Nazara Technologies Ltd Q1 FY2023 Concall Summary

Key Takeaways

• 70% YoY growth beat internal targets: Revenue grew 70% against a 55–60% guided range, driven by eSports (92% YoY) and the newly consolidated Ad-Tech segment. Management attributed the beat to execution, not a single surprise.
• Kiddopia has turned the corner on unit economics: A 10–15% price increase in June, combined with stabilized \$38–\$39 CPTs, has restored LTV/CAC to >2x, similar to pre-Apple IDFA levels. Subscriber growth is expected to resume in coming quarters.
• eSports momentum is broadening beyond media: Nodwin’s gaming accessory business (Wings) hit a ~₹3.5 crore monthly run rate and turned EBITDA breakeven, while owned IP like Pro Master series broke viewership records. The segment delivered 12% sequential growth in a seasonally low Q1.
• RMG is in a holding pattern by choice: The segment grew sequentially and improved EBITDA margins to 16.7% by optimizing tech and marketing, but management is deliberately holding back user acquisition spend until GST and game-of-skill regulatory clarity emerge.
• What to watch next quarter: Whether Kiddopia’s blended ARPU begins to rise as new higher-priced subscribers accumulate, the pace of Nodwin’s margin recovery toward its 5–6% full-year target, and any regulatory movement on RMG that would unlock consolidation.

eSports: Nodwin & SportsKeeda

• Nodwin revenue growth: 68% YoY, driven by distribution-led organic growth in own IP, increased monetization across all IPs, and growth in eSports-focused D2C revenue. The quarter delivered 12% sequential growth over Q4, making it bigger than the previous Q4 despite Q1 typically being a low quarter.
• SportsKeeda U.S. expansion: U.S. revenues grew 423% and now represent 57% of total revenues, driven by expanding the WWE playbook to new sports like American Football and Basketball. Revenue growth far exceeded 16% YoY MAU growth because U.S. inventory is 6x India’s and direct sales grew during peak season.
• Nodwin margin dip is investment-led: EBITDA margin fell to 1.2% from 6.3% YoY because of investments in scaling own IPs and new adjacencies (gaming accessories, on-demand content, scripted reality shows, merchandising). Own-IP businesses are weighted to H2, not H1. Adjusting for these investments, the margin would be much higher.
• SportsKeeda margin dip: EBITDA margin fell to 34% from 43.9% YoY because of content investments in growing the branded video content business in India.
• Wings (gaming accessories) consolidated: The business grew from a ₹22 crore run rate last year to ~₹3.5 crore per month and turned EBITDA breakeven against an expected loss, driven by operational efficiencies. Management expects to achieve and exceed the AOP of ₹70 crore this year.
• Building year-round IP: Nodwin is working to create year-round IPs like the Pro Master series (which broke viewership records on Star Sports 2) so that H2 is not much stronger than H1 and revenues normalize across quarters.
• BGMI ban impact: Zero impact on Nodwin’s planned revenue this year. The secular trend of eSports viewership growth is not going away; the temporary vacuum will be filled either by a Krafton-government resolution or by other games. No challenges seen to long-term or mid-term partnerships like Star Sports.

Manish Agarwal: “The secular trend of eSports, tournaments, people excitement and viewership is not going away. And hence, we do not really see any challenges to long-term or mid-term partnerships.”

Gamified Learning: Kiddopia Turnaround

• Unit economics stabilized: At a blended ARPU of \$8.4 for the new-user cohort and \$38–\$39 CPT, LTV/CAC is again >2x, similar to pre-Apple IDFA days. The unit economics model has stabilized after a year of headwinds from Apple’s policy change.
• Price increase executed: Subscription pricing was raised 10–15% in early June to \$8.99 monthly / \$69.99 annually, applied only to new subscribers. A full month of June data showed no impact on conversion from trial to subscription or on retention. Pricing remains the lowest versus competitors, leaving significant headroom for further increases.
• ARPU will rise gradually: Because the price hike applies only to the 16,000–18,000 new subscribers added per month (not the existing ~300,000 base), blended ARPU will increase over time as old subscribers churn out and the proportion of new, higher-priced subscribers grows, eventually reaching \$8.4.
• Brand marketing experiments halted: Brand marketing and YouTube marketing experiments in Q4 and early Q1 did not have the desired impact; YouTube CPTs were \$48–\$52, too high to sustain. Brand marketing has been stopped to focus exclusively on performance marketing, which should improve margins in Q2 as those experimental costs are already in the base.
• Market share holding: Kiddopia has maintained the number-two rank in the App Store Kids category consistently for 2–2.5 years, indicating subscriber loss and churn velocity is neither worse nor better than the market.
• Further price headroom: Management will experiment with gradual increases after 3–4 months as more consumer behavior data comes in.

