Nazara Technologies Ltd Management Discussions

Evolving Trends in Indias Gaming Market: RMG and Non-RMG Segments

Indias digital gaming market is divided into Real Money Gaming (RMG), where players can win money in games like poker and fantasy sports, Non-Real Money Gaming (Non-RMG) purely for entertainment, and esports, which includes competitive gaming and live streaming. Indias gaming market is evolving with notable growth projections for both RMG and non-RMG segments. The non-RMG sector is expected to grow rapidly at approximately 28% CAGR from CY 2023 to CY 2027, driven by increasing in-app purchases and subscriptions. Meanwhile, RMG remains a significant revenue driver, constituting around 58% of the digital gaming market.

Due to the recent tax changes effective from April 1, 2023, TDS is applicable at 30%, at the time of withdrawal without any threshold, slowing its growth to a CAGR of about 20%. Despite this, the RMG segment continues to play a crucial role in Indias gaming landscape and both segments are expected to contribute uniquely to the industrys dynamic expansion.

[Source(s): Redseer Research and Analysis Sept, 2023]

The Accelerating Rise of esports and Livestreaming in Indias Gaming Landscape

In CY 2023, esports represented approximately 1% of Indias digital gaming market. Projections indicate a rapid ascent, with esports expected to capture around 4% of the market by CY 2027, up from its modest beginnings. Currently valued at US$ 55-60 million in CY 2023, the esports and livestreaming sector is poised for substantial growth, forecasted to expand at a Compound Annual Growth Rate (CAGR) of 60% from CY 2023 to CY 2027. The market is anticipated to reach US$ 350-370 million by CY 2027, highlighting its emergence as one of the fastest-growing segments within Indias gaming industry.

[Source(s): Redseer Research and Analysis Sept, 2023]

INDIAN MOBILE GAMING INDUSTRY

The Mobile Games Market in India is projected to see a significant increase in revenue, reaching US$ 151.60 million by CY 2024. This growth is expected to continue with an annual growth rate of 7.02% from CY 2024 to CY 2027, resulting in a projected market volume of US$ 185.80 million by the end of CY 2027.

Furthermore, the number of users in the Mobile Games market is anticipated to reach 239.6 million users by CY 2027. This indicates a steady increase in user penetration, which is estimated to be 14.6% in CY 2024 and is projected to reach 16.3% by CY 2027. The mobile gaming industry is rapidly growing due to increased smartphone penetration, advancements in technology like 5G, and diverse monetisation strategies. The popularity of social and competitive gaming, coupled with emerging markets, is further driving this growth. Innovative game development continues to attract a broader audience, indicating a dynamic and evolving market. India is the largest mobile gaming market in terms of app downloads. There are more than 450 million gamers and 1,000+ gaming studios in game quality and reach. This dynamic market allows companies to adapt to India. India has around 1.8 million esports players and 22 professional esports teams. The growth of mobile gaming presents significant opportunities for companies to expand their user base, especially in emerging markets. Diverse revenue streams, including in-app purchases and ads, boost profitability. Investment in innovative game development and strategic partnerships enhances changing consumer preferences and ensure sustained growth.

[Source: https://www.statista.com/outlook/dmo/digital-media/video-games/mobile- games/india]

ABOUT NAZARA TECHNOLOGIES:

Nazara, based in India, functions as a diversified platform in gaming and sports media, with a worldwide reach covering both emerging and established markets such as Africa and North America. The Companys portfolio encompasses interactive gaming, esports, and adtech ecosystems.

Nazara is renowned for the popular IPs tailored to various demographics and interests. These include Kiddopia and Animal Jam, which focus on gamified early learning, and World Cricket Championship (WCC), a cricket simulation game targeting individuals aged 18-45. Additionally, the Company offers Classic Rummy in the skill-based real money gaming (RMG) segment.

