Cricket game developer Nazara Technologies Ltd, supported by billionaire Rakesh Jhunjunwala, became the first Indian gaming technology company to launch mobile entertainment in the world’s No. 2 smartphone sector. The Mumbai-headquartered start-up filed initial public offering documents with the market regulator on Friday. Its imminent debut on local exchanges could encourage other Indian startups to tap into public markets, with years of explosive growth in mobile and internet usage leading to the creation of large private companies from Paytm to Walmart Inc. to Flipkart. Founded in 2000 by gamer Nitish Mittain, when he was a college graduate, Nazara benefited from a global smartphone gaming boom that started just before the epidemic hit millions online (1).
It is said to have been backed by TPG, Nykaa E-Retail Pvt. This year, it is claimed as an IPO plan that could give Indian online cosmetic retailers a value of more than 3 billion dollars. Start-up of food delivery Zomato Pvt. It has stated that it will file for an IPO in the first half of 2021. Nazara plans to offer 49.6 lakh shareholdings for sale, with a face value of Rs 4, as shown by the filing. The introduction of cheap smartphones and reduced wireless data rates for 1.3 billion people has led to Nazara and her peers’ galvanized growth. The Company’s platform hosts multiple content categories and is active in sports, controlling the mobile cricket gaming segment’s share with titles such as the WCC. Nazara, whose supporters include Plutus Wealth Management and billionaire Rakesh Jhunjunwala, works in 52 countries from North America and the Middle East to Africa and Southeast Asia (2).
The veteran investor-backed company had previously received SEBI’s approval for its initial public offering in 2018. However, its DRHP had yet to be filed. The IPO will make Nazara the first Indian gaming company to enter the market (3). Key investors in the Company include Rakesh Jhunjunwala, which holds 32 lakh shareholdings, and the IIFL Special Opportunities Fund holds 17 lakh shareholdings on a fully diluted basis. Jhunjhunwala had invested Rs 182 crore in December 2017, and the IIFL Special Opportunities Fund had invested Rs 330 crore in 2017 (4).
Nazara had announced its plans for the IPO for the first time back in 2017, and it is finally ready after 20 years of incorporation. The wheels have begun to move forward, and so has the process of giving way to WestBridge Capital, which has been sitting on Nazara’s cap table since 2005 when it invested 3 million dollars. In 2017, the private equity fund made a partial exit, reducing its shareholdings from 60 percent to 21 percent. It is estimated that the IPO will further dilute its shares by 3 percent to 4 percent, as WestBridge Capital’s founder and MD Sandeep Singhal told us in an earlier interaction on the journey of starting up and going to the IPO. Nazaara’s IPO will reduce the Company’s share of WestBridge Capital from 21 percent to 3 percent (5).
Nazara’s growth over the years
Nazara Technologies is one of the leading e-sport developers, and New Age Sports Media’ Company headquartered in Mumbai and operating in 64 countries across India, Asia, Africa, and the Middle East (6). Nazara has diversified business models, including Subscription, Freemium, eSports, Skill-Based Gaming in India, and Chance based Gaming business in Kenya, Africa. Under the Subscription Model, they depend on telecommunications companies in India under this model. Telecom companies offer a gaming subscription to their subscriber base, which focuses on offering easy-to-play games. To address the low pay propensity, subscription services were offered through sachet pricing. Daily, weekly, and monthly subscriptions and payments were collected by the Telecom carriers, sharing on average 50 percent of revenues with service providers Nazara (7).
Under this model, the gaming organization creates popular games and uploads them to the Play and App Store, from which mobile users can easily download them for free. Users come across ads while using these games. These ads are the source of revenue for Nazara Tech. So more popular is the game (8), more revenue is going to come. These are skill-based games where players battle against other players and win real money. The subscribers are paying for playing games. This is how Nazara Tech is earning revenue. Under the e-sports model, amateur players watch the live stream of a match played by professional players on OTT platforms and listen to live comments.
