Nazara - Equiris

Nazara Technologies
Initiating Coverage
Playing the ‘Long’ game
June 23, 2021
Depesh Kashyap, CFA (depesh.kashyap@equirus.com, +91-7228934327)

Piyush Sevaldasani (piyush.sevaldasani@equirus.com, +91-9767990926)
India Equity Research | Media & Entertainment
June 23, 2021
Initiating Coverage
Nazara Technologies Limited

CMP Target Price
Rs 1,513 Rs 1,820
Playing the ‘Long’ game – initiate with Dec 2022
LONG
Rating Upside
LONG 20% ()
➢ India’s gaming market, currently small in size – at US$ 1.5bn in 2020 – is estimated Stock Information
to clock a 32% CAGR to US$ 3.5bn by 2023. Market Cap (Rs Mn) 45,984
➢ Nazara Technologies (Nazara) has scaled up revenues by making strategic 52 Wk H/L (Rs) 2,027/1,413
acquisitions, and terms this ecosystem as ‘Friends of Nazara’. With a net cash balance Avg Daily Volume (1yr) 599,344
of Rs 4.8bn, acquisitions will remain a key part of the company’s growth strategy. Avg Daily Value (Rs Mn) 1,002
➢ We estimate a 38%/49%/86% revenue/EBITDA/PAT CAGR over FY21-FY24E, driven Equity Cap (Rs Mn) 458
by eSports, gamified learning, and freemium segments. Face Value (Rs) 4

Share Outstanding (Mn) 30.5
➢ We initiate coverage on the stock with LONG and a SOTP-based Dec’22 TP of Rs
1820. As India’s first listed gaming company, Nazara has a lot of optimism built into Bloomberg Code NAZARA IN
its price; hence, right execution of strategy will be the key. Ind Benchmark SPBSMIP
Ownership (%) Recent 3M 12M
Gaming – fastest-growing M&E segment; to surpass movies by 2023: Globally, the gaming Promoters 20.7 0.0 0.0
industry has undergone a paradigm shift in the past few years with industry revenues at DII 8.1 0.0 0.0
US$ 158bn – bigger than both music and movie industries combined. The Indian gaming FII 6.0 0.0 0.0
market, currently small in size at US$ 1.5bn in 2020, is estimated to clock a 32% CAGR
Public 65.2 0.0 0.0
to US$ 3.5bn by 2023, surpassing estimated Bollywood revenues of US$ 2.7bn.
‘Friends of Nazara’ ecosystem emerging as a winning strategy: With the Indian gaming Brokers Poll 2021
industry still at a nascent stage, picking of winners is very difficult. No single company may VOTE HERE
be able to make all the right moves; however, acquiring stakes in companies who are leaders Equirus Research
in their niche categories and geographies is an unbeatable strategy, in our view. Nazara has
scaled up via strategic acquisitions, and terms this ecosystem as ‘Friends of Nazara’.
Revenues of Nodwin/Sportskeeda/Paper Boats have grown ~8x/2x/3x post acquisition.
Esports, gamified learning, freemium – to be key focus areas: India only has 17mn Esports
viewers at present; however, as the ecosystem develops, Esports has a potential to become
the mainstream sports after Cricket. In gamified learning, Nazara has a winning app in
Kiddopia; scaling it up in the US and other markets is the key focus area. In the freemium
category, Nazara has not been able to crack the winning code yet, and growth in In-App
Relative price chart
Purchase (IAP) revenues holds the key. NAZARA IN Nifty Index
1,950
Initiate with LONG, Dec’22 TP of Rs 1,820: As India’s first listed gaming company, Nazara 1,770
has a lot of optimism build into its stock price; this is certainly not out of line vis-à-vis other 1,590
early-stage players who are market leaders in their respective categories (Exhibits 120-121). 1,410
We estimate a 38%/49%/86% revenue/EBITDA/PAT CAGR over FY21-FY24E. Margins are 1,230
set to be capped as focus is on growing the market size and share. With a net cash balance 1,050
Mar-21
of Rs 4.8bn, acquisitions will remain a key growth strategy and right execution critical. Initiate
coverage with LONG and a SOTP-based Dec’22 TP of Rs 1,820 (Exhibit 118). Source: Bloomberg
Financial Summary Analysts
EV/ Core EBITDA
YE Mar Recurring P/B ROE
Sales EBITDA EPS (Rs) P/E (x) EBITDA ROIC Margin Depesh Kashyap, CFA
Rs mn PAT (x) (%)
(x) (%) (%)
depesh.kashyap@equirus.com
FY21A 4,542 452 133 4.4 345.5 7.0 91.3 1.4 2.6 10.0
+91-7228934327
FY22E 6,391 744 223 7.3 206.6 6.8 54.6 3.3 11.0 11.6
Piyush Sevaldasani
FY23E 8,789 1,071 403 13.2 114.2 6.4 37.0 5.6 21.6 12.2 piyush.sevaldasani@equirus.com
FY24E 11,872 1,493 598 19.6 77.1 5.9 25.7 7.7 34.8 12.6 +91-9767990926
Source: Company, Equirus Securities
Refer to important disclosures at the end of this report June 23, 2021| 1
Nazara Technologies Limited (NAZARA IN) India Equity Research | Initiating Coverage
Contents
Nazara’s Business Model ................................................................................3
India’s Gaming playbook ................................................................................4
Gaming: Fastest Growing Segment in M&E Industry...........................................5
Bigger than movies & music ........................................................................ 5
Indian gaming industry at an inflection point ................................................. 5
Indian gaming industry at a point where China was in 2012-13 .................... 6
Emerging Revenue Models In Mobile Gaming Industry ................................ 10
Esports: Set to emerge as mainstream sports of the future .................................12
Prize money, viewership higher than many traditional sports ......................... 12
…but monetization still lags traditional sports ............................................. 16
Market landscape in India ......................................................................... 16
Esports – Global Case Studies ................................................................... 19
Modern Times Group (MTG) .................................................................... 19
Versus Programming Network - VSPN........................................................ 20
SEA Ltd ................................................................................................... 21
Nodwin: Market leader among Esport leagues in India ................................ 22
Sportskeeda: Multi-sports news destination platform .................................... 26
Gamified Early Learning: Scalable Model .......................................................28
Freemium: Multiple synergies with Esports but scaling up pertinent ....................31
Real Money Gaming: Maintain Cautious Approach .........................................34
Telco Subscription: On a continuous decline ...................................................37
Acquisitions to remain a key part of Nazara’s growth strategy ...........................39
Initiate with LONG and Dec’22 TP of Rs 1820 ................................................44
Key Risk Factors ...................................................................................... 46
Key Managerial Persons ................................................................................47
June 23, 2021| 2

Nazara’s Business Model

Exhibit 1: Gamified early learning and Esports are the biggest segments for Nazara
Source: Company Filings
Exhibit 2: Revenue mix has changed over the last 3 years Exhibit 3: And so, has the geographical mix
Gamified early learning eSports Telco subscription
India Middle East Africa APAC / ROW North America
Freemium Real money gaming
100%
100% 3% 6% 12%
9% 14% 4% 90% 13%
17% 26%
16% 80% 13% 42%
80% 8%
70% 19% 8%
20% 7%
60%
60% 57% 33% 37% 13% 8%
50% 3%
89% 6%
40% 40%
35%
30% 59%
34% 49%
20% 20% 41%
39%
29% 10% 19%
2% 8%
0% 0%
FY18 FY19 FY20 FY21 FY18 FY19 FY20 FY21
Source: Company filings Source: Company filings
June 23, 2021| 3

India’s Gaming playbook

Exhibit 4: Transaction based gamers form 20% of total (mn) Exhibit 5: …but contribute 80% of gaming revenues (USD mn)
400
360
350
300 187
250 Rummy and Poker

387
200 Fantasy Sports
107
150 Esports
100 80 Casual
50 17
347
0
Online Gamers Transaction based Esports viewers
gamers
Source: FICCI, Equirus Securities; apart from casual games, rest is categorized Source: FICCI, Equirus Securities
as transaction-based gaming
Exhibit 6: No. of Esports teams have grown 50x(2018-21E) Exhibit 7: No. of players have grown 30x (2018-2021E)
Esports teams Esports players
1,20,000 7,00,000
100000 600000
1,00,000 6,00,000
5,00,000
80,000
60000 4,00,000
60,000
3,00,000
40,000
2,00,000 150000
16000 80000
20,000 1,00,000
2000 20,000
0 0
2018 2019 2020 2021E 2018 2019 2020 2021E
Source: FICCI, Equirus Securities Source: FICCI, Equirus Securities
Exhibit 8: Intl. teams in India have grown 10x (2018-21E) Exhibit 9: Prize money has grown 8x (2018-2021E)
International Esports teams in India Prize money in Esports ( Rs mn)
12 300
10 250
10 250
8 200
150
6 5 150
4 3 100 80
2 1 50 30
0 0
2018 2019 2020 2021E 2018 2019 2020 2021E
Source: FICCI, Equirus Securities Source: FICCI, Equirus Securities
June 23, 2021| 4

Gaming: Fastest Growing Segment in M&E Industry

Gaming has gone through a paradigm shift during the COVID-19 pandemic. It is no longer considered
a form of escapism, but rather has become an integral part of today’s economic transformation.
Gaming has attained global relevance, as visible in the astronomic rise in viewership, engagement,
COVID-19 has helped gaming investments, and opportunities.
industry gain on engagements
Gaming was a US$ 160bn industry in 2020 and has grown from an arcade style of entertainment to
a graphically immersive and social form of entertainment. It is also the fastest growing M&E segment.
Esports – gaming through competitive online engagements – receives huge attention at the global
stage. Esports has played a crucial role in bringing gaming to the mainstream M&E industry and is
expected to be an alternative to traditional sports in future.
The pandemic has seen an exponential increase in engagement levels in gaming as people stuck at
home resorted to newer forms of entertainment. As per estimates, the pandemic-led growth is expected
to continue even further with EMs set to lead growth. Mobile gaming, the most sought after and most
convenient way of gaming, will play a critical role in driving growth.
Newer gaming segments such as simulation and gamified early learning have seen good traction.
Bigger than movies & music

Global gaming is twice as large as
movies and music When compared to other M&E segments, the gaming industry was twice the combined size of movies
and music in 2017.
Exhibit 10: Globally gaming is bigger than movies & music combined Exhibit 11: Indian gaming industry vs. film industry (US$ bn)
(US$ bn)
Gaming Movie Music Gaming Bollywood

180 4
157.5 3.5
160 3.5
140.5
140 125.4 3
116 2.6 2.6 2.7 2.7 2.7
120 2.3
2.5 2.1
100 2 2.0
2
80 1.5
57 1.5 1.2
60 42 42.2
41 39.8 0.9 0.9
40 1 0.7
17 19.5 20.2 0.5
20 0.5
0 0
2017 2018 2019 2020 2016 2017 2018 2019 2020 2021E 2022E 2023E
Source: Frost & Sullivan Analysis, Investopedia Source: Frost & Sullivan Analysis, Investopedia
Strong growth is expected in India as well, with gaming revenues estimated to surpass Indian film
industry’s revenues by 2023 as people adopt gaming as a primary form of entertainment.
Indian gaming industry at an inflection point

With improvement in the quality and number of engaging games, along with growth of digital infra,
Revenue per gamer in India rose from
the Indian gaming industry is estimated to grow at 32% to USD 3.5bn by 2024. India has witnessed
US$ 2.3 in 2016 to US$ 8.8 in 2020
an increase in revenue per gamer from US$ 2.3 in 2016 to US$ 8.8 in 2020. Penetration has also
risen from 15% in 2016 to 30% in 2020. Besides, the number of game developers has surged due to
massive growth in the number of gamers – by almost 10x in the last decade. Cheap high-speed internet
and smartphones have driven this growth.
June 23, 2021| 5

Exhibit 12: Average revenue per gamer is still very low in India
Gaming Revenues ($ bn) Online Gamers (in Mn) Gaming Penetration
China 42.6 650 46%
USA 39 166 50%
India 1.5 360 27%
Source: Frost and Sullivan
Exhibit 13: Indian gaming market is mobile driven (US$ mn)

Based on mobile gaming revenues,
India has a higher growth projection of PC Console Mobile
38% CAGR(2020-23) as against 4,000
9.3%/10.0% for China/US
3,500
3,000
2,500
2,000 3100
1,500 2284
1661
1,000 1191
836
500 384 572
272
193 84 207 87 223 91 239 94 256 98 273 291 315
0 102 106 110
2016 2017 2018 2019 2020 2021E 2022E 2023E
Source: Frost & Sullivan Analysis
Mobile gaming forms bulk of revenues and is expected to grow to US$ 32.9bn in China by 2023.
Exhibit 14: China still uses lot of PC gaming (US$ bn) Exhibit 15: Consol gaming is still big in US (US$ bn)
PC Console Mobile PC Console Mobile
60 60
50 50
14.8
40 40 13.6
32.9 12.3
30.5 11.1
28
30 25.2 30 9.8
22.3 8.7
17.7 20.1 7.6
6.6 31
20 12.7 20 27.3
1.5 1.8 2.2 21.2 24
0.6 1.0 1.2 18.6
0.2 0.4 14.3 16.4
12.5
10 16.8 17.4 18 10
14.1 14.8 15.2 15.7 16.3
5.9 6.1 6.2 6.5 6.9 7.2 7.5 7.8
0 0
2016 2017 2018 2019 2020 2021E 2022E 2023E 2016 2017 2018 2019 2020 2021E 2022E 2023E
Source: Frost & Sullivan Analysis Source: Frost & Sullivan Analysis
Online gaming in the US is likely to touch US$ 54bn by 2023, with mobile gaming set to grow at a
10% CAGR by 2023.
Indian gaming industry at a point where China was in 2012-13

