Nazara Technologies’ ends FY21 on a good note; sustaining pace remains key ahead

Nazara Technologies ends FY21 on a good note sustaining pace remains key ahead

02 Jun , 2021 By : Kanchan Joshi

MUMBAI: The March quarter results of Nazara Technologies Ltd show a strong year-on-year improvement in revenues and Ebitda. Ebitda is earnings before interest, tax, depreciation and amortization.

Consolidated revenues rose 42% year-on-year to Rs123 crore, helped by a sharp 165% jump in gamified early learning business, which contributed 41% to revenues in the March quarter. Gamified early learning segment includes games plus learning for the 2-6 years age group with subscription paid by parents. Esports, which is the next main segment, accounting for 39% of revenues last quarter, saw a growth of 22% over the same period last year.

Even so, it's worth noting that the company’s overall revenues declined by 5% sequentially. There is a seasonal aspect with the fourth quarter traditionally muted. Typically, Nodwin Gaming (included in the Esports business) does not plan big events in the March quarter given that that 14–21 year-olds have exams during this time.

Further, higher costs took a toll on Ebitda margins (excluding other income) on a sequential basis, which contracted a sharp 1140 basis points to 9.5% in the March quarter. One basis point is one-hundredth of a percentage point. Nazara’s staff costs and other expenses increased considerably vis-à-vis the December quarter. On a year-on-year basis though, margins were higher.

For financial year 2021, Nazara’s revenues increased surged 83% to Rs454 crore. Gamified early learning and Esports together contributed 76% to total revenues. For FY21, the company reported a profit at the Ebitda level worth Rs45 crore against a loss of Rs5.6 crore last year.

According to its investor presentation, Nazara recorded a positive net cash flow from operations of Rs67.4 crore in FY21 against a loss of Rs22 crore in FY20.

While this is encouraging, investors will closely track if the revenue and profitability momentum sustains ahead. Even as the potential for growth is vast for gaming firms such as Nazara, competition remains a big risk. To be sure, shares of Nazara have appreciated nearly 56% from their issue price of Rs1,101 apiece. However, they have risen only about 8% from the listing closing price.