The Sale Of OpenPlay To Moonshine Will Streamline The Gaming Business: Nazara Technologies

Summary

Nazara Tech's MD & CEO, Nitish M, discussed the company's strategic move to consolidate its real money gaming (RMG) businesses under PokerBazi, which holds a dominant market share. The sale of a stake in PokerBazi’s parent, Moonshine, for INR 104 crore is aimed at streamlining operations and driving growth. Nazara plans to reinvest the proceeds into expanding its gaming portfolio and acquiring new studios. Despite market slowdowns, the company expects strong growth, with aggressive revenue and profitability targets for FY26. Nazara remains committed to its international expansion, particularly in the US market, and will continue its profitable marketing strategies.

Takeaways

• 😀 Nazara Tech has completed a divestment of its open place stake, transferring it to PokerBazi, to consolidate its real money gaming (RMG) businesses under one vertical.
• 😀 PokerBazi now holds over 60% market share in the online poker space in India, with a revenue run rate of approximately 600 crores, contributing to Nazara's strategic growth in the RMG sector.
• 😀 The consolidation of the RMG business under PokerBazi aims to lower customer acquisition costs and create strong network effects within the business.
• 😀 Nazara Tech is focused on organic growth and acquiring gaming studios, with recent investments in companies like Real Saga.
• 😀 The company remains cash-rich and actively pursuing acquisitions, with a focus on expanding its gaming studio portfolio.
• 😀 Nazara holds a 47% stake in Moonshine, with the option to convert its CCPS (Compulsory Convertible Preference Shares) into equity, potentially increasing its stake above 50%.
• 😀 Nazara plans to convert its CCPS in Moonshine in the future but is not in a rush, allowing the team to grow the business further before consolidation.
• 😀 Despite broader market challenges, Nazara's revenue grew by 66.7% YoY in Q3 FY25, and its EBITDA increased by 39%, reflecting strong growth and healthy operating cash flows.
• 😀 The company will continue to focus on marketing and advertising, especially in international markets like the U.S., to drive profitable growth.
• 😀 For FY26, Nazara expects aggressive growth in both revenue and profitability, with a focus on margin expansion and delivering sustainable financial performance.
• 😀 Nazara Tech has a clean balance sheet and proactively took an impairment charge for one of its businesses, Wings, to maintain financial health, with no expected impairments in the near future.

Q & A

What is the rationale behind Nazara Tech's decision to sell the OpenPlay stake to PokerBazi's parent company, Moonshine?

The rationale behind the sale is to consolidate Nazara Tech's real money gaming (RMG) businesses, specifically skill-based games, under one vertical. PokerBazi, with its strong technology team and dominant position in the market, is seen as a better platform to manage and grow these businesses.

How significant is the real money gaming (RMG) business for Nazara Tech?

The RMG business is significant, with PokerBazi, which holds over 60% market share, achieving a net revenue run rate of approximately 600 crores. This is an important area of growth for the company.

What are the plans for the 104 crore rupees from the divestment?

The 104 crore rupees will be used primarily for reinvestment in organic growth and acquisitions of interesting companies, especially in the gaming studio business, which aligns with the company’s long-term strategy.

What is Nazara's current stake in Moonshine, and what is the plan for increasing this stake?

Nazara holds a 47% stake in Moonshine, with an additional convertible CCPS note. They plan to convert this note at the right time to increase their stake to over 50%, but there is no specific timeline for this.

What revenue growth target did Nazara Tech initially have for FY25, and has that changed?

Initially, Nazara had indicated a 10% revenue growth for FY25. However, their Q3 results showed a 66.7% year-on-year revenue growth, surpassing expectations, which suggests they are on track for strong growth.

How is Nazara Tech performing financially in FY25, and what are the projections for FY26?

In FY25, Nazara's revenues grew by 66.7% in Q3, with a 39% growth in EBITDA. They are projecting even more aggressive growth in FY26, both in revenue and profitability, with a focus on expanding margins.

What is Nazara Tech's approach to marketing and advertising, especially internationally?

Nazara Tech is seeing strong traction with its games internationally, especially in the US. They plan to continue growing marketing and advertising spending in profitable markets, without a fixed target, aiming to scale as much as possible.

Is Nazara Tech planning any further impairments like the one taken on Wings in the previous quarter?

No, Nazara Tech does not foresee further impairments. They proactively took an impairment on Wings to clean up their balance sheet and maintain a healthy financial position. However, there is an outstanding loan to Wings that may be provisioned in the future.

What is Nazara Tech's stance on managing its balance sheet?

Nazara Tech takes a conservative approach to managing its balance sheet, regularly cleaning it up and ensuring it remains healthy and profitable. The impairment on Wings was part of this strategy.

How does Nazara Tech view the regulatory environment around real money gaming, and what is their strategy?

Despite regulatory challenges, Nazara Tech remains bullish on the real money gaming sector. By consolidating RMG businesses under PokerBazi, they aim to streamline operations and benefit from the network effect and reduced cost of acquisition.