Nazara Technologies

Nazara is one of the leading mobile games company headquartered in Mumbai, India and has operations in 64 countries across emerging markets having connections with 125 telcos, as on September 30, 2017. Nazara runs mobile gaming subscription services to mass mobile internet users comprising largely of first time mobile gamers across Africa, Middle East, South East Asia, Latin America and the Indian subcontinent. In India, Nazara has licensed mobile gaming rights to popular IP's like Virat Kohli, Hrithik Roshan, Chhota Bheem, Royal Challengers Bangalore, Motu Patlu, Mighty Raju, Tinkle Characters and Chacha Choudhary.

Variants of Chota Bheem, Motu Patlu, Jungle Run, Speed Racing, Star Cricket, Shikari Shambu etc are the most popular games introduced by Nazara Technologies

Promoters

Company’s growth is driven by the efforts of promoters - Vikash Mittersain and Nitish Mittersain, who have over 15 years of experience in the mobile entertainment/ gaming industry, CEO Manish Agarwal who has been associated with Company since 2015 and has approximately 18 years of experience in various fields including the gaming space and marketing.

Subscription Service

Subscription Business, operated under the brands “Nazara Games Club”, ”Cool Club” and “Video Club” with gaming and non-gaming consumption contributing approximately 87.40% and 12.60%, respectively, as on September 30, 2017. Subscription services of Nazara Technology games were accessed by 130.43 million monthly visitors from 61 countries across emerging markets, and over 4.08 million paying users subscribed to subscription services and downloaded over 37.62 million games in September 2017. Freemium Business had 44.49 million downloads until September, 2017 and 19.34 million downloads in calendar year 2016.

Subscription Business is focused on mass mobile internet users in the emerging markets, comprising largely of first time mobile gamers. In light of the low propensity of gamers to pay for online content in many of our markets, Company has tailored its product offerings to deliver maximum value for gamers at affordable price points. The “sachet pricing” strategy in Subscription Business allows gamers to access entire catalogue of over 1,000 android games, upon signing up for a daily, weekly or monthly subscription. Catalogue of 4000 aggregated (non-exclusive) games, videos, wallpapers. Periodic (daily, weekly and monthly) subscription starting from Rs. 5 to Rs. 99 that contribute to 90% of current revenues

Regular subscriber acquisition with a strict focus on return on investment, leveraging company’s in-house data analytics abilities, and targeting and acquiring relatively high ARPU subscribers among subscription users has resulted in CAGR of 36.13% of company’s revenue from subscription/ download of games/other contents, from Financial Year 2013 to Financial Year 2017.

As on September 30, 2017, company offered Subscription Business services through 113 telecom operators in 61 countries, including but not limited to Airtel, Vodafone and Idea in India; and Etisalat and Ooredo in the Middle East.

Freemium Business

Freemium Business was commenced in Financial Year 2016 focuses on providing curated games to gamers through smartphone app stores, featuring famous characters and celebrities, to the smartphone user base comprising of mid core mobile gamers. Monetisation in our Freemium Business is undertaken through in app purchases and advertisement revenues. As a part of company’s in-house Freemium Business, company had 44.49 million downloads until September, 2017 in calendar year 2017 and 19.34 million downloads in calendar year 2016.

Esports Business

Esports is a subset of the online gaming industry that includes competitive multiplayer online video gaming with players competing from around the world. Some of the most popular games for esports organisers include Counter Strike: Global Offensive, Dota2, League of Legends, HearthStone and Overwatch. The esports business was added to our network of games, pursuant to the recent acquisition of our Subsidiary Nodwin Gaming.

The global esports audience totalled 322 million in 2016, up 86 million since 2015. The Indian esports audience is still very small, with an estimated two million enthusiasts and two million occasional viewers but is expected to grow more than fivefold by 2021. (Source: Frost & Sullivan Report) With the expected growth in the esports industry in India, company’s business will grow in the coming years. During Financial Years 2017 and for the six month ended September 30, 2017, total income of Nodwin Gaming was Rs. 90.41 million and Rs. 104.78 million, respectively.