Business Overview of Nazara

Note: 1 Based on App Annie Top Grossing rank for Kids under 5 in the United States (iPhone) 2. Based on App Annie Top Grossing rank for Kids between 9-11 years in the United States (iOS devices)

In the Gamified Early Learning segment, our portfolio includes two IPs:

• Kiddopia, a subscription-based app designed for children aged 2-8 years

• WildWorks, featuring In-App purchases and Subscription models, tailored for kids aged 9-11 years

Kiddopia

In FY 2023-24, while overall revenue remained stable, the Company achieved a notable increase in EBITDA, which rose to 56.1 Crores from 35.7 Crores in FY 2022-23. This improvement primarily stemmed from the strong profitability of Kiddopia, supported by disciplined management of trial costs despite reduced spending on user acquisition.

During the same period, the Company observed a temporary decline in its subscriber base, attributed to strategic adjustments in user acquisition expenditure. In response, the Company is actively exploring new growth opportunities, such as IP licensing, to expand its reach beyond current acquisition strategies. This uptick reflects positively on the Companys ongoing efforts to enhance monetisation efficiency and highlights its strategic direction moving forward.

Animal Jam

Animal Jam, created by Utah-based studio WildWorks, is an engaging online platform aimed at children aged 8-12 who are enthusiastic about animals and nature. The game is available on iOS, Android, Mac, and PC, offering a blend of world-building and multiplayer games within a safely moderated social environment. It also features extensive STEAM-oriented educational content, accessible both in-game and through the AJ Academy website. With its rich and educational gameplay, Animal Jam has achieved a stable and profitable status, becoming a trusted and beloved resource for young players.

In FY 2024-25, the Companys focus will be on further expanding this business while also commencing development on a major new game slated for beta-launch later in the fiscal year. Q4 revenue saw significant growth driven by the continued success and monetisation of Wishing Coins in Animal Jam. Introducing Wishing Wells enabled players to make specific wishes for their fantasy animals, requiring varying amounts of coins for detailed requests. Initial offerings were exclusively tailored for Unicorns. The Mystical Wing Bundle, launched in Q4, exceeded revenue expectations by double. An exciting new fantasy animal is scheduled for release in Q1 of FY 2024-25. Additionally, from the Q1 FY 2024-25, a new member feature called ‘Fit Check will be introduced, allowing players to customize accessory sizes. Initially offered to select ambassadors, this feature aims to increase subscription revenue. WildWorks is actively exploring opportunities to integrate popular IPs into Animal Jam as part of its strategy to enhance user acquisition efforts.

World Cricket Championship Nazara taking 100% ownership

The World Cricket Championship (WCC) is Indias leading cricket simulation game and has around millions of monthly and daily active users.

• Nazara is in the process of acquiring the remaining 28.12% stake in Nextwave, which it doesnt already own, from the former promoters. This transaction, involving a combination of cash and equity, is subject to shareholder and regulatory approvals. Following completion expected within the next 4-6 months, Nazara plans to explore merging Nextwave and its Intellectual Property (IP) into its parent Company, Nazara Technologies Limited

• Anticipating this integration, Nazara appointed a new CEO last year, and the former CEO/ founder has facilitated a seamless transfer of knowledge and expertise associated with the WCC franchise, Indias leading cricket simulation game

• Nextwave is reinventing the WCC franchise to drive growth and expand beyond its current scale, with initial actions over the last two quarters focussing on ad monetisation, live ops, brand sales, and user acquisition. Product-related changes will continue through the first half of FY 2025, including updates to existing games WCC2 and WCC3, as well as the new game, Cric Stars, currently in early access

• Nazara intends to adopt a similar strategic approach for its other existing games and potential acquisitions. This involves integrating core gaming IPs into the parent listed entity to unlock synergies and directly capture cash flows at the parent level

Classic Rummy

OpenPlay operates a multi-game consumer gaming platform branded as ‘Classic Rummy, featuring skill-based games. A significant percentage of Monthly Active Users (MAU) for Classic Rummy are based in India. The primary revenue model revolves around collecting platform fees from skill games played on the platform. This business ranks among the top 10 rummy games in India.

