Nazara’s Q3 profit slumps 54% YoY as rising costs offset revenue surge

Nazara reported its highest-ever quarterly EBITDA of Rs 52.4 crore for the quarter, registering a 39% YoY growth.

Diversified gaming and sports media company Nazara Technologies saw a significant decline in its net profit for the quarter-ended December 31, 2024 (Q3-FY25), amid soaring expenses driven by a sharp rise in advertising and business expenses, and employee benefit costs.

On February 13, Nazara Technologies reported a 53.7 percent drop in its net profit to Rs 13.68 crore for the quarter, from Rs 29.52 crore in the same quarter last year.

Revenue from operations, however, jumped 66.9 percent to Rs 534.7 crore for the quarter, from Rs 320.4 crore in the corresponding quarter last year. This was driven by a significant jump in the company's advertising revenues that rose nearly six-fold to Rs 147.87 crore for the quarter, from Rs 26.1 crore in the same quarter last year.

The company also reported its highest-ever quarterly EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation of Rs 52.4 crore for the quarter, registering a 39 percent year-on-year (YoY) growth.

"This quarter’s performance reflects our continued focus on execution and growth. By expanding our gaming ecosystem, partnering with globally recognized IPs, and driving high-impact acquisitions, we are well-positioned to establish Nazara as a truly global gaming leader from India" said Nazara founder Nitish Mittersain in a statement.

Nazara, the country's only publicly listed gaming company, currently operates across a range of sectors such as gaming (World Cricket Championship, Kiddopia, Animal Jam, Classic Rummy etc), e-sports (Nodwin Gaming, Sportskeeda), and advertising (Datawrkz). It is also venturing into physical entertainment with the 60 percent stake purchase in Funky Monkey, slated to close in February 2025.

In January, Nazara announced that it is raising Rs 495 crore through a preferential equity issue to Axana Estates LLP, led by Plutus Wealth management founder Arpit Khandelwal and CaratLane co-founder Mithun Sacheti. This was after the firm closed a Rs 855-crore funding round from a slew of new and existing investors including SBI Mutual Fund in November 2024.

The deal also triggered an open offer through which Axana Estates, Plutus Wealth Management, and Junomoneta Finsol (an associate firm of Plutus Wealth) are seeking to acquire an additional 26 percent stake in the company for a total consideration of Rs 2,382.35 crore.

Segment-wise performance

Nazara's core gaming vertical saw a 52.7 percent jump in its revenues to Rs 154.9 crore for the quarter, from Rs 101.5 crore revenue in the corresponding quarter last year. This was fuelled by strategic acquisitions such as United Kingdom-based gaming studio Fusebox Games as well as strong performance by existing games such as Animal Jam.

Profits also surged three-fold to Rs 25.5 crore for the quarter, from Rs 8.4 crore in the year-ago quarter.

Nazara stated that Kiddopia's recent collaboration with Mattel's Barbie and Moonbug's Little Angel is expected to further strengthen engagement among young audiences, while partnerships with well-known franchises including Big Brother and Bigg Boss will enable the gaming vertical to scale.

Fusebox Games is developing interactive fiction games based on the popular reality television show Bigg Boss and its Dutch counterpart Big Brother, as part of its efforts to expand its gaming portfolio. Both the games are expected to launch later this year.

Nazara also recently acquired two popular gaming IPs - CATS: Crash Arena and King of Thieves - from Barcelona-based game developer and publisher ZeptoLab for Rs 66.6 crore ($7.7 million) in an all-cash deal. The two games reported $6.1 million in revenues in the calendar year 2024.

This was Nazara's first IP purchase under its new operating model, implemented early last year, which aims to bring the core gaming business into the parent entity. These games will be operated and published by Nazara, with revenue and profit from these accruing directly to the listed entity.

This will boost the parent firm's revenue and free cash flow, which can then be deployed for both organic and inorganic growth moving forward. Nazara stated that it intends to further scale this model in coming quarters.

Esports remained the biggest vertical for the company, with revenues of Rs 232.7 crore in Q3-FY25, up percent YoY from Rs 193.7 crore in Q3-FY24. The segment however reported a loss of Rs 15.86 crore for the quarter, as compared to a profit of Rs 7.1 crore in the same quarter last year.

Adtech business's profit jumped to Rs 3.53 crore for the quarter, as compared to 0.14 crore profit in the year-ago quarter.

North America accounted for 35 percent of Nazara's revenues in Q3-FY25, with India contributing 19 percent, and the rest of the world made up the remaining 46 percent.