Financials

Company is profitable since 2007. Revenue and PAT 4 year CAGR  of 37% and 46%. Zero Debt Company. Revenue has grown to Rs. 199 Crs in FY17 (as compared to Rs. 56 Crs in FY13), PBT stands at Rs. 70 Crs in FY17 (18 Crs) and PAT grew to Rs. 60 Crs in FY17 (13 Crs). Growth in Reserves & Surplus has been seen to Rs. 83 Crs in FY17 (35 Crs)

Recent Acquisition

Company has recently acquired a Subsidiary, Next Wave, had 64.30 million downloads until September 2017 and 42.02 million downloads in calendar year 2016. Company’s in-house monthly active users (MAUs) in September 2017, were 8.66 million as compared to 2.79 million MAUs in September 2016, across network of games on the Google Play Store and App Store. Next Wave’s MAUs in September 2017 were 11.02 million as compared to 5.98 million MAUs in September 2016, across its World Cricket Championship franchise.

Nodwin Gaming is a pioneer in esports in India with established relationships with global gaming publishers and platforms including market leaders such as ESL, the biggest esports organizer in the world and Valve Corporation.

Notable Investors

Company has pulled in a sizeable Rs 540 crores in December 2017. Rakesh Jhunjhunwala has roped in Rs. 180 crores for 12.21 stake. Rakesh on the investment said “Nazara has a consistent track record of delivering profits, cash flows, along with efficient use of capital and high RoE. I see growth potential in the company”.

The other big-ticket funding it received recently was Rs 330 crores from IIFL Special Opportunities Fund.

Evolution of Gaming

The digital gaming market worldwide has seen a paradigm shift in distribution, adoption as well as user behaviour. In the late 1990s and 2000s, basic computer gaming evolved to a wide universe of serious followers who indulged in expensive CD/DVD-ROMs, cartridges, handheld devices, and gaming consoles such as the Xbox, Wii and PlayStations, despite the limited shelf-life of each game. But smartphones and internet connectivity changed that. Since 2009, there has been a gradual shift towards mobile gaming. The availability of thousands of professional quality games with varying levels of difficulty on app stores, social media, and even pre-loaded on mobile devices and tablets popularized gaming among millions of users worldwide making it a dominant form of entertainment.

While leisure games increased multifold in usage, virtual professional gaming became more serious

internationally than ever before. India skipped a complete generation of gamers over the last two decades. Low PC penetration and prohibitive prices of gaming devices never allowed the ‘boxed’ gaming market to take off significantly in the country. On the contrary, the mobile gaming market has rapidly accelerated over the last few years. With the proliferation of Internet and commercialization of data, online gaming has become a reality across the Indian demography. The availability of international games side by side localized versions and emerging content has popularized gaming as a widely used application in the country.

The number of gamers in India is relatively small, especially in relation to the total population. However, with India becoming the second largest smartphone market after China and increased Government impetus to provide affordable access to high-speed Internet will drive the growth in the overall number of gamers.

Indian Gaming Industry

The Indian games market with an estimated US$0.7 billion in total revenue in Financial Year 2017, is dominated by mobile gaming and is forecast to grow very strongly, reaching US$3.5 billion in 2021, almost entirely driven by growth in mobile gaming revenue. Further, the rapidly increasing smartphone penetration will boost the number of mobile gamers, driving growth in the overall number of gamers. In terms of download volume of mobile games from Google Play and Apple’s AppStore, India is already one of the leading countries in the world in Financial Year 2017. A strong revenue growth will therefore almost certainly follow in the coming years.

Company is well poised to exploit the large opportunity in gaming across Subscription Business, Freemium Business and esports businesses, in emerging markets by leveraging the established presence across 61 countries, as on September 30, 2017, localised gamer insights and proven monetisation abilities.

Future Scope

The mobile-first digital entertainment opportunity in emerging markets is massive. In terms of its future business prospects, the recent report on the gaming industry by FICCI-KPMG says the business could expand from $200 million in 2016 to over $3 billion by 2019 and Nazara should definitely be able to bite a large chunk of this since it has already expanded its footprints beyond India to some 74 countries.

Conclusion

With a sustained profitability and rapid growth of operations, having focused, scalable and asset light model across business offerings, Nazara Technology managed by experienced and dedicated management team of experts would continue to grow in localised gaming with equal focus on national and international gaming market leading to proven monetisation abilities.

With strategic acquisitions and partnerships with Nodwin Gaming & Nextwave, invested in synergistic companies, such as Hashcube Inc., Mastermind Sports Limited, Moonglabs Technologies Private Limited and HalaPlay Technologies Private Limited which develop popular games, to support and strengthen the game offerings and protect intellectual property to offer network of games enabling the increased focus towards scaling operations.