Strong growth in eSports business likely to put Nazara Tech in good stead

Bengaluru, 15 May Strong revenue growth expectations in the eSports business coupled with gradual profitability improvement in gamified early learning space put Nazara Technologies in good stead for coming quarters.

Brokerage firms expect the company to witness 35 per cent growth in its revenue in the current financial year.

During the fourth quarter, Nazara Technologies posted 53 per cent rise in its revenue to Rs 140 crore, while gamified early learning saw revenue growth of 32 per cent at Rs 110 crore.

“Nazara has Rs 630 crore in cash. We believe this could be used to acquire scale through acquisition in real money gaming, once regulatory clarity emerges. Also, Nazara could benefit from inexpensive acquisition opportunities in the current liquidity situation,” ICICI Securities wrote in a note.

The real-money gaming segment accounted for 77 per cent of India's gaming sector revenue of Rs 13,500 crore in 2022 according to a recent FICCI-EY report. Nazara Technologies currently operates titles such as Classic Rummy (online rummy) and Halaplay (online fantasy) in this space.

Experts are of the view that Ministry of Electronics and Information Technology (MeitY)’s notification on new gaming-related amendments to the IT Act 2021 is likely to bring clarity on the gaming space.

Currently, the company is planning to scale up its current offerings by publishing new real-money games. It also plans to acquire companies to drive consolidation in the sector.

However, brokerage firms flag up growth risks in terms of slow scaling up in the gaming segment.

“Key risks include company’s inability to establish its gaming accessories business leading to lower margins, impact due to increased competition and slowdown in the US markets and possible inability to identify and integrate acquisitions,” ICICI Securities added in its note.

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