A time series comparison of India’s mobile gaming market with that of China’s shows that India is
around eight years behind China (Exhibit 16) During 2013-20, China’s mobile gaming market grew
at a 40% CAGR while the US market at a 21% CAGR. Considering the way China’s mobile gaming
market has grown in the past eight years and given the fact that India’s current mobile gaming market
reflects China’s trends in early 2010s (Exhibit 20), India’s mobile gaming market should grow at a
similar pace of ~38-40%.
June 23, 2021| 6

Exhibit 16: Number of mobile gamers in China in 2012-13… Exhibit 17: Was similar to the current number in India
Number of Mobile Gamers in China (Millions) Number of Mobile Gamers in India (Millions)
500 467 400 368

450 350 326
385
400
300 269
350
286 250
300 201
250 200
200 176
150
150
100
100
50 50
0 0
2011 2012 2013 2014 2016 2018 2020 2022E
Source: Frost & Sullivan, DRHP, Equirus Securities Source: Frost & Sullivan, DRHP, Equirus Securities
Exhibit 18: China’s mobile gaming industry size in 2012… Exhibit 19: …is similar to India’s current revenues
China, Mobile Gaming Revenue (USD Billions) India, Mobile Gaming Revenue (USD Billions)
2.5 1.8 1.7

2.1 1.6
2.0 1.4
1.2
1.2
1.5 1.3
1.0
0.8
0.9 0.8
1.0
0.6
0.5 0.4
0.2
0.0 0.0
2011 2012 2013 2019 2020 2021
Exhibit 20: China’s mobile gaming has grown at a 40% CAGR Exhibit 21: India’s mobile gaming pegged for a 38% CAGR
China, Mobile Gaming Revenue (USD Billions) India, Mobile Gaming Revenue (USD Billions)
30 3.5
3.1
25.2
25 3.0
2.5
20 38%
2.0
15 41%
1.5 1.2
10
1.0
5 2.1 0.5
0 0.0
2013 2020 2020 2023
June 23, 2021| 7

Mobile gaming to lead growth in next decade

Increasing penetration of smartphones, lower internet costs and high-speed internet would drive growth
in India’s mobile gaming market.
Developed markets have matured in the revenue model stage, moving from the download phase to
increasing usage of apps (which leads to revenue growth). In contrast, India is still in the app download
stage and monetisation is yet to peak, deterred by low spending patterns and payment channels.
The number of downloads and usage in India has exploded across multiple categories; also, engaged
gamers are increasingly paying for gaming content. This has led to a huge increase in game
developers, from merely 25 in 2010 to more than 400 as of now. Console gaming is losing relevance
as the ease of mobile gaming takes precedence.
Exhibit 22: Growing base of Internet users in India is good for gaming industry
While India’s internet users have
spiked, it is still in app download stage Internet Users, India –2016-2023, (in Billions) Internet Penetration
with monetization is yet to pick up
1.2 1.1 80%
70%
1.0 0.9
0.8 60%
0.8 0.7 50%
0.6
0.6 0.5 0.5 40%
0.4 30%
0.4
20%
0.2
10%
0.0 0%
2016 2017 2018 2019 2020 2021E 2022E 2023E
Source: Company filings
Every 10% increase in internet users has seen a 30% increase in the number of gamers. Internet
penetration is estimated to reach 70% by 2023E from the existing 28%.
Key growth drivers for gaming in India

Gaming – the most cost-effective form of entertainment
Game purchases have undergone a shift over the past few years, with end users buying a specific
IAP and cloud gaming to make console from developers providing free-to-play games, and then being charged for in-app-purchases.
gaming cost effective for end users This enables consumers to try the product and then take a purchase decision. Popular games such as
PUBG and Fortnite Dota work on a similar revenue model and success is evident from Fortnite’s 2019
revenues (US$ 1.8bn). These types of models would do even better in price-sensitive countries such as
India as they provide flexible and scalable payment options.
Another growth factor is streaming of games, making it possible to socialize via platforms like YouTube
and Twitch. Yet another promising area is cloud gaming, which eliminates the need of high-end
hardware to play games loaded on cloud on anything with a screen. This would make gaming a lot
more cost efficient, and make gamers move from spending high on consoles to games.
Growing Esports culture to help buoy consumer base

Esports has grown exponentially over the years and competition events could give a strong fight to
traditional media events with audiences live streaming content instead of broadcasting it. New games
and formats have helped Esports in growing the consumer base.
Rising smartphone penetration

Between 2016-2020, EMs like India and China have seen higher smartphone penetration growth than
India to reach 90% smartphone developed countries such as the US. With majority of gaming revenues coming from mobile gaming,
penetration by 2023 the penetration of smartphones is of paramount importance.
June 23, 2021| 8

Exhibit 23: Smartphone penetration (%) Exhibit 24: Mobile gamers (bn)
Global USA China India USA China India

100% 0.8
0.7
90%
0.6
80%
0.5
70% 0.4
0.3
60%
0.2
50%
0.1
40% 0
2016 2017 2018 2019 2020 2021E 2022E 2023E 2016 2017 2018 2019 2020 2021E 2022E 2023E
India is expected to have smartphone penetration of 90%, higher than US and China by 2023.
Better demographics: Higher mix of Gen Z population shall help

The Gen Z population is more tech savvy and engages in gaming much more than other groups. India
has the highest mix of such younger population which shall support the growth in the gaming industry.
Exhibit 25: India has a higher mix of GenZ population which shall support gaming
Millenials Gen Z Others
100%
90%
80% 37% 35%
49%
70% 64%
60%
50% 35%
32%
40% 26%
30% 11%
20%
31% 30% 25% 25%
10%
0%
Global India USA China
Source: Frost and Sullivan, Equirus Securities
June 23, 2021| 9

Emerging Revenue Models In Mobile Gaming Industry

Freemium/In-App purchases: Basic features of games are allowed to be played for free; however,
gamers have to pay for in-game features or functions like new maps. About 95% of consumer spend
on mobile gaming came from in-App purchases in 2018-19. In India, though in-app purchases are
growing amongst the mid and hard-core base of players, revenue per paying user (as a percentage
of gamers) is low as willingness to pay is much lower vis-à-vis the global average.
Subscription: Users can play the game for free for a limited period, post which they have to pay a
recurring fee to continue using the game. This model provides constant stream of cash flows to the
Freemium model getting the most developer. Once a user pays for the game, it is highly likely that he would continue playing the
attention as customers do not have game.
to pay for game trials
In-App advertising: Developers generate revenue through in-game ads like banner ads appearing
in some part of the screen or full screen ads. Banner ads are dying out as they have limited
engagement. In-app ads have a very high click through rate (CTR) – three times than that of website
ads.
Outright purchase: Users are asked to pay before downloading the game or pay after using its
preview. While users are asked for a one-time payment here, those under the subscription model
are charged small recurring fees at regular intervals.
The freemium model is getting the most attention as customers do not have to pay for game trials.
Only 3% of games on Google Play Store are paid games. In this model, user only pays to get additional
contents or features in the game; it is of paramount importance to generate user engagement to
continue monetising the game and keeping it alive.
Data shows IAP (in-app purchases) revenues have grown 200% from 2016 to USD120bn in 2019.The
success of IAP is more prominent in mid and hardcore gamers as this segment has propensity to pay.
Casual games, which are easy to understand and play, are targeted to a larger audience, and is one
of the fastest-growing segments in the gaming industry. IAPs are estimated to have highest growth in
this segment at 40% CAGR, while ad revenues are set to grow at a 27% CAGR.
Exhibit 26: IAP to drive growth in Casual gaming (FY20-25) Exhibit 27: Casual games: Segment view (FY25)
Growth of In-App Purchasing within Casual Gaming IAPs Ads

by Revenue (FY 2020-25)
45% 40%
40%
25%
35%
30% 27%
25%
20%
15%
10%
75%
5%
0%
IAPs Ads
Source: Frost & Sullivan Source: Frost & Sullivan
June 23, 2021| 10

The period 2018-2020 saw growth of over 100% across all three categories of casual, mid-core, and
hard-core gamers. A threefold increase is expected by 2025 in all these segments.
Exhibit 28: India has seen exponential growth in number of gamers ( at all levels)
100% growth across causal, mid and
hard-core gamers over 2018-2020 2018 2020 2025
600
500
500
400 345
300
200
100 100
100
30 15 25
5 10
0
Hard Core Gamer Mid-Core Gamer Casual Gamer
Source: Frost & Sullivan
June 23, 2021| 11

Esports: Set to emerge as mainstream sports of the future

Exhibit 29: Online gaming – Key segments
Online gaming
Real Money Games Mobile centric/ casual
e-Sports
(RMG) gaming
Daily Fantasy, Rummy, Candy crush, Subway Counterstrike, FIFA,

Poker, Quizzing, etc surfers, Temple run, etc. PUBG, etc.
Source: KPMG
Prize money, viewership higher than many traditional sports

Electronic sports, or Esports, are organised gaming competitions (both online and offline) wherein
players compete individually or as a team in a competitive gaming environment with the goal of winning
the tournament. These organized competitive gaming tournaments among professional players can be
viewed live in arenas or on TV or internet with live commentary, or online through gaming broadcasters.
With the recent increase in viewership and popularity of Esports, this market has risen to US$ 1bn in
2020 globally and is estimated to reach to US$ 1.6bn by 2023, a 16% CAGR.
Exhibit 30: Global Esports market, 2016-2023 (US$ mn) Exhibit 31: Global Esports audience growth (mn)
Global eSports Market, 2016-2023 (in USD Millions) Occasional Viewers Esports Enthusiasts
1,800 800
1600
1,600 700
1387
1,400
1151 600
1,200 375
1021 500 348
962 322
1,000 286
780 400 252
800 656 221
521 300 191
600
162
400 200 352 378
303 330
229 264
200 100 161 194
0 0
2016 2017 2018 2019 2020 2021E 2022E 2023E 2016 2017 2018 2019 2020 2021E 2022E 2023E
Source: Frost & Sullivan Analysis Source: Frost & Sullivan Analysis
June 23, 2021| 12

Exhibit 32: India ranks 59th globally in terms of prize money (2019)
Prize money (USD mn) Players (RHS)
180 169 25000

160
140 128 20000
120 100
15000
100
80
10000
60 40 40 34 32 29
40 5000
20 1
0 0
US China Korea Sweden Denmark France Russia Germany India
Source: Esportsearnings, Equirus securities
Exhibit 33: Esports value chain
Source: Nielsen, Equirus Securities
Esports companies host leagues and tournaments on a regular basis wherein gamers contest each
other for prize pools and spectators engage for entertainment.
June 23, 2021| 13

Exhibit 34: Role of players in value chain

Entities in value chain Key players What value they add How they make money
Companies which publish or develop the game. These

companies make high returns if the games become a hit and
Nazara, Various revenue models like In-app Purchase,
Game publishers have a high risk in terms of financial commitments if the game
Krafton, Tencent, Garena subscription, In-app advertising etc
doesn't do well. They identify the target market and also help the
organisers in terms of prize pool money
Organisers collaborate with publishers and organise various

Generate income mainly via Media rights
ESL, VSPN, Dreamhack, online and offline competitions. Organisers generally have
Organizers sales, corporate sponsorships, entry fees, ticket
Nodwin Gaming relationships with multiple publishers as a way to hedge against
sales, merchandise sales
game related risks
Teams/Players Fnatic, Cloud9 Players/teams consists of both amateurs and professionals Prize money and endorsements
Twitch, Hitbox, ESPN, Azubu,

Broadcasting competitions and publishing videos of professional
Broadcasters Sony, MTV, Disney Hotstar, Advertising and subscription fees from viewers
players is done by media companies
YT Gaming
Many brands sponsor such gaming events and some also

Airtel, Mountain Dew, Intel, Higher sales helped by better traction and
Sponsors/Advertisers sponsor the professional players. Branded merchandise is also
Dell, HP visibility
gaining popularity.
Source: Industry, Equirus securities
Exhibit 35: Sponsorships contribute lion’s share in Global Esports revenue of USD 1bn
3% 2%
6%
Sponsorships of events and Sponsorship
broadcasting rights are major revenue 11% Media Rights
sources for Esports events Publisher Fees
Merchandize & tickets
17% 61% Digital
Streaming
Source: Esport International, Frost & Sullivan Analysis
June 23, 2021| 14