Since the implementation of the new GST regime on October 1, 2023, the Real Money Gaming segment has encountered challenges like decline in user spending and offers, retrospective GST notices, adapting to new tax slabs in maintaining profitability. Despite this, Gross Gaming Revenues have remained stable, indicating sustained customer engagement. However, the increase in GST from 12% to 51% of Gross Gaming Revenue has prompted a strategic shift to enhance operational efficiencies and maintain robust performance.

To mitigate these challenges our strategic focus has been on optimising operations and enhancing customer engagement:

• Achieved a significant 17% increase in Monthly Active Users during the second half of the year through targeted retention strategies

• Successfully boosted contributions from reactivated players, increasing their share from 27% to 32%

• Implemented innovative features such as challenges and streaks to deepen player engagement and loyalty

• Encouraged increased utilisation of deposited funds, reducing turnover and optimising financial efficiency

• Strategically reduced bonuses as a percentage of gross gaming revenue to align with evolving market dynamics

• Implemented a comprehensive cost optimisation initiative, resulting in a notable 36% reduction in expenses during Q4 FY 2023-24, focusing on manpower, technology, and acquisition costs

These initiatives reflect our proactive approach to navigating regulatory changes while sustaining growth and enhancing profitability in the Real Money Gaming sector.

Telecom Operator-Driven Subscription Business

Nazara has secured exclusive global distribution rights for a premium selection of Disney and Star Wars games, showcasing beloved characters and stories like Frozen, Star Wars, Big Hero 6, Cars, Duck Tales, Finding Dory, and Toy Story. These high-quality games are offered through Nazaras partnership with leading cellular providers, enabling them to deliver these immersive experiences directly to their customers. Nazara is the only authorised third-party distributor licensed by Disney to curate and manage dedicated digital stores for premium Disney and Star Wars games across specific telecommunications platforms as part of this agreement.

ESPORTS

Esports has revolutionised the sports landscape by blending athletic competition with gaming, offering dynamic and engaging spectator entertainment. Its revenue streams encompass diverse sources:

• Media rights licensing for original content

• Commercial sponsorships spanning offine and online events

• Licensing fees from game developers for community engagement

• Brand sponsorships targeting millennials

• Retail sales of licensed merchandise and gaming accessories

• Advertising inventory sales through programmatic and direct brand partnerships on Sportskeeda

NODWIN

• NODWIN Gaming acquired a 100% stake in Comic Con India for 550 million. With this buyout, NODWIN not only looks to diversify its youth portfolio but also to strategically expand its presence in the global entertainment space

• Founded in CY 2011, Comic Con India has evolved into a company orchestrating various festivals across India, celebrating a wide range of popular culture elements including comics, cosplay movies, merch, and gaming, among others

• The merger of Comic Con India into NODWIN Gaming will create a unique platform for gaming and pop culture enthusiasts, aiming to expand festivals to more cities and markets

• Since its premiere on Amazon MiniTV, Playground Season 3 has captivated audiences nationwide, garnering impressive success metrics across all platforms

• The show has reached over 25 million unique viewers across all touchpoints, each viewer on Amazon MiniTV is spending 60 mins on an average per day with over 40% returning viewers, reflecting the strong audience engagement and loyalty

• In FY 2023-24, NODWIN raised 190 Crores from leading investors in the gaming and new media sectors. The year also saw NODWINs acquisition of Comic Con India, Publish. Me, Ninja, Freaks4U (investment), and Branded, along with acquiring the IP for Playground. These moves support NODWINs strategic expansion efforts, positioning the Company for growth starting from FY 2024-25

• On February 3, 2024, NODWIN relinquished control of Brandscale Innovations Pvt. Ltd. (BIPL), operator of the ‘Wings hardware brand, resulting in BIPLs deconsolidation. NODWIN now holds a 40.17% stake in BIPL, treating it as an associate in consolidated accounts. This adjustment led to a 10% decline in NODWINs total reported revenue for Q4 FY 2023-24

