Gaming has good opportunities for growth; Nazara will focus on every segment: Manish Agarwal, CEO

Manish Agarwal, Chief Executive Officer, Nazara Technologies, talks about the acquisition of 55% stakes in Datawrkz, acquisition plans, segmental growth, growth drivers and outlook for FY23, budget expectations and margins among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Nazara Technologies has announced plans to acquire a 55% majority stake in the ad tech firm Datawrkz. How will it complement your existing business and what role will it play in financial terms?

A: Two things are very important in the gaming company and they are

(i) How do you acquire a new player?

(ii) How do you monetize the ad inventory that you are creating?

These are the two factors that are very important for you to grow your business in a scalable and sustainable way. And for this, you need a work strong and ad tech partner. As your digital spending are increasing, gaming industry growth is increasing, you need a very strong technology team that can work with you and be a part of your growth so that you can effectively acquire your new acquisition. Datawrkz will help us in that in our every company maybe it is Freemium or Cricket game or Sportskeeda or eSports. All the divisions will be benefitted from them, we will get the benefit of their knowledge as well as of the US market presence. So, in the next three-four quarters, we will have to see how we can work with each other. Secondly, the advertising dollars, which is being spent, will continue to grow in gaming and there is no gaming-focused ad tech company is present right now, so, there is a wide space. With Datawrkz, our relationship and their abilities together can make a gaming-focused league ad tech company and increase its revenue scale because ad tech and gaming have a synergy and there is an opportunity to work together in the coming time. So, these are the two things in our current portfolio synergies and how big is the opportunity in the market and how we can grow it by working together. Amid these two things, we have announced this deal and the team is a good team we have been working with them for the last nine to ten months and we would like to welcome them into the Friends of Nazara Network.

Q: Have you lined up more acquisitions in the space, do you have the appetite to acquire and will it happen in the next few months?

A: We have four segments, Gamified Early Learning, e-Sports, Skill-Based Games and Freemium and the market is quite big in each of these segments. And, as I said on your channel before IPO that we believe in taking people along as such growth is our growth. As the market is quite big, gaming companies are emerging and few are established. So, we continuously talk with them and see where our company a harmony is being created with ours and this is a constant work for us. Thus, acquisitions will continue to happen. The important aspect of the acquisition is whether can we have a good friendship and can we grow well together. When these two things look right to us, then we do the acquisition. So, in the coming months, there will be acquisitions, we have an intent, if both our things are fit, then we will definitely do the acquisition, otherwise, there is no pressure that we need to do the acquisition.

Q: What would be the ticket size of these acquisitions and which are the segments that are on your radar from many segments in which you operate?

A: Growth is going well in all our four segments because gaming in itself has such a large opportunity in the next 10 years. There is no such segment in which we will say that the growth has saturated and the last ceiling has come, now we cannot grow in it. So, there is no such thing in the opportunity that it is a first child or that is a stepchild. Opportunities are available in all four segments. As I have said, there is an opportunity and we have to see the way we can grow and how the team is and can we have a good friendship. These two factors are very important for acquisition. There is not any particular segment on which we are targeting or focusing.

Q: eSports and Gamified early learning contributes about a total of 80% of your revenue. Going forward, what are going to be the growth drivers for these two major businesses and what segment can be a growth catalyst for FY23?

A: If we see in terms of FY23, our eSports is growing continuously and is growing in a good manner. In Gamified learnings, opportunities are available in front of us. Meanwhile, we saw a slight slowdown in the segment because of the policy issue that we discussed in the last quarter. Gradually, as the issue is resolved, it will again catch the growth momentum. In view of 23, if you see, our esports will grow continuously and will grow in a very good way. Opportunities are in front of us in gamified learning and there we have seen a slight slowdown because of the policy issue of April which we discussed in the last quarter. Gradually, as the issue is resolved, it will again catch the growth momentum. In FY23, we have to make big the Freemium vertical, which is very small whose opportunity is very big. Also, we have to see how to grow the ad tech that we have taken. As far as budget is concerned, the most important thing that is required in the skill-based real money gaming is stability and policy and if we see this stability and policy in this budget then we can grow it aggressively. If clarity on GST and definition of the skill gaming comes in our country then we have a very big market, which is currently established and there is growth. So, we can take our stance aggressively on the front.

Q: Budget is around the corner. What are your expectations from the upcoming budget for the online gaming industry?

A: Two things are required. (i) what is the rate of the GST and (ii) how to calculate GST. If we get that clarity in the skill-based real money gaming, then those who do not understand that are we paying at the right rate as the GST officers view is different. So, if the issue that is in mind will end, stability will come. Secondly, there should be the same definition for Game of Skill and Game of Chance across the nation and each state must comply with that definition. If these two things are happening then you will not hesitate to invest, you can invest in your marketing and M&A because due to policy stability your investments will not be at a risk. If clarity is provided on these two factors in the budget. The government is doing meetings with the industry on the same for a long time and if the clarity is provided on it then the industry will be benefited from it.

Q: In terms of margins, how are you planning to protect it as we understand that amid this huge competition, one needs to incur a lot of marketing expense to garner eyeballs?

A: We are not providing the margin guidance for FY23 at present. But in FY22, we provided an EBITDA guidance of 13-15% at the end of the second quarter and at this juncture I will like to stay with it.

Q: What's your strategy for growing the real-money gaming business? Are you thinking about integrating a few entities? Also, when can we assume telco subscription reviving?

A: In the telecom subscription business, as I said, we do not budget our growth. For us that business is a high EBITDA margin business, it generates cash but our growth engines are the four businesses that I have talked about earlier and the fifth that has added to it is ad tech. So, gamified learning, esports, freemium, skill-based real money and ad tech are our growth engines, where we will focus in FY23. The platforms of FY23, eSports is in momentum, gamified learning is a scale where we are resolving the issue with Apple across the world and it will bring growth. After that in Freemium, there is a game of Cricket where we will look forward to acquisitions and we will see the kind of acquisitions that can be made so that the vertical can cross the mark of Rs 100-150 crore. In skill-based real money gaming, as I said, the market is quite big and we have made acquisitions and it is growing but what we can do to be among the top three to four players in this country. Everything depends on whether the policy stability and clarity comes or not. If stability and clarity are not achieved, then we will act wisely and if stability is achieved then we will act aggressively.