Category
🗞
NewsTranscript
00:00Hello and welcome to NDTV Profit.
00:10This is Rucha Somaiya and today we have with us Mr. Nitish Mithirsen, the founder and MD
00:16at Nazara Technologies.
00:17Hello and welcome to the show, sir.
00:19Hi, thank you for having me.
00:22Thank you, sir.
00:23So firstly, let's talk about the numbers.
00:24So a little bit of weak quarter for the fourth quarter, but what's your outlook for FY25?
00:31I believe from the call that the management had for the earnings, you're pretty bullish
00:35about FY25.
00:37So what's your take in that?
00:38Yes, you know, I think for FY24, you know, we've set a strong foundation.
00:43If you look at a number while we saw a slightly slower revenue growth, our EBITDA has grown
00:48nicely from 109 crores in FY23 to 128 crores in FY24, but also more importantly, the free
00:56operating cash flow came in at 131 crores, which is even higher than the EBITDA.
01:01So the underlying health of the business is very strong.
01:04The company has also raised 950 crores in FY24, taking a total cash balance to almost
01:131500 crores on the balance sheet.
01:15So I think we are very well poised to deliver much faster growth in FY25.
01:22And we also shared on our earnings call that we have a FY27 EBITDA goal of 300 crores.
01:27And we are working very actively towards that.
01:30Sure, sir.
01:31So talking about the fund raise that you had, so pretty good cash balance.
01:36So what's your outlook on utilization of cash?
01:39Do you want to use the cash only inorganically, or would you wish to grow organically as well?
01:45And how?
01:46So, of course, organic growth is always our first priority.
01:50But most of our businesses are cash flow generating businesses.
01:54So they do not need additional funding to grow organically.
01:57They are able to deploy their own cash flows into organic growth.
02:01So most of the funds that we have will be deployed in inorganic growth.
02:05And we have a very strong pipeline.
02:06We also have a lot of experience in M&A over the last many years.
02:10And that model has worked very well for us.
02:12So I would say we are going to deploy these funds on acquiring global gaming studios,
02:19which can be quite cash flow generative for us.
02:23And we have a healthy pipeline.
02:24We're looking at nearly 15 hot deals at this point of time.
02:28And you will surely see us taking action on this in the coming quarters.
02:33So 15 M&A deals is what we can expect for the coming year, is it?
02:37No, sorry.
02:38What I meant to say was, we have a pipeline of 15 deals that we're looking at.
02:42And some of them we will surely convert.
02:45Okay, okay, sure, got it.
02:48Also, what kind of EBITDA margin or EBITDA range can you expect?
02:54And how will FY25 be?
02:55Will it be more front-ended towards first, second quarter, or more towards the third
03:00and the fourth quarter?
03:01Just a bit on that.
03:02We think the real impact of everything we're doing will start showing up from Q2 of this
03:07year and accelerate into Q3 and Q4.
03:10We definitely expect to show higher EBITDA margins in the current year.
03:14We even grew about 100 basis points in the previous year.
03:17I generally believe over a period of time, gaming business margins should be much higher
03:22than where we are today at about 11%.
03:25So every year, we will keep pushing to increase our margins while we grow our revenues as
03:29well.
03:31But Nitish, you also mentioned about closing our entities which are, say, unprofitable
03:36or with very less profit.
03:38So closing down on such segments, won't that affect the net profit as it did in the fourth
03:44quarter as well?
03:47No, there are two things.
03:48I think one is cleaning up the balance sheet every time and every year.
03:52We want to run a very healthy balance sheet because we have large growth prospects and
03:57we want to ensure that our balance sheet is extremely transparent and clean.
04:01So whenever there is an opportunity or need to clean up, we will consistently do that.
04:06And a lot of the companies we have closed down or sold are companies that are non-material
04:12but just unnecessary baggage for us in terms of process and administrative, etc.
04:17So we used FY24 to do some of that cleanup.
04:20And also some items which required impairments, we cleaned that up.
04:24So I think an ongoing process to do that is very healthy for the company and we will
04:29continue to do that whenever required.
04:32Okay, I got that.
04:34So just on the segmental front, I see that the esports segment was quite good for the
04:39company but there was a loss of client in, say, the ad tech business while the gaming
04:45business was also not that great.
