Nazara & Friends: Why Nitish Mittersain wants cash for his M&A train

Yet, it is hard to determine how to value the 25-year-old company. Is it a gaming firm? Its subsidiaries span everything from sports blogging to (more recently) outdoor kids’ play areas. Some liken it to a tech-focused holding company, such as InfoEdge, with stakes in multiple internet businesses, including Zomato and insurance aggregator Policybazaar.

But, Nazara’s co-founder and joint managing director Nitish Mittersain is firm on becoming the “emerging Tencent of India”. In an exclusive interview with Mint, he also described the company as a “micro-Berkshire Hathaway for gaming”.

Mittersain is pinning his ambitions on what is now an eight-year-long mergers and acquisitions (M&A) spree, snapping up games, gaming studios, events IPs, and other assets in India and abroad. And even though some subsidiaries are stagnating, Mittersain is preparing to buy more. After two fundraising rounds in 2024, the company is lining up another fundraise worth nearly ₹500 crore and bringing on new co-promoters in a massive restructuring exercise.

Can more money and owners help Nazara deliver on the goal of being India’s Tencent?

Shopping spree

Once, value added services (VAS) were Nazara’s cash cow; it billed telecom companies such as Airtel and the erstwhile Vodafone for selling mobile games and other entertainment content to users. At its peak, this was nearly 90% of the company’s total revenue.

Then, things shifted: the contemporary smartphone arrived, users began downloading apps from the Google Play Store, meaning game developers and telecom companies no longer needed each other to reach a user base. In a now well-known story, Nazara pivoted and began acquiring promising gaming companies instead.

Since 2017, Nazara alone has acquired at least 12 companies directly, and nearly a dozen more via its subsidiaries, mainly Nodwin Gaming and Sportskeeda. Some transactions have been for intellectual property (IP)—largely games and events—rather than companies themselves.

The result: Nazara is no longer a telecom-based VAS firm. But, it is also not purely a gaming company anymore. Its interests span several adjacent businesses, in entertainment (with event IPs like NH7 Weekender and YouTube FanFest) and media (ad tech firm Datawrkz).

Mittersain has long called his slew of acquisitions the ‘Friends of Nazara’. The idea, he says, came to him when thinking about how to transition Nazara out of its core telecom partnerships business and align with the new, app-based reality of gaming.

“(Gaming) is a small industry and we (founders) all know each other,” he said. “It struck me that rather than start from scratch, why don’t I find a way to partner with the people in the industry who are very passionate about what they do.”

The result is a diversified media and entertainment business, with a sizeable chunk of revenue coming from gaming-adjacent businesses. Nearly 43% of Nazara’s revenue for the December 2024 quarter came from eSports, while adtech (Datawrkz) and gaming brought in 28% and 29% of total revenue, respectively.

Meanwhile, Nazara’s shopping spree hasn’t slowed. Its official list of subsidiaries and associate ventures has grown from 27 in FY22 to 32 as of FY24. This fiscal, Nazara has acquired more, including real money gaming app PokerBaazi, its biggest deal by value ever.

Mittersain says this ‘decentralization’ strategy—acting almost like a holding company—turned Nazara’s fortunes around and ensured it had a successful listing and run on the bourses.

He points out that Nazara’s early bets have paid handsome returns. “In three years (after acquisition), Paper Boat Apps (developer of Kiddopia) went from roughly ₹20 crore topline to over ₹200 crore. Nodwin went from about ₹70 crore to over ₹250 crore. Sportskeeda, when we bought it, was doing about ₹15 crore revenue and was a break even business, running flattish for many years. That has now become a cash flow generating business for us,” he said.

The impact of this growth shows on Nazara’s consolidated topline. Total income has grown more than 2.5x between FY21 and FY24; for the December 2024 quarter, it is up more than 28% year-on-year.

The co-founder has his eyes on more acquisitions in the near future. “Right now, we are very busy acquiring gaming studios,” he said. “We now have a thesis on this as well: acquire good engines, good IP, then build a brand.”

In FY25, Nazara spent nearly ₹300 crore on gaming studios and IPs, largely on UK-based gaming studio Fusebox and on British-Spanish gaming firm ZeptoLab.

There may be room to pick up more such assets. “The global gaming market has actually been depressed, because during covid, there was a big run-up. Gaming companies saw a big spike, then a big drop, and now a slow decline. This has depressed valuations of all IPs and other assets in the market,” Mittersain explained.

He has been encouraging the company’s subsidiaries to follow Nazara’s M&A playbook. “Subsidiaries like Sportskeeda are generating a lot of cash,” he said. “Sportskeeda (and others) do not need a lot of cash to run daily operations. So, it is now doing its own M&A, as is Nodwin, and now, even Datawrkz.”

Nazara needs more acquisitions to keep plates spinning, as trends shift dramatically in the gaming business. Take Kiddopia for example. The gamified early-learning app was a big money spinner during the covid years as lockdowns worldwide forced children home and drove them to online learning and entertainment. All through FY24, Kiddopia subscribers fell by 3-6% every quarter, while the customer acquisition cost grew, as did the average subscriber churn rate. As of the December 2024 quarter, subscribers stand at 232,000, down nearly 15% year-on-year.

