
• D2C gaming accessories business | |
• Pipelines and networks of distribution countries across Africa, Middle East, and South Asia |
Business Overview of Nazara:
Nazara has a number of revenue and EBITDA generating business segments as of March 31, 2023.
S. No. Business Segment | Business Model | Content IP Ownership | IP Name | Contribution FY 2022-23 |
1. Gaming | In-app purchases, Advertising, Subscription, Platform fees | Yes | Kiddopia, Animal Jam, World Cricket Championship, Classic Rummy, Halaplay, Nazara Telco Distribution | 37% of revenue, 56% of EBITDA |
2. eSports | Brand sponsorships, Media rights revenue, Direct to consumer accessories business revenues | Yes | Nodwin, SportsKeeda, Wings, Branded, Pro Football Network, Publishme, Rusk DC, Planet Superheroes | 49% of revenue, 33% of EBITDA |
3. Adtech | Programmatic advertising, Digital media buying and planning, Self serve demand side platform, publisher solution like bidding tools and managing traffic | No | Vizibl, AdPrimus, BidAmp | 14% of revenue, 11% of EBITDA |
4. Unallocated | Corporate cost | - | - | (15%) of EBITDA |
OVERALL BUSINESS PERFORMANCE SNAPSHOT Segment-wise Commentary on Business Performance:
Gaming: We have a portfolio of IPs to capture the large gaming opportunity, providing us segment and geography diversification
Within the Gamified Early Learning segment, we have two IPs - Kiddopia, a subscription-based app for kids between 2-8 years of age and WildWorks which an In-App purchase and Subscription monetised apps for kids between 9-11 years of age
Kiddopia:
• As of March 2023, Kiddopia had achieved 3,11,758 subscribers (iOS), a growth of 1% from March 2022 (3,08,684)
• The team has worked on optimising the user channels for user acquisition in the last one year resulting in the Cost per Transaction (CPT) of US$ 35.9 in Q4 of FY 2022-23 with a quarterly marketing spend of US$ 3.2 million
• The efforts on content development have allowed us to take two price hikes in the last year increasing our monthly pricing to US$ 8.99 per month and annual pricing to US$ 69.99 per year
• Kiddopia continues to be #2 grossing app for kids under 5 years of age in the US (for iOS devices as per data.ai)
Kiddopia Quarterly ARPU and Quarterly Churn Comparison
Key Metrics# | Q4 FY 2022-23 | Q3 FY 2022-23 | Q2 FY 2022-23 | Q1 FY 2022-23 | Q4 FY 2021-22 |
Subscribers | 311,758 | 310,981 | 299,965 | 301,916 | 308,684 |
CPT (US$) | 35.9 | 37.3 | 37.9 | 39.3 | 36.0 |
Marketing Spend (US$ million) | 3.2 | 3.4 | 3.1 | 2.7 | 2.4 |
Avg. Activation Rate | 68.0% | 70.0% | 70.0% | 70.0% | 70.0% |
Avg. ARPU | 6.8 | 6.8 | 6.8 | 6.7 | 6.7 |
Avg. Churn | 6.4% | 5.9% | 6.5% | 5.9% | 6.8% |
*All data is for Kiddopia on iOS
Kiddopia Performance Snapshot FY 2022-23
Particulars | FY 2022-23 | FY 2021-22 | Growth (%) |
Revenue (Rs in million) | 2,206 | 2,044 | 8% |
EBITDA (Rs in million) | 357 | 510 | (30%) |
EBITDA % | 16.2% | 25.0% |
Animal Jam:
• Animal Jam developed by Utah-based studio WildWorks, is a game focussed on kids between 8-12 years of age. The game is an online playground for kids who love animals and the natural world. Available on iOS and Android mobile devices in addition to Mac and PC computers, the game features world building and multiplayer games in a closely moderated social play space and offers a wealth of free STEAM-oriented educational content that players can access in the app and through the AJ Academy website
• Animal Jam is #1 grossing app in its category (8-12 years of age for iOS devices in the US)
World Cricket Championship:
• The World Cricket Championship (WCC) is Indias leading cricket simulation game and has around 9 million monthly active users and 1.5 million daily active users
• In March 2023, Nextwave Multimedia, the developer and publisher of WCC announced collaboration with Cricket West Indies to bring the official West Indies Mens cricket team to WCC3 fans all over the world. Leveraging advanced AI, WCC3 offers state-of-the-art gameplay including realistic animations and professional commentary as well as real time motion capture to give the players an immersive experience. WCC3 will feature the West Indies team in ODI, T20 and Test formats and include the official roster and jerseys of all formats
WCC Snapshot FY 2022-23
Particulars | FY 2022-23 | FY 2021-22 | Growth (%) |
Revenue (Rs in million) | 237 | 188 | 26% |
EBITDA (Rs in million) | 62 | 36 | 72% |
EBITDA % | 26.2% | 19.1% |
Classic Rummy:
• OpenPlay runs a multi-game consumer gaming platform under the ‘Classic Rummy brand which hosts skill-based games
• 100% of MAU for Classic Rummy comes from India. The key monetisation model here is Platform fee collected from skill games played on the platform
