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A summary of Nazara’s IPO prospectus: Risks, regulations, areas of operation, strategy

Gaming and sports media company Nazara Technologies Ltd., last week filed its draft red herring prospectus with the Securities and Exchange Board of India (SEBI), after first receiving approval from the markets regulator to go public in 2018.

Founded in 2000 by Nitish Mittersain, Nazara operates in e-sports gaming and content, mobile gaming, and has recently entered gamified learning and real-money gaming, including fantasy sports gaming. Its operations are spread across India, South Asia, North America, and Africa. Some of its brands in India are WCC and CarromClash in mobile games, sports content website SportsKeeda, and HalaPlay and Qunami in real money quiz and gaming.

Revenues and primary areas of business

According to regulatory filing, revenues mainly come from subscription fees from gamified early learning content, and from e-sports business, cumulatively accounting for 71% and 42% of operational revenue in FY20 and H1FY21.

Business segment: Revenue and % of revenue in H1FY21 | FY20 

  • Gamified early learning: ₹787 million, 39% | ₹191 million, 8%
  • eSports: ₹637 million, 32% | ₹842 million, 34%
  • Telecom subscriptions: ₹428 million, 21% |  ₹818 million, 33%
  • Freemium: ₹90 million, 4.5% | ₹198 million, 8%
  • Real money gaming: ₹63 million, 3% | ₹426 million, 17%

I. Gamified early learning: Nazara entered this segment with the acquisition of Paper Boat Apps Pvt. Ltd., which operates subscription app Kiddopia, in January 2020. Kiddopia caters to children aged between 2-6 years in North America.

Paid subscribers increased to over 290,000 in October 2020 from around 115,00 when it acquired the company. The app has 5 million downloads and 300,000 active subscribers; it saw 300% revenue growth since its initial funding.

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Kiddopia has the advantage of strong unit economics, evidenced by our subscriber acquisition costs getting recovered in nine months and a high life-time value of subscribers, with monthly subscriber retention rates of 25.73% as of September 2020 for activations in September 2019.

II. eSports: This segment was launched with the acquisition of 55% stake in esports company Nodwin Gaming in 2018. Nodwin has exclusive partnerships with ESL to manage gaming events such as ESL India Premiership and KO Fight Nights; it also works with Valve Corporation. Key growth drivers are event and content IPs, exclusive streaming and ownership rights, on-demand esports content, media rights licensing, and brand partnerships.

Besides this, Nazara also acquired Absolute Sports Pvt. Ltd., which operates sports news website Sportskeeda, in 2019. Sportskeeda monthly active users stand at:

  • 17.79 million, with 47.32 million visits per month in FY20 
  • 29.43 million, with 58.27 million visits per month in H1FY21 

III. Freemium mobile gaming: Operates several free-t0-play sports simulation and children’s games based on cricket, carrom, table tennis, gaming. This includes the World Cricket Championship (WCC), Bat Attack Cricket, and CarommClash franchises.

  • In-game time spent per day per user: 39 mins in FY20 and 40 mins in H1FY21
  • In game time spent in WCC per day per user: 45 mins in FY20 and 46 mins in H1FY21
  • WCC: 100,000 installs per day in H1FY21 (April-September 2020), 100 million installs in total

IV. Real money gaming: Entered with the acquisition of real money fantasy gaming company Halaplay Technologies and Sports Unity (which operates real money quiz app Qunami). (more on real-money gaming below)


The Promoters and Promoter Group, which includes Vikash and Nitesh Mittersain and Mitter InfoTech Ltd, hold nearly 7 million shares making up 24.16% stake. The remaining shareholders, including several investment banks, IIFL Special Opportunities Funds, hold 12.8 million shares or 44% of the paid-up capital. 

Our Company will not directly receive any proceeds from the Offer (the “Offer Proceeds”) and all the Offer Proceeds will be received by the Selling Shareholders, in proportion to the Offered Shares sold by the respective Selling Shareholders as part of the Offer.

Revenues across geographies

Geographic: Revenue and % of revenue in H1FY21 | FY20 

  • North America: ₹835 million, 42% | ₹302 million, 12%
  • India: ₹825 million, 41% | ₹1.4 billion, 59%
  • Middle East: ₹118 million, 6% | ₹180 million, 7%
  • Africa: ₹63 million, 3% | ₹206 million, 8%
  • Asia Pacific: ₹164 million, 8% | ₹327 million, 13%


The company has 19 direct subsidiaries, including Nodwin, Next Wave, HalaPlay, Paper Boat Apps in India, and several subsidiaries in African countries, one each Bangladesh, US (Delaware), Dubai, and Singapore. NZ MOBILE Kenya Limited, NZMOBILE Nigeria Limited, Nazara Uganda, Nazara Zambia, are based in Africa and Nazara Technologies in Mauritius. Nazara Gaming International was incorporated in Hong Kong.