Sportskeeda

• Sportskeeda continues to have a dominant position across multiple sports. While the Company is also one of the fastest and ranked 5 in the US

• Sportskeedas acquisition of Pro Football Network (PFN) in March 2023 came at a time of significant growth for PFN, showcasing promising potential despite not yet reaching profitability

• Since the acquisition, Sportskeeda has collaborated closely with the PFN team to revamp its technology infrastructure, content operations, and advertising operations

• These efforts have resulted in PFN achieving profitability for the entire FY 2023-24 and maintaining profitability consistently from September onwards

• Importantly, this profitability has been achieved alongside impressive growth, with PFN expanding by 57% year-over-year in FY 2023-24

• Publishme: A leading games marketing and publishing enterprise with a strong foothold in Turkey and the MENA region. Its acquisition enhances the Companys position as a key player in the regions gaming market.

• Rusk: An Indian digital entertainment firm specialising in content IPs for Gen-Z and millennial audiences. With investments from Nazara and NODWIN, Rusk Media aims to expand its offerings in gaming and esports content, catering specifically to the 18 to 25-year-old demographic.

3^rd SEGMENT Adtech

• FY 2023-24 marked a strategic shift for Datawrkz, transitioning from lower-margin clients to focus on higher-margin clients and product-based businesses. This pivot led to a decrease in year-over-year revenue from 153 Crores (FY 2022-23) to 104 Crores (FY 2023-24). Despite the decline in revenue, the gross margin remained stable at 28.4 Crores compared to 28.9 Crores, highlighting the increased contribution from higher-margin segments and product offerings

• Throughout FY 2023-24, the Company continued to prioritise investment in product development and ramped up marketing efforts, particularly in the US market. While these initiatives absorbed more of the gross margin, EBITDA for the year decreased from 13.5 Crores to 8.3 Crores. The Company anticipated that these investments would yield positive business outcomes in FY 2024-25 and beyond

FINANCIAL PERFORMANCE AS A MEASURE OF OPERATIONAL PERFORMANCE A. Revenue Performance: Snapshot

In FY 2023-24, Nazara Technologies disclosed a consolidated total operational revenue of 11,383 million, indicating a 4% increase compared to the previous years revenue of

10,910 million. Most of the business segments, namely gaming, esports, and Adtech, showed a steady growth trajectory during FY 2023-24.

Revenue Breakup According to Segments is as Follows

*FY 2023-24 financials based on April 2023 to March 31, 2024 performance. Consolidation in Nazara post April 2023

Year-on-Year Segment-Wise Revenue Performance Analysis: Gaming: Kiddopia

Kiddopia reported relatively flat revenue but achieved a significantly higher EBITDA of

56.1 Crores in FY 2023-24 compared to 35.7 Crores in FY 2022-23, reflecting strong core profitability driven by disciplined cost management and controlled user acquisition spending

WildWorks was acquired on August 31, 2022 and contributed to 947 million in revenues in FY 2023-24

World Cricket Championship revenues dropped by 8% YoY during FY 2023-24 and the EBITDA ^{margins stood at} ~^18%

Openplay

Following the introduction of the new GST regime on October 1, 2023, the Real Money Gaming segment has shown stability, maintaining steady levels of customer engagement with just a minor reduction in Gross Gaming Revenues. Despite the sharp rise in the GST rate from 12% to 51% of Gross Gaming Revenue, the segment continues to attract a strong base of active players, indicating consistent interest and activity in the market.

Telco Subscription: The Telco division experienced a revenue of 32.7 Crores in FY 2023-24 as compared to 51.4 Crores in FY 2022-23, reflecting a (36%) degrowth.

