Nazara Tech Q1 Results | Nazara Tech Share Price: In the long term, Nazara should continue to post healthier margins and faster growth: Nitish Mittersain

Your earnings have increased. What have been the key factors and why have your revenues stagnated?
Nitish Mittersain: This is the 14th consecutive quarter of profits after our IPO and for us at Nazara, driving growth alongside profitability has always been very important as we do not focus only on growth at all costs. This time around, our esports business has performed very well. We have seen strong growth in overall profitability. sportskeeda The business has been doing well, with a 28% increase in profits. Some engines are working well for us. Some businesses, such as Kiddopia, have not yet taken off. But we recently acquired 100% of the shares and control of the company. We have some very good ideas that we hope to implement to grow this business faster.

You have said that you prioritize growth over margins, but you have also said that margins will never be compromised or come under pressure. But in this quarter they have contracted quite significantly. Does this mean that double-digit margins will not be maintained in the coming quarters? What is the outlook?
Nitish Mittersain: We always try to strike the right balance between profitability and growth. In the current quarters, some companies have allowed us to spend more on user acquisition so that we can drive faster growth, and this is a profitable expense. It is not an unprofitable expense for us. We have made that choice. In the case of Animal Jam, for example, this quarter we were able to acquire more users, which has driven revenue growth, but margins have contracted. From a longer-term perspective, we should continue to see healthier margins and we should also start to see faster growth.

This is a small part of the business, but you have also pointed out this in the investor presentation: the new GST regime has reduced the profitability of the real-money gaming segment. How has this affected your overall net income? How do you plan to improve your operational efficiencies within the new GST regime?
Nitish Mittersain: In the first quarter of FY24, we had about Rs 120 crore of revenue, which has come down to half. It is about Rs 500-600 crore. But from an overall perspective, it is a very small contributor to our revenue, so it has not affected us much. We have optimized this business now. It is starting to break even and become profitable again. And again, we hope that in the coming quarters, now that we have found this new stability, we will start getting it growing again.

There have been multiple acquisitions. Any that stand out? There was a Paper Boat app for Kiddopia, Fusebox, etc. What is the opportunity, as you have said there is Web3, VR, AI, new technologies, etc.? What areas are you ruling in your next acquisition?
Nitish Mittersain: For the better part of last year, we spent a lot of time building a strong pipeline of business opportunities that we are excited about and we are very clear about what we want to acquire, at what value we want to acquire it, etc. So whatever fits into our framework, we have been very patient about it. But in FY25, we are starting to execute on it. We have been sitting with cash reserves of over Rs 1,000 crore and this year we are aiming to invest most of that money in acquiring companies that will create value for our shareholders and significantly increase our profitability. We have set a target of reaching Rs 300 crore. EBITDA in fiscal year ’27 and some of these acquisitions will help us accelerate that process rapidly.

What about Kiddopia’s average revenue per user, which has increased to approximately $6.9? What is the outlook on user churn across pricing plans, ARPU, and subscriber growth?
Nitish Mittersain: Our overall KPIs for Kiddopia this quarter have been pretty healthy. We have seen a return to average in terms of churn rate which we have typically seen closer to 6% and we have also seen an improvement in ARPU this quarter to $6.92 from $6.89. Our acquisition cost, cost per trial we say has also improved slightly to $38.6. So overall the business is stable. We have some good ideas as I was saying, for example integrating popular IP into our game, which should start to drive growth again. Our team is very actively working on that. Now that we own 100% of Kiddopia, I think we will be able to drive faster growth and faster turnaround going forward.Your gross margins in the edtech sector have improved. This is a high-margin business which has driven this improvement. Will this trajectory continue?
Nitish Mittersain: Overall, the EdTech business has been challenging for us in the last few quarters, although again it has contributed little to our overall business. I think we are on the right track. We have been focusing on improving gross margins and this will enable us to scale our business. Therefore, in the coming quarters we should see continued improvement in margins and growth in top line.