Nitish Mittersain, Jt MD & CEO, Nazara Technologies, says “the rest of the year should be good for us. We see revenues increasing at a slightly faster pace than what they have in the first half of the year and we will continue to maintain or enhance our profit margins. Looking into FY25, I think we have a very good base set now to launch for much more aggressive growth going forward.”
Your profits have scaled higher. There is a very sharp uptick coming in for profits, for revenue as well as your margins. What were the key drivers in the quarter gone by and are you likely to see this sort of a performance sustaining?
Our focus has been growth alongside profitability. We think the gaming opportunity in India is very massive and it is very important to build a diversified and stable platform that keeps growing on its own quarter-on-quarter. We are focussing a lot on the core metrics of our business, focussing on the right KPIs so that we can deliver this profitability alongside growth. So, that is the input and that is the results you are seeing in terms of the output. I think the rest of the year should be good for us. We see revenues increasing at a slightly faster pace than what they have in the first half of the year and we will continue to maintain or enhance our profit margins. Looking into FY25, I think we have a very good base set now to launch for much more aggressive growth going forward.
Your gaming margins are around 20.9%, e-Sports is at 5.8% and ad-tech at 6.2%. What is the outlook on the overall segmental margins going ahead?
In the medium to long term, we are aiming to get our gaming margins above 25%. The right range we should be able to get our gaming margin is 25-30% and that is what we will keep striving for. Our e-Sports business remains a strategic business for us, therefore, our focus is not so much on margin expansion at this stage, but it is all about strategic moats that we can create in the business and we will continue to grow organically as well as through some acquisitions in that space.
Our ad-tech business has actually had a little bit of a pause but we are recovering well and we expect the margin profile to keep improving because a lot of the revenue mix is changing from services to product and you will see in the coming quarters ad-tech business margins to improve. So, I would say on a holistic basis as we go into FY25, our margins should keep improving.
Let us talk about Kiddopia because we have seen a minor decrease in the ARPUs on that particular front on account of the summer win back offers. If you could help us with some sort of a timeline by when do you expect this to recover what sort of a subscriber growth are you aiming at?
One of the big challenges that we are facing currently in the Kiddopia business is the ability to scale up our user acquisition spends. We have been using Google as the main source of acquisition and while we are able to get users at this cost per trial that we are comfortable with, we have not been able to really scale up the spend. We are working very closely with the Google team, we are looking at new ad networks and also new ideas on how we can kind of break through this ceiling that we have hit. That is the core focus on Kiddopia and once we are able to do that, we should be able to see an increase in subscriber base.
Overall, the market is very large. We just need to navigate how to get the user acquisition at the cost we want and at the scale we want. There is a lot of work in progress over there.
In Q2, you transitioned your main titles from WCC2 to WCC3 to online only mode. Has that impacted the ad revenue?
No. The World Cricket Championship is India’s most famous and most popular cricket game and we operate it with a large team that is continuously developing it. We think that the potential for this game in terms of monetization is much larger than what we have been able to realize till now and we are making significant disruptive changes to try and achieve that.
One of the things we did is move it from an offline to an online mode which helps us realize more revenue per user that increases our lifetime value of the user and we can spend more money in scaling up. So, these are some of the ideas we are experimenting with and very hopeful that in the coming quarters you will start seeing a larger scale over here.
Actually, within the real money, Classic Rummy also posted an EBITDA loss in Q3, in the quarter gone by before stabilizing to break even by Q4 FY24, is that your expectations by any chance?
Just to clarify, in the quarter gone by we actually posted an EBITDA profit of a little bit over Rs 3 crore in OpenPlay Classic Rummy business. It is Q3 where we expect some minor losses and this is largely on account of the new GST policy that has come in effect from October 1. We are tweaking our business model over there and we expect that by the end of this quarter, we should break even again and get onto a growth curve after taking this into the denominator.
Your Esports EBITDA was around 6.9%. How are you looking at growing the Esports segment? Also, Ad Tech seems to be in a slow lane. If you could tell us, what are the reasons contributing to that?
So, on the Esports side, we have two verticals, the NODWIN Gaming Esports business and Sportskeeda. Both the businesses are growing well, especially for NODWIN Gaming where we hold a lot of Esports tournaments. The second half of the year, which is October to March, is the main part of the year where about 65% to almost 70% of the revenues of the whole year get generated. So, we are quite excited about the upcoming quarters on that business.
Our Sportskeeda business has continued to perform very well. We acquired a company called Pro Football Network, which has on a year-on-year basis, more than doubled its user base. So, combined, the Esports business will continue to grow well. Our priority is not on margin expansion over there, but if we can still increase our profits, we will. Strategically, making sure that we continue to be the dominant player in that space with the largest market share is extremely important.
On the Ad Tech side, we had a little bit of a hiccup because a couple of quarters back, we had lost our largest customer, although he was a low margin customer. But we have built a very strong pipeline and we are starting to see a good uptick. Our margins are expanding. In another couple of quarters, we should have a very stable business that is growing again and with much more improved margins. I would say it is experiencing short-term pain, but in the medium to long term, it is actually going to benefit the business.
Nikhil Kamath has bought more shares of Nazara Tech. How are you leveraging his expertise? What does it mean to have these marquee investors?
We have always been fortunate to have the backing of marquee investors, as you know, from Mr. Rakesh Jhunjhunwala to now Nikhil. But specifically with Nikhil, I have had the opportunity to interact a few times after our meeting. And given that he is a young, very successful tech entrepreneur, obviously, he has a perspective on our business. And we are taking his valuable feedback and leveraging it as we can.