Nazara Technologies Limited (NAZARA) Earnings Call Transcript & Summary

So good afternoon, everyone, and welcome to you all. Thank you for joining us for another Valorem CXO Meet. My name is Anuj Sonpal, CEO of Valorem Advisors. So today, we are hosting the management of Nazara Technologies Limited. And firstly, on behalf of the company, I would like to thank you all for participating in this event. And let me also take this opportunity to thank the management participating with us today and for giving us the opportunity to host them. As you already know by now, the Valorem CXO Meet is a first of its kind virtual analyst meet event series. And our intention with these Virtual CXO Meets is to take advantage of technology platforms like this by reaching out to a wider audience to create a better understanding and bring awareness about our client company's fundamental business, provide insights into their specific industry, financials and future growth strategies. The format of this analyst meet will primarily be in a Q&A interview format, where I will start off by asking the management some broad-level questions, and then we'll move on to some questions from the participants. So please note that if you would like to ask any questions to the management, you can use the Q&A button at the bottom of your screen to post them there. And I will ask the management these questions on your behalf after I have been done with the initial broad questions. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's meeting may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. Let me now introduce you to the management participating with us today. We firstly have Mr. Nitish Mittersain. Nitish is a dynamic and visionary -- is the dynamic and visionary founder and CEO of Nazara Technologies. He has played a pivotal role in transforming Nazara from a nascent gaming start-up into one of India's leading mobile gaming and sports media companies. With his forward-thinking approach and commitment to innovation, he has successfully steered Nazara Technologies to new heights, solidifying its presence in both Indian and international markets. His entrepreneurial journey, backed by his deep understanding of technology and the gaming landscape, has made him a key figure in shaping the future of the Indian gaming industry. We also have with us Mr. Sudhir Kamath, who is the Chief Operating Officer of the company. He's an alumnus of Delhi University and IIM, and he brings over 20 years of experience in strategic consulting with McKinsey, private equity as well as operations and entrepreneurship. Now without any further delay, let's begin.

So my first question, I'm going to start with Nitish. Nitish, you are often considered as a pioneer in the Indian gaming industry and have taken Nazara to new heights. Could you start -- for the audience, some of the audience today who is probably new to the company, and also a catch up to some of the people who may have looked at you a while back. Could you start with giving a little bit of a brief history and background of how you started this journey and also how you've transformed it over -- how you've transformed Nazara over the years? Over to you, Nitish.

Sure, Anuj. I'll try and compress our 25-years journey in 5 minutes if I can. So basically, I got into computers, technology, and gaming at a young gauge. Got introduced to gaming at 5, started coding games in basic language when I was 7 years old. And it truly became a passion for me, and kind of my whole world became the world of technology and gaming. I was studying here in Mumbai, doing my college here in Mumbai. And when I look around my friends, and this is the late 90s, I really saw a lot of enthusiasm for gaming among my peer group. And coming from our business family, I've just felt that this could be a large opportunity and gaming would become big in India some time in the future. That's really what made me start Nazara in the late '90s in Mumbai. And yes, probably, I was a decade too early because the infrastructure didn't exist, consumers didn't have devices, Internet speeds on mobile phones wasn't there. Actually, the mobile phones themselves were barely there. So we started as an online gaming company. As mobile penetration came in, we started migrating towards mobile phones. I realized that in India, the net penetration of mobile phone devices with consumers will be very large