Manish Agarwal: “I think after a long one year, we are very comfortable and confident that there is a path to growth because of three reasons.”

Real Money Gaming: Waiting on Regulatory Clarity

• Sequential growth despite IPL headwind: The segment grew sequentially in Q1 over Q4, even though IPL typically causes poker and rummy to take a hit, driven by strong cohort-based player retention and engagement.
• Margin improvement by design: EBITDA margin improved to 16.7% because of tech optimization, marketing optimization initiatives, and a deliberate decision not to aggressively step up user acquisition cost due to the GST overhang. Rummy continues to grow without accelerating user acquisition, reflected in 28% EBITDA margins for OpenPlay.
• Consolidation on hold: Management has a clear desire to bring acquisitions under one RMG network and states the pipeline is not an issue, but will not press the green button until clarity emerges on both GST and a PAN-India regulatory framework on games of skill.
• Valuation stance: Management’s personal belief is that paying a premium for clarity in a large, growing market like India is not an issue because it removes clutter and allows the growth accelerator to be pressed freely.

Manish Agarwal: “My personal belief is, of the binary risks versus a clarity, a premium which you can pay in a market like India, which is very large and will continue to grow, I don't see an issue of premium being paid.”

Ad-Tech: Datawrkz Consolidation

• Segment added: Datawrkz was consolidated from April 13, 2022, adding a new Ad-Tech segment that grew 67% YoY. 67% of revenue came from retained clients, which grew 18% YoY in Q1 FY23.
• Growth runway: Management sees Ad-Tech as a very large growth driver while maintaining 10% to 12% EBITDA margins. The business niches in ethnic communities in the U.S. (Chinese, Indian, Hispanic) with high propensity to pay, and headroom on verticals and the young male demographic is very high. No issues seen on future growth projections.
• Group synergies expected: Synergies from Ad-Tech with group companies (SportsKeeda, Paper Boat, Next Wave, Nodwin, Open Play) will materialize down the line.

Margins & Capital Allocation

• Margin philosophy explicit: Management will pursue aggressive revenue growth, will not be loss-making, and is not maximizing EBITDA. A 12–13% range is considered a good EBITDA range for a high-growth company like Nazara in this market.
• Telco business decline: 16% YoY drop, mainly due to decline in the India business; non-Indian geographies remained flat.
• M&A pipeline building: The team has been augmented with an experienced person from gaming (4–5 years’ experience, networks in Europe and U.S.) to build a funnel of potential companies outside India, particularly for Freemium and Gamified Learning. Healthy discussions are underway across the globe.
• Freemium M&A focus: Aggressively looking for acquisitions, especially in Europe for good quality studios at relatively better value, focused on game development studios offering multiplayer experiences and social context. The aim is to replicate a Kiddopia-like story in the U.S.
• Leadership augmentation: A Chief Strategy Officer has been added at SportsKeeda, and Anupriya Sinha Das has joined as Head of Corporate Development to support Manish Agarwal, freeing him for business operations. Management will keep augmenting leadership teams at corporate and subsidiary levels.

Manish Agarwal: “We will look for an aggressive revenue growth. B) We will not have the revenue growth coming at the cost of EBITDA, we are not going to be a loss-making company ever. C) we are not maximizing EBITDA. We believe a 12% to 13% range is a good EBITDA range in a market like ours, in a high growth company like us.”

Guidance & Commitments

Key Metrics