A significant portion of revenues comes through the subsidiaries, most of which are incorporated outside India. The company plans to expand offerings and regions of operations to new jurisdictions, such as expanding its user base in the US from children to other age groups or to expand the portfolio of offerings beyond mobile games.

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  • Indian subsidiaries: HalaPlay, Paper Boat Apps, Nodwin contributed 14.30%, 7.51% and 29.84% respectively of FY20 revenue, and 2.72%, 38.04% and 26.12% respectively of H1FY21 revenue
  • Overseas Subsidiaries: Nazara Technologies FZ LLC (incorporated in Dubai) and Nazara Technologies, Mauritius, contributed 16.06% and 18.34% respectively to FY20 revenue; and 16.34% and 18.57% respectively to H1FY21 revenue

Corporate structure from Nazara’s website

Regulatory and legal risks and uncertainty in real money gaming in India

Nazara is an investor in fantasy sports real-money gaming company HalaPlay and online quizzing company Sports Unity (which runs Qunami). The company flagged that skill-based real money gaming is “fraught” with statutory risk and multiple states have recently banned any form of online real money gaming. “Considerable judicial and regulatory scrutiny” of real money gaming, including fantasy games means that “regulatory uncertainty continues”, the company warned. 

Online gambling subject to interpretation, varying state laws: The interpretation of what constitutes online betting or gambling and the extent of regulatory oversight varies across jurisdictions and in India from state to state.

“The current uncertainty also stems from there being no directly applicable legislation in some jurisdictions, and inconsistent or conflicting laws, regulations, interpretations or approaches by enforcement agencies.” — Nazara Technologies’ draft red herring prospectus

Further, the company pointed out that most of gambling laws “do not provide a list of games or activities that are to be covered within their ambit”, but most typically distinguish between games of chance and games of skill. 

We anticipate that scrutiny and regulation of our industry may increase, and we will be required to devote legal and other resources to addressing such regulation. — Nazara Technologies’ draft red herring prospectus

Any amendment, clarification or interpretation taken by the government or regulatory authorities that results in any of Nazara’s games either being regulated or prohibited may mean restrictions under the foreign exchange laws or penalties or regulatory action, or the need to withdraw such games, the company warned. 

Nazara’s strategy for real money gaming India amid uncertainty

Nazara said its entry into real-money gaming globally has been “strategically cautious”.

Given the uncertainty and associated risks, Nazara’s strategy has been to focus on “near-term profitability rather than investing in brand building”, consumer acquisition at scale, and limiting operations to certain games such as Halaplay, WCC Rivals Clash, Carrom Clash and Qunami. 

Having adopted this strategy, the company said that: 

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Therefore, we believe our exposure to the current Indian regulatory risks associated with real money gaming is low. For the six month period ended September 30, 2020, the contribution of such offerings to our total consolidated revenues is currently less than 5% of our total consolidated revenue. We believe we are well positioned to retain the option to capitalise on our current offerings and grow the business if regulatory clarity is achieved. — Nazara Technologies’ draft red herring prospectus

However, the company also warned that even if regulatory clarity comes through, it may not be able to expand into the real money business segment in a short period of time, or do so in a cost-effective manner.

II. Nazara flags recent regulatory moves

  • The company also noted recent regulatory moves such as the I&B ministry’s TV advertising guidelines on real-money gaming and Niti Aayog’s proposed self-regulatory approach; it is “closely monitoring the developments”. 
  • The company also pointed out Andhra Pradesh’s ban on online real-money gaming and the Chief Minister YS Jaganmohan Reddy’s request to the central government to block over a 100 websites allegedly operating in the space. It also pointed to Madras High Court’s notice to cricketers and celebrities for endorsing such platforms.

Online betting and gambling risks in Kenya

Nazara operates real-money gaming and betting platform BigPesa in Kenya through its subsidiary NZWorld Kenya Ltd.

While it operates under valid bookmakers off-the course license issued by Kenya’s Betting Control and Licensing Board, “there can be no assurance that our determinations on permitting users in a given jurisdiction to access our apps and on engaging in different marketing activities and customer outreach initiatives, are based on sufficient factors which comply with applicable laws”. 