as compared to PC or console. And therefore, India would become a mobile-first gaming country. So we kind of pivoted into mobile in 2003, 2004. And I think one of the big innovations that Nazara did in those early years, especially in around this 2007 period, is to create a Netflix-type of model for gaming subscription which was sold by mobile operators. And we built our technology in-house that enabled that, localized it for the local market dynamics. And that was very successful. We worked with itel and all these large telcos and monetized very well because at that point of time, you didn't have UPI, et cetera. And only way to bill consumers, micro pricing both through the mobile operators. So we did that very successfully in 2007. And once that model was established, we took it to over 50 countries and over 150 mobile operators. And 2007 to 2014, we kept our head down and really executed that very efficiently. To give you a perspective, till then to 2007, Nazara had placed all of INR 12 crores from WestBridge Capital. And by the time 2014 came around, we had over INR 200 crores sitting in our bank, all accumulated from the profits we had made. In 2014, I was realizing that gaming was already becoming, the mobile phones had spread, the data had become better, digital payments is coming up. We had originally dreamed of growing a lot more in gaming. Is -- I kind of started refocusing on that in 2014. And over the years, I realized that gaming can be also tricky in the sense that if you don't build the business model correctly, you can become stuck like a one-hit wonder, et cetera. And I didn't want to go into that kind of a path. So I wanted to build a diversified, profitable gaming platform that would sustain over a long time. And I realized that if I would sustain for a long time, then the opportunity in markets like India would only continue to be very large. From that perspective, we actually started what we call Friends of Nazara. We started acquiring stakes in companies that were operating in areas of direction that we wanted to get into, whether it's gamified learning, whether it's eSports, or whatever the mega trends we were spotting. We worked with many founders and management teams, kind of acquired majority stakes and paneled them on this Nazara platform and then rolled up our sleeves and started working with them very closely. This model has emerged as today our core focus, where we acquire businesses, they run fairly in a decentralized manner, and Nazara adds value for different businesses at different times in different ways. So we may add value from the user acquisition expertise we built over 15 years, or the way we look at data analytics, we may look at pricing models, because these are things we did for a really long time by running our telco business. We may use our network to open up a lot of doors and also bring our core DNA that we have kind of developed over many years on focusing on profitable growth and cash flows for many of these businesses. And we saw that when we got into this, in 3, 4 years, many of the businesses we acquired, we were able to potentially 10x their revenues while keeping them profitable. And many examples, like Kiddopia, Sportskeeda, NODWIN Gaming, are examples of this. Fast forward today, I think we listed the company in '21 and it's been a little bit over 3 years. I think we're really picking up momentum now. We've not only built a credible brand name here in India, but we've built it globally, especially in Western markets. And we see huge opportunities in also acquiring businesses in Western markets, which we have done in recent times, where there's WildWorks in the U.S. or the most recently Fusebox in the U.K., and then accelerate these businesses based on the expertise we have built. So I think that model is working very well for us. We are very excited with the potential. I think two things I'd like to say. Gaming in India is going to emerge, in my view, as a predominant entertainment and socializing platform online in the years to come. And I think sooner than later. And I think India will also make a large impact on gaming globally, especially with the advent of AI, et cetera, which will help us catch up on a lot of fronts compared to Western or Chinese developers. So we are very excited. It's still very much day 1 for us and looking forward to the next few years, building this to the next level.