“You have to be specialists to invest in this sector,” Salone Sehgal, co-founder and general partner of gaming-focused venture capital fund Lumikai, told Mint in an interview. “Every two years there is a genre and demographic shift.” As hype cycles come and go, Sehgal says, a large acquirer must spread its bets across studios, platforms, tools, and technology.

More acquisitions mean more money. But, as minority shareholders in their own company, Nazara’s founders had run out of substantial funding options. And so, it is restructuring.

New Nazara friends

This year, the company announced it was raising ₹495 crore from existing investor Arpit Khandelwal, along with Mithun Sacheti, founder of the jewellery retailer Caratlane (now owned by the Tatas) in exchange for a stake of more than 42%, making them new co-promoters along with Mittersain and his family.

This triggered an open offer, which if fully subscribed, will take Nazara’s total promoter shareholding from just under 9% to nearly 62%. Eligible shareholders will be informed starting 28 February.

Nazara had raised ₹855 crore via a preferential issue last September from SBI Mutual Funds, along with Junomoneta Finsol and US-based AIF Think Investments. In January 2024, it raised ₹250 crore from investors, including Zerodha founders Nikhil and Nithin Kamath.

Nazara needs the cash, not only to keep buying more assets, but also to amalgamate what it already has. In the past year, it has been spending big money buying out the remaining stakes from the founders of its various acquisitions. For instance, last September, it spent ₹300 crore to buy out the remaining 48% of Paper Boat Apps from founders Anupam and Anshu Dhanuka. Nazara is amalgamating the company with itself.

Apart from Kiddopia, Nazara acquired an additional 19.35% stake in Sportskeeda in September last year and invested ₹64 crore in Nodwin Gaming in December.

As more subsidiaries settle into their business models and generate cash on the books, Nazara wants to use its own cash to hike shareholding or run a reverse-merger, boosting the parent firm’s balance sheet.

But why must fresh cash come with new co-promoters?

Mittersain says bringing in co-promoters isn’t merely about raising cash. Instead, he’s hoping to tick off a few targets with one move.

“One aim was to strengthen the promoter group itself by bringing in really strong hands both with Arpit (Khandelwal) and Mithun (Sacheti),” he said. “It’s also a great vindication of what Nazara is trying to do. If my largest investor, who has been with us for 4-5 years now, plus someone like Mithun Sacheti, a tried and tested entrepreneur, are both willing to cross the line from being an investor to come in as a co-promoter—this is also a big validation for us.”

New co-promoters will bring in the cash and muscle required to stick with the company’s ‘Friends of Nazara’ strategy of buying promising businesses.

Assuming the open offer is fully subscribed, Nitish Mittersain and his co-promoters will own a majority of the business, reducing the public float, and freeing the management to take acquisition decisions.

Companies with relatively low promoter shareholding usually take debt or conduct buybacks to finance their expansion. Besides, gaming isn’t a capital-intensive industry and the largest deal Nazara has cracked so far is PokerBaazi, a gaming company in which it bought a 47.7% stake for ₹982 crore.

At the end of FY24, Nazara had ₹567 crore in cash on its books, nearly 4x more than the previous year. Besides, higher promoter shareholding also means more fundraising options in the future.

Soul searching

An open offer is a potential exit for public investors. But will a larger promoter shareholding, and more cash, help Nazara finally build a core business?

Analysts closely tracking the company are not so sure.

“I have not been a great fan of this growth strategy,” Abhishek Kumar, equity research analyst with brokerage JM Financial, told Mint. “My central thesis is that the only thing constant in the gaming industry is the gamer. Games, tastes, and monetization models will change,” he said. “Nazara’s biggest challenge is that it does not have a homogenous set of assets, as Tencent does. What will you cross-sell to a Kiddopia user, a Sportskeeda fan, and a Fusebox gamer?”

But according to Mittersain, Nazara’s core business has always been gaming. “Our gaming culture is still the core but we are also evolving. What we are today and what we may become, may change,” he said.

Nazara’s biggest challenge is that it does not have a homogenous set of assets, as Tencent does.
—Abhishek Kumar

For now, Nazara’s numbers show it isn’t using its money efficiently. In the last four fiscal years, return on capital employed—a metric to measure the earnings the company’s investments generated—has remained roughly between 3-7%. That is partly because of the nature of the gaming business.

“It is very difficult to predict the longevity of a game or a gaming asset,” Piyush Pandey, senior vice president at brokerage Centrum India, told Mint. “Unlike a hard asset, such as a cement plant, you cannot predict the cash flows and value generation from such an asset. If it does not do well, there is an additional impairment risk.” An impairment is a one-time charge a company takes on its books when the value of its asset decreases.

In sum, there is still a high risk that the cash Nazara has raised, and is raising now, will potentially be lost to a bad asset. But Mittersain is not too worried about these capital efficiency measures. His only concern, he says, is how much cash the company brings home at the end of the day.

“If you look at my FY24 numbers, we reported ₹129 crore Ebitda (earnings before interest, tax, depreciation, amortization) and my OCF (operating cash flow) was ₹154 crore, much more than Ebitda,” he said. “This is our DNA: we don’t burn cash to grow.”

Cash on Nazara’s consolidated books has risen steadily in the last four fiscal years. With the current fundraise, it will have an even bigger pile, and much less public shareholding to worry about or placate.

“If we generate cash, I can reinvest it in whatever I want to do,” Mittersain said. “I can’t be diluting or raising capital forever, right?”