Nazara Technologies Ltd Q4 FY2022 Concall Summary

Key Takeaways

• Growth over margins, delivered: Esports revenue grew 79% for the full year, and management explicitly reaffirmed it will keep prioritizing growth and market leadership over near-term margin optimization into FY23.
• Apple’s IDFA changes hit Kiddopia hard: User acquisition stalled, cost per trial rose from \$26 to \$36, and quarterly revenue was nearly flat YoY, though the brand avoided the outright declines seen at Netflix and Zynga.
• Offline events are the FY23 swing factor: With COVID restrictions lifting, Nodwin expects ₹70–80 crore in incremental revenue from the return of live IPs like DreamHack and NH7 Weekender.
• The M&A flywheel is spinning at lower prices: Private-market valuation exuberance has “come down sharply,” and Nazara is using the window to consolidate in Freemium, RMG, and gamified learning while letting subsidiaries run their own deal agendas.
• What to watch next quarter: Whether Kiddopia’s brand marketing experiments show positive lead indicators, the pace of HalaPlay’s integration onto the common RMG platform, and any concrete update on stemming the Telco segment’s decline.

Esports: The Growth Engine

• Nodwin drove the segment: Revenue grew 55% for the full year, with media revenues alone up 84% in Q4, while the partner count expanded from 27 to 103.
• Sportskeeda scaled rapidly: 130% revenue growth pushed it from No. 17 to No. 7 among US sports sites per Comscore, driven by high-quality content and a 13% increase in user volumes.
• Margins compressed by design: Nodwin’s EBITDA margin fell from 9% to 7.4% as offline events returned and the company invested in new IPs; management wants investors to peg the margin at 6–7% going forward because building the ecosystem takes priority over maximizing near-term profit.
• Offline events are the FY23 catalyst: With the economy reopening, IPs like India Premiership, DreamHack, NH7 Weekender, and Bacardi Vivid Shuffle are expected to return, adding an estimated ₹70–80 crore to Nodwin’s top line this year.
• Operating leverage is a medium-term story: It will arrive when a multiplicity of OTT platforms start bidding for the same content and more games enter India, creating richer combinations of games and events, a dynamic management sees playing out over the next 2–4 years.
• No owned streaming platform: Nodwin will not build its own channel because management does not believe that is a path to a profitable business for at least the next 3–5 years; it will keep building IP viewership on YouTube and other far-reaching platforms unless a platform offers significant money for exclusivity.

Manish Agarwal: "In Esports our conviction has been very very strong always and we believe that Esports will be the biggest viewed sports entertainment format in the next 5 to 7-10 years, and we don't want to be losing this amazing and massive opportunity in India, South Asia and other emerging markets as we really look at."

Gamified Learning: The Kiddopia Reset

• Apple’s IDFA policy froze acquisition: The April 2021 policy change made new user acquisition challenging, pushing cost per trial from \$26 to \$36 and stretching the breakeven on ad spend from 10 months to 12–13 months.
• Revenue was nearly flat, but resilient: Q4 revenue was roughly flat YoY, yet the team changed its advertising mix and delivered 16% full-year growth with no sequential decline, while global peers like Netflix, Zynga, and Unity posted drops.
• A brand-building experiment is now underway: Nazara launched a US brand campaign for Kiddopia, is exploring Captain Kidd merchandise, and is rewarding loyal users, all aimed at building an enduring brand beyond performance marketing.
• Marketing spend is stepping up: An incremental ~\$600K per month (split between YouTube and brand) started in May and will run at least through June; if results are even “80% ok,” the spend continues into Q2, with constant quarterly review.
• Subscriber growth is the priority, not margin: Management has no plan to return cost per trial to the old \$24–30 range because the product is strong and the market is large; it will not throttle subscriber addition just to maximize EBITDA.
• App-store commission is a problem for later: The 30% payout to app stores is not being addressed now; management calls it “a good problem to solve” only after the marketing and YouTube campaigns prove themselves.

Manish Agarwal: "Honestly, the brand marketing, nobody can predict. YouTube as I mentioned, let's say in a couple of months when we talk about June quarter, we will be able to give some insights on YouTube, whether it's working or not working."