Great. Thank you, Nitish, for that very good story, and congratulations on this amazing journey of yours. Let's move -- for my next question, let me ask Sudhir. Sudhir, as the COO of the company, can you enlighten our viewers today just a little bit on the business segments that we have, which is Gaming, Esports, Adtech. And also within them, just explain a little bit about the constituents of each of them, the kind of games that we have, what constitutes in Esports, Adtech, et cetera?

Sure. Let me just take that. Let me start with the Gaming segment. So as Anuj correctly said, we have Gaming, Esports, and Advertising Tech. I'll take each of them in turn. Let me start with Gaming. Within Gaming, we have a number of studios. Historically, we may have had more than 50% control, but now increasingly, almost all of our gaming studios are now 100% owned by us. That's a recent change for some of those studies. At the time of IPO, about 3 years back, we had a gamified early learning business which is called Kiddopia. That business has continued to scale and has roughly INR 200 crores revenue. It produces a game which is targeted at young kids, so 3 to 6 year old, and is the #2 or #3 game in that segment in the U.S. market, which is the largest market for that kind of game. We also have a game called Animal Jam, which targets slightly older kids. It's roughly in the 8 to 12 kind of age segment. And again, that game is the market leader in that space. This game is built by a studio in the U.S. which we acquired a couple of years back, and has continued to grow since then and improve its profitability. Third, Nitish mentioned Fusebox, which is a studio based out of U.K. which does narrative-based games in collaboration with IP owners. So there's a very popular TV show called Love Island, which is big in the U.K. and U.S. They've created a game around that which does very well. It has massed quite a good following, the game itself, in India. They also have the rights for Big Brother, which is the parent game for Big Boss, which you may have seen in India. And that's a new game that they're developing which will come out some time around April or May of next year. Apart from this, we have World Cricket Championship, which is a cricket simulation game where you can do batting and bowling online. And that's been one of India's most popular cricket simulation games. India as well as the rest of the world. And that, again, is something that we've been growing and has recently acquired a second game on UTP, Ultimate Teen Patti, which is there not real money, just a casual associate card game. Apart from this, we then have the real money gaming segment, which in India is actually the largest segment otherwise. We have 100% ownership of a company called OpenPlay which has a game called ClassicRummy which has been around for many years and offers rummy and also fantasy sports to its customers. And recently, we announced a big investment about INR 1,000 crores in a company called Moonshine, which is PokerBaazi and SportsBaazi. PokerBaazi is India's #1 gain in the poker space with real money. And that's a business which continues to grow 30%, 40% each year. Currently, we will own about 48% in that business as the transaction closes. We're in the final stages of that. And we also have a convertible debt which we've invested in that business. So all of this was broadly on the Gaming side. If you move to the Esports side, there are 2 large businesses in that. One is NODWIN, which is India's largest eSports company and is 1 of the top 3 eSports companies in the world now. NODWIN itself has multiple assets and businesses within it, including Comic Con India, which is an iconic sort of live event which happens in multiple cities, 8 to 9 cities now. We also have NH7 Weekender, which is one of India's leading music festivals. There's a company called Freaks 4U which NODWIN acquired recently, which is Germany's #1 eSports company, and they also have a strong footprint in markets like Turkey, Middle East and Singapore. And in all of these, the common thread is that NODWIN has the expertise and the team here which can deliver events across all of the sports space. The second big business that we have within eSports is Sportskeeda, which is news media reporting around sports and content creation. And that is a business, again, which has been growing very rapidly just like NODWIN. NODWIN has been growing more than around 40%, 50% a year for the last few years, many years now. Sportskeeda itself has also been growing about 30%, 40% a year and also has very strong EBITDA profile. And that's a business, again, which started with India and Cricket, but expanded to the U.S. and to the extent that now more than 60% of its revenue comes from the U.S. market. And it covers all the sports which are popular in the U.S. as well, not just cricket and others. Lastly, coming to Advertising Tech. We had acquired a company called Datawrkz. Datawrkz offers both demand side and supply side services at the sites. So it helps content owners to monetize their content, it also helps advertisers to acquire users, and it offers both of these services to its clients. We've also been pushing it to move more towards the product sites, where some of these services, they have now converted into products which can be offered on a SaaS kind of a model, self-serve to their customers. And that has begun to scale up and significantly is improving the EBITDA profile of that business. So I would say that, in a nutshell, those are the businesses. I think we can go through more detail if there are questions on these.

Thanks for that overview. Let me go back to Nitish for one more question. Nitish, in the last question, you did talk a little bit about the acquisitions we've made and some very interesting ones. For some of the viewers today, can you explain this strategy? We've obviously been very aggressive in inorganic growth. So can you explain the strategy of growth? And what are you trying to do, to create, by acquiring so many companies? And also, how do you see Nazara really shape out, let's say, 5, 10 years down the line?