Esports: The segment witnessed 10% of growth in FY 2023-24

NODWIN Gaming

During the FY 2023-24, the growth of 10% was primarily fuelled by strategic investments in esports and New Media Spaces

Sportskeeda: In FY 2023-24, revenues grew by 60% as the Company scaled presence in American sports such as NFL, NBA and Golf. In addition, esports revenues grew by 31% during the same period

Adtech: Revenues declined by 32.2% YoY in FY 2023-24 (Consolidation in Nazara only post April 13, 2022). 38 new clients were added in FY 2023-24, contributing to 15% 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

1. Advertising and Promotion

During the fiscal year, the Company witnessed a 26% decrease in advertising and promotional expenses. This increase was mostly driven by decrease in marketing spends at Kiddopia, as the team was optimising the right marketing channels. The advertising and promotion costs accounted for 17.56% of the total operating expenses in FY 2023-24, as opposed to 24.4% in FY 2022-23.

2. Commission

The Company primarily incurred App Store and Google Play commission fees in the Kiddopia & Animal Jam app and for in-app purchase (IAP) sales in WCC3, representing 6.7% of the total revenue for FY 2023-24, as compared to 5.5% in FY 2022-23.

Other Expenses

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 10.6% of the total operating expenses in FY 2023-24.

3. Purchases, Content, Event and Web Server

Content, Event and Web Server contributed to 46.5% of the total operating expenses in FY 2023-24. This incremental expense is due to the new events conducted by NODWIN, especially on the offine side and games that the Company brought for its user base.

4. Employee Benefits

The cost of employees increased proportionally with the Companys total operations, and employee benefits accounted for 18.4% of the revenue in FY 2023-24.

Non-Operating Costs a. Impairment Losses

Company-Wise Break Up of Impairment Losses

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

Companys mobile accessories brand Wings, operated through Brandscale Innovations Pvt Ltd, which is an 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

Over the past 3-4 years, the Group has acquired several companies, resulting in the acquisition of intangible assets such as goodwill and brands. Goodwill is assessed for impairment annually and not amortised. Brands are amortised over a ten-year period, licenses are amortised over their useful life, and other intangible assets are amortised over six years. The increase in intangible asset amortisation for FY 2023-24 is largely attributable to the recent acquisition of new subsidiaries.

Consolidated EBITDA Performance: Snapshot

Gamified Early Learning: In Kiddopia, optimised advertising expenditures led to higher EBITDA from 357 million in the previous year to 561 million in FY 2023-24 at a flat revenue of 2,194 million this year. In Animal Jam, through multiple product and marketing initiatives we have been able to improve revenue from 522 million last year to 947 million this year and EBITDA from 45 million last year to 188 million this year

(Wildworks FY23 financials based on August 31, 2022 to March 31, 2023)

Esports: EBITDA stood at 2 million in FY 2023-24

Freemium: EBITDA decreased from 63 million in FY 2022-23 to 40 million in FY 2023-24 Telco Subscription: The Telco Subscriptions EBITDA stood at 5 million in FY 2023-24 Skill-based RMG: Since GST regime which kicked in on Oct 1, 2023, the entire Real Money Gaming segment has been struggling which has led to a decrease in Revenue from 531 million in FY 2022-23 to 374 million in FY 2023-24 and EBITDA from 110 million in FY 2022-23 to 21 million in FY 2023-24

Adtech: EBITDA contribution of the Adtech business was 83 million in FY 2023-24

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

*FY 2023-24 financials based on April 13, 2022 to March 31, 2024 performance. Consolidation in Nazara post April 13, 2022

Cash Flow Analysis

Upon integration with the closing balance of 6,283 million from the preceding year, the aggregate sum of cash and cash equivalents at the conclusion of the FY 2023-24 culminated in 14,582 million.

Cash and Cash Equivalents

During the year under review, the Company has the total cash and near cash reserves of

14,582 million as of March 31, 2024, compared to the previous fiscal years value of 6,283 million as of March 31, 2023. It is noteworthy that the Company and most of our subsidiaries remained debt free. During the year ended March 31, 2024, Company has invested 2,204 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 8,299 million during FY 2023-24.

