After running Nazara Technologies for the last 25 years with limited liquidity, the company's promoter family decided to sell some stake to an existing investor to get some liquidity.
"As a promoter family, we have been running this company for the last 25 years. The way the company developed, we never had large amounts of liquidity in the past. So, at some point of time it was important for the promoter family to get some liquidity. The promoters will remain fully in control of the business," said founder Nitish Mittersain, during an analyst call discussing Q4 and FY24 results.
Mitter Infotech, a promoter of Nazara Technologies, sold 6.38 percent shares to Plutus Wealth Management, a pre-IPO (initial public offering) investor in Nazara.
"For me it is not about capital but more about the legacy of 25 years, a dream that was about how India can become really big in gaming. Plutus has been an investor with us since pre-IPO days. They have again come back and bought this size of stake which shows their confidence in the company's (Nazara's) growth prospects, the promoters as well as the management," Mittersain said.
Also read: NSE should become Nasdaq in 5 years, more founders should list in India: Nazara's Nitish Mittersain
He added that after the stake sale, the promoter stake in the company is around 10-12 percent.
While Mittersain, who will continue in his current role as CEO and joint Managing Director in Nazara, has his work cut out, he is also betting big on the company's merger and acquisition strategy and artificial intelligence (AI).
AI a game changer
He thinks AI can be a game changer for Nazara's business. "AI is a game changer and Nazara is doubling down through optimising gaming studios, enhancing their ability to engage with players, to analyse data. We are focused on deploying AI in these areas."
In a recent interview to Moneycontrol, the CEO had highlighted how AI is reshaping game development especially as it looks to acquire new firms.
Also read: Nazara Tech surges to 52-week high after promoter Mitter Info sells 6.38% stake to Plutus Wealth
"M&A (merger and acquisition) is our top priority and we put together a strong team in FY24. People are looking at Nazara as a potential consolidator of business not only in India but also in markets like the US. In the last few months, we have been in advanced stages of conversation with many companies and we have at least 4-5 ongoing diligences with various companies and hope to get a couple of them across the finish line by Q2 FY25. Core gaming IPs (intellectual properties) similar to Wildworks and Animal Jam which are playing out well for us, we think we can double down over there especially with new tech like AI."
He added, "We think studios can produce a lot and we can take advantage of that. We have started to work a lot on AI to create a playbook that can scale up these studios once we acquire them. It is a strong focus area for us. AI applications can be for creatives in games, design elements. We are looking at automating product testing through AI. There are unlimited use cases in gaming in terms of games that are produced."
Also read: Nazara Technologies announces $100 million war chest for global expansion
"Also, we can also throw all data that we get of users to AI to make offerings a lot more personalised to help increase engagement. We are paranoid as well as excited about AI as it is moving very fast. We have a task force internally that is focused on using it in innovative ways and testing with a couple of studios with an intent to create a playbook that can be replicated to everything across that we do," Mittersain said.
FY25 to be strong for Esports
In FY24, Nazara's esports arm NODWIN made five acquisitions including Comic Con India, Publish.Me, Ninja, Freaks4U, Branded and also acquired the IP related to Playground.
"Our playground IP has a strong footing and its season 3 did well. There is international demand for the IP. In Q4 FY24, there was an uptick in media rights revenue because of Playground season 3, sponsors came in. First time a potentially global IP has been created in India in gaming and esports and we are seeing global demand to licence the IP or co-produce with us. This opens up the whole world for us," the joint MD said.
He, however, added that in the second half of FY24 there was pressure on media rights as things were not great given the startup funding crunch with companies struggling to raise capital which led to cut down of media spends.
Mittersain added that FY25 will be a much stronger year for esports, a mainstay in terms of revenue for Nazara which contributed 55 percent to company's overall revenue in FY24.
Also read: Nazara Technologies' Q4 profit shrinks to Rs 0.18 cr, revenue declines to Rs 266.2 cr
"On the international front, we have been making large moves. In December quarter, Nodwin made an investment in Freaks4U which is the largest esports tournament organiser in Europe. There are other international activities ongoing. A lot of expansion activities there will be on the international side in the coming months," he said.
The company, which is planning to ramp up its investments and acquisitions as well as look at bigger deals, in March had earmarked a $100-million war chest for global expansion over the next 24 months.
As the company is focusing on acquisitions, the management said that it will be predominantly all cash deals. "We are not keen to issue equity very easily."
Nazara on May 24 reported a net profit of Rs 0.18 crore, registering a significant drop from Rs 9.4 crore in the year-ago quarter. This was mainly due to a Rs 16.87 crore loss from discontinued operations during the quarter, as a result of write-offs in many of the company's legacy businesses including its real-money gaming business Halaplay.
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