Nazara Technologies: Thriving Despite Challenges in the Indian Gaming Sector
India’s gaming industry is witnessing growth, despite facing challenges such as a high Goods and Services Tax (GST) rate of 28%. Among the key players in this industry is Nazara Technologies Limited, which has not only weathered the storm but is also attracting significant investments.
GST Rate and Its Impact
When the Indian Government announced a 28% GST rate for the gaming industry, concerns arose about its potential negative effects. This move had led to a sharp decline in stock prices for some gaming companies, with Delta Corp experiencing a 30% decrease in its stock price.
However, Nazara Technologies took a different stance. On the day of the GST announcement, Nazara’s stock price dipped by only ₹26 or 3.68% on the NSE and managed to recover by the end of the day. The reason behind this resilience lies in the nature of its business.
Nazara’s Resilient Business Model
Unlike Delta Corp, which primarily operates in gaming and casinos, Nazara Technologies has a more diversified business model. The 28% GST rate was expected to affect only its skill-based real money gaming segment, which contributes just 5.2% to its overall consolidated revenues for FY23. Nazara swiftly responded to this challenge by implementing measures to minimize the potential impact.
Attracting Investments for Growth
Nazara Technologies is not just surviving but thriving. The company is actively seeking funding to fuel its growth ambitions. Recently, Zenith and Nikhil Kamath invested Rs 100 crore in Nazara, increasing their combined stake from 1% to approximately 3.5%. Furthermore, SBI Mutual Fund is set to invest Rs 410 crore in Nazara Tech through preferential allotment of equity, resulting in a 7.8% stake in the company.
This funding strategy is well on its way to help Nazara raise the remaining 240 crores needed to achieve its goal of 750 crores, even during a funding winter.
Global Gaming Boom
Despite the challenges posed by the 28% GST rate, the gaming sector is experiencing global growth, and early indications suggest a similar trend in India. Nazara’s business model is strategically positioned to take advantage of this boom due to its cost-effective India-based operation.
Revenue Streams and Segmental Breakup
Nazara Technologies earns revenue through multiple streams:
– Subscription: Accounting for 29% of revenues.
– Platform Fees: Contributing 20%.
– Advertising: Generating 14% of total income.
– Brand Sponsorship and Media Rights: Making up 37%.
Segmentally, Nazara’s revenue breakup includes:
– eSports: Dominating with 50%.
– Gamified Early Learning: Comprising 24%.
– AdTech: Contributing 14%.
– Real Money Gaming: Affecting just 5.2% due to the GST.
– Telco Subscription: Adding 5%.
– Freemium: Concluding with 2%.
Nazara’s Future Outlook
Nazara Technologies’ resilience in the face of the 28% GST rate reflects the strength of its diversified business model and its adaptability to changing regulatory environments. The company’s strategic investments and funding initiatives position it well for future growth in India’s burgeoning gaming sector.
While challenges persist, Nazara’s ability to navigate them and attract substantial investments demonstrates its potential to remain a key player in India’s gaming and sports media landscape. As the gaming industry continues to evolve, Nazara Technologies appears poised to capitalize on the opportunities that lie ahead.