• The business is one of Indias top 10 rummy games
Telecom Operator-driven Subscription Business: Nazara has acquired the global distribution rights for a collection of elite Disney and Star Wars games featuring iconic narratives and characters, such as Frozen, Star Wars, Big Hero 6, Cars, Duck Tales, Finding Dory, Toy Story, and several others. Through its network of cellular providers, the corporation provides these high- end games to its clientele. Nazara is the sole third-party distributor authorised and licensed by Disney to create and operate Disney-themed digital stores dedicated to premium Disney and Star Wars games on certain telecommunications channels under the terms of this agreement.
2nd segment:
eSports: eSports has disrupted traditional sports by combining elements of sports and gaming to create fast-paced spectator entertainment content. The revenue streams for eSports include media rights licensing of original content, commercial sponsorships for both offline and online events, licensing fees collected from game developers for community activation, sponsorships from brands targeting the millennial audience, retail of licensed merchandise and gaming accessories, and the sale of advertising inventory through programmatic and direct brand sales on Sportskeeda.
Nodwin:
• Nodwin sustained its revenue growth momentum in the fiscal year 2022-23, exhibiting an increase of 84% in comparison to the previous FY 2021-22
• During the FY 2022-23, media rights constituted approximately 21% of the total revenues generated by the Company. Nodwin generates its revenues through the sale of media rights of its eSports events to distinguished broadcasters, including but not limited to, Star Sports, Disney Hotstar, Jio TV, and Glance
• Additionally, the Company garners sponsorships from brands that aim to target the millennial audience and white-label IPs from game publishers. Nodwin is devoted to engaging with eSports enthusiasts across various domains of interest and has crafted multiple offerings, such as OML IPs for music/live events, Rusk Distribution for Content Needs, Wings for gaming accessories, and Planet Superhero for gaming merchandise.
• Targeting the eSports fan across passion points
• Playground, one of the IPs for eSports audience, saw 1.5+ billion views with 40+ million unique viewers reached in FY 2022-23 along with multiple awards won for the advertiser solutions
• Wings Nodwins gaming accessories brand, emerged as the no.1 gaming brand on Flipkart and has achieved over 30%+ market share on Flipkart in gaming accessories. The business has grown 300% in FY 2022-23
• Nodwin has signed definitive agreement on April 4, 2023 for acquisition of 51% of share capital of Branded Pte. Ltd. at a consideration of US$ 1.3 millionNodwin Performance Snapshot FY 2022-23
Particulars | FY 2022-23 | FY 2021-22 | Growth (%) |
Revenue (Rs in million) | 3,887 | 2,108 | 84% |
EBITDA (Rs in million) | 70 | 157 | -55% |
EBITDA % | 1.8% | 7.4% |
Sportskeeda:
• Sportskeeda continues to have a dominant position across multiple sports. While we are among top 3 sports content destination in India, we are one of the fastest and ranked 9th in the US
Sportskeeda Ranking in the US (Comscore, April 2023)
Domain (10,000) | Traffic Share | MoM traffic change |
0 1 espn.com | 18.63% | ^ 10.02% |
0 2 cbssports.co... | 3.04% | ^ 27.05% |
0 3 sports.yahoo... | 2.83% | ^ 2.98% |
0 4 247sports.co... | 2.24% | ^ 1.33% |
0 5 nbcsports.co... | 1.90% | ^ 7.87% |
0 6 marca.com | 1.86% | ^ 1.96% |
0 7 dickssportin... | 1.76% | ^ 2.04% |
0 8 bleacherrepo... | 1.49% | ^ 1.01% |
0 9 sportskeeda... | 1.39% | ^ 3.7% |
• Sportskeeda acquired ~73% stake in Pro Football Network LLC, a premier source of coverage and analysis of NFL in the US in March 2023 for US$ 1.82 million. With more than 5 million MAUs, PFN is ranked 3rd amongst the top NFL focussed media sites in the US (SimilarWeb Rankings, January 2023)
Revenue Spilt by Sports
(Rs in million)
Combat Sports | Cricket | eSports | Others | Total | |
FY 2021-22 | 347 | 167 | 111 | 167 | 792 |
FY 2022-23 | 461 | 273 | 247 | 242 | 1,224 |
Sportskeeda Performance Snapshot FY 2022-23
Particulars | FY 2022-23 | FY 2021-22 | Growth (%) |
Revenue (? in million) | 1,224 | 792 | 55% |
EBITDA (Rs in million) | 388 | 274 | 42% |
EBITDA % | 31.7% | 34.6%, |
Publishme is a comprehensive games marketing and publishing enterprise with extensive expertise in collaborating with gaming publishers in Turkey and the MENA region. The acquisition helping to facilitate the Companys establishment as a predominant player in the region.