Sure. So in terms of our M&A strategy. Like I was telling you, we figured that in the gaming world, the 0 to 1 can be very time consuming. And the graveyard for 0 to 1 is very high, with 80%, 90%, 95% failure. And because we wanted to grow fast, we realized that us getting stuck in the 0 to 1 game at that phase or stage of our journey would slow us down considerably. We found our core competency to be able to acquire businesses that have completed the 0 to 1 journey and help them accelerate on the 1 to 10 journey. And if you look at our acquisitions in the past, I will refer back to the ones we did in 2018, 2019, 2020. When we acquired Kiddopia, it was doing about INR 15 crores, INR 20 crores of revenue. But we did see that -- and I'll share a couple of specific examples that will give better light on how we acquire the business and also what we do with it. So in Kiddopia's case, when we acquired it, they were selling these games for premium, what we call the premium business, which means you paid a certain fee to own the game. And because we came from many, many years of running subscription services on gaming, we did realize that this will do much better on subscription. The ARPU will be higher. The product, it was already there, the kids are already loving it. So we worked with the team to tweak the business model to a more subscription-driven model which increased ARPU significantly, doubled the ARPUs of the product. And that allowed us to spend a lot more money in the user acquisition, again, where we brought in our expertise of UA over many years. How do you do predictive modeling of LTV, LTV, which is lifetime value of the customer, when you acquire the customer, et cetera? And that allowed us to 10x that business in a short span of 3 years, while remaining profitable, right? Of course, thereafter, the business kind of plateaued because of for a multitude of reasons, post COVID normalization and other privacy issues. But we're very confident that we will break out again and very much on it, which is why we recently acquired 100% stake in that business. Similarly, when we bought Sportskeeda, I think it was 2019 or 2020, it was about a INR 15 crore revenue business. But we spotted that the core engine was very interesting, the way they were curating content, and we also saw that the U.S. would be a large potential market for it. So we kind of refocused the team to the U.S. That was monetizing much better. And I saw a couple of questions around Sportskeeda here. I think in the last 4 years, we've maybe multiplied the revenue by 15x or so. Again, had a very profitable business, running a very profitable business. And Sportskeeda today is the #5. It ranks between #5 or #6 in the U.S., not only in India, but in the U.S., it's a #5 or #6 sports destination. So I think what we found is that our ability to take these businesses, make sure that they generate cash and grow over a period of time, in a fairly short period of time, I would say a 3-, 4-year period of time, has been far more lucrative for us compared to us trying to start a new business and spend 3, 4 years trying to get into gestation. That said, will we never do 0 to 1 business in our organic businesses? Surely, we will do. With Nazara attempt a AAA title out of India and spend $10 million, $20 million, $30 million and 5 years on it? Maybe we will, but at the right time. At this point of time, we are not doing that. In terms of where do we see ourselves in 5 to 10 years? I think we've got a fantastic platform now and an engine that's running. And we have 2 tailwinds. One is the Indian market growth itself, which I think will be -- which will compound over the next 5, 7 years and we can take a lot of benefit out of that. The second is the global play that we have already established now with our game studio business. I think can see us scale our revenues and profitability significantly. We're also starting to -- until now, we've in the last 5 years run a very highly decentralized model with the focus being on stand-alone businesses. There was a question I saw year around the synergies, et cetera. One belief I've had is that, in the M&A game, one place where you can really go wrong is when you account for too many synergies while acquiring a business. Because what tends to happen is you're overthink these synergies and then you value these synergies and pay for -- pay a top dollar for it. And then in reality, when the synergies don't happen, you're kind of left holding the bag. So the way the approached M&A is that while we, of course, want to buy businesses that would have synergy, and we anticipate some synergies. When we buy the business, we actually discount synergies altogether. And it is sort of post year or 2, we focus very much on the core business and its core performance. So we want to ensure that the core is very strong, and then we start kind of trying to link the synergies. We are now this year, I would say, last few months, and 1 main agenda in 2025 for us is to drive more synergies. And for that, what we are doing is we are creating centers of excellence on a few strategic areas which we have identified. One is user acquisition because user acquisition is important and relevant across our businesses. The second is data analytics because gaming is a very data-driven business if you want to perform well. And the third is AI or artificial intelligence because if we move fast on it, we can really take advantage of it. We don't move fast on it, we will get disrupted. There's no question about it, right? So I think right now, a lot of work is going on at a central level on these 3 areas and we're kind of servicing all our businesses and starting to service all our businesses with common knowledge sharing, common tools, et cetera, to drive some of these synergies. So yes, I think that's where we are going right now.

Great. Thank you so much, Nitish. You also -- so we'll start taking questions from the participants. And as you have already tried to address a few of them, we'll try to take and address as many of them as possible. So participants, once again, if you have any questions, please use the Q&A button and type them there. I'll try to ask the management as many of them as possible. So the first question is from Vishal, and he talks about, you've seen Nazara evolving into the next Indian Tencent within this decade given the current momentum in funding and M&A. I think you've already addressed this to a certain extent, but any comments on that?

Yes, I think we have developed into our own unique model. And while there would be similarities with the overall Tencent model, it's not a exact replica. But I think there is a huge opportunity for Nazara to emerge as a really large gaming company out of India, for India and out of India. And I think that's -- so we are very confident that, that's the path we are pursuing.

Sure. Next question from Chirag. Could you throw some light, which segment will you be focusing more on? Will it be gamified learning, real-time money game, eSports or others? And could you give some understanding on how the revenue is made in each segment and how leverage is played out for increasing profitability?

I'll answer the first part of the question. which is, for us, given the way our structure is built. One thing that's very -- one thing very interesting has developed with the Nazara structure, is that because of our loosely held decentralized model which is run by very passionate founders or management teams, the bandwidth at Nazara level is highly scalable. We can enter areas and drive them because once we enter a particular area, let's say gamified learning right? Through Kiddopia or even WildWorks Animal Jam that we have, we already have a very strong management who understands that speaks, and then for us, can continue to grow it organically as well as inorganically. Same goes for our eSports business or now the real money gaming business. In terms of how will they all grow. I mean, we are obviously chasing growth across categories. But I think different businesses in different markets will grow at different paces. The second part, I think, is a very detailed question. If I start answering that now, probably this whole call will go just answering that out. But I think our quarterly presentation answers most of those points.

Sure. Sudhir, would you like to maybe quickly attempt that, just to kind of give the broad revenue models across this thing rather than each game's revenue model? Or each segment's revenue model?

