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Nazara Technologies: Pioneering growth amid regulatory challenges in the gaming industry

Nazara Technologies

In the dynamic realm of gaming and media, Nazara Technologies emerges as a pioneering force, adept at navigating challenges while seizing expansion opportunities. 

With a diverse portfolio that encompasses gaming, esports, and advertising, the company continues to innovate and broaden its horizons despite regulatory hurdles.

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Diversified offerings catering to varied audiences

Nazara Technologies is a leading player in the gaming and media industry, boasting a multifaceted presence across three key sectors: gaming IPs, esports events, and advertising solutions. 

In the gaming sector, Nazara offers popular titles like the World Cricket Championship, Kiddopia, and Animal Jam, catering to various audiences. Its esports division includes Nodwin Gaming and Sportskeeda, contributing significantly to the company’s revenue. 

Additionally, Nazara operates in the advertising space through Datawrkz, providing targeted advertising solutions. With acclaimed gaming titles, engaging esports events, and informative content, Nazara has solidified its position as a versatile player in the entertainment industry.

Managing the impact of GST

The introduction of a 28% GST mandate has posed challenges for Nazara, particularly affecting its real-money gaming segment. The company has absorbed a significant portion of the GST levy on entry fees for its real-money games, impacting its net revenue. 

Classic Rummy, one of Nazara’s real-money games, reported an EBITDA loss in Q3 FY24 due to increased GST costs. Despite efforts to mitigate the impact, such as absorbing GST to protect players’ liquidity and implementing cost optimisation measures, the company faced challenges in maintaining profitability in specific segments.

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Driving growth through strategic initiatives

Despite the GST impact, Nazara Technologies has witnessed substantial growth driven by various factors. The company’s esports division emerged as a significant revenue generator, with Nodwin Gaming leading the charge. 

Sportskeeda also contributed significantly to profitability, fueled by a robust performance in the US market. Nazara’s strategic approach of acquiring global gaming IPs, leveraging user acquisition, and focusing on data-driven product innovation has started to yield positive results. 

Additionally, recent acquisitions and fundraising efforts have bolstered the company’s financial position, enabling it to pursue strategic expansion opportunities.

Financial performance and strategic focus

In its latest financial results, Nazara Technologies reported a notable increase in revenue and expenses. Despite a modest 2% YoY growth in revenue to ₹320.4 Cr in Q3 FY24, the company saw a substantial 47% YoY growth in net profit to ₹ 29.5 Cr. 

However, certain segments witnessed declines, such as the gaming vertical, which reported a 12% YoY decline in revenue. The impact of the 28% GST regime and higher loyalty promotion expenses affected the real-money gaming segment, resulting in a halving of revenue. 

On the expense side, total expenditure grew marginally by 0.3% YoY to ₹ 301 Cr, with content and server expenses accounting for the most significant chunk. Despite challenges, Nazara remains optimistic about its growth prospects, fueled by its diverse portfolio and strategic initiatives.

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Conclusion

As Nazara Technologies navigates its course in the gaming and media landscape, it showcases resilience and innovation. 

Despite regulatory obstacles, the company’s unwavering determination to overcome challenges while capitalising on growth opportunities solidifies its position as a pioneer in the ever-evolving world of gaming and entertainment.

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Hunny Meghani

A curious mind, a love for writing, and a passion for all things finance - that's me in a nutshell. Whether I'm exploring the latest stock market trends or diving into the nitty-gritty of personal finance, marketing, and AI. I'm always on the hunt for the next big story.

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