What do you make of the response you have seen for Nazara IPO?
Vikash Mittersain: It has been absolutely unbelievable and it has been all God’s wish that eventually this has happened. One part of the journey is over and the next one begins today.
Esports content business for Nazara has grown by 60% in FY20 and has grown 9x in the last three fiscal years. What is your plan going forward specifically for esports?
Nitish Mittersain: Esports is the new wave in the sporting world. The young generation is really enjoying watching games being played by champion gamers. We are only getting started. It already is a very popular sport and India is catching up very fast with international markets. The future looks very bright for esports.
Gaming continues to be a huge opportunity in India and one of the factors that is leading to that optimism is the fact that mobile penetration is increasing. How much of a catch up do you see India seeing right now as compared to the global market for gaming?
Vikash Mittersain: This is just the beginning of the mobile revolution as far as gaming is concerned. We are still behind some countries like China, Korea. But we will catch up very soon. Everybody has a smartphone in hand and it is natural to move into games. Gaming is going to go ahead of all other entertainments in the country.
You posted a loss in FY20 and that was largely on account of increased spends on advertising and promotion. What is the outlook on margins and profitability going forward?
Nitish Mittersain: If you look at our H1 FY21 numbers, we had a EBITDA profit of around Rs 12.6 crore. The only reason you saw a negative PAT was because of a large amount of depreciation in intangible assets, which were accumulated due to multiple acquisitions that we have done, It is a non-cash impact. All our businesses are running profitably. They are cash flow positive and that is in our DNA. That is the way we intend to continue growing all our businesses.
In terms of the advertising spends, our thought is very simple. Let us take Kiddopia for example. If we have a profitable unit economics, for every amount that we are spending on acquiring the users, we are going to earn profit over that over a 12-month or a 24-month period and we are very comfortable scaling up the spends significantly as we have done in the last 18 months or so, taking it from $100-$1000 a month all the way up to a million dollars a month.
We will not hesitate and we will be very aggressive when it comes to driving profitable growth but we are never chasing vanity metrics. We are not going to burn money trying to acquire users if profitability is not there. Nazara remains a very profitability focussed company and that is how we are going to continue.
Across your platforms how many subscribers do you have at the moment and what is the average growth in subscriber base you see over the next couple of years?
Nitish Mittersain: There are three segments which are growth engines for us right now. The esports is one. We believe the viewership on the esport segment will continue to rise dramatically over the next few years and that is what we are going to focus on.
The second is sports simulation where we own the world cricket championship, the most popular cricket game in the world. India has a billion plus cricket crazy fans. We today have 15 million plus monthly active users and we believe that there is a huge scope to grow that from 15 million to wherever we can take it. The focus should continue to be on very strong product development. The third aspect is in terms of Kiddopia, which is our gamified early learning product. There, in H1, we had about 300,000 paying subscribers. In the US alone there are 25 million kids in that segment. All our 300,000 subscribers are coming from the US market.
Just the US market offers huge room for us to grow and we are actively looking to expand into Europe, into Asian markets and eventually in India as well. We see a lot of growth potential in all three growth engines of ours which will continue to drive growth in the foreseeable future for us.
How open are you for any possible partnerships, collaborations or perhaps the possibility of a buyout of a company by a global tech giant or a gaming company with global presence? What is the long-term plan?
Vikash Mittersain: There is no plan for anything like that. The plan right now is just to buckle down and deliver value to the stockholders. We have nothing beyond that.
What are the plans to expand both domestically as well as globally?
Nitish Mittersain: If you look at our H1 numbers, we are a truly diversified business when it comes to product verticals within the gaming ecosystem as well as from a geographical perspective. 40% of our revenues today come from India in the H1, 40% come from the US market and the remaining 20% is spread out among 40-50 countries across Middle East, Africa and South Asia.
We are already operational in a lot of geographies. A lot of the new products that our teams are developing may be very relevant in many markets and different products are targeting different markets. Kiddopia for example is very focussed on very high ARPU markets like the US or Western Europe. The esports business today predominately drives the revenues from India but is very fast expanding into the Middle East and Africa.
Similarly, depending on the product vertical and where the opportunity arises, we are looking at geographical expansion. Today Nazara has a very global mindset. India is going to be our core market with a billion plus users and massive opportunity but the company is going to continue to operate and expand globally and that is how we are looking at the growth path in the next few years.
What is the outlook on cash flows going forward and how do you plan to monetise the esports offerings?
Nitish Mittersain: Our cash reserves are pretty strong. I would say the company holds ballpark Rs 300 crore of cash. We are a debt-free company and most of our businesses are pretty strongly cash flow positive. So we are not burning cash and are not sucking in the cash that we have. We will continue to explore inorganic opportunities in the areas that we find interesting especially the ones we are already operating in. These could be backward integration, these could be geographical expansions. That is one area where we will use some of our cash going forward for sure.
Nazara network has been very successful in the last three years. We will continue to add to it whether they are companies we acquire or partnerships that we enter in. That is the outlook I see.