Rusk is an Indian digital entertainment firm that designs content Intellectual Properties (IPs) catering to Gen-Z and millennial consumers. Following the investment from Nazara and Nodwin in Rusk Media, the Company can augment the proliferation of gaming and eSports content oriented towards entertainment and offer media channels with material that resonates with the 18 to 25-year-old demographic.
Wings is a gaming accessories Company that produces and markets audio equipment for gaming purposes. Through this collaboration, Nodwin aspires to widen and intensify its retail footprint and expedite its direct-to-consumer outreach towards gaming and eSports enthusiasts in India.
3rd Segment Adtech:
• Founded in 2013 by Senthil Govindan, Datawrkz is a global advertising technology firm focussed on accelerating user and revenue growth for clients through highly optimised digital advertising
• The Company is headquartered in the India with branches in Singapore and US
• Datawrkz continues to build all three of its business units: ITD (services for advertisers); Mediawrkz (services for publishers); and Vizibl (self-serve demand side platform)
FINANCIAL PERFORMANCE AS A MEASURE OF OPERATIONAL PERFORMANCE:
A. Revenue Performance: Snapshot
In the FY 2022-23, Nazara Technologies disclosed a consolidated total operational revenue of 10,910 million, indicating a 75% increase compared to the previous years revenue of 6,217 million. Most of the business segments, namely gaming, eSports and Adtech, exhibited a robust growth trajectory during the FY 2022-23.
Revenue Breakup According to Segments is as Follows:
(in Rs million)
Revenue from Operations | For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change |
Gaming | 4,063 | 3,178 | 28% |
eSports | 5,315 | 3,039 | 75% |
Adtech | 1,532* | - | - |
Total Operational Revenue | 10,910 | 6,217 | 75% |
Other Income | 495 | 241 | 105% |
Total Income | 11,405 | 6,458 | 77% |
EBITDA | For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change |
Gaming | 713 | 691 | 3% |
eSports | 417 | 414 | 1% |
Adtech | 135* | - | - |
Unallocated | (168) | (159) | 6% |
Total EBITDA | 1097 | 946 | 16% |
*FY 2022-23 financials based on April 13, 2022 to March 31, 2023 performance. Consolidation in Nazara post April 13, 2022
Year-on-Year Segment-wise Revenue Performance Analysis:
Gaming:
• Kiddopia: Kiddopia has came back on growth track and registered a 1% subscriber growth in the year. We also took price hikes in FY 2022-23, leading to a steady increase in ARPU resulting in a revenue growth by 8% in FY 2022-23
• WildWorks was acquired on August 31, 2022 and contributed to 522 million in revenues in FY 2022-23
• World Cricket Championship revenues significantly improved monetisation of users, leading to 38% growth in Ad revenues; 26% growth in overall revenue
• Openplay: In FY 2022-23, the business saw a revenue growth of 33% YoY. We are working on improving acquisition funnel; branding; and player journeys as well as a CRM. Tamil Nadu banned online games with chance of money, including Rummy and Poker in April 2023. TN contributed to ~20% of revenues and active player base in FY 2022-23, and hence the ban will have a short-term negative impact on the business. We are actively working to mitigate this downside risk
Telco Subscription: This business shrank by 18% in FY 2022-23
eSports: The segment witnessed 75% of growth in FY 2022-23
Nodwin Gaming: During the FY 2022-23, the growth of 84% was primarily fuelled by multiple IPs, including Playground, PUBG IPs in South Asia and Digtl among others. In addition, the gaming accessories grew 300% during the year.
