08 May 2018
Gaming firm Nazara Technologies expects India’s gaming market to grow significantly in the next 2-3 years on cheaper and faster mobile data services and sees consolidation opportunities in the sector
Mumbai: Gaming firm Nazara Technologies Ltd, which is heading for an initial public offering (IPO), expects India’s gaming market to grow significantly in the next 2-3 years on cheaper and faster mobile data services and sees consolidation opportunities in the sector, a senior executive of the company said.
Mumbai-based Nazara is a mobile games firm engaged in acquisition of, value addition to and distribution of mobile games across emerging markets such as India, West Asia, Africa, South-East Asia and Latin America. Nazara’s operation comprises subscription, freemium and e-sports businesses.
Nazara filed the draft prospectus for its IPO on 31 January and received regulator Securities and Exchange Board of India’s (Sebi’s) approval for the share sale in April. The firm is expected to launch the offering soon. “We feel that in 2-3 years this market will really open up. With Reliance Jio, the velocity of new users coming in has significantly increased. The number of downloads has significantly increased. At this point, going down the IPO path gives us that recognition of being a large player in the industry and the first gaming firm from India to go public,” said Nitish Mittersain, founder and managing director of Nazara Technologies. Mittersain founded Nazara in 1999.
“We had been approached by Chinese gaming companies three years ago to sell majority stake but felt it was a bit premature as data revolution in country had just started then,” he said, adding the company has been growing at a compound annual growth rate (CAGR) of 36% in the last five years.
He said the IPO will help the company build strong equity currency which will help it tap consolidation opportunities.
“We felt an IPO should build a good equity currency for us and we are seeing a lot of consolidation opportunities in the market now and going forward. So, using that equity currency and the value that we create, we could help consolidate the market,” said Mittersain.
Nazara has in the past few months acquired two gaming firms with the aim of accessing a large customer base and entering new lines of business.
In January, Nazara acquired a majority stake in NODWIN Gaming, an e-sports pioneer in India. Also in January, it bought a majority stake in Chennai-based NextWave Multimedia, which runs the most popular cricket game in India-World Cricket Championship.
Inorganic growth will continue to be a significant part of the company’s growth strategy going ahead. “Our strategic approach is that you have to build a network of companies. We believe that time is very important. In gaming companies you can’t have talent under one roof. You look at right entrepreneurs, you look at right structures and give them operational independence to run the business,” said Manish Agarwal, chief executive of Nazara Technologies Ltd.
Unlike the internet firms of today that have been burning cash to grow business, Nazara is a cash-rich company with a profitability track record of over a decade,said Mittersain.
“As a company our DNA has been very strongly to be profitable. We have been profitable for the last decade. Today our company has cash reserves of Rs150 crore,” said Mittersain.
For the financial year ending 31 March 2017, Nazara reported revenue of Rs198.9 crore and a profit of Rs59.7 crore, according to the company’s draft IPO prospectus.
The gaming company has also been conservative with investor capital. Nazara raised funds from private investor Westbridge Capital in 2005. “From Westbridge we raised just over $3 million of cash over the years. We raised $1.5 million in 2005 and that was topped up with another $1.5 million in 2007,” he said.