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Online gaming company Nazara Technologies, which saw esports contribute 49 percent of its overall revenues in FY22, expects the segment to continue to be the largest in FY23.
The esports segment saw its revenue increasing from Rs 1,701 million in FY21 to Rs 3,039 million in the last financial year.
The company, which reported its Q4 FY22 results on May 13, reported 37 percent growth year-on-year in operating revenues to Rs 6,217 million in FY22 versus Rs 4,542 million in FY21. Nazara’s profit after tax grew from Rs 136 million in FY21 to Rs 507 million in FY22.
The company had expected esports to become the largest segment in the second half of FY22 after it contributed 40 percent to the overall business of Nazara Technologies and saw 62 percent growth in revenue in the first half of FY22. This was higher than its largest segment — gamified early learning — which contributed 41 percent and saw 35 percent growth in revenue during the same period.
«The tailwind for esports is strong. As an industry we are still in infancy. There is lot of growth yet to happen. We have been making investments in the space. We bought OML IP, Rusk Media. We want to distance the gap between us and the second player. Hence, we are in a hyperactive growth phase. We have strong momentum and have a good base of Rs 300 crore to build on. Revenue contribution from esports in the overall pie will continue to be largest in FY23,» Nitish Mittersain, Joint MD, Nazara Technologies, told Moneycontrol.
He is also counting on offline events in the esports segment, which had taken a hit due to COVID-19.
«The big challenge was that in the last two years there were no offline events and that was a dampener for business. Having said that, things have started in terms of offline events and we will see a good contribution from them in FY23, which will help the growth of esports, Mittersain added.
He said that the Asian games choosing esports as a medal event was a game changer and a strong signal that esports is becoming a mainstream sport. However, the Asian Games, which were scheduled to take place this September, have been postponed due to a fresh COVID-19 wave in China.
The esports sector saw its revenue increase by 29 percent from Rs 7.5 billion in 2020 to Rs 9.7 billion in 2021. The number of esports players doubled from 3 lakh in 2020 to 6 lakh in 2021, according to an EY-FICCI 2022 report.
Real money gaming
Along with esports, Nazara is eying the real money gaming (RMG) segment, which saw its share increasing from 3 percent in FY21 to 5 percent in FY22 in Nazara’s overall revenue pie, with revenue increasing from Rs 138 million in FY21 to Rs 297 million in FY22.
«We expect other growth engines to kick in as well, especially real money gaming. In this segment, we made the acquisition of OpenPlay in FY22. But we are still waiting for some more regulatory clarity, especially in terms of GST, before we double down on it. If there is more clarity in terms of regulation and the tax perspective then Nazara Technologies will make larger moves in this segment. There is large potential to scale over,» said Mittersain.
Speculation about online gaming being brought under the highest tax slab of 28 percent, from 18 percent now, is making the sector nervous.
The Internet and Mobile Association of India (IAMAI), in a statement on Monday, said that any increase in the GST rate is likely to turn businesses in the sector unviable. This will lead to a complete shutdown, which in turn will result in the loss of a large number of jobs and a loss of investor confidence, debilitating India’s online gaming industry, which is currently witnessing fast and exponential growth of 35 percent (CAGR), IAMAI added.
Due to the uncertainty around GST rates on online gaming, Mittersain said that the company is being conservative. «We don’t want to take large regulatory risks.»
Overseas focus
In FY23, apart from India, the company will be focusing on international markets. Nazara has a presence in markets such as West Asia (Middle East), Uganda, Zambia, Singapore and Mauritius, among others.
«Certain emerging markets like Middle East and Africa are a focus for us, we are especially pushing esports in the Middle East. In addition, the US is becoming a very important market for us. The Kiddopia business is all from the US today. Rs 200 crore of revenue is coming from the US for us. We acquired Data Works, which is an ad tech firm that derives most of its revenue from the US. So, the US is becoming a significant contributor in terms of revenue,» noted Mittersain.
However, he pointed out that gamified early learning faced the challenge of changes in privacy controls by Apple last year. “This impacted our ability to acquire new users,” said Nazara’s Joint MD. Kiddopia (iOS) had 308,684 paying subscribers as of March 2022, a 6 percent decline compared to December 2021’s 327,738 subscribers.
Along with gamified early learning, Nazara saw a dip in revenue contribution from telco subscriptions, from 17 percent in FY21 to 10 percent in FY22. Revenue dropped from Rs 749 million in FY21 to Rs 624 million in FY22.
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Copyright © e-Eighteen.com Ltd All rights resderved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express writtern permission of moneycontrol.com is prohibited.