Sportskeeda: In FY 2022-23, revenues from the US grew by 89% as the Company scaled presence in American sports such as NFL, NBA and Golf. In addition, eSports revenues grew by 100% during the same period
Adtech: Revenues grew by 53% YoY in FY 2022-23 (Consolidation in Nazara only post April 13, 2022). 42 new clients were added in FY 2022-23, contributing to 34% of total revenues in the same period. The Company anticipates a short-term revenue impact due to the loss of a major client. Nevertheless, the acquisition of new clients is poised to offset this loss and facilitate EBITDA growth in the long run.
B. Expenses: Snapshot Operating Costs
1. Advertising and Promotion
(in Rs million)
For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change | |
Advertising and | 2,399 | 2,017 | 19% |
Promotion |
During the fiscal year, the Company witnessed a 19% increase in advertising and promotional expenses. This increase was mostly driven by increase in marketing spends at Kiddopia, as the team has found the right channels for user acquisition spends. The advertising and promotion costs accounted for 24.4% of the total operating expenses in FY 2022-23, as opposed to 38.3% in FY 2021-22.
2. Commission
(in Rs million)
For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change | |
Commission | 539 | 504 | 7% |
The Company primarily incurred App Store and Google Play commission fees in the Kiddopia app and for in-app purchase (IAP) sales in WCC3, representing 4.9% of the total revenue for FY 2022-23, as compared to 8.1% in FY 2021-22
Other Expenses
(in Rs million)
For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change | |
Other Expenses | 876 | 473 | 85% |
Other Expenses primarily comprised legal and professional expenses, travelling and conveyance expenses, rates and taxes, rent and other office expenses. Expenses increased in line with the Companys total operations and accounted for ~8.9% of the total operating expenses in FY 2022-23.
3. Purchases, Content, Event and Web Server
(in Rs million)
For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change | |
Purchases, Content, | 4,509 | 1,396 | 223% |
Event and Web Server |
Content, Event and Web Server contributed to 45.9% of the total operating expenses in FY 2022-23. This incremental expense as due to the new events conducted by Nodwin, especially on the offline side and games that the Company brought for its user base.
4. Employee Benefits
(in Rs million)
For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change | |
Employee Benefits | 1,490 | 881 | 69% |
The cost of employees increased proportionally with the Companys total operations, and employee benefits accounted for 13.7% of the revenue in FY 2022-23.
Non-Operating Costs
a. Impairment Losses
(in Rs million)
For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change | |
Impairment Losses | 86 | 87 | -1% |
Company-wise Break Up of Impairment Losses:
(in Rs million)
Particulars | For the Year Ended March 31, 2023 |
Goodwill impairment in Halaplay Technologies Private Limited | 71 |
Intangible assets written off in Nextwave Multimedia Private Limited | 11 |
Impairment loss for impairment in financial assets in Nazara Technologies Limited | 4 |
Although the Company experienced significant revenue growth and expanded its operations, it was able to control other expenses by closely monitoring its costs.
b. Finance Cost
For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change | |
Finance Costs | 47 | 6 | 683% |
[Companys mobile accessories brand Wings, operated through Brandscale Innovations Pvt. Ltd., which is a inventory heavy business, has availed certain loan facilities and issued some non-convertible debentures for business operations and working capital, which resulted in increase in finance cost.]
c. Depreciation and Amortisation
For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % Change | |
Depreciation and Amortisation | 571 | 390 | 46% |
The Group acquired several companies over the past 3-4 years, leading to the procurement of intangible assets, including goodwill and brand. While goodwill is not amortised, it is evaluated for impairment annually. The brand is amortised over a period of ten years, the license is amortised throughout the lifespan of the asset, and the remaining intangible assets are amortised over six years. The rise in amortisation of intangible assets in FY 2022-23 can be mainly ascribed to the acquisition of new subsidiaries.
Consolidated EBITDA Performance: Snapshot
The Companys EBITDA for FY 2022-23 amounted to 1,097 million, exhibiting a growth of 16% from the previous fiscal years figure of 946 million. Consequently, the EBITDA margin stood at 10.1% in FY 2022-23 from 15.2% in FY 2021-22.