04:48But as I can see on the margin front, the esports segment had just 10% of the margin
04:55but there is good traction on this segment.
04:57So do you plan to change the revenue percentage share from the esports segment because it
05:04has lower margin and how do you expect margin to revive in the esports segment?
05:09Look, for us, the esports is a very strategic business.
05:12We are a market leader in that in India with over 80% market share.
05:16So the guidance to the team on the esports side is continue to dominate the market, continue
05:21to grow aggressively, continue to invest in the ecosystem while remaining profitable.
05:26So we haven't really focused on optimizing margins on the esports business at this point
05:31of time.
05:32Actually, that would be a self-poll if we were to do that.
05:35So I think while you see better margins over there, you need to think of this as a market
05:41leadership play where we would really focus on maximizing margins two years, three years
05:46out from this point of time.
05:48The gaming business, we expect it to grow this year quite well, both organically and
05:53due to the acquisitions we intend to do.
05:56And our ad tech business, while we did suffer last year due to the client loss, we expect
06:02our ad tech business to bounce back quite strongly in the current year.
06:07Sir, also, I think Ethiopia is a sort of weak business for you.
06:11And that is why I think you had hiked the tariff as well recently.
06:14But then that led to a churn for customers.
06:19So how do you plan to take this segment going ahead?
06:23Do you plan to increase the tariff hike?
06:26But that comes at a cost of our customers.
06:29So what's your trade off over here?
06:31Yes.
06:32No, we don't expect to increase tariffs further.
06:36If you compare FY23 to FY24 performance, our revenues are flat, but our profitability
06:42or EBITDA grew almost by 50% from about 25 crores out to 55 crores.
06:47So I think overall, the company has continued to generate very healthy cash since the Ethiopia
06:54business itself has about 160 crores of cash accumulated.
06:58And today we are working on some new ideas and strategies that can help us kind of break
07:02through this plateau that we have faced and scale up.
07:05So doing a lot of activities behind the scene over there.
07:09And hopefully in the coming quarters, we will show some results.
07:12Right, sir.
07:14Okay, sir.
07:15So and just a little bit around taxation, you know, the GST has been increased to 28%
07:21in the gaming area.
07:23So will that affect and what kind of regulatory challenges do you expect going forward?
07:29I think the GST impacts the real money gaming space, which is a small exposure for Nazara.
07:35So it doesn't impact us in a very large manner.
07:38That said, GST clarity going forward makes us interested in that business.
07:43And we are looking at certain M&A opportunities that could be attractive for us.
07:48Overall regulations for gaming, I really do think that India is in a fantastic position
07:53to build a very large gaming industry for the Indian market as well as for the world.
07:58India can really become the gaming nation of the world.
08:01And I'm very hopeful that now that the elections are behind us, the government will focus on,
08:05you know, providing a lot of positive tailwinds to this industry so that we can capture the
08:10market in the years to come.
08:13Any plans for international expansion other than the US?
08:18I think the US is a very large market.
08:20And, you know, we had a very small revenues in absolute terms from there.
08:25I think there's a lot of scale-up available there.
08:27So I think for us currently, the US and Indian markets will continue to be the core strategic markets.
08:34Beyond that, we already work in Europe, we work in the Middle East, we work in Africa, etc.
08:39But if you were to ask me, you know, where will the chunk of the revenues come?
08:43It's largely going to be the Indian market and the US market.
08:46Sure, sir. Got that.
08:48And, sir, just to understand a little more, the kind of EBITDA margin that you are expecting going forward,
08:53that will be coming from which segment, of course, not in particular,
08:58but broadly which segment will be beneficial for you going ahead?
09:01So to our viewers, what sort of segment will help you grow in the coming quarters, like just the near term?
09:09Our gaming business will surely grow with healthier margins.
09:12Our esports business will also grow with healthier margins.
09:15So actually, we're expecting all three engines of growth this year to fire for us.
09:19Got that.
09:21So lastly, from my side, any sort of promoter's take sale?
09:25I know that might not be planned, but any sort of outlook on that, promoter's take sale?
09:31There's no additional promoter's take sale planned at this point of time.
09:37Okay. Got that, sir. So that's it from my end.
09:40And we thank you for joining us and looking forward to have more interactions with you.
09:45Thank you very much.
09:46Thank you, sir.