Your profits have scaled up. What have been the key drivers and how come your revenues are flat?
Nitish Mittersain: This is the 14th successive quarter of profits after our IPO and for us at Nazara, driving growth along with profitability has always been very important as we do not just focus on growth at all costs. This time around, our e-Sports business has done very well. We have seen strong growth in overall profitability. Our Sportskeeda business has done well with 28% increase in profits. Certain engines are firing well for us. Certain businesses such as Kiddopia are yet to take off. But recently we acquired 100% stake and control of the company. We have some very good ideas that we hope to implement to grow this business faster.
You said you prioritise growth over margins but you have also gone ahead and said that margins will never be compromised or will not come under pressure. But in this quarter, they have contracted quite significantly. Does this mean that in the coming quarters, double-digit margins will not be sustained? What is the outlook?
Nitish Mittersain: We are always trying to get the right balance between profitability and growth. In the current quarters, certain businesses that allowed us to spend more in terms of user acquisition so that we can drive faster growth and this is profitable spending. This is not spending that is not profitable for us. We have taken that decision. For Animal Jam, for example, this quarter we were able to acquire more users which has driven revenue growth higher, but the margins contracted. From a longer-term perspective, we should continue to see healthier margins and we should start seeing faster growth as well.
This is a small part of the business, but you guys have flagged it off in the investor presentation as well, the new GST regime that has reduced the real money gaming segment profitability. How has it affected your overall net revenue? How do you plan to improve your operating efficiencies within the new GST regime?
Nitish Mittersain: In Q1 of FY24, we had about Rs 12 crore of revenues, which has kind of halved. It is about Rs 5-6 crore. But from an overall perspective, it is a very small contributor to our revenues, so it has not impacted us much. We have optimised this business now. It is starting to break even and be profitable again. And again, we are hoping that in the coming quarters now with this new-found stability, we will start getting it back to growth.
Multiple acquisitions have taken place. Anything that stands out? There was a Paper Boat App for Kiddopia, Fusebox, etc. What is the opportunity because you have said that there is Web3, VR, AI, new tech, etc. Where are you reigning in your next acquisition?
Nitish Mittersain: Most of last year, we spent a lot of time creating a very strong deal pipeline of opportunities we are excited about and we are very clear about what we want to acquire, at what value we want to acquire, etc. So, whatever fits in our framework, we have been very patient about it. But in FY25, we are starting to execute. We have been sitting on cash reserves of over Rs 1,000 crore and this year we are aiming to deploy most of that in acquiring businesses that are value accretive to our shareholders and significantly increase our profitability. We have set a target for ourselves of achieving Rs 300 crore EBITDA in FY27 and some of these acquisitions will help us accelerate towards that quickly.
What about the average revenue per user for Kiddopia because that has increased to about $6.9. What is the outlook on the attrition of users on pricing plans, the ARPU, your subscriber growth?
Nitish Mittersain: Our overall KPIs of Kiddopia in this quarter have been pretty healthy. We have seen a return to average in terms of the churn rate that we have normally seen closer to 6% and we have also seen an improvement of ARPU in this quarter to $6.92 from $6.89. Our cost of acquisition, the cost per trial that we say has also slightly improved to $38.6. So, overall, the business is stable. We have some good ideas like I was saying, for example, popular IP integration into our game, which should start boosting growth again. Our team is working very actively on the same. Now that we own 100% of Kiddopia, I believe we will be able to drive faster growth and faster change going forward.Your gross margins in edtech have improved. It is a high-margin business that has led to this improvement. Is this trajectory going to continue?
Nitish Mittersain: The edtech business generally for us in the last few quarters has been a tough one, although again a small contributor to our overall business. I think it is in the right direction. We have focused on better gross margins and this will allow us to scale our business. So, coming quarters should see continued improvement in margins and topline in revenue growth.