Nazara Technologies reports flat margins despite 69% revenue rise in Q3FY23

Mumbai headquartered gaming and advertising firm, Nazara Technologies, on Tuesday reported a 69% year-on-year (YoY) rise in its overall revenue to ₹314.8 crore from ₹185.8 crore in the year-ago period — led by its esports holding, Nodwin Gaming. However, investments to boost revenue earned from esports events and tournaments saw its earnings before interest, taxes, depreciation and amortisation (Ebitda) remain largely flat — up by 0.9% even as Ebitda margin declined by nearly 660 basis points. 

The company also reported better diversification of business verticals — while esports contributed to 59% of Nazara’s overall topline last December, the same accounted for 48% this year. 

Other sectors that have also contributed to growth at Nazara include gamified learning platforms Wildworks and Kiddopia, which Nazara said in an investor presentation on Tuesday has received a boost after a subscription price hike in December last year. 

Overall, gamified learning saw 70% YoY revenue jump to ₹80.4 crore, while the company’s advertising technology holding, Datawrkz, reported ₹46.6 crore in revenue for the December quarter. Real-money gaming holdings Openplay and Halaplay combined to deliver ₹15.1 crore in revenue during the period, while telecom subscriptions and ‘freemium’ services contributed to the rest. 

Backed by these growth figures, net profit grew 31% YoY for the quarter to ₹22.4 crore. Nazara’s nine-month consolidated revenue for FY23 (April to December) grew 80% YoY to ₹801.7 crore, while net profit for the period rose 22% YoY to ₹55.8 crore. 

Nitish Mittersain, joint managing director and chief executive of Nazara, said that the company will “continue to invest for future growth across (all) businesses,” which include the above-mentioned key segments. 

The company offered caution on the newly proposed inclusion of online gaming into India’s existing information technology (IT) rules, but said that it will offer “increased regulatory clarity” — which in turn could be “positive (in the) medium to long term.” Nazara’s note to investors added that “stricter KYC (know your customer) norms and more cumbersome KYC processes could lead to lower growth in new player registrations and higher customer acquisition costs.” 

“(It) could lead to higher compliance costs, especially for smaller companies, which could lead to consolidation in the industry,” Nazara’s note also said. 

The company said that its failure to expand its Ebitda margin was largely due to “growth investments” made in Nodwin, its esports division. 

Nazara’s quarterly earnings were announced after trading closed on Tuesday. On Wednesday, shares of Nazara gained 6.4% in early trading hours to ₹651, after closing at ₹611.30 on Tuesday. At publishing time, Nazara shares were priced at ₹617.35 — up 0.99% through the day. The BSE SmallCap index, on which Nazara is listed, was down 0.83% to ₹28,187.55 at press time.