3. Overview: Indian Online Gaming Industry (1)
Industry dynamics
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60
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8000
2016 2017 2018 2019 2020 2021E 2022E 2023E
Mobile Gaming eSports Gamified Early Learning
Mobile Gaming Growth eSports Growth Gamified Early Learning Growth
• Indian Gaming Market is expected to reach US$ 7.5 Billion by 2023 at CAGR of 36.45%.
• The Early Learning and Mobile segments are seeing strong growths at an average of 45% and 30% respectively.
• These two segments are expected to contribute around 90% of the Indian Gaming Revenues.
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Mobile Gamers Mobile Internet Users
Mobile Gamers Growth Mobile Internet Users Growth
• Internet penetration expected to reach 70% by 2023.
• The growth in number of mobile gamers is forecasted to reach 15% by 2023
• Growth in revenues > the growth in number of gamers , implying shift towards paid games and users
Indian Gaming Market ($ Mn) User Growth
Competitive positioning of the industry
0.5 0.7
0.9
1.2
1.5
2
2.7
3.5
2 2.1 2.3
2.6
0.9
2.6 2.7 2.7
2016 2017 2018 2019 2020 2021 2022 2023
Gaming Bollywood
116
125.4
140.5
157.5
41
42
42.2
39.8
17
19.5
20.2
57
2017 2018 2019 2020
Gaming Movie Music
• Music & Movies industry are direct competitors, the graphs above show the changing consumer preference
• Even though the gaming industry is still at an early stages of growth it is expected to surpass Bollywood
• The inherent engagement and social angle to online gaming positions it well against music and movies
Global Gaming industry vs Movies &
Music ($ Bn)
Indian Gaming Industry compared to
Bollywood ($ Bn)
*Source: Nazara Technologies Ltd RHP, Mar’21
Porters five forces analysis for the online gaming industry
Supplier Power Buyer Power Substitutes New Entrants Rivalry
App Store and
play store which
provide platform
to the online
gaming industry
have tremendous
pricing power
with almost no
viable alternative
for the gaming
industry
Chance of
disruption by new
entrants given
buyers focus more
on quality than
reputation. The
industry requires
relatively low
investment
Relatively low
buyer power. The
extremely high
engagement
ensures customer
stickiness
There is no like for
like substitute for
the online gaming
industry. Music,
Movies & physical
activities bring
competition but
are very different
in terms on
engagement and
social experience
Although the
industry has been
experiencing rising
competition, the
industry is at a
very nascent
stage. This is room
for multiple
players to become
big and evolve the
industry
4. Overview: Indian Online Gaming Industry (2)
Merits of investing in the online gaming industry
Supernormal organic
Revenue Growth
Investment Structure for Nazara Technologies Ltd
Indian mobile gaming
industry is currently where
the Chinese industry was 8-
10 years ago and is
expected to grow 40-45%
CAGR for the next decade
Massive inorganic
growth opportunity
Indian gaming industry has
the opportunity to disrupt
& partner with the
education / EdTech industry
by gamifying learning
Demerits of investing in the online gaming industry
Developed business
models
Nascent industry with an
established monetization
model. Advertising,
subscription, media rights, in-
app purchases & brand
sponsorships are verified
monetization models
Scalability
Smartphone penetration is
expected to reach 51% by
2025. Internet penetration to
reach 70% by 2023 This gives
the gaming industry massive
scale to tap
Changing consumer
preference
The inherent engagement in
gaming has made it the prime
choice of entertainment.
People are expected to spend
2x time and money they
spend on movies and music
combined
Increasing per
capital income
Increasing per capital income
rapidly increases discretionary
spending. Given gaming is the
first choice for entertainment,
this provides another boost to
industry growth and
profitability
Prone to
disruption
The gaming industry is quite prone
to disruption by internal as well as
external players. The industry has
low-to-medium barriers to entry
due to less reputational and more
qualitative importance
All players private and
public enjoy premium
valuations which might
limit the upside of the
investment
Cash based games could be
linked to gambling by authorities
which might pose additional
regulatory burden. Possibility so
“Gaming Tax” equivalent to
“Sugar Tax” to promote physical
activity by governments
High
Valuations
Regulatory
Risks
Rising
Competition
Massive opportunities in the
industry has attracted
multiple domestic and
international competitors
leading to rising competition
Cyber security
risks
The gaming industry collects
huge amount of financial and
personal data and is very
prone to cyber attacks. With
rising concerns of privacy,
security breach could lead to
massive sanctions.
Platform
Risk
Given that most of the online
gaming industry publishes apps
on IOS & android there is a great
risk of arbitrary commission
increases impacting margins
significantly
Positive and
growing Cash
flow from
operations
High growth
opportunities
Relatively low
Capex going
forward
Room for
margin
improvement
Nazara Technologies is an ideal LBO
candidate
Debt free
*Source: Nazara Technologies Ltd RHP, Mar’21
5. Investment Overview
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2500
30-Mar-21 30-Apr-21 31-May-21 30-Jun-21
Shareholding (%)
Promoters 20.7%
Institutions & Public 79.3%
Rs Crore FY18 FY19 FY20 FY21
Revenue 172 169.7 247.5 468.5
EBITDA 38.7 16.4 9.8 59.6
Net Profit 1.0 6.7 (26.5) 13.6
6%
11% -1% 6% 12% 21%
35%
60%
97%
6%
2% -2% 3% 9%
12% 18% 26%
35%
2018 2019 2020 2021 2022e 2023e 2024e 2025e 2026e
ROIC ROCE
ROIC & ROCE
Share price performance
Nazara is a leading India based diversified gaming and sports media platform. It has a large user base of 62.59mn average monthly active users in FY21, a growth of 56% YoY.
Nazara in Numbers Business Overview Valuation & transaction structure
MCap: Rs 5,650cr
Product Select Offerings Overview Revenue Model
Gamified Early
Learning
(39% of Revenue)
Immersive, self-
directed learning
experience with
content designed and
developed in-house
Subscription based
eSports
(37% of Revenue)
#1 player in the fast-
growing Indian
eSports segment
Media rights
Brand sponsorship
Advertisements
Freemium
(4% of Revenue)
Casual to mid-core,
free-to-play sports
simulation and
children’s games
In-app purchases
Advertisements
Telco Subscription
(17% of Revenue)
Games Hub
Games Club
Games Lounge
Bouquet of mobile
games offered as
value-added services
to telco subscribers
Partnerships with
telecom operators
Skill-based, fantasy
and trivia real money
gaming
(3% of revenue)
Strategic presence in
real-money gaming
and sports fantasy
gaming
Platform fee collected
from skill games
played on the
platform
Include based on model
and structure
10. Exit Opportunities
M&A and Spinoff Opportunities Secondary Sale
EdTech Industry Global Gaming Industry Global Investors
2021/22
Complete the transaction Focus on innovation and ensure
expansion of our IPs portfolio
2022/23
Invest resources in the gamified
learning and eSports opportunity
2023/24
Gaming for multiple languages
Focus on global expansion with
emphasis on growth markets
2024/25
Start preparing for
an exit
Focus on acquiring customers on
the lack of innovation.
Investment
Roadshows
2025/26
Exit the company
