Nazara promoter sells 6.4% stake to Plutus Wealth

Gaming and sports media company Nazara Technologies’ promoter Mitter Infotech has sold 4.9 million equity shares of the company, representing 6.38% stake worth over Rs 300 crore, to existing investor Plutus Wealth Management through a block deal, the firm said on Monday.

The company said the deal will provide liquidity for the promoters, whose shareholding will come down to 10.05% from 16.43%. Plutus Wealth, an investor in Nazara since 2020 (pre-IPO), will become the single largest shareholder with a stake of 13.01%, up from 6.63%.

The promoters will retain control of the company, with Nitish Mittersain continuing as CEO & joint managing director, the company said in an exchange filing.

“…we have been running this company for the last 25 years and … never had large amounts of liquidity in the past. So, at some point in time it was important for the promoter family to get some liquidity,” Mittersain said at the company’s post-earnings call with analysts.

Arpit Khandelwal, managing partner of Plutus Wealth Management said the decision underscores its confidence in Nazara.

Nazara, which reported an 8% year-on-year fall in revenue to Rs 266.2 crore in the March quarter, expects the growth to be visible from July-September quarter. Initiatives in FY24, such as the new publishing platform, game launches, IP and a strong M&A pipeline are expected to yield results in FY25 and beyond,” Mittersain said. The company is targeting to achieve an Ebitda of Rs 300 crore by FY27, up from Rs 128 crore in FY24. To achieve the same, the company is looking at new game launches, mergers and acquisitions, uplifting margins from higher revenue earning segments such as e-sports, creation of own IPs in gaming, leveraging artificial intelligence, among others.

“For existing businesses we will continue to push for higher growth as well as higher margins. We believe that core gaming businesses should generate 25-30% margins and there is enough room for us to increase our margins,” Mittersain said, adding that most of the acquisitions to be done by the company will also be a good Ebitda contributor to the business.

Currently, Nazara is in talks with about five companies for mergers and acquisitions, and it expects to close a few deals by the July-September quarter.

“People are looking Nazara as very potential consolidator of their businesses not only in India but also in markets like US, which throws up very good opportunities to us,” Mittersain said. “In terms of focus areas, one key focus is core gaming IPs, very similar to what we did with Wildworks and Animal Jam which is playing out pretty well for us and we think we can double down over there. Especially with new tech like AI, we think a lot more these studios can produce and we can take advantage of that,” he said.

Nazara is doubling down on use of AI in gaming studios, and has an internal taskforce on AI that is exploring innovative use cases and testing them out on gaming studios. “We are both paranoid and excited about AI. We need to be in forefront on this. We are looking at automating product testing and stress testing through AI,” Mittersain said.

“We are looking at using AI both in terms of how games are being produced — faster, better, more efficient and how do we throw all data being generated by players to AI to make a lot more personalised offering, which will help increase engagement as well as better monetisation through advertising and user acquisition,” Mittersain added.

On the continuous revenue decline from the adtech business, he said from July-September quarter onwards, the company will be able to achieve growth status. “FY25 should bounce back on good growth both in terms of revenue and Ebitda,” he added.

The adtech business represented by Datawrkz fell 29% y-o-y to Rs 27.5 crore in the January-March quarter owing to a strategic pivot to move away from lower-margin clients towards higher-margin clients and contracts.

Mittersain said the international gaming tournaments are also expected to bring in opportunities for media rights.The esports business, which contributes 55% to Nazara’s topline, witnessed a 6% y-o-y growth in revenue to Rs 148.2 crore in the March quarter, led by content business Sportskeeda.