A game like PUBG, played by an indoor stadium and live streaming professionals, is shown on the TV or OTT platform. Imagine that you’re sitting at home watching live games. This is the new concept that is taking off at many places in India. A company like Nazara will organize such games, sell media rights to players like Star Sports and earn revenue. Nazara Tech aims to make these games a battery that can be played by professionals. ESports is the fastest-growing sports entertainment format among competitive players, and Nazara has over 80 percent of the Indian market through its majority stake in Nodwin (9).
How their model facilitate earnings
The subscription business is down due to the slowdown in revenue growth due to the maturation of the telecommunications players’ subscription business and the consolidation of the telecommunications market by JIO. The user preference shifts from paying to free to downloading games from the App Store, which creates more revenue downsides. Freemium & eSports business is growing due to smartphones’ proliferation, a sharp drop in data prices, increased cellular infrastructure, digital payment penetration, and casual players have moved to Skill-Based Gaming and competitive PC/Mobile gaming. The Company focuses more on Freemium Skill-based games, and e-sports games are moving forward and are trying to move their traditional telecom subscription business model.
India’s e-sports market has seen a huge increase lately, partly driven by a surge in digital usage. Online gaming revenue increased by 59 percent year-on-year to 4900 Crores in 2018 and is estimated to reach 12000 Crores by 2021 at 35 percent CAGR. Casual gaming revenue increased by 40 percent yearly to 2300 Crores in 2018 and is estimated to reach 4900 Crores by 2021, with a CAGR of 30 percent (10). Real money gaming revenue increased by 82 percent year-on-year to 2600 Crores in 2018 and is estimated to reach 7100 Crores by 2021, with a CAGR of 40 percent. In 2018, the number of online players in India increased by 52 percent per year to 27 Crores players, with the number of users expected to reach 34 Crores by 2021.
Nazara has laid the foundation for continuing to gain market share in the fast-growing gaming market by transforming Nazara from a telco-driven subscription service company to a pure-play Interactive Gaming & Sports Media Platform, which is led by multiple fast-growing verticals with enormous opportunities.
The Men behind the success
Mr. Vikash Mittersain (11) is the Chairman and Chief Executive Officer of our Company. Since its incorporation, he has been a director of the Company. He holds a degree in Industrial Electronics from the Walchand College of Engineering, Sangli. He has 38 years of experience in several business sectors. He had been a part of the Advisory Council of the APJ Abdul Kalam Centre. He also has been the founder of the Indian Business Group. He has participated in several panel discussions and conferences, including sessions at VESIM Literati and Innovators Pitching Session at Maker Mela 2018.
Mr.Nitish Mittersain (12) has been the joint MD of the Company. He holds a B.COM degree from the University of Bombay. He founded the Company 21 years ago and has been involved in the Company’s promotion for eighteen years. He was taken in as a member of the Young Presidents’ Organization in the year 2014. He received many awards, including the Visionary Award from the Vision Foundation in 2012, the Young Achievers Award from the Indo-American Society in 2000, and the Outstanding Young Person Award from the Junior Chamber International, Marine Lines 2017. He is also a part of the Asia Board of the MEF.
What makes a company like Nazara grow?
On a consolidated basis, revenue from operations for the financial year 2018-2019 amounted to Rs. 167 Crores compared to Rs. 170 Crores for the financial year 2017 to 2018, reflecting a decrease of 2 percent. Revenues from subscriptions and download of games and other content decreased by 62.98 percent from Rs. 151 Crores for the financial year 2017-18 to Rs. 95 Crores for the financial year 2018-19. In the financial year ended March 31st, 2019, the Company registered a profit after Rs tax. 4.4 Crores at a consolidated level compared to Rs. 1.2 in the previous financial year ended March 31st, 2018 (13).
Looking at their records over time, the Company surely has a stable earning factor and could turn profitable for the investors. The e-sports company has a huge base in India. With the Digital India movement that PM Narendra Modi started, the system’s improvement gets to grow, which is why Nazara has put up an IPO for the betterment of the games and features.