At a time when gaming companies are grappling with financial challenges and layoffs, Nazara Technologies is making headlines for raising capital. The company recently secured INR 510 Cr from the Kamath Brothers of Zerodha and SBI Mutual Fund.

Armed with such a big war chest, the gaming company is now looking at aggressive expansion, organic as well as inorganic, according to Nazara Technologies CEO and joint MD Nitish Mittersain.

In a conversation with Inc42, Mittersain said the gaming giant plans to deploy a “large portion of the fresh capital for new investments, maybe some acquisitions, especially gaming studios”.

The statement comes at a time when Indian gaming startups are marred with tax troubles. Nazara, on the other hand, seems well-placed to expand its presence with the fresh round of funds.

Nazara, which has presence in esports, adtech, and gaming verticals, among others, has acquired a number of companies like Sportskeeda, Nodwin Gaming, Kiddopia over the past few years to build key verticals. It has also acquired small stakes in the likes of Snax Games, Pro Football Network LLC, Wings, and Datawrkz, among others. The company, which listed on the stock exchanges in 2021, currently has a market cap of INR 5,510.98 Cr.

Indian Market To Supercharge Growth

Mittersain said the Mumbai-based gaming firm is looking to acquire gaming studios, which have good gaming intellectual properties (IPs) with them.

“We are looking at multiple categories, multiple genres – so they could be for young kids, could be mid-core games as well. What is important for us is that it should have a strong identity, community around it, and it should have strong core metrics such as high retention,” he said.

It must be noted that Nazara, last year, acquired a 100% stake in the US-based children-focussed gaming firm WildWorks in an all-cash deal.

Mittersain said users are increasingly spending more time on mobile gaming, adding that India is at the second spot globally in terms of game downloads on mobile devices. As such, Nazara’s core strategy will revolve around acquiring or nurturing studios capable of producing top-tier games tailored for both the Indian and global markets.

To be sure, India ruled the global gaming industry in FY22, having the highest number of mobile gamers globally, as per a Lumikai report. With 15 Bn game downloads, India beat both China and the US, which saw 6.1 Bn and 5 Bn game downloads, respectively, during the year.

However, India is far behind in terms of monetisation of games, as the country is not even in the top 10 countries in the world. But Mittersain believes this situation will change in the next 2-4 years.

With an eye on making the most of this transition, Nazara plans to utilise the fresh funds for fostering organic growth, addressing working capital requirements, investing in new technologies, among others.

Taking Nazara Global

Nazara, which last month invested $500K (about INR 4.15 Cr) in Israel-based game developer Snax Games, is eyeing more investments in gaming companies outside India for expansion.

Snax, established by Israeli gaming industry veterans, develops casual games and puzzles. Talking about the investment, Mittersain said the investment includes publishing rights for Snax’s games in the Indian and Middle East markets, helping Nazara form a partnership in these “vital regions”.

Going ahead, Nazara will actively explore investments in global gaming companies, Mittersain said, adding that more updates can be expected from the company in the coming months and quarters.

“It is high time that Indian gaming companies make their presence felt in the entire world. I think Nazara is well-positioned, so there’s a very good way to do that,” he said.

Speaking about the key global markets, the CEO said the US market is of significant importance for the company. Besides looking at Israeli gaming firms for investments, Nazara is also targeting the Nordic region, particularly Finland, and Turkey due to the presence of a large number of skilled developers.

Outlining the company’s growth areas and strategy for FY24, Mittersain said Nazara will focus on the development of esports, a segment it continues to invest in.

Nazara also aims to expand its existing IPs like Utopia, Animal Jam, and World Cricket Championship, while also creating new IPs.

The Indian gaming giant reported a consolidated net profit of INR 61.4 Cr in FY23, a rise of 21% from INR 50.7 Cr in FY22. Revenue from operations zoomed 75% to INR 1,091 Cr during the year under review from INR 621.7 Cr in the year ended March 2022

The company also reported strong growth in Q1 FY24, with its net profit rising 31% year-on-year (YoY) to INR 20.9 Cr. Operating revenue rose 14% to INR 254.4 Cr during the quarter under review from INR 223.1 Cr.

Nazara’s esports arm contributed revenue of INR 117.8 Cr in Q1 FY24, while the gaming vertical, which includes NODWIN gaming and SportsKeeda, accounted for INR 109.5 Cr of revenue.

At a time when the skill-based real money gaming companies are in a tight spot following the GST Council’s decision to levy 28% GST on full face value, Mittersain said Nazara will not scale down its presence in the sector.

“We have not changed our plans. In fact, we may look at it more positively and more closely, because there’s more regulatory clarity and taxation clarity,” he said.

It must be noted that gaming startups such as MPL, Hike, and Spartan Poker have laid off employees since the announcement of 28% GST on real money gaming. Recently, Bengaluru-based Gameskraft also pulled the plug on its fantasy offering, Gamezy Fantasy.

Leveraging AI, VR To Improve Gaming Experience

Nazara is actively exploring AI, web3 and virtual reality to improve the experience of users, Mittersain said. As part of this, the company is looking to acquire a VR studio.

AI can enhance the game development process by making programming more efficient and accelerating graphic generation, resulting in faster game production. Besides, it can play a crucial role in improving matchmaking, ensuring better customer support, enhancing player engagement within the game, optimising user acquisition strategies, and improving retention.

On VR, the Nazara CEO said it can take the overall user experience to a different level. However, challenges related to the cost and bulkiness of VR headsets persist.

Nevertheless, with major players like Apple, Sony, and Meta entering the VR market, there’s potential for significant advancements in accessibility and affordability, which can revolutionise the gaming experience further.

Talking about the challenges, Mittersain said talent development continues to be an obstacle for the gaming industry and called for establishing top-tier training facilities to nurture high-quality gaming talent. He said it is essential to increase the talent pool if India has to emerge as a global gaming powerhouse, capable of producing games tailored to the Indian market and competing on a global scale.

Highlighting the crucial role of the central government in giving a much-needed boost to the sector, the gaming industry veteran, as of now, wishes for an extensive collaboration between the industry and the Centre. However, what could be on the anvil is yet to be seen.