We're very focused on scaling up our existing verticals: Nazara founder Nitish Mittersain

Nazara Technologies founder Nitish Mittersain has a scale on his mind as the diversified games and sports media firm looks to accelerate the revenue growth of its businesses, especially its freemium, ad-tech and real-money gaming (RMG) verticals.

These verticals contribute a modest chunk of Nazara's topline but have large potential for scale, Mittersain told Moneycontrol. In Q2 FY23, ad-tech business accounted for 14 percent of the company's revenues in H1-FY23, while real-money gaming and freemium contributed 6 percent and 2 percent, respectively.

"Any business that we currently are in, we do not want to operate at subscale. Earlier, it was a different story but in our revenue mix today, only a Rs 20 crore or Rs 30 crore (yearly) business does not make any sense. So one of our biggest focuses right now is how do we quickly scale up businesses that are subscale for us at present and put them on their own momentum," he said.

Mittersain said that eSports and gamified early learning - two of its biggest verticals - already have momentum and are well on their way to scale up further.

The growth on the RMG front will however come with certain caveats, as it awaits more clarity on the sector's regulatory problems and GST (Goods and Services Tax) to invest more aggressively into this business, Mittersain said.

Earlier this month, the Tamil Nadu government had passed an ordinance to ban online gambling, including rummy and poker in the state.

In its Q2 investor presentation, the company said this move will adversely impact the segment's revenue growth in the coming quarter, since the state contributes to around 20 percent of its NGR (net gaming revenue). It currently operates Halaplay, Qunami, and OpenPlay in the skill-based RMG vertical.

"From an OpenPlay perspective, there will be a 15-17 percent hit on revenues but also there's a corresponding drop in the advertising spend. So, from a profit perspective, the impact is limited" he said.

Since RMG is still a minor part of the company's business, Mittersain said there will be only a 0.5-0.75 percent impact from an overall revenue perspective, which he believes can be easily made up from other places.

"More than these bans, one of the topics holding us up more is to get clarity on GST. We are not convinced about taking a large bet in the RMG space. We are keeping conversations warm. When there is clarity around GST, we will do something," he added.

Read: India will be among the top countries in spending on games in 4-5 years: Nazara Technologies founder

Top management exit

Nazara Technologies is also witnessing a change in the top deck with Mittersain taking back the chief executive role from December 1 with the current chief executive Manish Agarwal announcing plans to step down after a seven and half year stint on October 20. The company has also roped in Sudhir Kamat as chief operating officer.

"At least from a CEO perspective, I will be carrying that mantle and don't think there's any intention (to change) right now. Maybe, we will get someone on the M&A side at some point of time. Overall, we have a pretty strong team" he said.

Kamat, who previously founded Sparskills Technologies (9stacks), will be responsible for developing and executing the company's strategy, working with Mittersain on the M&A side and working closely with the company's subsidiaries, he added.

Spike in audio accessories

Wings, a gaming accessories brand backed by Nazara subsidiary Nodwin Gaming, also saw a sales spike in Q2 due to the festive season. This significantly contributed to the revenue growth in the esports vertical, Mittersain said. "The peak in Wings business is in Q2 while Q3 and Q4 will be in steady state" he said.

Revenue from E-sports grew by 132% percent year-on-year to Rs 239.8 crore for H1-FY23. This was driven by a 144% revenue growth in Nodwin Gaming and a 89 percent revenue increase in H1-FY23.

The segment however also saw increased expenses due to the creation of new gaming entertainment intellectual properties such as the Playground that was co-produced with digital media firm Rusk Media and investment in Wings to boost the brand and acquire users.