I think I won't dive into each one, but maybe just at a high level, right? I mean, one belief we have is that, at the group level, we do want to be diversified across different revenue models, that if there is turbulence in any particular kind of model, we're not really held hostage to that, right? But just to take a high-level stab. So some games -- and for us, the leading model initially with games have been subscriptions, as Nitish mentioned, from the telco heritage, on to Kiddopia, Animal Jam, a few others. This is essentially where a customer, it is buying a straightforward subscription to play the game and then enjoy that for a year or 2 years or as long as it goes, right? The second model, which is very common, is in-app purchases. And this is really meaningful in the Western markets, more so than the Indian markets and games like Animal Jam, Fusebox followed that quite strongly. This is where somebody is making a purchase within the game for a good that is useful in the game itself. The third is advertising. And advertising is something that traditionally has worked across the world. But in India, a lot of the games were last year advertising supported. So [ WCC ] fits into that bucket. And that is still a place where I think a lot more evolution needs to happen in terms of especially pricing around advertising. But that's something that will come. The fourth model is real money gaming where it's a transaction fee kind of a structure, which is essentially a player is playing with real money every time they make a transaction effectively there. There's a small percentage of that which goes to the operator of the game which is the studio that we have. So within gaming, these are the 4 predominant models. If you come to the eSports side of the business, there's a couple more. So one is marketing support, which is unlike in digital ads, this is -- if you're doing a physical event, which is an eSports tournament or a music concert, then tying up with large brands, people like, could be a Coke, it could be a Hyundai, it could be an Acer or Chevron. But those kind of guys are large brand partnerships is one big model in that. And those events obviously also then have ticketing and F&B kind of revenue strengths which also then kick in. So those are slightly different models which exist there.

Moving on to the next question from Kewal Shah. The growth rates have been muted since 4, 5 quarters due to understandable reasons. From when can we expect sizable pickup in growth rates?

I'd like to first say thank you for understanding. But more importantly, I think from a Nazara perspective, there are a couple of things I'd like to say. One is the whole reason we run a diversified platform is that gaming businesses do get impacted because of a multitude of reasons. This could be technology changes, consumer preference changes and also regulatory changes, right? And therefore, I think our platform still provides a lot of stability even at a time where there may be a multitude of such reasons impacting us. Second point is we have always reduced quality of revenue and the right approach to the growth of revenue rather than growth at all costs. for us as much as the revenue matters or profitability matters, our cash flows matter. And we don't like to burn cash just for growing, right? That's the second point. I think the third point, irrespective of first point or second point. All that matters really is the growth, right? And we understand that. And we're very hopeful that in coming quarters, we will have much better growth than what we have seen in the last 2, 3, 4 quarters. Many of our businesses are looking good, and we will see how that pans out in actual results.

Thank you, Nitish. Next question is from Prajal Jai. Do we have any plans for creating platforms like apps for Bharat for game development?

I think what apps for Bharat shows with [indiscernible] and other products of theirs is that how the Indian market can have a lot of innovation that is very locally relevant, right? And what that means for gaming is that India first or India native gaming approach would actually see to a lot of breakouts. Still now, in the last few years, gaming revenues in India haven't been large to attempt AA or AAA titles that are very locally relevant, which I believe will eventually be very successful. We definitely intend to go down that path. Right now, we have started with the Nazara publishing platform, where we are starting to publish games that are relevant for the Indian consumers on behalf of Indian developers as well as use or leverage global partnerships and global games, but help localize them and culturalize them for the Indian market. So I think taking the leap from [indiscernible] locally relevant content will do well. And it's not about just localizing in terms of changing the language to Hindi or something. It's about really making it connect with the Indian audience. So yes, we will go down that path.

Next question is from Chirag Maru. He wants to understand what are our strategic strategies to grow active user or monthly active users in high double digits, and make sure that the attrition rate of users are low? Also, what is our active user and attrition rate product-wise? I think that active user attrition rate product-wise is there in the presentation, but let's talk about the growth aspect.

So like I mentioned earlier, we have created enhanced support now on user acquisition at a central level, where we are also leveraging AI, et cetera, to become more efficient at it because growing your user base, there are 2 key box to it. One is the user acquisition, how efficiently you do it? And second is the retention of the customer. Which through tools like data analytics, through better personalization through AI can we achieve. So there's a lot of work going on here. Again, different businesses of ours are approaching it differently. So for example, I can give you maybe a couple of ex assets. Kiddopia, for example, today is leaning on partnering with popular IP, which I think is something we've spoken about in the last few quarters. And hopefully, we will make specific announcements around that in partnerships in the near future. In terms of how do we get popular Kids IP in to Kiddopia, which will drive a lot of organic traffic. Today, one of the big challenges we face at Kiddopia is to be able to scale paid-user acquisition. But these 3 partnerships could actually take through on that front. And we've seen other peers of ours in being able to that. So we're doing that in something like a PokerBaazi, for example, there's a large brand spend at this point of time. They have brand ambassadors like Shahid Kapoor and they have the -- one of the main sponsors of Shark Tank. So they are down a path of -- on that business down a path of really creating this large brand, which continues to then create a lot of awareness and stickiness to the platform over the years to come. So I think this is how we are really approaching it right now.

