Nikhil Kamath-backed Nazara Technologies's Q4 profit plummets 98% YoY
What's the story
Nazara Technologies, a diversified gaming and sports media company, has reported a substantial decrease in its Q4 net profit.
The firm's profit plummeted to ₹0.18 crore from ₹9.4 crore in the same quarter of the previous year, translating to a fall of 98.09% YoY.
This decline is primarily attributed to a loss of ₹16.87 crore from discontinued operations during the quarter, resulting from write-offs in several legacy businesses including Halaplay, its real-money gaming business.
Business strategy
Nazara Technologies undergoes corporate restructuring
In response to the financial downturn, Nazara Technologies is simplifying its corporate structure.
The company is closing or merging entities that do not align with its future vision, including Nazara Bangladesh and NZ Mobile Nigeria.
Additionally, it's divesting subsidiaries such as Nazara Kenya, Nazara Pro, digital entertainment firm Crimzon, and Sports Unity (maker of quiz app Qunami).
The company is also evaluating options for its Singapore and Mauritius entities.
Company outlook
Founder's vision for Nazara Technologies's future
Despite the profit drop, Nazara Technologies's founder Nitish Mittersain remains optimistic about the company's future.
He stated that FY24 has been a year of building a strong foundation for rapid future scaling.
As part of this restructuring strategy, a new operating model has been implemented to enable more revenue and free cash flows to accrue directly to the parent company.
This strategic shift aims at strengthening the firm's financial position in the long run.
Financial highlights
Nazara Technologies's financial performance amid restructuring
Despite the overall profit drop, Nazara Technologies's net profit from continued operations increased by 43.6% to ₹17.1 crore for the quarter.
However, revenue from operations declined by 8% year-on-year to ₹266.2 crore for the quarter.
For FY24 as a whole, Nazara posted a net profit of ₹74.75 crore, up by 21.8% from FY23, and its revenue grew by 4.3% to ₹1,138.3 crore in FY24.
Acquisition strategy
Nazara Technologies increases stake in Nextwave Multimedia
As part of its new operating model, Nazara Technologies is merging gaming IPs and increasing its stake in mobile gaming subsidiary Nextwave Multimedia to 100%.
Known for developing the World Cricket Championship (WCC) franchise, Nextwave Multimedia was first acquired by Nazara Technologies in 2018.
The firm is now buying the remaining stake for ₹21.63 crore from founder shareholders P.R Rajendran, R Kalpana, and P.R Jayashree in two tranches.
Growth prospects
Nazara Technologies's future plans and expectations
Nazara Technologies is considering deploying a similar playbook for other existing games as well as new acquisitions.
The company aims to merge core gaming IPs into the parent-listed entity to extract synergies and capture cash flows directly at the parent level.
Mittersain expressed optimism about FY25, expecting accelerated growth in both revenue and EBITDA.
He stated, "With substantial cash reserves and a robust M&A pipeline, we are well positioned to seize further growth opportunities."