The Companys net worth expanded from 11,048.9 million in FY 2022-23 to 19,986 million in FY 2023-24, while basic EPS increased from 6.29 per share in FY 2022-23 to 10.28 per share in FY 2023-24.

Types of Ratios FY 2023-24 FY 2022-23 % Change Explanation for Change

Interest Coverage 16.21 19.79 (18.09) Working capital funding for Ratios (Times) Brandscale. Reduction in ratio is attributed to greater increase in interest as compared to increase in earning before interest. Current Ratio 4.97 2.98 66.46 Change in ratio is attributed (Times) to greater increase in cash and bank balance and comparatively increase in current liabilities.

Debt Equity Ratio 0.00 0.02 (82.80) Change in ratio is due to (Times) greater decrease in debt vis-?-vis increase in equity during year.

Debtors Turnover 4.94% 7.28% (32.19) Improvement in receivables management.

Operating Profit 11.24% 10.06% 11.68 Higer operating margin Margin Net Profit Margin 7.86% 5.81% 35.30 Higer operating margin

Return on Net 4.48% 5.74% (21.96) Change in ratio is attributed Worth to greater increase in shareholders equity and increase in profit.

Details of the Investments Made by Nazara as of March 31, 2024

Nazara has consistently employed mergers and acquisitions as core strategies since its inception, allowing the Company to broaden its product portfolio and enhance diversification across a wider customer base. In FY 2023-24, NODWIN successfully raised 190 Crores from leading investors in the gaming and new media sectors. During this period, NODWIN executed strategic acquisitions, including Comic Con India, Publish.Me, Ninja, Freaks4U (investment), and Branded, in addition to acquiring the IP for Playground. These initiatives are pivotal in supporting NODWINs expansion plans, positioning the Company for significant growth starting from FY 2024-25.

• Actively exploring consolidation opportunities in the Real Money Gaming (RMG) space, particularly following regulatory clarity

• Nazara continues M&A efforts within and outside India to enhance its portfolio in Gamified Early Learning, esports, Freemium, and Real Money Gaming

• Strategic focus on acquiring IPs targeting young boys, female gamers, and children aged 7 to 12 globally

• Expansion plans encompass South Asia, Southeast Asia, and the Middle East, with a specific emphasis on Freemium and esports markets

• Enhancing capability and capacity across its network to drive growth in Gamified Early Learning, esports, Freemium, and Real Money Gaming sectors

OUTLOOK

The global gaming industry is on the brink of significant expansion, driven by the widespread accessibility of smartphones, advancing technology, and increasing disposable incomes. This growth not only promises economic opportunities but also marks a transformative period for the industry, characterised by evolving trends and innovations that are shaping its future landscape. As industry penetrates untapped markets, its potential to contribute substantially to the economy is amplified. Indias gaming sector is experiencing rapid expansion fueled by a growing base of gamers and the increasing accessibility of gaming platforms. Nazara is positioned as a key player in this evolving landscape, leveraging its strong market position to implement a strategic plan aimed at expanding its footprint, improving game quality, refining monetisation tactics, and pursuing strategic acquisitions and investments. This proactive approach highlights Nazaras commitment to capitalise on the growing opportunities within the Indian gaming market, ensuring sustained growth and leadership in the industry.

FINANCIAL RISKS

The Companys senior management diligently oversees the management of financial risks, including market risk, credit risk, and liquidity risk, ensuring these are regulated through suitable rules and processes. These risks are systematically identified, measured, and managed according to the Companys policies and risk objectives, with the Board of Directors formulating specific policies to address each risk.

MARKET RISK

Market risk refers to the potential fluctuation in the fair value of a financial instruments future cash flows due to changes in market prices, affecting instruments such as deposits, mutual funds, and debt investments. Market risk encompasses interest rate risk, currency risk, and other price risks, including equity price risk and commodity risk.