Business and regulatory risks: eSports, telcos, digital media regulation in India

1. Dependence on telecom subscription business for a substantial portion of profits: Revenue from the telco subscription business accounted for 33% and 21% of the company’s FY20 and H1FY21 revenue respectively. This can be negatively impacted with any changes in payment collection models by telecom partners, to telecom regulations, or the increasing popularity of freemium mobile games, or a reduction in payment barriers. Over a thousand Nazara games are offered via telco subscriptions.

Subscribers of telecom services also pay for Nazara’s games (et al) through the telecom companies’ billing gateways. However, telcos have “increasingly” started bundling free services in their plans, leading to decline in number of subscribers for non-telco freemium services.

2. Risks in eSportsNazara enters into arrangements and partnerships with global gaming publishers and league owners and brands; for instance, it has an exclusive license partnership with ESL Gaming for hosting gaming events such as ESL India Premiership; it also uses technology platform Toornament to host such tournaments.

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  • E-sports revenue primarily comes from ad investor sales, media rights licensing and sponsorships. Any adverse event impacting creation and development of content, titles, events can lead to the prize pool being offered impacted, impacting brand value and popularity, as well as overall revenues and operations.
  • White label e-sports events are seasonal in nature, with a significant number of events being held in June-December every year.

3. Revenues from freemium games depend on “mindshare” in cricket simulation games: Cricket simulation games such as Next Wave’s WCC and its franchises are a key contributor to freemium mobile gaming revenues. WCC accounted for 76% and 82% of total MAUs for the freemium business for FY20 and H1FY21. 

4. Regulatory risks abroad around children: Nazara’s gamified early learning apps are subject to US Federal Trades Commission rules such as the Children’s Online Privacy Protection Rule (COPPA), which applies to commercial websites and online services catering to children aged below 13 years. 

5. Proposed privacy law in India: The anticipated enactment of the Personal Data Protection Bill, 2019, “may incur increased compliances and costs, which may also require significant management time and other resources, and any failure to comply may adversely affect our business, cash flows, results of operations and prospects”.

6. Regulation of digital news and content in India: The company flagged the Indian government’s recent move, in November 2020, to bring digital and online media under the regulatory ambit of the Ministry of Information & Broadcasting.

There can be no assurance that such oversight or any guidelines or regulations enacted by the Ministry pursuant to this amendment will not restrict our ability to display or disseminate our current content during eSports events or on our apps like Halaplay and Sportskeeda, or that the relevant government authorities will not prohibit the distribution of information through the internet that they deem to be objectionable on various grounds, such as public interest or public security, or consider such content to otherwise be in violation of local laws and regulations. — Nazara Technologies’ draft red herring prospectus [emphasis ours]

Business strategy and plans

  • Possible opportunity to cross-sell offerings, “thus creating network effects and unit level economics”. For instance, using Sportskeeda as a content destination for eSports events 
  • Increasing geographic coverage of Kiddopia and WCC franchises across developed markets to leverage monetising potential 
  • Introduce more products and services tailored to overseas markets; make games and content available in multiple languages, creating localised gaming etc 
  • Build in-app purchases revenue by creating online and offline competitions between players in popular offline games such as quiz, cricket, and carrom 
  • Develop in-game targeted promotions and offer more virtual items and payment options to increase sale of virtual goods 
  • Develop new content to increase reach in the US, and expand into Spanish-, French- and German- speaking geographies 
  • Pursue investments and acquisitions opportunities, including increasing stakes in existing investments to grow user base, deepen market penetration, and expand offerings and products

Operational Metrics

  • Sportskeeda: 17.79 million MAUs, 47.32 million monthly visits in FY20; 29.43 million MAUs and 58.27 million monthly visits in the six month period ended September 30, 2020
  • WCC: daily engagement is 51 minutes, over 15 million MAUs
  • eSports content business grew 60% in FY20, grew 9x in the last three financial years
  • HalaPlay: 10 million downloads, Qunami: 400,000 downloads
  • Kiddopia: 195,401 and 85,490 monthly and annual subscribers, respectively, in September 2020
  • Sports simulation games: 4.2 million downloads per month, average time spent was 45 minutes in FY20

Read Nazara’s DHRP

*Update at 4:50 PM: Changed “$” to “₹” in multiple places. Originally published at 4:18 PM on January 29, 2020. 

Corrigendum: An earlier version of the story said that persons close to the promoter group own minority shares in some of the subsidiaries. This was incorrect and has been removed. The error is regretted.

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