Nazara Technologies

Segment Rev Mix Opportunity Reach

Gamified Early Learning 38.7% 2.5mn Kids 0.34mn Age 2-7 in USA subscribers

eSports (Nodwin) 130mn 28mn 29.9% Mid & Hardcore live stream views Gamers by 2025

eSports (Media) 528mn 89mn 7.6% MAUs for large sports website Monthly Visitors

Freemium 4.3% 330mn 12.7mn MAU India Mobile Gamers WCC Franchise

Real Money Gaming $947mn 10mn 3.8% Market Size users

Telco 2.2bn 58 countries Games Club, 16.5% Gamers Worldwide Covered Games Hub

Nazara Technologies

VP - Research: Rahul Jain Associate: Divyesh Mehta Tel: +9122 40969771 Tel: +91 22 40969768 E-mail: [email protected] E-mail: [email protected]

June 28, 2021

June 28, 2021 2 Nazara Technologies

Nazara Technologies

BUY

Dopamine Overload! CMP Rs 1,559 Nazara Technologies is a unique play (acts like a Gaming-sector-fund) that Target / Upside Rs 2,400 / 54% offers an unmatched opportunity to participate in Gaming industry. The NIFTY 15,791 exquisiteness is in the fact that it covers investments in businesses in all the relevant segments within ecosystem viz. gamified learning, Scrip Details simulation games, eSports, league games, eSports media & events, Equity / FV Rs 122mn / Rs 4 branding & networking, fantasy sports, subscription, game-packs etc. and Market Cap Rs 49bn thus have been able to expand its access to diversified cohorts of gamers and enter new geographies in a cost-effective manner, and built a USD 663mn network of over 63mn MAUs across all games in FY21. 52-week High/Low Rs 2,025/ 1,432 With India expected to have 130mn Mid-Hardcore gamers by FY25 we Avg. Volume (no) 5,19,927 expect competitive spirit to kick in amongst Gamers; driving up ARPUs in Bloom Code NAZARA IN India ($9/pa), thus company would gain both in volumes and value Price Performance 1M 3M 12M driving up multi-year growth trend. Nazara offers an opportunity to buy on a portfolio approach thus neutralizing the risk while opening up doors Absolute (%) (10) to play a part in megatrend of Gaming in India with significant optionality Rel to NIFTY (%) (12) and thus should commands premium valuations. We initiate our Shareholding Pattern coverage on Nazara with DCF based price target of Rs. 2,400 implies 5.2x on its EV/Rev in FY24E (implies PER of 84x and Price to Growth ~2x). Sep'20 Dec'20 Mar'21 Gamified Learning (39% of rev): Screen-time is unavoidable for kids and Promoters 0.0 0.0 20.7 thus need for showing curated content that entertains and can help in MF/Banks/FIs 0.0 0.0 14.6 learning sub-consciously is gaining impetus and is witnessing major FIIs 0.0 0.0 13.6 adoption and strong monthly ARPUs (Kiddopia App - $7/month). The Biz Public / 0.0 0.0 51.1 boasts multiple growth triggers in near-to-medium term such as a) Pricing Others increased in Q1, b) tested just 4% of US market and c) entering Europe. NAZARA Relative to SENSEX eSports: eSports is the confluence of entertainment, sports, social 130 networking, streaming, profession for e-athletes and can provides compact 20-30-min adrenaline rush to both players and viewers. Here, it is helping 120 game-publishers in community activation of their games in specific geos/markets to drive up popularity by getting both gamers/viewers 110 Initiating Coverage (online/offline) and in turn is creating massive powerful content library

that can be sold at huge media-licencing fees as the popularity improves of 100 the content with every passing season. Sportskeeda (eSport Media App) is also witnessing massive traction given focus on curated content that matches taste of target market, driving organic traffic and improved eCPM. 90