(in Rs million)
Particulars | FY 2022-23 | FY 2022-23 % | FY 2021-22 | FY 2021-22 % |
EBITDA | 1,097 | 10.1% | 946 | 15.2% |
Segment-wise EBITDA Performance: Snapshot
(in Rs million)
Particulars | FY 2022-23 | FY 2022-23 % | FY 2021-22 | FY 2021-22 % |
eSports | 417 | 7.8% | 414 | 13.6% |
Gaming | 713 | 17.5% | 691 | 21.7% |
Adtech | 135 | 8.8% | - | - |
Year-on-Year Segment-wise EBITDA Performance Analysis:
Gamified Early Learning: Increased advertising expenditures and other expenses increased revenue led to lower EBITDA, which reduced from 510 million in the previous year to 357 million in FY 2022-23
eSports: EBITDA stood at 417 million in FY 2022-23
Freemium: EBITDA increased from 36 million in FY 2021-22 to 62 million in FY 2022-23
Telco Subscription: The Telco Subscriptions EBITDA stood at 139 million in FY 2022-23 from 142 million in FY 2021-22
Skill-based RMG: Integration of HalaPlay and OpenPlay led to EBITDA from (1) million in FY 2021-22 to 110 million in FY 2022-23, as variable expenses decreased
Adtech: EBITDA contribution of the Adtech business was 135 million in FY 2022-23
The Company aims to sustain its market leadership in the high-growth business segments of Interactive Gaming, Gamified Early Learning, and eSports while prioritising profitable growth.
Company wise Financial Reporting:
Revenue | Nature of Relationship | For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | % YoY Growth |
Nodwin Gaming Private Limited (Consolidated) | Subsidiary Company | 3,887 | 2,108 | 84% |
Absolute Sports Private Limited | Subsidiary Company | 1,224 | 792 | 55% |
Paper Boat Apps Private Limited (Consolidated) | Subsidiary Company | 2,206 | 2,044 | 8% |
Nextwave Multimedia Private Limited | Subsidiary Company | 237 | 188 | 26% |
Openplay Technologies Private Limited | Subsidiary Company | 530 | 400 | 33% |
Datawrkz Business Solution Private Limted (consolidated) | Subsidiary Company | 1,532* |
EBITDA | For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 |
Nodwin Gaming Private Limited (Consolidated) | 70 | 157 |
Absolute Sports Private Limited | 388 | 274 |
Paper Boat Apps Private Limited (consolidated) | 357 | 510 |
Nextwave Multimedia Private Limited | 62 | 36 |
Openplay Technologies Private Limited | 113 | 42 |
Datawrkz Business Solution Private Limted (Consolidated) | 135* | - |
*FY 2022-23 financials based on April 13, 2022 to March 31, 2023 performance. Consolidation in Nazara post April 13, 2022
Cash Flow Analysis
During the year under review, witnessed a dip in cash and near cash reserves, inclusive of current investments, to 628.3 million as of March 31, 2023, compared to the previous fiscals value of 7,326 million as of March 31, 2022. It is noteworthy that the Company and most of our subsidiaries remained debt free. The following is a breakdown of cash additions from key sources during the year:
Particulars | For the Year Ended March 31, 2023 | For the Year Ended March 31, 2022 | Reasons for Change |
Net cash generated from/(used in) operating activities | 81 million | 621 million | Investments in working capital primarily for our consumer accessory business and certain advance payments made to Kiddopia vendors in the normal course of business |
Cash generated from/ (used in) Investing activities | (952) million | (3,495) million | Equity proceeds generated in FY22 have been invested in current investments, hence this was higher in FY2022. |
Cash generated from financing activities | 145 million | 3,348 million | Nazara raised capital by preferential issue of equity in FY 2021-22 |
Upon integration with the closing balance of 2,081 million from the preceding year, the aggregate sum of cash and cash equivalents at the conclusion of the FY 2022-23 culminated in Rs 1,421 million.
Cash and Cash Equivalents:
During the year under review, the Company has the total cash and near cash reserves of Rs. 6,283 million as of March 31, 2023, compared to the previous fiscal years value of Rs. 7,326 million as of March 31, 2022. It is noteworthy that the Company and most of our subsidiaries remained debt free. During the year ended March 31, 2023, Company has invested Rs. 1,337 million towards acquisition of subsidiaries (net of cash) and acquiring additional stake from non- controlling interest. Netting this from its cash reserves, the company has increased its cash and near cash reserves by Rs. 294 million during FY 2022-23.