Sure. Next question is from Kewal Cha. Is PokerBaazi and Freaks 4U currently profitable at EBIT level, if not, by when do we see this breaking even?

I would say it is profitable. We haven't given out specific numbers. But which I just mentioned in the earlier answer was that they have large brand spends at this point of time in the range of INR 150 crores to INR 200 crores a year and we will continue to support that because I think they are the market leader by far today, and they have the opportunity to really be the brand in that space for the decades to come. So I think today, that marketing dollar or the branding dollar that's going in is going to pay a very rich dividends in the years to come.

Next question is from Jahil Parek. Thanks for touching upon AI. Can you please elaborate more on the AR/VR space, example, Sandbox VR technology?

So we've been looking at the VR space for a decade. We actually even contemplated starting where we studio payback in 2011 to 2012. Thankfully, we did not other you would have owned a lot of money. That said, I think the technology is really progressed to it. And we are much closer to our tape-out than we were ever and it's probably sooner than later, maybe 2 years out, 3 years out, it's difficult to really put a specific month on it. But the way the devices -- the experience of these devices, whether you look at the Quest 2 or even the Apple Vision Pro, et cetera, the experience has really become good even from a gaming perspective. With the devices getting more condensed and the pricing coming down, I think mass market option will happen. From a Nazara perspective, today, we are actively looking at acquiring maybe 1 or 2 VR studios, not very large, but studios that have core competencies there, so that we can enter that space and then ride the wave as it comes.

Sure. Next question is from Vishal Soni. What's your take on the future of esports tournament platforms? And how do you see Nazara fitting into it?

Do you want to take that Sudhir or I'll answer?

Feel free to disclose.

So I think esports in India, in our view, is a mega trend, which will -- actually, a lot of innovation in global esports, I think, is going to happen out of India because it's a mobile-first gaming country with a very large youth population. And we're already seeing a lot of innovation actually emerge out of India, which is being taken out globally. So I think esports will continue to grow very fast. Esports today is having an offline tournaments, which NODWIN Gaming is very active in, and also online tournaments. So I think both segments will continue to grow. And as you know, with NODWIN, we are already the market leaders in that space. We've grown quite large. We've expanded our ecosystem in the esports for a lot. So I think Nazara's very well positioned on the bet we took a few years back in this segment.

Sure. Next question from Sanjay Ladha. What is our acquisition strategy? When you see that synergy really play out once you buy the company, what is the desirable margin or sustainable margin we would like to operate in?

For our core gaming business, which is a game studios we run, [indiscernible] Kiddopia, Animal Jam, Fusebox in recent times. I think any healthy gaming business -- core gaming business, which owns the IP should be doing at least a 30%, 25%, 30% EBITDA margin. I think most of the business today, Sudhir correct me, is around 20%, 22%.

Yes, currently blended about 20-ish.

So I think we do have opportunity to further scale these margins as we scale and go along. In some of our businesses like the esports business in NODWIN, because these are growth businesses. Our focus is on growing the system and growing the business. So the margins will be lower today. but we will hopefully catch up on margins in a couple of years time, you start seeing upticks on that. Largely, you will see that we avoid -- we don't like burn and we don't like losses. So most of our businesses, you will see that we are avoiding usually at least getting into a large burn mode.

Fair enough. His follow-up question is the promoter shareholding is on a decline mode. Any reason apart from capital raise by them, do we see management shareholding to increase?