Exhibit 36: Winnings in Esports higher than most traditional sports

Rank Name Winnings Game Event
1 Rory Mcllroy USD 15,000,000 Golf FedEx Cup
2 Hossein Ensan USD 10,000,000 Poker World Series of Poker
3 Rafael Nadal USD 3,850,000 Tennis US Open
4 Topias "Topson" Taavitsainen USD 3,100,000 Dota 2 The International
5 Sebastien "Ceb" Debs USD 3,100,000 Dota 3 The International
6 Johan "N0tail" Sundstein USD 3,100,000 Dota 4 The International
7 Anathan "Ana" Pham USD 3,100,000 Dota 5 The International
8 Jesse "JerAx" Vainikka USD 3,100,000 Dota 6 The International
9 Kyle "Bugha" Giersdorf USD 3,000,000 Fortnite Fortnite World Cup
10 Novak Djokovic USD 3,000,000 Tennis Wimbledon
11 Simon Pagenaud USD 2,600,000 Racing Indy 500
12 Tiger Woods USD 2,000,000 Golf The Masters
13 Denny Hamlin USD 1,500,000 Racing Daytona
14 Michael Van Gerwen USD 600,000 Darts PDC Championship
15 Egan Bernal USD 550,000 Cycling Tour De France
Exhibit 37: Esports to be the second most watched sports in the US in 2021
Esports events are rising above many 160
141
traditional sports events, both in terms 140
Viewers in US (mn)
of viewership and prize money
120
100 84 79
80 63
60
40 32
16
20
0
NFL Esports MLB (Baseball) NBA NHL(Hockey) MLS(Soccer)
(Basketball)
Source: Activate, Equirus Securities
Twitch is a major streaming platform for various Esports events. Exhibits 39-41 depict the incredible
growth Twitch has seen from 2012-2021 in key operating parameters.
Exhibit 38: Twitch leads the Esports streaming market Exhibit 39: Hours watched have grown 41x over 2012-21
Hours watched (mn)
3% 2,500
9%
2,000
Twitch
1,500
Youtube gaming
28%
Facebook gaming 1,000
61% Microsoft Mixer
500
0
Nov'16
Sep'12
Feb'13
Oct'14
Dec'13
Aug'15
Apr'17
Sep'17
Feb'18
Aug'20
Dec'18
Jul'13
May'14
Mar'15
June'16
Jul'18
May'19
Oct'19
Mar'20
Jan'16
Jan'21
Source: Industry, Equirus Securities Source: Industry, Equirus Securities
June 23, 2021| 15

Exhibit 40: No. of viewers have grown 29x over 2012-21 Exhibit 41: No. of broadcasters have grown 31x over 2012-21
Avg. concurrent viewers ('000s) Monthly broadcasters ('000s)
3,500 10,000
9,000 9480
3,000 2970
8,000
2,500 7,000 6900
2,000 2120 6,000
5,000
1,500 4,000
1260 3640
1,000 1070 3,000 3390
747 2,000 2000
603
500 1700 1800
351 539 1,000 900 1500
102 208 300
0 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
…but monetization still lags traditional sports

Though Esports has become a much bigger global sport than traditional sports with its global
viewership next only to NFL, the audience is fragmented across various IPs. Consequently, revenue
A fragmented audience across IPs generated by Esports events are much lower than big traditional sports events. Due to the regional
leads to much lower revenues than nature of traditional sports, monetization through media rights has been much higher in such sports.
traditional sports As per Forbes, revenues from media rights constitute 40-45% of traditional sports revenues but only
14-17% of Esports revenues. Local sponsorship has been the main revenue source till date.
Exhibit 42: Though viewership of Esports events is quite high… Exhibit 43: …revenues lag traditional sports
Viewers in US (mn) Revenue(USD bn)
MLS(Soccer) 16 Esports 1.0
NHL(Hockey) 32
NHL(Hockey) 4.4
NBA (Basketball) 63
NBA (Basketball) 8.0
MLB (Baseball) 79
MLB (Baseball) 10.7
Esports 84
NFL (Football) 141 NFL (Football) 15.3
0 50 100 150 0 5 10 15 20
Source: Industry, Equirus securities Source: Industry, Equirus securities
However, going forward, as viewership of Esports continues to grow, and league IPs continue to get
bigger in size and reach, monetization through sale of media rights will emerge as a key revenue driver.
Market landscape in India

The Esports market in India is currently at US$ 107.8mn and is expected to grow at a 25.1% CAGR to
Audience for Esports has grown ~3x
US$ 208.6mn by 2023, as per Frost and Sullivan. The boom in the Indian Esports industry is similar
over 2017-2020
to what China saw in 2010. At present, China is the largest Esports market in the world. Growth in
India will be driven by better broadband connectivity, higher bandwidth, and lower latency.
There are currently 350-400mn online gamers in India, but most are casual gamers as only 17mn
play/watch Esports events (~4%). Audience for Esports has grown ~3x over 2017-2020 but the
number is still very small and there remains huge scope for growth.
June 23, 2021| 16

Exhibit 44: Indian Esports market vs. China (US$ mn) Exhibit 45: Esports audience (mn) is just 4% of overall gamers
China India Online gamers Esports enthusiasts audience
700 Occasional Esports Audience

616.7
600 527 500
450 400
500 365
400
385
400 300
300 269
300
210 208.6
200 164 165.7 200
133.2
70 92 107.8
100 100
3 3 4 5 6 7 8 9
0
0
2018 2019 2020 2021E 2022E 2023E
2017 2018 2019 2020
Source: FICCI, ESFI, Frost & Sullivan Source: FICCI
Exhibit 46: Youth is the main target audience… Exhibit 47: …and 83% are male
4%
7% 17%
8% Below 24 years
25-30 years
Male
31-35 years
Female
22% 59% 36-40 years
41+ years
83%
Exhibit 48: Increasing number of platforms covering Esports events

2018 2019 2020
Dsports Instagram MX Player
Twitch Jio Rheo
YouTube SonyLIV Nimo
No. of platforms covering Esports
Facebook Twitch TikTok
events have grown to 12 in 2020 vs. 6
Hotstar YouTube MTV
in 2018
Voot Facebook Jio
Hotstar SonyLIV
Voot Twitch
YouTube
Facebook
Hotstar
Voot
June 23, 2021| 17

Exhibit 49: Few games played in Esports events; currently, there are no Indian games
Esports market in India is largely

fragmented with Nazara (Nodwin
Gaming) being the market leader
Source: Industry, Equirus securities
Exhibit 50: Esports market in India is highly fragmented... Exhibit 51: … with Nazara (Nodwin) being the market leader
18%
Nazara
Usports
7%
MPL
1%
0% Gamerji
Others
73%
Source: Industry, Equirus Securities Source: Industry, Equirus Securities, Esports market revenue includes the
revenues generated by Esports gaming platforms, Esports game publishers and
Esports leagues or tournament organizers
June 23, 2021| 18

Exhibit 52: Funding has increased in Esports companies… Exhibit 53: … and so has the prize money of events
Funding in USD mn No. of deals (RHS) Indian Esports prize money ( USD mn)
40 7 3.0
6 2.6
35 6 2.5
30
5
4 2.0
25
4 1.5
20 3 1.5
3
15
1.0
2
10 1 1 0.5
0.5 0.32
5 1
0.1
7.1 4.5 3.7 7.02 35.8
0 0 0.0
2015 2016 2017 2018 2019 2016 2017 2018 2019 2020
Telcos, with their own Esports Indian telcos, Airtel and R-Jio, are also increasingly getting interested in E-sports; recently, both
tournaments, are attempting greater companies were involved with major Esports tournaments in the country. R-Jio recently concluded its
control over streaming rights, in our 70-day Esports tournament with Garena’s Free Fire as the primary title game. Airtel also tied up with
view Nodwin Gaming for conducting an Esports India tour with four major tournaments, viz. Call of Duty
Mobile India challenge, North East Esports Summit, KO Fight Night and ESL India premiership.
Exhibit 54: Airtel has tied up with Nodwin for various events… Exhibit 55: .. R-Jio also recently concluded an event
Source: Industry, Equirus Securities

Esports – Global Case Studies

Modern Times Group (MTG)
MTG is a digital entertainment company listed in Stockholm, with Esports, gaming and other digital
assets. MTG owns two Esports companies; ESL (~90%) and Dreamhack (100%). ESL Gaming GmbH
is world's largest Esports company based in Cologne, Germany, with offices in all major countries.
In Sep’18, MTG increased ownership in ESL’s parent company, Turtle Entertainment, from 8.44% to
82.48% and further to 89.97% in Apr’20. ESL runs 13 mega events every year. Dreamhack is another
Esports company MTG owns, which specialises in Esports tournaments and gaming conventions. It is
MTG owns 2 Esports companies: ESL recognised by the Guinness Book of Records and Twin Galaxies as the world’s largest LAN party and
(90% stake) and Dreamhack (100%) computer festival with the world’s fastest internet connection, and the most generated traffic.
Post-acquisition by MTG, ESL, the world’s largest Esports company, and Dreamhack, the premier
gaming lifestyle festival company, have merged their organisations to further accelerate future of
Esports and gaming. Primary revenue streams comprise sponsorship deals, media rights sales, event
tickets and branded merchandise.
June 23, 2021| 19

Exhibit 56: MTG’s major events
Though growth in ESL and Dreamhack

Esports events has been in double
digits, decline in Whitelabel events led
to tepid growth in Esports revenues
In 2015, MTG bought 74% stake in the parent company of ESL, Turtle Entertainment, for €78 mn.
Revenues of ESL were €33 mn in 2014, leading to price/sales of 3X.
Exhibit 57: Segmental Financials: MTG

(Amounts in USD Mn) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Revenue
Online Gaming 0 145 265 268 292
Esports 118 161 175 181 143
EBITDA
Online Gaming NA NA 55 51 71
Higher investments in ESL and
Esports NA NA -2 -37 -24
Dreamhack and also new category
launches have led to EBITDA losses
EBITDAM %
Online Gaming NA NA 21% 19% 24%
Esports NA NA -1% -20% -17%
Source: Bloomberg, Equirus Securities
Versus Programming Network - VSPN

VSPN is leading Esports solution provider in Asia, with a 70% market share in premium Esports events
hosted in China. The company conducts and builds online/offline events and produces online content.
In Jul'17, it also launched very large-scale Esports complexes – Shanghai Quantum Community and
Chengdu Quantum Community. In Aug'18, VSPN expanded into South Korea.
Exhibit 58: Major events conducted by VSPN (not exhaustive)

Year Event Location
Kuaishou Technologies bought a Sep'2016 King Pro League China

1.13% stake in VSPN in Oct'20 for May'2018 PUBG China Pro Invitational China
RMB 70mn, amounting to a valuation Nov'2018 PUBG Mobile Star Challenge (PMSC) (Global Event) Dubai
of US$ 929mn for VSPN Jan'2019 PUBG Asia Invitational China
June 23, 2021| 20

Exhibit 59: Funds raised by VSPN (not exhaustive)

Year Funding From Amount
Jan'2017 Focus Media, DMG Entertainment, Sequoia Capital China, China Media Capital NA
Oct'2020 Tencent Holdings, Tiantu Capital, SIG and Kuaishou $100Mn
Jan'2021 Prospect Avenue Capital (PAC), Guotai Junan International and Nan Fung Group $60Mn
Jun'2021 Morgan Stanley Private Equity Asia NA
As per its IPO document, Kuaishou Technologies bought a 1.13% stake in VSPN in Oct'20 for RMB
70mn, amounting to a valuation of US$ 929mn for VSPN. The price decided was based on the price
to sales multiple.
SEA Ltd
SEA has three major segments (1) Ecommerce, (2) Digital Payments, and (3) Digital Entertainment
(Includes Esports). SEA is the leader in Esports in Southeast Asia, Taiwan, and Brazil. The company also
SEA LTD has 3 major business has developed one of the most played battle games, Free Fire – the most downloaded mobile game
segments: Ecommerce, digital globally in 2019 and 2020. Besides, Free Fire was the highest grossing mobile game in Latin America,
payments and Digital Entertainment Southeast Asia, and India in 2020.
SEA has set up Garena Academy, which educates young people on making a career in gaming. Digital
entertainment includes revenues through sale of games (including IAPs) and Esports.
Exhibit 60: Major Esports events by SEA (not exhaustive)

Digital Entertainment segment houses
Major Events Country
both Esports and gaming. It developed
Garena World Bangkok Thailand
Free Fire – the most downloaded
mobile game in 2019 and 2020 SEA Tour Indonesia, Malaysia, Philippines, Singapore, and Thailand
League of Legends Master Series Hong Kong, Macau, Taiwan
Free Fire India Championship (FFIC) India
Free Fire World Series 2021 Worldwide Organised in Singapore
Exhibit 61: SEA: Segment-wise revenues Exhibit 62: SEA: Segment-wise EBITDA
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Revenue (USD MN) Adjusted EBITDA (USD MN)
E- Commerce 0 9 270 834 2,167 E- Commerce -170 -444 -860 -1043 -1,307
Digital Entertainment 328 365 462 1,136 2,016 Digital Entertainment 85 175 263 1,022 1,983
Digital Financial 20 16 11 9 61 Digital Financial -34 -37 -32 -113 -511
All others 12 24 83 196 132 All others -9 -18 -54 -28 -40
Revenue Growth % EBITDAM %