The Companys net worth expanded from 10,413 million in FY 2021-22 to 11,049 million in FY 2022-23, while basic EPS increased from 4.55 per share in FY 2021-22 to 6.29 per share in FY 2022-23.
Statement of Key Ratios
Types of Ratios | FY 2022-23 | FY 2021-22 | % Change | Explanation for Change |
Interest Coverage Ratios (Times) | 32 | NA | Not Material | Working capital funding for Brandscale |
Current Ratio (Times) | 2.98 | 5.29 | -43.5% | Increase in payable for expenses for FY 2022-23 |
Debt Equity Ratio (Times) | 0.02 | NA | Not Material | Working capital funding for Brandscale |
Debtors Turnover | 9.2 | 8.1 | 12.8% | Improvement in receivables management |
Operating Profit Margin (%) | 10.1 | 15.2 | -33.5% | Investments in our eSports business for growth and reversion of marketing spends back to normal levels for Kiddopia |
Net Profit Margin (%) | 5.6 | 8.2 | 31.7% | Lower operating margins |
Return on Net Worth (%) | 5.6 | 4.9 | -0.9% | Not Material |
Commentary on Key Growth Drivers & Investment - Performance Snapshot:
Details of the Investments Made by Nazara as on March 31, 2023
Mergers and acquisitions have been the key strategies for Nazara from the inception. This enables the Company to expand its product portfolio while strengthening the diversification for a wider customer base. In FY 2022-23, the Company acquired 100% stake of WildWorks which solidified the leadership position of Nazara in the Gamified Early learning space for kids. Furthermore, this has helped the Company to drive growth in the subscriber base while accelerating the production of content updates and increasing geographic reach through partnerships in Asia Pacific and Latin America. Strategic mergers and acquisitions (Friends of Nazara) will drive the progressive growth of the Company as well as establish a strong brand partnership model.
Investments made by Nazara Group as on March 31, 2023 | ||||
Name of the Party | Amount (in Rs million) | |||
Cash Consideration | Share Swap and ESOP | Total | Nazaras Holding (%) | |
Nextwave Multimedia Private Limited | 300 | 228 | 528 | 52.38 |
Nodwin Gaming Private Limited | 505 | 414 | 919 | 54.52 |
Halaplay Technologies Private Limited | 432 | 146 | 578 | 64.70 |
Crimzoncode Technologies Private Limited | 17 | 13 | 30 | 100 |
Khichadi Technologies Private Limited | 7 | 7 | 16 | |
Sports Unity Private Limited | 61 | 61 | 62.53 |
Investments made by Nazara Group as on March 31, 2023 | ||||
Name of the Party | Amount (in Rs million) | |||
Cash Consideration | Share Swap and ESOP | Total | Nazaras Holding (%) | |
Absolute Sports Private Limited | 305 | 343 | 648 | 86.54 |
Paper Boat Apps Private Limited | 500 | 435 | 935 | 51.58 |
Instasportz Consultancy Private Limited | 10 | 10 | 10 | |
Moong Labs Technologies Private Limited | 10 | 10 | 29.38 | |
Rusk Media Private Limited (Nazara Standalone) | 20 | 20 | 3.12 | |
Openplay Technologies Private Limited | 434 | 1,430 | 1,864 | 100 |
Publish Me Global FZ LLC (including loans) | 202 | 202 | 72.46 | |
Hashcube | 23 | 23 | 12.38 | |
Mastermind | 27 | 27 | 26 | |
AFK Gaming Private Limited | 6 | 6 | 10 | |
Rusk Media Private Limited (Nodwin investment) | 100 | 100 | 10 | |
Nodwin Investment Private Limited | 0 | 0 | 54.52 | |
Rusk Distribution Private Limited (Nodwin Investment) | 0 | 0 | 27.81 | |
OML Division of Nodwin | 730 | 730 | NA | |
WildWorks | 828 | 828 | 100 | |
Datawrkz Business Solution Private Limited | 350 | 250 | 600 | 33 |
Litifer Technologies Private Limited | 11 | 11 | 1.47 | |
Superhero Brands Private Limited | 35 | 35 | 38.88% | |
Brandscale Innovatians Private Limited | 100 | 100 | 19.08% |
Nazara will continue to pursue M&A both within and outside of India to address gaps in its portfolio, particularly in areas such as Gamified Early learning, eSports, Freemium, and Real Money Gaming.
