SUMMARY
Nazara saw its operating revenue more than double to INR 263.8 Cr in Q2 FY23 from INR 129.6 Cr in the same quarter of FY22
Buoyed by the growth in its existing business, the company revised its FY23 guidance upwards, and expects consolidated revenue to grow in the range of 70-75% on a YoY basis
Nazara also said that its CEO Manish Agarwal will step down from his role on December 1 and will be replaced by founder Nitish Mittersain
Diversified gaming startup Nazara Technologies reported a 13.7% year-on-year (YoY) increase in its net profit at INR 17.4 Cr in the July-September quarter of the financial year 2022-23 (FY23) on the back of a strong growth trend across its portfolio.
The startup’s net profit stood at INR 15.3 Cr in the corresponding quarter last year. On a sequential basis, the profit rose 5.4% from INR 16.5 Cr in the previous June quarter.
Nazara, whose subsidiaries include the likes of NODWIN Gaming and Sportskeeda, saw its operating revenue more than double to INR 263.8 Cr in Q2 FY23 from INR 129.6 Cr in the same quarter of FY22.
The gaming company’s total revenue stood at INR 287 Cr in Q2 as against INR 135.2 Cr in the corresponding quarter last year and INR 229.7 Cr in Q1 FY23.
Continuing with the last quarter’s trend, Nazara saw the esports segment making the biggest contribution to its revenue. The segment’s revenue grew over 174% YoY to INR 136.6 Cr during the quarter.
While esports contributed almost 52% to Nazara’s operating revenue, gamified early learning segment was the second biggest contributor at almost 23%.
The gamified early learning segment’s revenue grew 11% YoY to INR 59.8 Cr in Q2 this year from INR 53.9 Cr in Q2 FY22.
Among its subsidiaries, esports company NODWIN Gaming witnessed a 240% YoY jump in revenue to INR 104.5 Cr, driven by Master Series and Playground IPs along with strong growth in gaming accessories business.
Meanwhile, Sportskeeda’s revenue grew 75.6% to INR 28.1 Cr in Q2 FY23 owing to a strong sales growth in the US market where the company scaled its video business with Snapchat and strengthened text offering in core American sports like American football, basketball, baseball, and tennis.
“We have built strong execution platform in the first half of the year and we expect continued growth in the second half,” said Nitish Mittersain, Joint Managing Director at Nazara. “We have revised our guidance upward for FY23, and expect our FY23 consolidated revenues to grow in the range of 70-75% on a YoY basis with EBITDA margin above 10%. This is primarily driven by growth in our existing businesses.’’
The company’s total expenses in Q2 FY23 shot up over 118% to INR 261.3 Cr from INR 119.5 Cr in the corresponding quarter last year.
Nazara’s advertising and promotional expenses in Q2 stood at INR 83.3 Cr, contributing about 32% to its total expenses. The expenditure in the segment grew 63.6% YoY from INR 50.9 Cr in Q2 FY22.
On the other hand, its expenses for content, event and web server jumped 283% to INR 63.2 Cr in the quarter.
Nazara has been on an acquisition spree for some time. Last quarter, it acquired a 100% stake in the US-based children-focused gaming firm WildWorks in an all-cash deal.
Speaking about the company’s acquisition strategies, brokerage JM Financial said last month that the WildWorks deal augments the growth challenge that Nazara has been facing as it adds incremental revenue in the near term as well as expands the company’s total addressable market (TAM) in gamified early learning space.
However, the brokerage expressed concern on long-term growth and downgraded the stock to a ‘sell’ rating from ‘hold’ earlier.
But in the latest reported quarter, all its portfolio companies, including the newer acquisitions, have reported an overall good result.
Meanwhile, Nazara also announced that its CEO Manish Agarwal will step down from his role on December 1, 2022 to pursue an entrepreneurial journey. He will be replaced by Nazara founder Nitish Mittersain who will take over as MD and CEO from December 1.
Though various regulatory challenges remain an overhang on the gaming companies that particularly deal with esports and real-money gaming, the sector is expected to keep growing on the back of a rise in the millennial and Gen Z population.
As per a Statista report, the esports industry revenue in India is projected to peak to INR 1,100 Cr in 2025 from about INR 250 Cr in 2021.
Shares of Nazara ended 0.9% lower at INR 688.25 on the BSE on Thursday.