E- Commerce NA NA 2900% 209% 160% E- Commerce NA -4933% -319% -125% -60%
Digital Entertainment 16% 11% 27% 146% 77% Digital Entertainment 26% 48% 57% 90% 98%
Digital Financial 122% -20% -31% -18% 578% Digital Financial -170% -231% -291% -1256% -838%
All others 50% 100% 246% 136% -33% All others -75% -75% -65% -14% -30%
Source: Bloomberg, Equirus Securities Source: Bloomberg, Equirus Securities
June 23, 2021| 21

Exhibit 63: SEA: Share performance
SEA Share Price (US $)

300
Share price rose on success of its
250 e-commerce platform "Shopee" and
continued success of its game "Fire
SEA’s share price has rallied 18x over 200 Free"
last 3 years, largely due to the success
150
of its own developed game Free Fire Share price reflected the
and E-commerce platform, Shopee 100 continued success of its game
"Fire Free"
50
0
Oct-17
Oct-18
Dec-17
Apr-18
Dec-18
Apr-19
Oct-19
Oct-20
Dec-19
Apr-20
Dec-20
Apr-21
Feb-18
Jun-18
Aug-18
Feb-19
Jun-19
Aug-19
Feb-20
Jun-20
Aug-20
Feb-21
Source: Yahoo Finance, Equirus Securities
Nodwin: Market leader among Esport leagues in India

In FY18, Nazara acquired Nodwin Gaming – a leading company in Esports in India. Nodwin organized
82% of all unique Esports events in India and enjoyed a total prize pool share of 73% for Esports events
in India in 2019.
Exhibit 64: Market share of Nodwin across categories (2019)

86% 85%
84% 82%
82%
80% 78%
78%
76%
74% 73%
72%
70%
Nodwin acquisition a game changer 68%
66%
for Nazara
Unique IPs Unique events Unique event days Prize pool
Source: Company filings, Equirus Securities
June 23, 2021| 22

Exhibit 65: Nodwin’s key parameters have improved from FY19

IPs & Assets FY17 FY18 FY19 FY20
Globally Licensed IP 1 1 3 3
Joint / Owned IP 0 1 4 4
White Label Work 5 5 6 8
Countries 1 1 2 5
Staff 3 7 32 55
Events & Days FY17 FY18 FY19 FY20
Events 5 7 12 17
On Location Days 18 26 47 68
Online Event Days 32 69 182 51
Event Footfall ('000s) 65 120 260 510
Locations/Cities 5 14 147 242
Reach & Participation FY17 FY18 FY19 FY20
Yearly Video (Million) 1 6 28 175
Social/ Digital (Million) 4 35 208 512
Gamers Registered ('000s) 88 450 2200 6900
Clients / Partners 3 8 18 27
Business KPIs FY17 FY18 FY19 FY20
Total Revenue 1.3 2.4 7 11.3
Core Revenue (Sponsorship + White Label + Data Services) 1.3 2.3 6.4 7.2
Media Rights Revenue 0 0.1 0.6 4.1
Prize Pool 0.1 0.2 0.6 1.9
Nodwin organizes Esports competitions that range in size from grassroot-level tournaments to Esports
events to national and state-level Esports competitions. Some key Esports tournaments hosted include
DreamHack, ESL India Premiership, KO Fight Bights, Mountain Dew Arena and Airtel Indian E-sports
tour. The company has exclusive rights through partnerships with brands and publishers such as ESL,
to broadcast and distribute global media content of such partners through various online channels.
Nodwin has an exclusive license partnership with ESL for management and hosting of IP-based gaming
events such as ESL India Premiership. Further, it utilizes publicly available technology platforms, such
as ESL Play, Smash.gg, Toornament, Challengermode and Sostronk, for hosting gaming tournaments.
Exhibit 66: Nodwin has Esports events across the value chain, both online and offline
June 23, 2021| 23

Exhibit 67: Nodwin’s Portfolio of Events

Portfolio
Ips Activations Content
ESL India Premiership 2020 Dew Arena Pak Esports 360
Dew Arena India PUBG Mobile Club Open PUBG Mobile Club Open
Dreamhack India PUBG Mobile Pro League Dreamhack India
KO Fight Nights PUBG Mobile India Series World of Esports
North-East Cup Redbull River Runes Esports Mania
Pan Fest
Umzansi SA
Exhibit 68: Nazara is able to create lot of value for game publishers given its experience and tech infrastructure
There are three main revenue sources for Nazara in the Esports segment:
Exhibit 69: Media rights to lead growth in the Esports segment
Sponsorships in IPs White label + Data services Media rights
4,000
3,500
3,000
2,500
2,038
2,000
1,567
1,500
1,120
1,000 746 749
635
500 507
407 595
305 458
0 204
FY21 FY22E FY23E FY24E
June 23, 2021| 24

Sponsorships: Nazara has exclusive licensing with ESL and Dreamhack to use their IPs in India.
Additionally, there are many other owned and co-owned IPs which Nazara has created over time
(Exhibit 67). Nazara conducts various online and offline events under its IPs. It also executes
sponsorship agreements with many popular brands for Esports events; as per the agreements, the
sponsors agree to pay Nazara a fixed amount, in certain cases, upon completion of pre-determined
milestones. Some sponsors also provide equipment for use in the event, such as monitors, as a part of
the arrangement. Nazara includes logos of sponsors in banners, introduction videos, waiting screens,
and signs at offline events and in games being played by gamers. The company also mentions and
calls out sponsor names by stage hosts, analysts and commentators.
White label & data services: Many game publishers’ approach Nazara to host online/offline events
and tournaments in India. Nazara also handles tech infrastructure for game publishers in India (Exhibit
68). Typically, these agreements are event-specific and game publishers provide for fixed payments for
the event. The IP for such events remains with the game publisher.
Media rights: Due to increasing viewership of Esports events, many media companies compete for the
broadcasting and distribution rights of various IPs owned/co-owned and licensed by Nazara. So, higher
number of hours of content produced and broadcasted drive media rights revenues. As the viewership
of Esports events grows with the increase in number of gamers in India, revenue from media rights shall
continue to grow exponentially.
Exhibit 70: More no. of gamers drive higher revenues for game Exhibit 71: As the Hard-core/Mid-core gamers increase, viewership for
publishers and publishers continue to invest in Esports events shall increase leading to more revenue from media
attracting more gamers and cycle continues rights
Source: Company filings, Equirus Securities Source: Company filings, Frost and Sullivan, Equirus Securities
Exhibit 72: With higher investments in new IPs, EBITDAM are expected to be in 7-10% range
14%
6% Events costs
40% Marketing costs
6%
Employee costs
Other expenses
EBITDAM
34%
Source: Company filings, Equirus securities, * Major cost items as % of sales
June 23, 2021| 25

During COVID-19 lockdowns, Nazara was unable to conduct its popular offline events, but still clocked
a 66% revenue CAGR over FY19-FY21 led by more online events and higher sales of media rights
amid increasing popularity of Esports. Nazara is expanding its events across more geographies in Sri
Lanka, Bangladesh, Pakistan, Middle East and Africa, and will try to replicate its playbook of India. It
also intends to create many more IP events. Generally, a new IP takes around 3-4 years to break even;
also with offline events expected in the second half of the year, we estimate EBITDAM to stay in the
range of 7-10%.
Exhibit 73: Focus on creation of new IPs to keep up strong momentum

Rs mn FY19 FY20 FY21 FY22E FY23E FY24E
Revenue 495 775 1,357 1,932 2,660 3,382
YoY% 57% 75% 42% 38% 27%
EBITDA 30 106 137 146 230 306
EBITDAM (%) 6% 14% 10% 8% 9% 9%
Sportskeeda: Multi-sports news destination platform

Sportskeeda, the largest Esports news website in India, has both Esports content as well as traditional
sports. Content on Esports is primarily sourced from freelance sports journalists in India and abroad.
The website sources images direct from IP owners or through third-party image providers. It generates
revenues by displaying advertisements, which are sourced through ad networks and programmatic
demand channels, enabling the company to monetize user visits and impressions. Nazara entered this
segment in FY20 with the acquisition of Absolute Sports.
Exhibit 74: SportsKeeda MAUs have grown 3x in FY21 Exhibit 75: SportsKeeda overall visitor traffic
Monthly Active users (Mn) Visits per month (Mn) (RHS) WWE esports Cricket Other Sports
45 100.0 100%
90.0 90% 20.11% 14.95%
40 88.0
35 80.0 80%
70.0 70% 34.76%
30
60.0 60%
25 42.4
50.0 50% 58.90%
20 43.0 40.0 40%
31.4
15 30% 38.98%
30.0
10 16.0
11.9 20.0 20% 3.57%
5 10.0 10% 17.42% 11.31%
0 0.0 0%
FY19 FY20 FY21 FY20 Dec' FY21
Nazara has scaled up the Sportskeeda business as well post acquisition. The average monthly active
user for Sportskeeda has increased from 16mn in FY20 to 42mn in FY21. Esports has been a critical
component for visitor growth on SportsKeeda as it was the only sport to scale up during the lockdowns
in FY21.
Sportskeeda’s content mainly focuses on Cricket, WWE and Esports. As Cricket is by far the most
Cricbuzz.com and espncricinfo.com watched sports in India, we compared the performances of Sportskeeda with other two leading
enjoy better brand recall than cricketing websites i.e., espncricinfo.com and cricbuzz.com. Exhibit 77 clearly indicate that total visits
Sportskeeda on Cricbuzz.com and espncricinfo.com are far higher than Sportskeeda.com. Also, the high bounce
rates and traffic sourcing data suggests that most visitors reach the website through some links on
Facebook or Google. In contrast, espncricinfo.com and cricbuzz.com have >70% direct traffic,
implying that brand recall of these two websites is far higher than others.
June 23, 2021| 26

Exhibit 76: Sportskeeda has lower traffic than focussed cricketing websites
Sportskeeda.com espncricinfo.com cricbuzz.com
300
250
200
150
100
50
0
Nov'20 Dec'20 Jan'21 Feb'21 Mar'21 Apr'21
Exhibit 77: Sportskeeda also ranks lower in terms of bounce rates and direct referrals
Sportskeeda.com Esportsobserver.com espncricinfo.com cricbuzz.com
Total visits (mn) 53.7 0.32 92.89 238.32
avg. visit duration 1min 22 sec 23 sec 7 min 57sec 8min 8 sec
pages per visit 2.3 1.17 2.57 2.53
Bounce rate 64.97% 85.04% 37.00% 38.16%
Traffic sources
Direct 8.25% 18.62% 79.52% 73.61%
Referrals 0.51% 2.82% 0.54% 0.03%
Search 88.26% 63.91% 18.37% 22.14%
Social 2.88% 13.06% 1.33% 3.05%
Mail 0.08% 1.44% 0.23% 1.15%
Display 0.01% 0.15% 0.02% 0.02%
As the viewership of Esports events increases, the readership of Esports related content shall also
increase which shall lead to more visitors to Sportskeeda and hence more advertising revenues.
Exhibit 78: High operating leverage business model

FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Revenue 132 154 142 343 473 593 742
YoY% 17% -8% 141% 38% 25% 25%
EBITDA 20 8 14 167 201 257 327
EBITDAM (%) 5% 9% 49% 43% 43% 44%
June 23, 2021| 27

Gamified Early Learning: Scalable Model

Gamified early learning – as the name suggests – brings in an element of fun to learning by making it
more interactive and engaging. This segment does not aim to replace the traditional classroom
education system but aid the learning process by adding fun to it.
The global gamified learning market is pegged at US$ 9.8bn; the US is the biggest market
(~40% share) with an estimated market size of US$ 4bn. While China has been embracing
gamification in its education sector, but the idea of gamification is yet to take off in India.
Exhibit 79: Global gamified early learning market (US$ bn)

US gamified early learning market
currently at US$ 4bn (40% of global USA (USD BN) US as % of global
market) and set for a 48% CAGR 14 12.6 45% 46%
12 44%
44%
10 8.6
42% 42% 42%
8 41% 41%
5.8 40%
6 39%
39%
4 38%
4 2.7
1.9
2 1 1.4 36%
0 34%
2016 2017 2018 2019 2020 2021E 2022E 2023E
Source: eSchoolNews, Elearning Industry, Frost & Sullivan
Nazara entered this business through the acquisition of Paper Boat Apps in FY20. Kiddopia, its flagship
Kiddopia is ad-free. Limited amount of app in the gamified learning space, is a subscription-based app primarily catering to 2-6 year olds in
content is available for free, and full North America. Entire content for Kiddopia has been conceptualised, designed and developed in-
content is accessible on monthly/ house. Apart from teaching mathematics and language skills, activities on Kiddopia help develop skills
annual subscription on social learning, general knowledge, problem solving, creativity and self-expression. Limited number
of activities on this ad-free app are free of cost, and full content is accessible upon subscription, either
on monthly or annual basis.
Exhibit 80: Kiddopia – Nazara’s flagship app Exhibit 81: Typical app interface and learning cycles
Source: Company filings, Equirus Securities Source: Company filings, Equirus Securities
Subscribers are mainly generated through the distribution platform provided by Apple, with a smaller
portion coming from Google and the Amazon distribution platform.
Nazara has been able to able to scale up Kiddopia in a big way post acquisition. Kiddopia had
115,220 paying subscribers at the time of acquisition; the number has grown to 340,282 paying
subscribers as of Mar’21. Revenues jumped 202% yoy in FY21 to Rs 1,758mn (FY20: Rs 582mn;
Exhibit 83). Rankings of the Kiddopia app have been consistently rising, and it is currently no.3 in the
most installed kids apps in Apple and Google play stores in the US (Exhibit 82).
June 23, 2021| 28