I think a lot of the -- so 2 answers there. One is originally in 2005 with [ Vesabich ] capital invested capital in the company. This company started in 2000 and the first capital infusion was in 2005. The company had been through 5 years of significant turbulence post the dot com crash. So we diluted significantly at that point of time, $1.5 million, we diluted 40% plus ESOP almost 50%, 55%. So a lot of the structure of the cap table that you see is an impact of early dilution between 2005 and 2007 rather than later dilution. The reality is that company could actually built, it's a bit of a paradox because the company actually got built on very low capital. Like I was mentioning, 2005 to 2007, we only raised INR 12 crore. The next fundraise only happened, I think, in 2020 just before our IPO when [indiscernible] capital put INR 100 crores. So between 2000 and 2020, till we reach the IPO point, the company actually raised only INR 12 crores. So it has been run in a very highly capital-efficient manner. It's just that because of circumstances, we diluted only. But it's never impacted the promoters, which is me or my family because we've been choosing a dream that was incepted in 1999, about where gaming is going to go in India and how we can be a larger part of it. In recent years, because of the increased M&A activity, obviously, we've used our unlisted stock as well as our listed stock to either raise capital or swap the equity to do some of this M&A but we believe and at least our intent always is to ensure that the value that we hope to create through such activity to be much higher than the cost of dilution that is being incurred but obviously, collateral damages for the promoter shareholding. And in May of this year, we did sell -- the promoter family did sell a 6% stake. And that was primarily because we hadn't really taken any meaningful liquidity for 25 years. And that was the only reason that, that stake sale was done. But we remain fully committed to this business.

Okay. Next question is from Michal Soni. Do you think Nazara could develop an in-house game in the future that matches the popularity of BGMI or Free Fire?

Yes, our intent will be very much to do it. Either ourselves or through developer partners that we may invest in. I think AA, AAA titles coming out of India should happen, will happen. And AI will actually make it easier because like I was saying earlier, some of the gaps in knowledge can be filled faster using AI. Also the cost of making attempts for AA, AAA title will drastically come down as AI progresses over the next year. So it's something we will attempt. We have not yet started on that path. But maybe in another year's time, we may take on such an initiative.

No, I'll just chip in for a bit there. There's a game called FAU-G, which some of you might be familiar with. The initial version was launched just after India and China had the [indiscernible] and that game didn't work that well. But there's a new version of FAU-G called FAU-G Domination coming out probably by January, it's very close now. And that's a game that Nazara is publishing. It's on development at Nazara, but we work quite closely with the developers there to make sure it works well and to launch it. And...

Sorry, Sudhir, you are on mute.

We Just lost you.

I'm sorry. As the thing to -- and we're quite hopeful that, that game FAU-G Domination might become India's first big homegrown title. I mean, it is the kind of game that BGMI is not necessarily do as well as that, but that is the ambition.

Next question, a follow-up on Padma is, you have mentioned the target of INR 300 crores EBITDA by FY '27. How will you achieve this target?

We will achieve this target by, obviously, focusing on one scaling of our revenues through the various initiatives we have as well as improving our margin profile. And at this point of time, I feel very confident that we are well on track to achieve the target.

Okay. Next question is from Bansi. Can you throw some light on PokerBaazi revenue, EBITDA post GST change regime? Also, can you share at what kind of -- even by EBITDA did we acquire PokerBaazi?

The detailed KPIs is we will share in the next quarter's presentation. In terms of the GST costs, obviously, generally for the industry, the GST costs have increased by a multiple of 4x from whatever they were paying, which means they eroded the profitabilities of almost all RMG businesses. But I think PokerBaazi has done extremely well, to bring back this business to profitability and growth as a well. So I think we're quite excited with how their KPIs look. In terms of the multiples, I think EV to EBITDA would probably not with the right multiple to look at it at this point of time. But on net revenue to multiple the value we paid is probably about 3, 3.5x in that region.

Okay. Follow-up from Ros, can you share the segment-wise path to INR 300 crores EBITDA by FY '27?

We'll put it out in the next presentation.

Next question from Kimberly is can you please throw some light on the integration with ONDC and what is the opportunity for us in this?

Yes, I think this is a very interesting project because what are we trying to do here is that gaming in India, 500 million people are playing, 500 consumers are playing games. But a big challenge is monetization has still been low. India today ranks #1 in global download charts. But not even in top 10 on monetization charts. So your propensity to buy in app purchase is small still growing and will grow, but still small. The revenues from advertising when you're taking programmatic advertising is fairly poor. The fill rates are poor. But India is already a shopping nation, right? E-commerce is big, food deliveries is big, et cetera. So I think what we are trying to really do is how can we match the 500 million consumers who are spending so much time playing games. And also games is a very interactive medium, right? People are constantly booked -- their attention is focused on the game that they're playing. How can we show them relevant products and services that they can purchase while doing the gaming. I think that can help improve the yield to the developer, which can overall boost the industry. And that's what we are trying to experiment with ONDC because the ONDC already has a whole tech stack in place, the supplier base in place. We are kind of integrating that into our own in-game shopping platform. But it's early days, I would say we are at an experimental phase now in the next couple of quarters, we will try and get this to a place where we believe if we see success then it can be kind of extrapolated on a much larger scheme.

