Market does not appreciate ambivalence: Nazara CEO Manish Agarwal

In a Q&A, he dwells on his company's journey the past one year, the gaming market in India and the company's future plans

Gaming company Nazara was among the first batch of tech companies to go public last year just around the time when the second wave hit in mid-March. Nazara CEO Manish Agarwal spoke with Business Standard’s Deepsekhar Choudhury about the journey the past one year, the gaming market in India and the company’s plans ahead. Edited excerpts:

The Nazara IPO happened last year before the massive private funding or IPO rush in tech started in the first week of April. What helped you decide that the timing was right?

The IPO was a culmination of shaping Nazara for four to five years. From being a telco value added services provider in 2017, we had become a diversified esports company during the period. That gave us a very strong confidence that we had volume, velocity, variety, leadership and IPs. And more importantly, we had predictability and tangibility of revenues.

Meanwhile, that telco subscription segment business today is sub 10 per cent of our business. And some of the segments which were not there five years back are the ones which are really dominating today.

How did you respond to the comparisons when a slew of tech unicorns went public at multi-billion dollar valuations?

We were the trendsetters as our IPO was the first off the block. Of course, comparisons were made, but our focus was always on revenues, margins and the P&L. We have also seen that the market gets worried when there is a change of narrative from pre-IPO to post-IPO. Also, having a dialogue with the market in a transparent manner is very important. Some things will go right and some things will go wrong, but the market will not appreciate it if you are ambivalent.

Do you think that the market in India has really understood the gaming business model?

We were always very clear that Nazara is an Indian company, our market is here in India and we wanted to list in the country. The strategic positioning of Nazara as a gaming company from India has a halo effect and other benefits that will accrue in the coming years. We did know that it will be a tough thing to explain our diversified portfolio and the gaming business model. But we took it in our stride.

There has been a debate around games of chance and skill in India. Several state governments have moved to pass laws and they have been litigated in the courts. What do you stand on this issue?

Skill-based real money gaming is four per cent of our business while its share of the gaming market is almost 80 per cent.  And our view is that more clarity will come with time on skill based real money gaming on the statutory front and taxation. Ultimately, there will be one enabling legal framework across the country which will help avoid the flip flops. But the one unknown factor here is how much time that will take. That is why we have not gone very aggressive in the segment.

Your edtech entry is interesting and accounted for 25 per cent of your revenue in the December quarter. Do you have aspirations to build something like Roblox?

Our view is that we are an entertainment-first company which subsumes learning. We are not a learning first company like Byju’s or Unacademy. Nazara’s first aim is that the child should get entertained – and as a part of entertainment, they can get a certain amount of learning. For the age group 2-7 years, we have Kiddopia which is a subscription product and allows the child to learn motor skills and creative expression.

The age group of 7-12 years is where Roblox and everything comes which provide a platform for the kids to have a social community of their own, create their own games or consume the games created by their friends. We don't have any offering for this demographic yet, but we are always looking for a good offering to fill the void.

You have continued to make several strategic investments in gaming companies in the past one year. Has your attitude towards these investments changed in some way after the IPO?

On one hand, we have made investments to acquire more IPs, distribution capabilities and an advertising tech stack so that we can monetise better. Our playbook has been to fill the white space in India and then expand to frontier markets like the Middle East and Africa – and all that has not changed.

What has changed after the IPO is our ability to look at slightly larger companies which are doing revenues of up to $10 million because now we have liquid stock to give as equity. This makes the founders and investors of those companies really appreciate us more and be open about an equity swap kind of a discussion.