Exhibit 82: Kiddopia has consistently been improving its ranking (currently at No. 3)
ABCMouse.com (which is No.1 app in US) is a leading digital learning resource for kids aged 2-8
majorly operating in the US. It consists of a comprehensive online curriculum and the #1 digital
learning product for young children. As a part of its growth strategy, it is entering into the education
space for elder kids. As per media reports, post the VC funding in 2016, Age of learning inc. had post-
money valuation of US$ 1bn.
Exhibit 83: Nazara has scaled up Kiddopia post acquisition Exhibit 84: Major cost items as a percentage of sales (FY21)
Revenue (Rs. mn) Paid Subscribers (RHS)

1%
2,000 400000 2%
1758.4 7% Commission to APP
1,800 stores
340282 350000
1,600 28%
300000 Advertising and
1,400 promotion
1,200 250000
Employee benefits
1,000 197552 200000
800 150000 Other Expenses
581.6
600
100000
400 62% EBITDAM
182.5
200 52785 50000
0 0
FY19 FY20 FY21
In terms of cost structure, (Exhibit 84) commission to app stores and advertising are the two main costs
for the segment. Since all content development work happens in India, management is able to keep
employee and other expenses under control.
June 23, 2021| 29

Exhibit 85: Kiddopia has profitable unit economics with LTV > CAC
in USD
Lifetime Value (24 months) 61
App store commissions 28%
Net LTV 44
Customer Acquisition Cost (CAC) 30
Gross profit 14
Gross margin 32%
Content costs 8-10%

EBITDA margins 22-24%
Source: Equirus research
Management has highlighted that due to the good subscriber retention rates, Kiddopia App has
profitable unit economics (Exhibit 85), with the ratio of Net Lifetime Value (LTV) of a subscriber to
customer acquisition cost being >1. As long as this unit economics remains profitable, it makes sense
to keeping the advertising/promotion expenditure high to increase the subscriber base. According to
management, currently it has a 4-5% market share in the US market and the market leader, ABC
mouse, is nearly 8 times the size of Kiddopia. Therefore, Nazara has a long way to go in terms of
adding subscribers in the 2–6-year age category.
Exhibit 86: Kiddopia has fairly good subscriber retention rates
Average retention rates
90% 81.86%
80%
70%
60%
48.99%
50%
40% 31.40%
30% 21.73%
20% 14.59%
10%
0%
Nazara stated due to recent change in 1 month 6 months 12 months 18 months > 24 months
Apple policy in April (Google,
Facebook barred to track user device Source: Company filings, Equirus securities
IDs, unless users opt for them), it has

become difficult to target potential Going forward, management plans to launch the Kiddopia app into Spanish, French and German
subscribers. In ensuing quarters, speaking geographies. However, note that the company has not seen much success in Germany
marketing spends will be lower and lead recently, which may affect its decision on further roll outs. Nazara also plans to have an app for 7-12
to subdued subscriber addition but year olds, but management acknowledges this be possible only through acquisitions; organically, it
keep EBITDAM high may not be able to target this customer segment. Organically, Nazara is aiming to keep advertising
spends high in the US market as it targets 4-5% monthly growth in subscribers.
Exhibit 87: Revenue/EBITDA CAGR estimated to be 54%/91% over FY21-24E

Rs mn FY19 FY20 FY21 FY22E FY23E FY24E
Revenue 183 582 1,758 2,841 4,304 6,399
YoY% 219% 202% 62% 52% 49%
EBITDA -20 -33 126 388 583 871
EBITDAM (%) -11% -6% 7% 14% 14% 14%
June 23, 2021| 30

Freemium: Multiple synergies with Esports but scaling up pertinent

Nazara offers casual-to-mid-core sports simulation games and some children’s games mainly through
smartphone app stores, such as Google Play Store and Apple App store. Sports genre, due to its longer
shelf life than other genres, has been Nazara’s focus area. It offers free-to-play sports simulation games
such as cricket, carrom, and table tennis. It also owns World Cricket Championship – the largest cricket
simulation game on mobile.
Exhibit 88: Key games in Kid’s portfolio Exhibit 89: Key games in sports simulation portfolio
Source: Company, Equirus Securities Source: Company, Equirus Securities
Nazara scaled up its freemium segment by acquiring Next Wave Technologies in FY18. The company
has focused on the WCC franchise and has over the years updated and refined the gaming interface,
introduced new content within and launched newer versions of the WCC (currently WCC3 is the latest
version). User base of these games is mainly in the age group of 15-25 years, followed by players in
the 25-35 year group.
WCC – a famous cricket simulation Though WCC is a famous game in India in terms of cricket simulation, the most popular games in
game in India – consistently updated India are from non-Indian publishers. (Exhibit 91). As the number of Indian games are increasing, it is
and refined over the years a matter of time when more Indian game publishers create a games which become popular.
Exhibit 90: WCC performance has been improving with newer versions
Organic Install / day Time spent (min./day/user) WCC ( RHS)
1,20,000 50
45
1,00,000
40
35
80,000
30
60,000 25
20
40,000
15
10
20,000
5
0 0
FY18 FY19 FY20 FY21
June 23, 2021| 31

Exhibit 91: Very few Indian games like Ludo King and Teen Patti feature in the top mobile games in India (2020)
Consumers
Game Game type Genre Publisher Downloads MAUs
spend
Ludo King Casual gaming Board Gametion 1 1
PUBG Mobile Casual gaming Action Tencent 6 2 2
Free Fire Casual gaming Action Sea 4 3 1
Candy Crush Saga Casual gaming Casual Activision Blizzard 4 9
Carrom Pool Casual gaming Board Miniclip 2 5
Subway Surfers Casual gaming Arcade Sybo 7 6
Bubble shooter by Llyon Casual gaming Casual Miniclip 5 7
Hunter Assassin Casual gaming Action Ruby Oyun Ve Yazilim Danismanlik 3 8
Callbreak Multiplayer Transaction based gaming Card Sujan Shakya 9
Temple Run 2 Casual gaming Action Imangi 9 10
Subway Princess Runner Casual gaming Action Tax Vietnam Technology 8
Hill Climb Racing Casual gaming Racing Fingersoft 10
Coin Master Casual gaming Adventure Moon Active 3
Teen Patti Transaction based gaming Casino Octro 4
Clash of Clans Casual gaming Strategy Supercell 5
Call of Duty: Mobile Casual gaming Action Activision Publishing, Inc 6
Teen Patti Gold Transaction based gaming Casino Moonfrog 7
Lords Mobile Casual gaming Strategy IGG 8
Gardenscapes – New Acres Casual gaming Puzzle Playrix 10
Source: FICCI, Equirus Securities
Exhibit 92: Ad and IAP are main sources of revenue Exhibit 93: EBITDAM in freemium tend to be higher
In -app purchases ( IAP) Advertisements
160 Production expense

140
26%
120 Employee expense
37%
100
Sales and promotion
99
80 126 expense
108
60 Other expense
40 21%
7% EBITAM
20 38 9%
16 19
0
FY19 FY20 FY21
Main sources of revenue for a freemium game are advertisements and In-App Purchases (IAPs).
Currently, most segment revenues are generated from advertisements; management is striving for better
game design and user interface improvement to improve IAP conversion. Nazara has discontinued
many of its games promotions as they were making no RoI; focus is to improve popular games so that
IAP improves. Currently, the most popular game Free Fire has an IAP conversion of 3-4%; there is a
long way to go for WCC, which has IAP conversion of 0.1% currently.
June 23, 2021| 32

Exhibit 94: IAP conversion expected to improve
% IAP conversion ( % DAU)
0.30%
0.25% 0.25%
Targeting IAP conversion of 0.25% in 0.20% 0.20%

the near term
0.15% 0.15%
0.10% 0.10%
0.05% 0.05%
0.00%
FY20 FY21 FY22E FY23E FY24E
Source: Company filings, Equirus securities
Management is targeting IAP conversion of 0.5% in the near term, post which it will scale up its
investments. Another benefit of a game becoming popular is it can be leveraged in various Esports
events.
Exhibit 95: Revenue and EBITDA estimates of Freemium segment

Freemium segment margins typically
Rs mn FY20 FY21 FY22E FY23E FY24E
trend in a high range
Revenue 198 195 267 360 481
YoY% -1% 37% 35% 34%
EBITDA 66 41 67 89 120
EBITDAM (%) 33% 21% 25% 25% 25%
Revenues in FY21 were flattish due to weaker advertising revenues but IAP revenues showed
improvement. Going forward, as the advertising environment improves, revenues should pick up; this
along with IAP conversion, if it kicks in, will lead to sharp growth acceleration for the company.
EBITDA margins in the freemium segment are generally higher, in the 25-30% range; however, FY21
margins came in weaker due to higher startup and development expenses related to new games like
WCC3. Going forward, management has guided to lower advertising spends unless IAP conversion
starts happening with the existing userbase.
In our view, freemium segment is a big candidate for further acquisitions.
June 23, 2021| 33

Real Money Gaming: Maintain Cautious Approach

Online fantasy sports gaming is a skill-based online sports gaming where fans create their own teams
made up of real players from upcoming matches. Game include cricket, football, Kabaddi and
basketball.
At present, there are two models of fantasy sports:
• Free to play: Users can play free contests which may or may not have any prizes
• Pay to play: Users pay an entry fee to participate, and operators charge 15-25% as a platform
fee, while the rest is distributed as winnings.
Rising popularity of fantasy sports and localization of games by game developers have led to the
development of real money and skill gaming in India in recent years. The target audience for such real
money and skill games (mainly youngsters), are presented with different avenues and opportunities to
exhibit their competitive mettle. Games such as Online Poker, Rummy and Sports Fantasy have gained
significant traction in the Indian market. Fantasy Sports is the fastest growing segment of the real money
market, growing by over 5 times in the past three years to reach 100mn users, as per the All India
Gaming Federation.
Fantasy sports has grown by >5 times Exhibit 96: Growing fan base of fantasy sports in India
in past 3 years to reach 100mn users
Fantasy sports users in India (Mn)
120
100
100
80
60 50
40
20
20
2
0
Jun-16 Dec-17 Feb-19 2020E
Source: KPMG, Equirus Securities
Exhibit 97: Emergence of new sports leagues has helped Fantasy Sports
League Sport Year of incorporation Viewership base
India Premier League Cricket 2008 ~460mn
Indian Super League Football 2014 ~429mn
Pro Kabaddi League Kabaddi 2014 ~435mn
Hockey India League Hockey 2013 ~41mn
Pro Volleyball League Volleyball 2019 ~14mn
Source: KPMG
June 23, 2021| 34

Exhibit 98: Market landscape of Fantasy Sports in India

Business
Player (Year Est.) Key investors Sports available on platform Format
model
Kalaari Capital, Think
Cricket is the most popular fantasy Daily and
Investments, Multiples Cricket, kabaddi, NBA,
Dream11 (2008) season long Freemium
sports in India Alternate Asset football, hockey
contests
Management, Tencent
MyTeam11 (2017) Cricket, football, kabaddi Daily Freemium
Halaplay (2017) Kae Capital, Nazara Games Cricket, football, kabaddi Daily Only Paid
11Wickets (2018) Cricket, football Daily Only Paid
Fantain (2013) BookMyShow Cricket, football, kabaddi Daily Freemium
Football, basketball, cricket,
Starpick (2018) Angel Investors Daily Freemium
tennis, kabaddi
Source: KPMG, Equirus Securities, Many more companies like MPL, Gamezy etc have entered this market over
last few years
Many new players have entered the market over the last 18 months like Mobile Premiere league (MPL),
Gamezy, My11Circle, MyTeam11, BalleBaazi, 11Wickets etc and the competition continues to heat
up in this segment.
Exhibit 99: Cricket is the most popular fantasy sports… Exhibit 100: Dream11 is a market leader by long distance
Cricket Others Dream11 Others

100% 5%
90% 15%
80% 10%
70%
60%
50% 95%
40% 85%
30%
20%
90%
10%
0%
2015 2018
Source: KPMG Source: KPMG
Nazara entered real money gaming via the acquisition of Halaplay and has investments in Sports Unity.
Besides, it has entered real money gaming in Kenya under a valid bookmakers off-the-course license
issued by Betting Control and Licensing Board, Kenya.
There have been several issues at the state level in terms of statutory risks, leading to the closure of
Nazara entered real money games via businesses in states of Andhra, Telangana and Tamil Nadu. Due to this, management – in Sep’19 –
the acquisition of Halaplay decided not get into the binary risk nature of this business.
June 23, 2021| 35