Freemium: On Appstores Out of 3mn+ apps only 3% are paid. Competitive 80

spirit among gamers which along with esthetics factor (on Social) is Apr-21

boosting potential growth of In-App-Purchases. Nazara owns WCC game Mar-21 May-21 which is the most popular Cricket Simulation game with 12.7 MAUs and holds potential to scale the business multifold like EA-FIFA, 2K-NBA. NAZARA SENSEX

FINANCIALS (Rs Mn) Particulars FY19A FY20A FY21A FY22E FY23E VP - Research: Rahul Jain Revenue 1,697 2,475 4,542 6,297 9,264 Tel: +9122 40969771 Growth(%) (1.4) 45.9 83.5 38.6 47.1 E-mail: [email protected] EBITDA 163 (56) 452 887 1,373 OPM(%) 9.6 (2.3) 10.0 14.1 14.8 Associate: Divyesh Mehta PAT 175 (21) 92 330 518 Tel: +91 22 40969768 Growth(%) (54.4) (111.8) (544.5) 259.0 56.9 E-mail: [email protected] EPS(Rs.) 6.4 (0.7) 2.9 10.5 16.4 Growth(%) (57.8) (111.7) (491.3) 259.0 56.9 PER(x) 244.1 (2091.1) 534.5 148.9 94.9 ROANW(%) 4.6 (0.5) 1.6 4.9 7.2 ROACE(%) 2.2 (4.5) 2.4 6.7 10.0

June 28, 2021

INDEX Sr. No. Particulars Page 1 The Company Summary 5 2 Investment Thesis 7 3 Gamified Early Learning – Kiddopia 20 4 eSports – Nodwin 34 5 eSports – Sportskeeda.com 56 6 Telco Business 63 7 Freemium Business 69 8 Real Money Gaming 78 9 Other Investments 85 10 Outlook – Way forward 90 11 Risks 92 12 About Company 94 13 Peer Group 98 14 Financial Performance 105 15 Valuation 113 16 Annexure 115 17 Financials Tables 117

June 28, 2021 4 Nazara Technologies

The Company Summary Nazara Technologies is a diversified gaming platform company with presence across the globe (India, Other Emerging economies and North America). It operates in multiple high-growth segments within the fast growing gaming industry (CAGR: 30%) with offerings across Freemium Segment (Nextwave), Paid eLearning Apps (Kiddopia), Real-money based Gaming (Halaplay, Carrom Clash and Qunami) and eSports (Live Events, Sportskeeda News portal). Nazara is clearly the visionary in the gaming industry in India and owns several strong IPs (WCC Cricket, Kiddopia, Nodwin) that covers variety of business aspects within the industry. The Company is founded by Mr. Vikash Mittersain and Mr. Nitish Mittersain (Joint Managing Director) in 1999. Nitish believed in Indian Gaming Market story right from his college days. He has successfully steered business from being a strong Gaming VAS provider (Telecom Service Provider led Biz) to a diversified gaming platform company with help of several niche and strategic acquisitions. Nazara is operating across the Globe with US being its largest market, wherein it has a strong presence in Gamified learning space with the ‘Kiddopia’ App with 340,282 paid subscribers bulk of them in US (39% of Revenue). India is its 2nd largest market wherein it has multiple lines of businesses across the gaming ecosystem. The largest being Esports where-in it has huge first-mover advantage and its strong market leadership position in a nascent market along with strong IP partnerships (segment accounts for 37% of Revenue). Nazara also owns Cricket Mobile Simulation Games IPs under Freemium Games which have highest mind-share in Cricket Mobile Games around the Globe (4% of Revenue). It also owns assets in Real Money Gaming apps which is large part of the Indian industry but has been under cloud given regulatory concerns about its legality in Indian Markets (3% of Revenue). The Legacy Business of being a Value Added Services provider (Gaming Subscriptions Packs ~1000 odd games for Android Appstore) to Telcos customers is scaling down (16% of Revenue). It is one of the leader amongst the Gaming players in the country and achieved Revenue of Rs. 4.5bn in FY21 with 62.6mn Monthly Active Users (MAUs) across its various gaming assets. Business Overview Rev Target Segment Offerings Overview Revenue Model share Demographics

