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Mumbai-based gaming company Nazara Technologies reported a 22% year-on-year (YoY) increase in its consolidated profit after tax (PAT) at INR 16.5 Cr in the April-June quarter of the financial year 2022-23 (FY23) on the back of strong growth in its esports and real money gaming businesses.

On a quarter-on-quarter (QoQ) basis, the company’s PAT more than tripled during the quarter from INR 4.9 Cr reported in Q4 FY22.

Nazara’s operating revenue also surged 70% to INR 223.1 Cr in Q1 FY23 from INR 131.2 Cr reported in the corresponding quarter last fiscal year. It was 27% higher on a QoQ basis from INR 175.1 Mn reported in Q4 FY22. 

Esports was the biggest contributor to revenue at 46%, followed by gamified earlier learning at 24%.

Revenue generated from esports grew to INR 102.3 Cr in Q1 from INR 53.2 Cr reported in the year-ago quarter. On the other hand, Nazara’s gamified earlier learning generated total revenue of INR 52.5 Cr, up marginally YoY.

“As revenues from media rights, own IPs and the D2C business increase, benefits of operating leverage will kick in, leading to higher EBITDA margin for esports segment,” Nazara said in an investor presentation.

Meanwhile, Nazara also witnessed a 90% jump in total expenses in Q1 FY23 to INR 193 Cr, with expenses on the content, event, and web server front contributing the highest.

The gaming company spent a total of INR 71.2 Cr on the content, event, and web server in Q1 as against INR 21.3 Cr in the corresponding quarter last year.

Advertising and business promotion expenses grew 53% YoY to INR 65 Cr from INR 42.4 Cr in the year-ago quarter. Employee benefit expenses surged almost 96% to INR 28.4 Cr in  Q1 FY23 from INR 14.5 Cr reported in the corresponding quarter last year.

In this context, it is pertinent to note that Nazara acquired a majority stake in programmatic advertising and monetisation startup Datawrkz earlier this year, which is now one of its subsidiaries along with sports news website Sportskeeda, NODWIN, among others.

Besides, Nazara also announced investment of an additional INR 20.1 Cr in its material subsidiary Absolute Sports Private Limited, which runs Sportskeeda, in June.

“Addition of new growth engine in form of Datawrkz has augmented well for the business,” Nazara CEO Manish Agarwal said. “On the operating margin front, We have made investments in our business segments that will provide us with robust growth opportunities in the years to come.”

Agarwal also said that Nazara is looking to augment its presence in the freemium segment, especially in developed markets.

Nazara’s growth can also be attributed to the growing market and demand for esports in the country, which got a significant boost during the Covid-19 pandemic.

The number of online gamers in India grew to about 400 Mn by mid-2020 from about 250 Mn in 2018, making the country the second-largest base of online gamers after China, as per a 2021 KPMG report.

While the company’s growth looks impressive, it also remains to be seen how the final decision on revision of the goods and services tax (GST) levy on the gaming industry impacts players like Nazara.