EQUITY/INVESTMENT PRICE RISK

The Company has made significant investments, including in unlisted subsidiaries, associates, and other investee companies, some of which are startups in the growth stage. To minimize share value risk, the Company invests in various gaming firms, with all investment decisions reviewed and preapproved by the Board of Directors. Additionally, the Board reviews and evaluates exposure to unlisted equity securities in noncurrent and current investments, considering long term growth rates, 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.

RISK FROM FLUCTUATIONS IN FOREIGN CURRENCY

The risk from fluctuations in foreign currency, which can impact the fair value or future cash flows due to changes in foreign exchange rates, is primarily related to the Companys 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.

CREDIT RISK

Credit risk, the possibility of financial loss due to a counterpartys failure to fulfil its obligations under a financial instrument or consumer contract, is present in the Companys operational activities, mainly in the form of trade receivables, and financing activities. To manage this 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. Each business segment traditionally manages credit risk through credit approvals, credit limits, and ongoing monitoring of the creditworthiness of clients who receive credit terms.

LIQUIDITY RISK

Liquidity risk refers to the possibility that the Company may not be able to fulfill 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

Operational risks are also a significant concern for the Company.

Gamified Early Learning Sector: The ability to attract users and maintain low costs may be impacted by changes made by distribution platforms like Apple and Google. However, the Company collaborates with partners and has an inhouse team to stay ahead of such shifts.

Esports Revenue in India: Growth 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 evangelize the Indian market.

In-app Purchases in Freemium Games: The Companys ability to generate revenue through in app purchases depends on the habit of Indian gamers converting to paying gamers and the supply of game designers who can create designs to encourage microtransactions.

Sports Media Business: The capacity to build this business is subject to changes in data privacy regulations imposed by app stores, governments, and ad networks like Facebook and Google.

Real Money Gaming Business: Expansion 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.

Cyber Security: The gaming sector is vulnerable to cybersecurity 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.

Intellectual Property Rights: Infringement of IP rights over game names and content, or acquired or held IPs, can result in financial losses and long drawn claims and litigation. The Company has made sufficient arrangements to protect its intellectual property rights, registering 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 proportionate to the magnitude of its activities. Internal control systems, which include policies and procedures, are intended to ensure proper management of the Companys operations, asset security, and the prevention and detection of fraud and mistakes. To maintain the highest levels of internal control, the Audit Committee reviews systems and processes regularly. The Companys auditors, M/s. MAKK & Co. (formerly known as R. Jaitlia and Co.), Chartered Accountants, conducted a thorough internal audit, and post audit evaluations were conducted to ensure that the findings were followed up on. The Companys Board of Directors is 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 comprehensive ‘Peoples Policy that encompasses essential guidelines for all employees. These include provisions for equal opportunities, codes of business conduct, working hours, probation, internal transfers, promotions, misconduct and sexual harassment protocols, leave policies, departure procedures, business travel norms, and whistleblower policies.

To address issues related to sexual harassment, the Company has instituted an Internal Complaints Committee under the ‘Policy on Sexual Harassment Prevention, implemented since August 23, 2014. The composition of the Board adheres to the guidelines outlined in the Companys ‘Policy on Board Diversity, last updated in March 2024. Similarly, the ‘Nomination and Remuneration Policy, revised in March 2024, applies to Executive and Nonexecutive Directors, Key Management Personnel, and Senior Management Personnel.

Recognising the importance of its workforce, the Company places a strong emphasis on recruiting, developing, motivating, and retaining highly qualified employees, which is crucial for its success. It anticipates a potential labour shortage due to increased employment in technology-driven enterprises and intensified global competition for skilled gaming experts. Employees specializing in game development and gaming platforms selection are particularly vital to the Companys operations.

The Company is committed to fostering a positive, inclusive, safe, and collaborative workplace environment. For the FY 2023-24, it aims to achieve an attrition rate of 15% for employees and 0% for directors. Continuous investment in structured training and upskilling programs is planned to nurture a culture of entrepreneurship, meritocracy, and diversity within the organisation.

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. Multiple 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 incidental factors over which the Company does not have 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.