Real-Money Gaming & the Openplay Platform

• Openplay is scaling fast: The revenue run rate jumped from ₹42–45 crore to ₹65–70 crore post-acquisition, growing 14–15% month on month, while cost per player fell and breakeven ROI improved from 8–9 months to 6–7 months.
• A common tech platform is being built: The underlying platform can consolidate multiple RMG brands with one data view, shared user-acquisition modelling, and frictionless login, registration, and deposit systems; HalaPlay is the first brand being migrated, with integration to finish after the IPL.
• Growth will be prioritized over EBITDA: If unit economics of 5–7 month breakeven and strong LTV-CAC hold, management will press the accelerator on growth rather than maximize near-term profit.
• Competitive KPIs are being kept secret: Management declined to share the right KPIs for the RMG space publicly, citing competitive sensitivity, but offered to review what lead indicators can be disclosed and revert in a few weeks.

Manish Agarwal: "If I can get unit economics of 5-6-7 months of breakeven and then LTV-CAC which we have in this business, I would rather kind of press the accelerator on growth than try to maximise EBITDA."

M&A and Capital Allocation

• The flywheel is decentralizing: With cash generated, M&A will now happen at both the corporate level and within subsidiaries, as Nodwin already demonstrated last year by adding Wings, Planet Superheroes, and an e-pins business.
• Valuation expectations have reset: Private-market exuberance has “come down sharply,” creating an opportunity to look at more studios outside and inside India at lower multiples because investors have re-aligned expectations.
• Freemium is the top corporate priority: The segment is very small at just ₹21.3 crore in revenue, and Nazara is looking at game-based studios doing \$3–5 million with high growth potential.
• RMG consolidation will use downstream equity: In the real-money gaming space, management is telling founders they can merge equity with Openplay and take that equity rather than Nazara’s, avoiding dilution at the parent while paying some cash raised at a higher value.
• No desperation, no fixed target: There is no allocated chunk or target for FY23; the focus is on good teams and products first, and management is “not desperate to do M&A to drive growth.”
• Founder secondaries are a reward tool: When founders hit their targets, Nazara will not hesitate to facilitate secondary earnings as a way to endorse great performance, as it did with the ₹10 crore Kiddopia secondary transaction.

Manish Agarwal: "The valuation expectations or the excitement, exuberance over the valuation even in the private space has come down sharply. That is also giving us an opportunity to look at more and more studios outside and also in India."

Segment Watch: Telco, Freemium, and New Bets

• Telco is a managed decline for now: Revenue fell 17% to ₹62.4 crore, but EBITDA margins improved from 15.2% to 22.8% and absolute EBITDA grew 25%; management is working with new partners and will give a concrete view in a couple of quarters on whether the segment can return to growth, hold steady, or decline 5–10%.
• Freemium remains tiny but targeted: The segment grew only 9% YoY to ₹21.3 crore and “needs to be much larger,” which is why it is the biggest M&A focus area this year.
• Datawrkz is a synergy experiment: The acquisition closed in April and will be consolidated from Q1 onwards; synergy trials with Sportskeeda, NextWave, Openplay, and Paper Boat are beginning, and management expects to know where they are successful in a couple of quarters.
• Web3 and blockchain are in the works: A blockchain team is being set up, and the company is actively working on a Web3 cricket offering that leverages its existing community and game-engine strengths; management says “you will hear very soon from us.”
• Publishme is in investment phase: A strong team has been built in the Middle East, and this year should see the start of discussions with game publishers and brands about partnerships in the UAE and Saudi Arabia, with the aim of becoming the go-to game marketing agency in the region.

Strategy & Philosophy

• Growth over margins is the explicit creed: Management will continue prioritizing growth and market leadership over near-term margin optimization into FY23, while remaining profitable and cash-flow generative in every segment.
• The D2C bet is being assembled: Nodwin is combining Planet Superheroes merchandising, Wings gaming accessories, and an e-pins business to unlock its community; the accessories business may be in investment mode in FY23 but carries strong operating leverage and could become a good margin driver as scale builds over 3–4 years.
• Kiddopia’s cash position is strong: The business already holds ₹75 crore of cash and is a positive working-capital operation barring the brand campaign; if more cash is needed, neither Kiddopia nor Nazara will shy from putting it in.

Nitish Mittersain: "In the phase of growth we are, growth and market leadership far outweighs near term margin optimisation. And, we are very clear that we will continue with such strategy of prioritising growth over margins into FY23, while remaining profitable and cash flow generative in every segment of our business."

Guidance & Commitments

Key Metrics