Nazara Q3: Profit Zooms 46% YoY To INR 29.5 Cr, Sales Up 2%

Gaming major Nazara Technologies’ consolidated net profit zoomed over 46% to INR 29.5 Cr in the third quarter of the financial year 2023-24 (FY24) from INR 20.1 Cr in the year-ago period.

Sequentially, the company’s profit rose 22% from INR 24.18 Cr in Q2 FY24. 

However, operating revenue rose a mere 2% year-on-year (YoY) to INR 320.4 Cr in Q3 FY24. This was a 7% increase sequentially from INR 297.2 Cr. 

The company’s gaming vertical saw contraction as its revenue declined 12% YoY to INR 101.5 Cr in the quarter ended December 2023. 

Adtech vertical also saw degrowth as revenue declined 44% YoY to INR 26.1 Cr in Q3 FY24. The company attributed this decline to the shift in focus towards securing higher-margin business clients and diversifying client portfolio mix to ‘reduce reliance on a few key customers’.

Meanwhile, esports vertical continued to be Nazara’s growth engine as it contributed a revenue of INR 193.7 Cr to the parent’s kitty in Q3 FY24, up 27% YoY. “Recent acquisitions are propelling the expansion of product offerings and market presence,” the company said. 

The gaming company’s EBITDA rose 24% to INR 37.7 Cr in the quarter ended December 2023 from INR 30.5 Cr in the year-ago period. 

“… Our approach of acquiring global gaming IPs and leveraging focused user acquisition alongside data-driven product innovation is beginning to pay off… We are optimistic this strategy will enable substantial scale-up opportunities we can replicate in the future,” said Nazara Technologies cofounder, CEO and joint MD Nitish Mittersain.

Meanwhile, the company reiterated that it is looking for acquisition opportunities. 

“We have also completed our FY24 fundraising goal, securing INR 760 Cr through a preferential placement to marquee investors. With significant cash reserves, we’re in an excellent position to pursue the exciting acquisition opportunities our team has identified, aiming for strategic expansion in the upcoming quarters,” added Mittersain. 

In its Q2 earnings report, the company also announced the appointment of Dhaval Sheth as the head of strategic initiatives (founder’s office). Nazara also designated Sheth as a senior management personnel starting February 19. 

Prior to this, he was the chief financial officer (CFO) of Nazara-owned Kiddopia. 

GST Mandates Weigh Heavily

Speaking about the impact of the 28% GST mandate on the company, Nazara said that the new tax levy on the entry fees for its real-money games has largely been absorbed by the company. 

It also said that gross revenue (before netting loyalty promotion bonuses) continues to be steady while net revenue has suffered on account of higher loyalty promotion expenses. The gaming giant said its real-money game ‘Classic Rummy’ suffered an EBITDA loss in Q3 FY24 on account of these ‘added GST costs’.

Nazara also said that it has undertaken multiple efforts on the operations front to address issues arising out of the 28% GST fallout:

• Absorbed GST impact to protect players’ liquidity
• Increased player retention and reactivation through focused customer relationship management (CRM) campaigns
• Implemented product initiatives to enhance player engagement and reduce deposit churn 
• Initiated several cost optimisation measures

Going ahead, Nazara said it will actively seek consolidation opportunities in the real-money gaming sector. 

Zooming Into Nazara’s Expenses

Total expenditure grew marginally by 0.3% to INR 301 Cr in Q3 FY24 against INR 300 Cr in the year-ago period. 

Of this, content and server expenses accounted for the biggest chunk of expenses at INR 123.80 Cr in the three-month period ended December 2023, down nearly 2% YoY. Employee benefit expenses were the second biggest cost centre at INR 47.5 Cr in Q3 FY24 as against INR 43.57 Cr in Q2 FY24.

Advertising and marketing expenses declined 27% YoY to INR 41.12 Cr in the period under review. 

The company released its quarterly results after market hours. Shares of Nazara ended today’s trading session 3.65% higher at INR 865.95 on the BSE.