Sure. Next question on Michal Soni is how does Nazara view the future of STAN and Lysto, especially with the recent investment in STAN and the new collaboration with Lysto in the Web3 space?

Look, for us to stay relevant, we are always looking at new technologies, and we're also excited about it. At the same time, I believe that making the moves too early is not very useful. But at the right time, can be very positive. So Web3 technology is something we've been looking at for many, many years, and we took a serious look at it in 2020, 2021 and decided to wait. At this point of time, we are starting to again explore the space. But we do think that things like Smart NFT, which are digital asset ownership that you can have within games can be big game changers for the gaming industry going forward. And we can't stay out of it. Both STAN and Lysto are doing some interesting stuff in the Web3 space. They have traction, proven KPIs user bases, especially STAN, we are very impressed with our traction they're getting. And therefore, the idea of acquiring stakes in these companies are doing collaborations was to work more closely with them and grow together, both our knowledge as well as our business.

Got it. Next question is from Kotak Doshi. Could you provide an update on the anticipated time line and strategic plans for the integration of Smaaash Entertainment into Nazara, pending the necessary regulatory approvals?

So specific for Smaaash, we were the successful bidders after a process has taken 2, 3 years. So it's been quite time-consuming with in the final stages of that process, I believe, at NCLT. They still have an approval process, which may take 2 months, 3 months, 6 months, I don't know exact time lines. But we are hopeful that we will get control of that business in the near future. Post which we can look at scaling it up. I think generally, we are taking a view that offline entertainment is going to be very large in India, the same going out strategy that Zomato has been talking about. We also concur with that consumers are going to want to go out spend money on interactive entertainment, social experiences. And we also believe we will see some synergy with what we do online, and we can drive hybrid solutions. So for us, our approach in offline is going to be a multi-IP multi-format approach, of which mashes one more will do it. We recently announced an investment and acquisition of Funky Monkey, which is another move, and there may be a third or a fourth idea also. So that's how we are kind of approaching that space.

Similar to that question and going to that trend, Chirag asked, is there any thoughts of offline-based poker events? Or is it too early to start?

It's an interesting question in my discussions with PokerBaazi team, it has definitely come up. And I have heard recently that [ UP ] -- perhaps [ UP ], I'm not sure if I'm right, Sudhir, is that right? [indiscernible] As they have allowed permitted it. So I'm sure depending on the opportunity, they are very well placed to take advantage of any such opportunities that may come up. In terms of the esports margins, I think esports the way we present it today is a combination of NODWIN Gaming as sports leader. As you know NODWIN Gaming today operates at almost breakeven margins, whereas sports [indiscernible]. Sudhir, is it 30%?

30% to 40% depending on the quarter.

Yes, let's say, 30%. So today, we are presenting a blended margin, which may be about 10%, 12% or 15%. I think, is the NODWIN Gaming margins once they start picking up that would really see a large uptick in overall sports margins. I think we're about a year away from starting to see a meaningful uptick.

Today's final question is how many offline or online events do we do on an annual basis?

I don't have a ready count because it's been really increasing at a fairly fast velocity.

On an approximate basis, Sudhir, we have a number, how many kind of events does NODWIN do?

Well over 100, but -- and that's across the world, right? So it's a large number.

Fair enough. I think those are all the questions and right on time. Thank you. Thank you, Nitish and Sudhir, this is a very educational and a good overview. I think we've covered a lot of questions in a very short span and a very interesting ones on Nazara. So thank you so much for giving us the time. Any closing comments from your side, Nitish?

No, I think I'd just like to reiterate that India really has a fantastic opportunity to become a global leader in gaming. Our prime minster spoke about it in the last -- in the recent independent speech as well. And Nazara is doing all it can do to make that happen.

I'll just add a small one as well, which is the way to think about gaming is also gaming in the context of entertainment, overall. If you look at it globally, gaming is one of the largest segments within the entertainment market, larger than movies or larger than music, et cetera, in most parts of the world. In India, gaming is still much smaller than some of those other segments. But that switch is beginning to happen. If you see the younger generation. And by that, I mean maybe kids and teenagers to maybe early 20s, already their consumption patterns have changed, where they may even be watching games much more than, say, watching series or movie or news. And as that generation, kind of, keeps going up, we do believe gaming will just become larger than larger. So that's the long-term direction tailwind...

Great to hear. Thank you so much, Sudhir. Thank you so much, Nitish. Thank you for your time, and thank you, participants, for joining us. Have a great -- Bye.

Thanks so much. Thanks, everyone.