• The Company aims to take advantage of opportunities in demographics worldwide, including acquiring IPs that cater to young boys, female gamers, and children aged 7 to 12
• Additionally, Nazara plans to expand into South Asia, Southeast Asia, and the Middle East for Freemium and eSports
• The Company also aims to build capability and capacity within the Nazara network to establish a strong enabling environment for the growth of Gamified Early learning, eSports, Freemium, and Real Money Gaming
Outlook
The gaming industry is witnessing rapid expansion worldwide and appears to be on the cusp of a period of substantial growth, fuelled by the widespread availability of smartphones, the affordability of technology, and rising disposable incomes. This presents a remarkable opportunity for the industry to contribute significantly to the economy, with incremental penetration into untapped markets driving expansion. As the number of gamers in India grows, convenient gaming culture is anticipated to emerge, further catalysing industry growth.
Nazara is a leading gaming company in India with a dominant market position and vast growth opportunities. Leveraging its position, the Company has developed a strategic plan focussed on expanding its presence in the market, improving its game offerings and monetisation strategies, exploring strategic acquisitions and investments, and continually investing in research and development to enhance its technological architecture. By prioritising these key areas, Nazara aims to maintain its market leadership and capitalise on the immense potential for growth in the Indian mobile game industry, ensuring continued success for the Company in the future.
The recent acknowledgement of eSports by the Government of India as a part of a multi-sports event will open new casement of opportunities. With the stronghold in the segment through Nodwin and Sportskeeda, Nazara is well-positioned to capitalise on the opportunities in the Indian eSports division and make the most of it.
RISKS AND MITIGATION
Financial Risk
The Companys senior management oversees the management of market risk, credit risk, and liquidity risk, which can leave the Company vulnerable. Suitable rules and processes are put in place to regulate the Companys financial risk operations, and risks are identified, measured, and managed in accordance with the Companys policies and risk objectives. The Board of Directors formulates policies to address each of these risks, as outlined below:
1. Market Risk - This refers to the risk that the fair value of a financial instruments future cash flows will fluctuate due to changes in market prices, affecting instruments such as deposits, mutual funds, and debt investments. Market risk is classified into three categories: interest rate risk, currency risk, and other price risk, which includes equity price risk and commodity risk.
However, sensitivity analysis does not include the impact of market factors on the carrying values of gratuity and other post-retirement obligations, provisions, and non-financial assets and liabilities of overseas businesses.
1.1 Equity/Investment Price Risk - The Company has made significant investments, including unlisted subsidiaries, associates, and other investee companies, some of which are start- ups in the growth stage. The Company minimises share value risk by investing in various gaming firms, and all investment decisions are reviewed and pre-approved by the Board of Directors. In addition, the Board reviews and evaluates the exposure to unlisted equity securities in non-current and current investments at the reporting date. The Board considers unobservable inputs, such as long-term growth rates and the weighted average cost of capital, 5-year cash flow projections, actual performance compared to approved cash flow projections, and sensitivity analysis performed by an independent external valuation expert.
1.2 Risk from Fluctuations in Foreign Currency - The risk of an exposures fair value or future cash flows being impacted by changes in foreign exchange rates is known as foreign currency risk. The Companys primary exposure to this risk is related to its operational activities, where revenue or expenses are denominated in foreign currency and its net investments in foreign subsidiaries. The Company does not use derivative instruments for hedging or speculative purposes.
2. Credit Risk - Credit Risk is the possibility of financial loss due to a counterpartys failure to fulfil its obligations under a financial instrument or consumer contract. The Company faces credit risk in its operational activities, mainly in the form of trade receivables, and financing activities. To manage credit risk, the Company employs an internal credit rating system that assigns low, moderate, or high credit risk ratings to each class of financial assets based on various criteria and assumptions. Traditionally, each business segment has managed credit risk through credit approvals, credit limits, and ongoing monitoring of the creditworthiness of clients who receive credit terms.
3. Liquidity Risk - Liquidity risk refers to the possibility that the Company may not be able to fulfil its obligations when they come due. Senior management oversees policies and procedures related to such risks. The management team evaluates the net liquidity position using rolling forecasts based on anticipated cash flows. The Companys policy on liquidity risk is to maintain sufficient cash reserves and invest in liquid mutual funds to meet its operating requirements with a reasonable degree of cushion.