Exhibit 101: India does not have consistent regulations across states for real money games
State Fantasy gaming Rummy Poker Act
Tamil Nadu Not allowed Not allowed Not allowed Draft
Andhra Pradesh Not allowed Not allowed Not allowed Amendment to the AP gaming Act 1974
Telangana Not allowed Not allowed Not allowed Amendment to the Telangana gaming Act 1974
Amendment to the Gujarat Prevention of Gambling
Gujarat Allowed Allowed Not allowed
Act 1887
License needs to be
Nagaland License needs to be obtained License needs to be obtained Online Games of Skill Act
obtained
Restricted to servers based Restricted to servers based in Restricted to servers based in
Sikkim Sikkim Online Gaming Act
in Sikkim Sikkim Sikkim
Assam Not allowed Not allowed Not allowed Assam Game and Betting Act
Odisha Not allowed Not allowed Not allowed Orissa Prevention of Gambling Act
Meghalaya License required License required License required Ordinance
Source: FICCI, Equirus Securities
Nazara aims to turn Halaplay profitable but has reduced the scale of business considerably in FY21.
Going forward also, management has guided that till the binary risk element of the business is not
covered, it will not scale up revenues by not making any big investments in the segment and continue
to operate at break-even levels.
Exhibit 102: Halaplay has been scaled down to reduce losses

Big investments in Halaplay unlikely
Halaplay (Rs mn) FY19 FY20 FY21 FY22E FY23E FY24E
Revenue 223 397 135 149 163 180
YoY % 78% -66% 10% 10% 10%
MAU 2,78,273 5,71,835 1,94,571 2,14,028 2,35,430 2,58,974
EBITDA -277 -308 -54 -30 -18 -19
EBITDAM (%) -124% -78% -40% -20% -11% -11%
Nazara’s stake in Halaplay was at 75% while the remaining 25% is with Delta Corp. Recently, post
new fund infusion by a financial investor, Nazara’s stake has fallen to 65%.
Apart from Halaplay, Nazara also has certain trivia-based games in this segment, under the name of
‘Qunami’.
Exhibit 103: Key trivia-based games in India

Application Downloads
Loco 10mn
BrainBaazi 10mn
Qureka 10mn
Zupee 5mn
Qunami 400k
June 23, 2021| 36

Telco Subscription: On a continuous decline

Nazara has more than 1,021 android games targeting mass mobile internet users, distributed in 58
countries through arrangement with 52 telecom operators. The games are typically offered in a
bouquet format, including under the names of Gameshub, GamesLounge or GamesClub, depending
Nazara has >1,021 android games
on the relevant region, through periodic subscriptions or on a downloadable basis. Nazara operates
distributed in 58 countries via
its telco subscription business through an asset light model, using the Nazara Content Management
arrangement with 52 telecom operators
Platform (NCMP), which is designed and built in-house; the platform has enabled it to scale operations
and provide capacity as required and to manage subscription services across telecom operators. The
NCMP links content providers with subscribers through their partner telecom operators.
Nazara operates telco subscription business through strategic partnerships with multiple telecom
operators in different regions. Subscribers of telecom partners can access games made available
through Nazara’s platform, either upon subscription, which may typically be on a daily or weekly
subscription, or by purchasing and downloading them from their platform. Telecom operators manage
Telecom operators manage billing for billing for the subscriptions, and the revenue from telco subscription is shared between Nazara and the
subscriptions, and revenues from telco telecom operator through periodic payments by the telecom operators in accordance with the terms of
subscription is shared between Nazara the agreements (typically ranging between one to two years). Considering the low propensity to pay of
and telecom operators through subscribers in the emerging markets, the unit prices for subscription to the services are kept low, to
periodic payments by telecom ensure that the price for subscriptions does not dissuade gamers from subscribing to games.
operators in accordance with
agreement terms
Exhibit 104: Geographical breakup of Telco subscription revenues
India Middle East Africa Iran APAC
100%
90% 24% 23%
30% 34%
80%
70%
18%
60% 34% 20% 13%
50%
23%
40% 22% 28%
30% 24%
21%
20%
28% 25%
10% 19%
14%
0%
FY18 FY19 FY20 1HFY21
Telco subscription revenues, which used to form ~90% of group revenues for Nazara, have been on
decline ever since Telcos in India started offering free games since 2018. India revenues from telco
segment has become nil over the years due to disruption by R-Jio. Since this was a high margin segment
for the company, overall margins have been on decline due to lower contribution from Telcos.
June 23, 2021| 37

Exhibit 105: Free games offered by R-Jio… Exhibit 106: and Airtel have hurt the subscription-based model
Source: My JIO, Equirus Securities Source: Airtel Xtreme, Equirus Securities
Nazara recently has acquired a Disney contract for exclusive distribution of their games of Star Wars
Ips and Disney Ips on telco platforms across 101 countries; Nazara is trying to leverage this premium
content via its strong relationship with the telcos. Currently, Nazara maintains flat growth guidance in
this segment; we however have assumed a modest yoy decline.
Nazara recently has acquired a Disney
EBITDAM have been falling mainly due to fall in revenues as most costs are fixed in nature. According
contract for exclusive distribution of
to management, they book their corporate costs under this segment, due to which fall in margins looks
their games of Star Wars Ips and
steep, otherwise operational EBITDAM are still in the range of 25-30%. Going forward, Nazara plans
Disney Ips on telco platforms across
to separately report corporate costs and operational EBITDA of this segment, which shall give more
101 countries
clarity.
Exhibit 107: Revenues have been consistently falling with margins also under pressure
Telco subscription (Rs mn) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Revenue 1,862 1,517 961 818 749 727 705 684
YoY % -19% -37% -15% -8% -3% -3% -3%
EBITDA 752 368 206 137 153 148 144
EBITDAM (%) 50% 38% 25% 18% 21% 21% 21%
June 23, 2021| 38

Acquisitions to remain a key part of Nazara’s growth strategy

Nazara’s revenue mix has seen a tectonic shift over the last few years (Exhibit 108). Telco subscription
revenues, ~98% of group revenues in FY17, have been on decline and new acquired businesses –
sports and Gamified Early Learning – have gained share.
Exhibit 108: Revenue mix over the years has undergone a tectonic shift
Share of telco subscription revenues
on a decline while that of newly Telco subscription Gamified early learning Freemium eSports Real money gaming
acquired businesses on an uptrend 100% 2% 2% 3% 2% 2% 2%
90% 9% 17%
29%
80% 37% 38% 37% 35%
70%
14% 34%
60% 4% 4%
4% 4%
50% 98%
89% 8%
40%
8% 39% 44% 49% 54%
30% 57%
20%
33%
10% 16% 11% 8% 6%
0%
FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Nazara’s revenue grew at a 39% CAGR over FY18-FY21 helped by the acquisitions of Nodwin Gaming
Acquisitions to remain a key part of in 2018 and Paper Boat Apps in FY20. Nazara’s acquisition strategy has been to buy companies partly
Nazara’s growth strategy by cash and partly by share swaps. The company likes to call it a “Friends of Nazara Network”, which
is a network of gaming companies wherein Nazara has acquired majority stakes in fast-growing
gaming businesses with growth potential and possible synergies within the network.
Management of acquired companies are also given some equity of Nazara to bring in a common
alignment of roles, while day-to-day operations continue to be run by original managements.
Exhibit 109: Nazara’s acquisitions over last three years

Consideration (Rs. Mn) Revenue (Rs. Mn) EV/Sales
Name of company acquired Year of Acquisition Cash Share Swap % Holding Year of acquisition FY20 Year of acquisition FY20
Next Wave Multimedia FY18 300 227 52% 118 137 8.55 7.36
Nodwin Gaming FY18 355 414 55% 170 747 8.21 1.87
Halaplay Technologies FY20 318 - 38% 397 397 2.09 2.09
Absolute Sports FY20 95 343 64% 142 142 4.82 4.82
Paper Boat Apps FY20 400 435 51% 572 572 2.87 2.87
Except for Halaplay, which has been scaled down, Nazara has done a good job with its acquired
businesses. Revenues of Nodwin/Sportskeeda/Paper Boats have grown ~8x/2x/3x post acquisition by
Krafton recently bought 10% stake in Nazara. Nazara has spent ~Rs1.5bn of cash and ~Rs1.4bn of Equity on various acquisitions over the
Nodwin gaming at valuation of Rs last 3 years and has been able to create a lot of value for its shareholders. For e.g., Nazara acquired
11bn while Nazara had acquired 55% Nodwin Gaming in FY18 at valuation of Rs1.5bn when its revenue was just Rs 170mn. However,
Nodwin Gaming at valuation of Rs post-acquisition, revenues of Nodwin Gaming have scaled up to Rs 1357mn in FY21 and Krafton
1.5bn in FY18 recently bought 10% stake in Nodwin gaming valuing the business at Rs 11bn (i.e., 7x growth in value
in 3 years).
June 23, 2021| 39

Exhibit 110: Nazara has done a good job in scaling up revenues (Rs mn) post acquisitions
Year of acquisiton FY21
2,000
1758
1,800
1,600
Revenues of Nodwin/ Sportskeeda/ 1357
1,400
Paper Boats have grown ~8x/2x/3x
1,200
post acquisition by Nazara
1,000
800
572
600 397 343.2
400 195.2
118 170 135 142
200
0
Next wave Nodwin Gaming Halaplay Absolute Sport Paper boat apps
Given Nazara’s track of buying 50-
60% majority stakes in companies with Source: Company filings, Equirus Securities
a mix of cash and equity and its buying

range generally at Price/sales range of Nazara’s net cash position on Mar’21 stood at Rs 4.8bn which shall largely be used for acquisitions.
2x-9x, we estimate that Nazara can Given Nazara’s track of buying 50-60% majority stakes in companies with a mix of cash and equity
add ~Rs 15-20bn of revenues through and its buying range generally at Price/sales range of 2x-9x, we estimate that Nazara can add ~Rs
acquisitions to its topline over the next 15-20bn of revenues through acquisitions to its topline over the next years which can then be further
years which can then be further scaled scaled up.
up
Nazara to acquire a majority stake in Publishme, game publishing co. in Middle East and Turkey
On 17th June, Nazara announced that they have signed a binding term sheet to acquire a majority
stake in Arrakis Tanitim Organizasyon Pazarlama San. Tic. Ltd. Sti. (Publishme) the largest mobile game
publishing agency in the Middle East and Turkey. Nazara will invest an approx. amount of Rs. 200mn
(in an all-cash deal) for acquiring 69.82% stake by way of primary and secondary transaction through
its subsidiary.
Publishme is a full-service games marketing and publishing agency which works extensively with
gaming publishers in Turkey and the MENA region. MENA is one of the fastest growing gaming
markets, with an estimated market size of USD4.8bn and has over 160mn gamers in the region (of
which 100mn are mobile gamers) With this acquisition, Nazara expands its international footprint in
the freemium segment. Nazara will aim to build local execution capabilities cutting across key growth
segments namely, freemium, gamified learning and Esports.
Nazara will be sharing the Revenue and EBITDA potential of this acquisition once the definitive
document is signed. Currently, we are not building this in our estimates.
June 23, 2021| 40

Exhibit 111: Revenue/EBITDA estimated to grow at 38%/49% CAGR over FY21-FY24E

Consol Revenue FY18 FY19 FY20 FY21 FY22E FY23E FY24E CAGR (FY18-21) CAGR (FY21-24)
Telco subscription 1,517 961 818 749 727 705 684 -21% -3%
Gamified early learning - - 191 1,758 2,841 4,304 6,399 54%
Freemium 152 246 198 195 267 360 481 9% 35%
Esports 36 492 842 1,701 2,405 3,253 4,124 260% 34%
Real money gaming - - 426 138 152 167 183 10%
Total 1,705 1,698 2,475 4,542 6,391 8,789 11,872 39% 38%
Consol EBITDA
Telco subscription 206 137 153 148 144 2%
Gamified early learning -35 126 388 583 871 91%
Freemium 66 41 67 89 120 43%
Esports 75 305 347 487 633 28%
Real money gaming -347 -58 -33 -21 -23 -27%
Unallocated 133 44 62 62 71 17%
Total 98 596 983 1,346 1,816 45%
Other income 155 143 239 275 323 31%
Operating EBITDA 446 104 -57 452 744 1,071 1,493 1% 49%
Consol EBITDAM (%)

Telco subscription 25% 18% 21% 21% 21%
Gamified early learning -18% -18% 7% 14% 14%
Freemium 33% 21% 25% 25% 25%
Esports 9% 18% 14% 15% 15%
Real money gaming -81% -42% -22% -13% -12%
Operating EBITDAM (%) 26% 6% -2% 10% 12% 12% 13%
Exhibit 112: Estimate 49% EBITDA CAGR over FY21-FY24E Exhibit 113: Estimate 86% PAT CAGR over FY21-FY24E
EBITDA EBITDA Margin Net Income After Extraordinaries and Minorities
1,600 1,493.5 30.0% Margin(%)
1,400 26.1% 25.0% 700 25.0%

598.0
22.6%
1,200 1,071.2 600
20.0% 20.0%
1,000 500
403.4
15.0% 15.0%
800 11.6% 12.2% 12.6% 400
10.0%
600 445.7 10.0% 300 8.9% 10.0%
6.1% 743.7 4.6% 5.0%
400 200 3.5%
452.4 5.0% 151.4 2.9% 5.0%
200 104.4 100 27.7
-2.3% -0.9% 92.4 223.0
0.0% 0.0%
0 0
-200 -56.6 -5.0% -100 -21.3 -5.0%
FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Source: Equirus, Company Data Source: Equirus, Company Data
June 23, 2021| 41

