Nazara eyes tax crisis-hit real money game companies

Nazara Technologies is considering the possibility of acquiring crisis-stuck real-money gaming (RMG) companies as they may become available at attractive valuations, at a time when they are struggling under the burden of heavy tax liabilities, chief executive Nitish Mittersain told ET.

“We see this as an opportunity, and we are also in conversation with a few of these companies,” Mittersain said.

“But before that, as a listed company, we have to figure out how do we de-risk our investment from any past tax claims that these companies are facing at the moment,” he said. “Given that the new taxation regime transfers the liability to the player, platform providers need not worry about taxation going forward. But retrospective dues are definitely a challenge … they are nearly three times the books of these companies and we definitely cannot absorb those.”

Also read | Nazara Technologies launches game publishing arm

The RMG industry is facing a tax demand of more than Rs 1.5 lakh crore, after the government decided to levy a 28% GST on deposits made by users to play a game, instead of on the winnings.

Having garnered investments from investors like the Kamath brothers from Zerodha and SBI Mutual Fund recently, Nazara is flush with capital. It has built a war chest of Rs 510 crore and also has more than Rs 628 crore in cash and equivalents on its books.

This week, the gaming and sports media platform unveiled its publishing division which will launch up to 20 games over the next 18 months, backed by an investment of Rs 1 crore per game. “We are looking at acquisitions and strategic investments to expand our portfolio and enable growth across the length and breadth of India’s gaming ecosystem. Among the first of these many initiatives is the launch of our publishing platform which will enable Indian developers to publish their games globally,” he said.

Also read | Offshore real money gaming apps lure users with ‘No GST’ carrot

Since getting listed on stock exchanges in 2021, Nazara has made several big-ticket investments and acquisitions, including Saudi media marketing agency Publishme, US’ kids entertainment platform WildWorks and Indian ad-tech platform Datawrkz.

Amid the tax-related uncertainty, venture capital investment firm Lumikai has downgraded its growth projection for the RMG segment in India to 5% over next five years from 25% previously, citing the heavy tax liabilities and consolidation in the industry.

The RMG category, which today constitutes nearly 60% of the Indian gaming market, shall be reduced to a share of 32% by FY28, according to the State of India Gaming FY’23 report released by Lumikai.

Stay on top of technology and startup news that matters. Subscribe to our daily newsletter for the latest and must-read tech news, delivered straight to your inbox.