Nazara Technologies Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Acquisition-heavy quarter resets the portfolio: Nazara deployed capital from a INR 900 crore raise into PokerBaazi, Fusebox Games, and full ownership of Kiddopia, shifting the business mix decisively toward IP-led gaming and skill-based RMG.
• RMG pivot is a margin-for-scale bet: The legacy OpenPlay business is now roughly break-even under the new GST regime, but the PokerBaazi investment signals a move to a market-leader model where post-GST margins and cash generation are expected to be materially higher over time.
• Kiddopia’s growth unlock hinges on IP: Management is “very close” to closing large global IP partnerships, with announcements targeted for Q3; the thesis is that popular kids’ IP can break the ~\$40 cost-per-trial ceiling that has capped marketing scale.
• H2 profitability expected to inflect sharply: Seasonality in NODWIN and early contributions from new assets should make the second-half margin uptick steeper than historical patterns, though management declined to commit to a double-digit EBITDA margin for the full year.
• What to watch next quarter: Whether the promised Kiddopia IP deals are announced and closed, the initial revenue trajectory of Fusebox’s new game launch, and any quantification of PokerBaazi’s post-GST margin profile now that the transaction is closing.

M&A and Portfolio Reshaping

• Capital raise deployed at speed: INR 900 crores raised via preferential equity was immediately directed into multiple transactions, the largest being the investment in Moonshine Technologies, parent of India’s dominant online poker platform PokerBaazi.
• Full control of Kiddopia: Nazara acquired the remaining stake in Paper Boat Apps and approved its merger into the parent, a move management frames as necessary to drive the product changes, IP partnerships and geographic expansion that the prior structure could not unlock.
• Fusebox Games adds TV-linked IP capability: The 100% acquisition of the UK-based studio, consolidated from 23 August 2024, brings a portfolio of games tied to television IP, a model that benefits from organic spikes when shows air in the UK and US summer months.
• Datawrkz expands into Europe: The acquisition of Space & Time Limited for GBP 0.48 crore gives the ad-tech vertical a direct sales channel into the UK and European market, with cross-selling and cost-optimisation synergies expected to build over the next couple of quarters and scale meaningfully in FY26.
• Centers of excellence being built: Nazara is creating shared centres in data analytics, user acquisition, M&A, AI and back-office operations, rolling out over the next 12 months, aimed at extracting cost and knowledge benefits across the portfolio.

Nitish Mittersain: “I think directionally, all 3-4 businesses of ours are in the right direction. And I think 3-4 years out, we should and we must see much higher EBITDA margin profile from where we are today.”

Real-Money Gaming: The PokerBaazi Pivot

• Legacy RMG hit hard by GST: OpenPlay’s gross gaming revenue declined only slightly, but the GST bonus payout jumped from 13.4% to 46.7% of GGR, wiping out the previous 25-30% EBITDA margin and leaving the business roughly break-even. Smaller and mid-sized companies in the sector have been worst affected.
• PokerBaazi is a different structural bet: As the market leader in Indian online poker with much larger scale, PokerBaazi is expected to sustain higher post-GST margins than OpenPlay, though in the near term it will also invest heavily in brand marketing.
• Cash generation ambition: Management expects PokerBaazi to become a “very highly cash generating business” over a 2-3 year horizon, with detailed financial disclosures promised from Q3 onwards once the transaction closes.
• Transaction still in final stages: The deal has not yet closed; management declined to share specific margin profiles or pre/post-GST splits, deferring all detail to subsequent quarters.

Kiddopia: The IP Thesis

• The marketing ceiling is real: Kiddopia’s cost per trial has hovered around the \$40 mark, give or take 5%, and management has not found a scalable way to grow marketing spend at that price point. The business has not proactively cut spend, but it has also not been able to expand it profitably.
• IP partnerships are the proposed unlock: Management believes integrating popular, globally recognised kids’ IP into Kiddopia can lower acquisition costs and drive organic growth, a playbook they say other companies have successfully executed. The strategy is to target “best in class” IP rather than volume.
• Deals are close: Management stated they are “very close to closing some IP transactions of meaningful, large global IPs” and hopes to announce one or two partnerships within Q3. If closed in Q3, IP would launch into Kiddopia in Q1 FY26 or earlier, with early performance signals visible within one to two months of launch.
• Product experimentation underway: Beyond IP, the team is iterating on price points, subscription plans, free trials and geographic expansion now that Nazara has full ownership and control.

Nitish Mittersain: “One big breakthrough is going to be partnering with popular IP and starting to integrate it within Kiddopia... We are very close to closing some IP transactions of meaningful, large global IPs.”

Segment Performance

Margins and Profitability

• No specific margin guidance given: When asked directly whether the company can return to double-digit EBITDA margin within this fiscal year, management explicitly declined to provide guidance, stating only that the second half is expected to be stronger.
• H2 seasonality should be sharper this year: NODWIN’s Q3 and Q4 are the main revenue and margin seasons, and management expects the favourable H2 skew to be more pronounced than in past years, supported by new and expanded IPs entering the second half.
• Fusebox steady-state target: Management aims for a 20-25% EBITDA margin for Fusebox on a steady-state basis, comparable to Kiddopia and Animal Jam.
• Employee cost shift in Esports: More NODWIN project delivery is moving to India and Turkey; as revenue grows, the percentage of cost delivered from offshore will increase, and employee costs as a percentage of revenue are expected to drop significantly.
• Depreciation and one-off costs: The Q2 depreciation increase reflects amortisation of intangibles from the Freaks and Fusebox acquisitions, not a write-down. Higher expenses also include deal-related costs that were fully expensed.

Nitish Mittersain: “I think we should look at Fusebox margins similar to our other gaming company margins, whether it is Kiddopia or the other IPs that we have, like Animal Jam. We will be aiming for that 20% to 25% kind of a EBITDA margin on a steady state.”

Guidance & Commitments

Key Metrics