Strong balance sheet and good cash flow generation to help scale up the
business
Overall, Nazara’s WC cycle has improved substantially over the last few years as the contribution of
low working capital-B2C businesses (Kiddopia) has increased and contribution of high working capital
intensive B2B businesses like Telco subscription has come down. Going forward, the working capital
will largely depend on growth rates and acquisitions in B2B and B2C businesses.
Nazara has maintained a strong net cash position despite making acquisitions in the past few years.
The company has net cash of Rs 4.8bn as of FY21 helped by recent stake sales in its subsidiary,
Nodwin, to Krafton and to Instant growth limited (financial investor) in 4QFY21.
Exhibit 114: Working capital cycle has improved as the proportion of telco subscription has fallen
Days of sales FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Trade receivables 92 99 100 55 60 60 60
Inventory 0 0 0 0 0 0 0
Trade payables 62 54 102 51 51 51 51
Core working capital 31 45 -2 4 9 9 9
Other current asset (unbilled revenue+ other receivables+ balance with govt.
102 111 127 106 40 30 25
authorities)
Other financial liabilities 7 37 58 87 30 22 16
Other current liabilities 18 12 45 24 17 12 9
Overall working capital 108 108 22 -2 2 4 8
Source: Company filings, Equirus Securities * in FY21- Other current assets and other financial liabilities were bloated with IPO related expenses and some selling
shareholder related numbers which shall not be repeated
Exhibit 115: Nazara has a strong cash position
Net debt Net Debt/Equity (RHS)
0 0.0
-1,000
-0.2
-2,000
-1863 -2042
-3,000 -2172 -2234 -0.4
Net cash position as of FY21 at -4,000 -0.4 -4784
-0.6
Rs 4.8bn -5,000 -0.6 -0.5
-5498
-6,000 -0.7 -6451 -0.8
-0.8 -0.8 -7669
-7,000 -0.9
-1.0
-8,000 -1.0
-9,000 -1.2
FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
June 23, 2021| 42

Exhibit 116: Equity stake sales and Cash flow from operations have been the main sources of cash mainly being used for acquisitions.
Cash sources Cumulative (FY17-21) Cash spent Cumulative (FY17-21)
CFO 1,300 Net capex -175
Equity raised 3,203 Acquisitions -693
Debt raised 300 Debt repayment -301
Dividend and Grant received 5 Interest paid -1
Interest received 197 Dividend paid -300
Sale of investment 3,630 Purchase of Investment -6,434
Loan to JV 5 Payment of Finance Lease Liabilities -109
Payment of Interest on Finance Lease Liabilities -12
Movement of restricted bank balances -536
Change in Cash & Equivalents -77
Total 8,639 Total -8,639
Cash sources Cumulative (FY17-21) Cash spent Cumulative (FY17-21)

CFO 15.0% Net capex 2.0%
Equity raised 37.1% Acquisitions 8.0%
Debt raised 3.5% Debt repayment 3.5%
Dividend received 0.1% Interest paid 0.0%
Interest received 2.3% Dividend paid 3.5%
Sale of investment 42.0% Purchase of Investment 74.5%
Loan to JV 0.1% Payment of Finance Lease Liabilities 1.3%
Payment of Interest on Finance Lease Liabilities 0.1%
Movement of restricted bank balances 6.2%
Change in Cash & Equivalents 0.9%
Exhibit 117: Return ratios to improve largely driven by revenue growth in existing business segments
DuPont Analysis FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
A. Net Profit Margin (PAT/Sales) 32% 2% 9% -1% 2% 3% 5% 5%
B. Asset Turnover (Sales/Assets) 0.72 0.36 0.33 0.33 0.44 0.61 0.76 0.90
C. Equity Multiplier (Assets/Equity) 1.19 1.33 1.24 1.51 1.55 1.53 1.61 1.69
ROE (A*B*C) 27% 1% 4% 0% 1% 3% 6% 8%

The company’s RoE profile has been hit due to PAT margin contraction which in turn was affected by
(1) falling contribution of the high-margin telco subscriptions, and (2) multiple acquisitions made over
the last three years into businesses wherein margins have been low due to higher marketing costs.
Going forward, as Nazara’s focus is on scaling up its businesses rather than margins, we estimate RoE
improvements in the backdrop of better asset turnover ratios.
June 23, 2021| 43

Initiate with LONG and Dec’22 TP of Rs 1820

At CMP, Nazara trades at an EV/sales of 6x/5x and an EV/EBITDA of 56x/38x on our FY22E/FY23E
estimates, respectively. Though the company was incorporated in 1999, it has scaled up operations
only in the last few years via acquisitions. Its two main acquisitions – Nodwin Gaming (founded in
2014) and Kiddopia app (launched in 2017) – are largely start-ups with market leadership in their
respective industries.
We initiate coverage on Nazara with LONG and a SOTP-based Dec’22 TP of Rs 1,820.
Exhibit 118: Valuation snapshot

Nazara's
Segments FY24E EV/Sales (x) EV Equity value Nazara's Equity value Per share
stake
Esports 4,124 9 37,117 39,504 55% 21,727 713
Gamified early learning 6,399 9 57,593 61,297 51% 31,200 1,025
Freemium 481 7 3,369 3,585 52% 1,878 62
Telco 684 3 2,052 2,184 100% 2,184 72
Real money Gaming 183 1 183 195 65% 127 4
Total 11,872 8 1,00,313 1,06,765 57,116 1,876
No. of shares (mn) 30

Dec'22 TP (Rs) 1,820
CMP (Rs) 1,513
Upside (%) 20%
Source: Equirus securities, *Nazara has 2 components in Esports- Nodwin and Sportskeeda where the stake is 50.1% and 74.3% respectively, so taken weighted
average of these two to calculate stake in Esports.
EV/sales a preferred valuation metric: We have chosen EV/sales as our valuation metric as the gaming
industry is still nascent in India; therefore, the focus of Nazara and other gaming companies is largely
on growing the user base and topline. Players such as Nazara, having successfully developed a
profitable business model for themselves, strive to spend most of their earnings on marketing with a
focus on growing the market; this keeps their margins capped.
We acknowledge there is no direct listed peer for Nazara in the Indian and global listed space to gauge
the right valuation metric; however, we have looked at valuations of global gaming companies, Indian
tech companies and various tech start-ups in India to understand how growth is being valued:
a. Global gaming companies trade at a one-year fwd. EV/sales of 4-5x (Exhibit 120),
depending on their size and maturity of the market they operate in. Gaming is a very broad
word and includes various companies such as game publishers, game marketing platforms,
Esports platforms and Esports team franchises. Most listed companies have already reached
considerable scale, and their growth rates are much lower than what is expected from Indian
counterparts. This is also visible from the fact that most game publishing companies are
increasingly investing in India at considerably higher valuations.
b. Indian internet companies: Most Indian tech companies trade at an EV/sales of 25-50x
(Exhibit 120), given the huge market opportunity and leadership of companies.
c. Unicorn club of Indian start-ups: As shown in Exhibit 121, many Indian start-ups have been
commanding very aggressive valuations given their market leadership in respective industries
and a huge growth opportunity. In the mobile gaming sector, Dream11 has been valued at
US$ 5.4bn and MPL at US$ 1bn – both based on their last fund raise. These companies are
also spending big to grow the market and not focusing on their profitability at the moment.
Some recent transactions of Nazara as a valuation guide: According to company filings, Krafton Inc.
has bought a 10.8% stake in Nodwin Gaming for Rs 1.098bn, implying equity valuation for Nodwin
Gaming at Rs 10.2bn. (EV/Sales of 8x). Krafton, being a strategic investor, adds a lot of value to the
company.
June 23, 2021| 44

Exhibit 119: Nazara has done acquisitions in the EV/sales range of 2x-9x
Consideration (Rs. Mn) Revenue (Rs. Mn) EV/Sales
Name of company acquired Year of Acquisition Cash Share Swap % Holding Year of acquisition Year of acquisition
Next Wave Multimedia FY18 300 227 52% 118 8.55
Nodwin Gaming FY18 355 414 55% 170 8.21
- Increase in stake by 2% by Nazara FY21 50 - 2% 1,357 1.79
- Investment by Krafton FY21 1,640 - 15% 1,357 8.06
Halaplay Technologies FY20 318 - 38% 397 2.09
Absolute Sports FY20 95 343 64% 142 4.82
Paper Boat Apps FY20 400 435 51% 572 2.87
Exhibit 120: Few listed Internet companies in India trade at significant premium multiples
P/E EV/EBITDA EV/Sales
Currency Market Cap (Mn) EV (Mn) FY21 FY22 FY23 FY24 FY21 FY22 FY23 FY24 FY21 FY22 FY23 FY24
Global Companies
Activision Blizzard Inc USD 71,089 66,337 31 24 21 20 20 16 14 12 8 7 6 6
Electronic Arts Inc USD 40,366 36,154 48 22 20 16 27 15 14 13 6 5 5 4
Zynga Inc - Cl A USD 11,236 11,094 NA 26 22 20 67 16 12 11 6 4 3 3
Tencent Holdings Ltd HKD 56,65,970 56,99,423 47 40 32 26 33 26 22 18 12 9 8 6
Netease Inc HKD 5,65,972 4,92,813 NA 32 21 15 27 26 20 15 7 6 5 4
Ubisoft Entertainment EUR 7,206 7,433 24 25 21 18 7 8 7 6 3 3 3 2
Mixi Inc JPY 2,22,019 81,133 14 19 15 NA 3 5 NA NA 1 1 NA NA
Rovio Entertainment Oy EUR 515 436 12 18 17 16 6 8 22 7 2 1 1 1
Sea Ltd-Adr USD 1,48,147 1,43,947 NA NA NA 307 NA 257 85 47 33 17 12 9
Ihuman Inc USD 552 -303 NA NA 26 8 7 5 NA NA NA NA NA NA
Modern Times Group-A Shs SEK 11,904 13,827 NA 77 27 21 42 14 9 7 3 2 2 1
Median 27 25 21 19 23 15 14 12 6 4 5 4
Indian Companies
Info Edge India Ltd INR 6,41,049 6,35,276 NA 175 145 NA 232 125 124 NA 57 42 36 NA
Indiamart Intermesh Ltd INR 2,19,275 1,96,959 75 62 54 52 60 54 45 41 29 24 20 17
Matrimony.Com Ltd INR 22,324 19,475 328 38 29 NA 29 NA NA NA 5 NA NA NA
Affle India Ltd INR 1,24,186 1,24,741 88 94 64 44 96 70 49 34 24 13 10 8
Just Dial Ltd INR 64,754 64,769 32 32 24 NA 42 NA NA NA 10 NA NA NA
Median 82 62 54 48 60 70 49 38 24 24 20 12
Nazara Technologies
Equirus Estimates INR 46,075 41,291 499 207 114 77 97 56 38 27 10 6 5 3

Source: Bloomberg, Equirus Securities
June 23, 2021| 45

Exhibit 121: Many start-ups in digital space have got very aggressive valuations due to their market leaderships and big market opportunities
Revenue (FY20)
Companies Sector Valuation (USD bn) * EV/Sales
US$ mn
Byjus Edutech 16.5 390 42

PhonePe Fintech 5.5 60.0 92
Zomato Ecommerce 5.4 350 15
Dream11 Mobile gaming 5.0 103 49
Delhivery Logistics 2.5 242.9 10
Cred Fintech 2.2 0.1 na
FirstCry Ecommerce 2.1 122.1 17
MEESHO Social commerce 2.1 48.8 43
Urban company Marketplace 2.1 29.6 71
Pharmeasy Online pharmacy 1.5 91.0 16
Gupshup Conversational messaging 1.4 150.0 9
Zeta Financial Services 1.4 94.5 15
Groww Personal finance 1.0 0.1 na
MPL Mobile gaming 1.0 0.4 na
Median 43
Source: Business Standard, Various media articles, Equirus Securities, * Last fund raise implied these valuations.
Key Risk Factors

• Nazara growth depends on maintaining and growing its existing relationships and distribution
network within the Esports, gamified early learning ecosystem and any adverse impact on the
relationships with telecoms, app stores, content aggregators, marketing agencies etc could
have an adverse impact on the financial performance.
• Kiddopia in US is facing the heat of intense competition from established players like Spin
Master which could impact the growth in paying subscribers. Also, any change in regulations
around children could adversely impact the operations in this segment.
• Nazara host tournaments for ESL India Premiership, Dream Hack, KO Fight Nights, Mountain
Dew Arena etc. which sees participation from both India and abroad. Though the company
exclusive partnerships with the league owners, they could unilaterally cease the deal.
• Skill-based fantasy and trivia real money games faces the risk of any regulatory changes as
the real money game perceived with risk and many states in past have banned real money
games.
• The freemium gaming segment is predominantly dependent on the cricket simulation games
like WCC. Thus, inability to engage gamers could lead to significant loss of revenue in this
segment.
• Foreign exchange risk as ~40% of revenues come from US.
June 23, 2021| 46