Operational Risks:
• The Companys ability to attract users and maintain low costs in the Gamified Early learning sector may be impacted by changes made by distribution platforms like Apple and Google. However, the Company collaborates with partners and has an in-house team to stay ahead of such shifts
• The Companys growth in eSports revenue in India is dependent on an increase in the revenue scale of the Indian mobile gaming market and the entry of more global gaming publishers in India. The Company engages with stakeholders to evangelise the Indian market
• The Companys ability to generate revenue through in-app purchases in Freemium games is dependent on the habit of Indian gamers to convert to paying gamers and the supply of game designers who can create designs to encourage microtransactions
• The Companys capacity to build its sports media business is subject to changes in data privacy regulations imposed by app stores, governments, and ad networks like Facebook and Google
• The Companys capacity to expand its Real Money Gaming business is subject to changing legal and regulatory concerns, such as changes in tax regimes and anti-online real money gaming rulings based on societal optics. The Company collaborates with other leaders and agencies to educate stakeholders
• The gaming sector is vulnerable to cyber security breaches and data compromise, which can harm reputation and result in long-term financial impact. The Company has implemented appropriate IT measures, firewalls, and antivirus software to safeguard data privacy
• Infringement of IP rights over game names and content, or acquired or held IPs, results in financial losses and long-drawn claims and litigation. The Company has made sufficient arrangements to protect its intellectual property rights. It has registered for protection with the Office of the Controller General of Patents, Designs, and Trademarks of the Government of Indias Department for Promotion of Industry and Internal Trade
Internal Control Systems and Adequacy
The Company has suitable internal financial control mechanisms that are proportionate to the magnitude of its activities. Internal control systems, which include policies and procedures, are intended to ensure good management of the Companys operations, asset security, and the prevention and detection of frauds and mistakes. Since they are put in place by the Company to act as a deterrent to any wrongdoings by the Company and to prevent any misbehaviour, they should be effective in providing credible financial reports to avoid fraud.
To maintain the highest levels of Internal Control, the Audit Committee reviews systems and processes on a regular basis. The Companys Auditors made no major or severe observations during the year under review, indicating the inefficiency or inadequacy of such controls. M/s. MAKK & Co. (formarly known as R. Jaitlia and Co.), Chartered Accountants conducted a thorough internal audit. Post-audit evaluations were also conducted to ensure that the findings were followed up on. The Companys Board of Directors are responsible for ensuring that necessary internal controls are in place throughout the preparation and presentation of financial statements.
Human Resources
The Company has established a ‘Peoples Policy that outlines important requirements applicable to all employees. This policy covers equal opportunity, business behaviour codes, working hours, probation, internal transfers, promotions, misconduct and sexual harassment, leave, departure, business travel, and whistle-blower issues.
To address sexual harassment allegations, the Company has formed an Internal Complaints Committee under the ‘Policy on Sexual Harassment Prevention implemented on August 23, 2014. The composition of the Board is subject to the Companys ‘Policy on Board Diversity, last revised in March 2023. The ‘Nomination and Remuneration Policy, last modified in March 2023, applies to Executive and Non-executive Directors, Key Management Personnel, and Senior Management Personnel.
Being a people-driven Company, recruiting, developing, motivating, retaining, and efficiently using highly qualified employees across companies is critical to the Companys success. There is an expected labour shortage due to increased employment by technology-driven enterprises and increased global competition for competent gaming experts. Game developers and gaming industry specialists who select mobile games and develop/provide gaming platforms are also crucial to the Company.
Nazara aims to provide a good, welcoming, safe, and collaborative workplace. The Companys attrition rate for FY 2022-23 was 15% to 26.53% for employees and 1% for director. Employees are the most valuable assets, and the Company maintains people-centric policies and procedures. Finding the right personnel, such as game developers, animators, technology stack engineers, game designers, UI/UX professionals, M&A specialists, HR business partners, and marketers, is a crucial investment area for the Company. The Company plans to invest in structured training and upskilling programmes on a continuous basis, promoting a culture of entrepreneurship, meritocracy, and diversity.
Cautionary Statement
Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations, and others may constitute ‘forward-looking statements within the meaning of applicable securities laws and regulations. Actual results may differ from those expected or implied. Several factors that could significantly impact the Companys operations include economic conditions affecting demand, supply and price conditions in the markets, changes in technology, changes in Government regulations, tax laws and other statutes, climatic conditions, and such incidental factors over which the Company does not have any direct control. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Copyright © IIFL Securities Ltd. All rights Reserved.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.