Key Managerial Persons

Vikash Mittersain is the chairman and MD of Nazara technologies and has been associated as director
since incorporation. He holds diploma in industrial electronics from Walchand College of Engineering,
Sangli and has multiple years of experience in multiple business sectors.
Nitesh Mittersain is the joint MD of Nazara technologies and holds bachelor’s degree in Commerce
from University of Bombay. He has founded the company in 1999.
Manish Agarwal is the Chief Executive Officer of the company. He holds bachelor’s degree in
technology from the Regional Engineering College, Warangal and a post graduate diploma in
Management from the Indian Institute of Management, Ahmedabad. He has 20 years of experience in
multiple fields including the gaming space and marketing. He is associated with company since 2015.
Rakesh Shah is the Chief Financial Officer of Nazara technologies. He holds bachelor’s degree in
Commerce from University of Bombay and is a qualified cost accountant from Institute of Cost and
Works Accountants of India. He has more than 24 years of experience in financial, administration and
management accounting. He is associated with company since 2010.
June 23, 2021| 47

Company Snapshot
How we differ from consensus
Particular (Rs Mn) Equirus Consensus % Diff Comment
FY22E 6,391
Revenue
FY23E 8,789
FY22E 744
EBITDA No Consensus available
FY23E 1,071
FY22E 223
PAT
FY23E 403
Key Estimates
Segmental Revenues (Rs. Mn) FY19A FY20A FY21A FY22E FY23E FY24E
Esports 492 842 1,701 2,405 3,253 4,124
Gamified Early Learning - 191 1,758 2,841 4,304 6,399
Freemium 246 198 195 267 360 481
Telco Subscription 961 818 749 727 705 684
Real Money Gaming - 426 138 152 167 183
June 23, 2021| 48

Key Financials (Consolidated)

Income Statement
Y/E Mar (Rs mn) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Revenue 1,705 1,698 2,475 4,542 6,391 8,789 11,872
COGS 83 474 578 1,026 1,551 2,217 3,067
Employee Cost 372 409 319 487 584 701 841
Other Expenses 804 711 1,635 2,577 3,511 4,799 6,469
EBITDA 446 104 (57) 452 744 1,071 1,493

Depreciation 42 156 263 355 345 337 354
EBIT 404 (52) (320) 98 399 734 1,139
Interest Exp. 10 9 12 9 7 6 6
Other Income 98 163 155 143 239 275 323
Profit before Tax 492 102 (178) 232 631 1,003 1,456
Tax Expenses 122 49 72 31 126 201 291
Profit After Tax 370 53 (250) 201 505 803 1,165
Minority Interest 16 108 246 (44) (282) (399) (567)
Profit/(Loss) from Associates (1) (9) (18) (24) 0 0 0
Recurring PAT 385 151 (21) 133 223 403 598
Exceptional Items (357) 0 0 (41) 0 0 0
Reported PAT 28 151 (21) 92 223 403 598
Other comprehensive income. 0 0 0 0 0 0 0
PAT after comp. income. 28 151 (21) 92 223 403 598
FDEPS 12.6 5.0 (0.7) 4.4 7.3 13.2 19.6
DPS 11 0 0 0 0 0 0
BVPS 117 134 165 216 223 237 256
YoY Growth (%) FY19A FY20A FY21A FY22E FY23E FY24E

Sales (0.4) 45.7 83.5 40.7 37.5 35.1
EBITDA (76.6) NA NA 64.4 44.0 39.4
EBIT NA NA NA 308.5 84.2 55.1
PAT 445.9 NA NA 141.4 80.9 48.2
Key Ratios
Profitability (%) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Gross Margin 95.1 72.1 76.6 77.4 75.7 74.8 74.2
EBITDA Margin 26.1 6.1 (2.3) 10.0 11.6 12.2 12.6
PAT Margin 22.6 8.9 (0.9) 2.9 3.5 4.6 5.0
ROE 0.8 3.7 (0.4) 1.4 3.3 5.6 7.7
ROIC 7.6 (0.6) (8.9) 1.3 4.0 6.8 9.4
Core ROIC 15.6 (1.3) (15.8) 2.6 11.0 21.6 34.8
Dividend Payout 88.1 0.0 0.0 0.0 0.0 0.0 0.0
Valuation (x) FY18A FY19A FY20A FY21A FY22E FY23E FY24E

P/E 119.7 304.4 NA 345.5 206.6 114.2 77.1
P/B 12.9 11.3 9.2 7.0 6.8 6.4 5.9
P/FCFF (614.8) 598.8 (507.0) 70.5 95.7 67.3 51.2
EV/EBITDA 98.8 420.4 (774.3) 91.3 54.6 37.0 25.7
EV/Sales 25.8 25.9 17.7 9.1 6.3 4.5 3.2
Dividend Yield (%) 0.7 0.0 0.0 0.0 0.0 0.0 0.0
June 23, 2021| 49

Balance Sheet
Equity Capital 108 110 112 122 122 122 122
Reserves 3,454 3,969 4,899 6,460 6,683 7,086 7,684
Net Worth 3,562 4,079 5,011 6,582 6,805 7,208 7,806
Total Debt 0 0 0 0 0 0 0
Other long term liabilities 150 94 47 42 42 42 42
Minority Interest 420 323 690 1,208 1,490 1,889 2,456
Account Payables 288 249 693 640 901 1,239 1,673
Other Current Liabilities 145 240 792 1,496 934 934 934
Total Liabilities 4,746 5,070 7,544 10,227 10,431 11,572 13,171
Gross Fixed Assets 823 1,146 2,245 2,297 2,381 2,489 2,628
Acc. Depreciation 134 545 751 1,041 1,365 1,701 2,056
Net Fixed Assets 689 601 1,494 1,257 1,017 788 572
Capital WIP 6 7 63 24 24 24 24
long term investments 138 435 216 122 122 122 122
Others 959 877 1,973 2,013 1,991 1,991 1,991
Inventory 0 0 0 0 0 0 0
Receivables 431 460 681 686 1,051 1,445 1,952
Loans and advances 2 2 22 29 29 29 29
Other current assets 479 515 861 1,314 700 722 813
Cash & Cash Equivalents. 2,042 2,172 2,234 4,784 5,498 6,451 7,669
Total Assets 4,746 5,070 7,544 10,227 10,431 11,572 13,171
Non-Cash WC 479 488 79 (107) (55) 23 186
Cash Conv. Cycle 30.6 45.3 (1.7) 3.7 8.6 8.6 8.6
WC Turnover 3.6 3.5 31.4 (42.4) (116.1) 379.1 63.7
Gross Asset Turnover 2.1 1.5 1.1 2.0 2.7 3.5 4.5
Net Asset Turnover 2.5 2.8 1.6 3.5 6.1 10.8 19.9
Net D/E (0.5) (0.5) (0.4) (0.6) (0.7) (0.7) (0.7)
Days (x) FY18A FY19A FY20A FY21A FY22E FY23E FY24E

Receivable Days 92 99 100 55 60 60 60
Inventory Days 0 0 0 0 0 0 0
Payable Days 62 54 102 51 51 51 51
Non-cash WC days 103 105 12 (9) (3) 1 6
Cash Flow
Profit Before Tax 134 93 (196) 208 631 1,003 1,456
Depreciation 42 156 263 355 345 337 354
Others 504 142 (104) (36) (232) (269) (317)
Tax paid (170) (147) (72) (160) (126) (201) (291)
Change in WC (567) (107) 87 306 (52) (78) (163)
Operating Cashflow (57) 137 (22) 674 565 792 1,039
Capex (18) (60) (69) (21) (84) (108) (139)
Change in Invest. (217) (656) 120 (2,164) 0 0 0
Others 40 39 38 (491) 239 275 323
Investing Cashflow (195) (676) 89 (2,675) 155 167 184
Change in Debt (1) 0 0 0 0 0 0
Change in Equity 760 118 97 2,228 0 0 0
Others (300) (1) (64) (57) (7) (6) (6)
Financing Cashflow 459 116 34 2,171 (7) (6) (6)
Net Change in Cash 206 (423) 101 169 714 954 1,217
Source: Company, Equirus Research
June 23, 2021| 50

Rating & Coverage Definitions: Registered Office:

Absolute Rating Equirus Securities Private Limited
• LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion Unit No. A2102B, 21st Floor, A Wing, Marathon Futurex,
and ATR >= 20% for rest of the companies N M Joshi Marg, Lower Parel,
• ADD: ATR >= 5% but less than Ke over investment horizon Mumbai-400013.
• REDUCE: ATR >= negative 10% but <5% over investment horizon Tel. No: +91 – (0)22 – 4332 0600
• SHORT: ATR < negative 10% over investment horizon Fax No: +91- (0)22 – 4332 0601
Relative Rating
• OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon Corporate Office:
• BENCHMARK: likely to perform in line with the benchmark 3rd floor, House No. 9,
• UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,
Investment Horizon S.G. Highway Ahmedabad-380054
Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of Gujarat
a calendar quarter. Tel. No: +91 (0)79 - 6190 9550
Fax No: +91 (0)79 – 6190 9560
© 2021 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities
Private Limited
Analyst Certification
I, Depesh Kashyap, CFA/Piyush Sevaldasani, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their
securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures
Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital
Market (Reg. No. INZ000251536), Futures & Options Segment (Reg. No. INZ000251536) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No. INZ000251536) of BSE Limited (BSE).ESPL
is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg.
No.INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP-324-2017). There are no disciplinary actions taken by any regulatory authority against ESPL. ESPL
is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to merchant banking services, private
equity, mergers & acquisitions and structured finance.
As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for investment
banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have received a mandate
from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their directors and employees may
from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in their proprietary position) 1% or more
of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or Associates did not receive any compensation or
other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor Research Analysts have any material conflict of interest at the
time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ESPL has not been engaged in market
making activity for the subject company.
The Research Analyst engaged in preparation of this Report:-
(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c) has
neither received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months nor received any compensation for products or services other
than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation or other benefits from the subject company or third party
in connection with the research report; (e) might have served as an officer, director or employee of the subject company; (f) is not engaged in market making activity for the subject company.
This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication,
availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be
eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable restrictions. Please delete this
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affiliates to any registration or licensing requirement within such jurisdiction.
This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on this
report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to its accuracy
or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information contained herein.
While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information current. Also there may
be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to
in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any
particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance
on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its research report. Thus, investors should be aware that the firm
may have conflict of interest.
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years” period in the price chart).
Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest
Research Analyst’ or Relatives’ financial interest No
Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No
Research Analyst’ or Relatives’ material conflict of interest No
Disclaimer for U.S. Persons

Equirus Securities Private Limited (ESPL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition
ESPL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by ESPL, including the products and services described herein are not available to or intended for U.S.
persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional
investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange
Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., ESPL has entered into a chaperoning agreement with
a U.S. registered broker-dealer name called Xtellus Capital Partners, Inc, (''XTELLUS'). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
"U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US
Persons" under certain rules.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, XTELLUS, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
June 23, 2021| 51

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Nazara Technologies

Playing the ‘Long’ game

June 23, 2021

Depesh Kashyap, CFA (depesh.kashyap@equirus.com, +91-7228934327)

Nazara Technologies Limited

by eSports, gamified learning, and freemium segments. Face Value (Rs) 4

Ownership (%) Recent 3M 12M

We estimate a 38%/49%/86% revenue/EBITDA/PAT CAGR over FY21-FY24E. Margins are 1,230

June 23, 2021| 2

Nazara’s Business Model

Source: Company Filings

Source: Company filings Source: Company filings

June 23, 2021| 3

India’s Gaming playbook

250 Rummy and Poker

Esports teams Esports players

Source: FICCI, Equirus Securities Source: FICCI, Equirus Securities

International Esports teams in India Prize money in Esports ( Rs mn)

Source: FICCI, Equirus Securities Source: FICCI, Equirus Securities

June 23, 2021| 4

Gaming: Fastest Growing Segment in M&E Industry

Bigger than movies & music

Gaming Movie Music Gaming Bollywood

Indian gaming industry at an inflection point

June 23, 2021| 5

Exhibit 13: Indian gaming market is mobile driven (US$ mn)

Source: Frost & Sullivan Analysis

PC Console Mobile PC Console Mobile

Indian gaming industry at a point where China was in 2012-13

June 23, 2021| 6

500 467 400 368

2.5 1.8 1.7

June 23, 2021| 7

Mobile gaming to lead growth in next decade

Source: Company filings

Key growth drivers for gaming in India

Growing Esports culture to help buoy consumer base

Rising smartphone penetration

June 23, 2021| 8

Global USA China India USA China India

Source: Company filings Source: Company filings

Better demographics: Higher mix of Gen Z population shall help

Millenials Gen Z Others

Source: Frost and Sullivan, Equirus Securities

June 23, 2021| 9

Emerging Revenue Models In Mobile Gaming Industry

Growth of In-App Purchasing within Casual Gaming IAPs Ads

Source: Frost & Sullivan Source: Frost & Sullivan

June 23, 2021| 10

Source: Frost & Sullivan

June 23, 2021| 11

Esports: Set to emerge as mainstream sports of the future

Daily Fantasy, Rummy, Candy crush, Subway Counterstrike, FIFA,

Prize money, viewership higher than many traditional sports

June 23, 2021| 12

Prize money (USD mn) Players (RHS)

180 169 25000

Source: Esportsearnings, Equirus securities

Exhibit 33: Esports value chain

Source: Nielsen, Equirus Securities

June 23, 2021| 13

Exhibit 34: Role of players in value chain

Companies which publish or develop the game. These