Gamified Immersive, self-directed Children aged Subscription based 39% Early Learning learning App for Kids 2-6 years Model Media rights & Largest Esports Brand Sponsorships

Tournament Organizers Rev driven by eSports and eSports 37% with strong IP Partnerships Tournament sports fans and Leading Sports News Viewership. Ad Website Revenue from News Website Viewership

Free to play sports Advertisements & Players aged Freemium 4% simulation and children’s In-app purchases 15-35 years games based on DAUs Bouquet of mobile games Games Hub, Telco offered as value-added First-time Sachet Based Pricing 16% Games Club, subscription services to telco subscribers mobile gamers (Subscription Model) Games Lounge on subscription Platform fee Strategic presence in real

Real money Youngsters & collected from skill 3% money gaming and sports gaming Sports Fans games played on the fantasy gaming platform Source: DART, Company June 28, 2021 5 Nazara Technologies

Nazara Journey Year Event 1999 Company was Incorporated 2000 Acquisition of Nazara.com portal for Rs. 8mn 2004 Launched java games pay per download with BPL and Hutch (Now Vodafone Idea). 2004 /05 Signed an exclusive agreement with Cricketers (Sachin Tendulkar) for Marketing 2005 First round of investment by WestBridge (Rs. 66mn) 2006 Took Decision to be Mobile First Company 2006 / 07 Commenced work with telecom operators such as Tata Teleservices Limited, Vodafone and Bharti Airtel 2007 Second round of investment by WestBridge ($ 1.5Mn) 2008 Signed an exclusive wireless content distribution agreement with Electronic Arts for India Region 2009 Launched the subscription based ‘Games Club’ model for Casual Games (Rs. 99 Pack) on Telecom Channels 2011-13 Commenced business operations in the Middle East, Zambia, Uganda, Nigeria, Singapore, Mauritius and Kenya 2013 Started a Seed Fund of Rs. 100Mn to invest in Indian Gaming Based Startups 2014 Acquired Exclusive Rights from Fox Studios to develop games based on Movie Titles 2014 Made first Investment from Seed Fund in Hashcube worth Rs. 22Mn ($0.36Mn). 2015 CEO Manish Agarwal Joined from Reliance Games 2015 Commenced the Freemium business in India Won deal with ZeptoLab to publish ‘Cut the Rope’ game in the Indian subcontinent and Signed licensing deal 2015 with Virat Kohli and Hrithik Roshan and executed exclusivity deal on ‘Chota Bheem’ Cartoon. Partnered with Tinkle Comics to recreate more games 2016 Launched Games Subscription Model in more countries (Philippines & Papua New Guinea) 2016 Invested in Moong Labs for 26% Stake (Total Investment: Rs. 10Mn) 2016 Invested in Mastermind Sports for 26% Stake (Total Investment: Rs. 26Mn) 2017 Announced to Invest $20Mn for Indian eSports ecosystem over 5 Years 2017 Partnered with RCB (IPL) to launch RCB Star Cricket Game 2017 Acquired 52% stake in Next Wave Multi-media (Total Investment: Rs 528Mn) 2017 Made first investment (Rs. 8mn) in Halaplay for 8% stake (Total Investment: Rs. 322Mn) 2017 IIFL Special Opportunities Fund acquired 20% stake for Rs. 3,300Mn 2017 Rakesh Jhunjhunwala acquired 11.5% stake for Rs. 1,800Mn 2018 Acquired (55.9%) majority stake in Nodwin Gaming, pioneer of Esports in India. (Total Investment: Rs. 770Mn) 2018 Acquired majority stake in Next Wave Multi-media (Total Investment: Rs. 528 Mn) 2018 ESL, World's largest eSports Co., signed exclusive agreement with Nodwin and acquired 1.75% for Rs. 260Mn With exclusive mobile gaming rights for RCB, Nazara launched its 2nd RCB Game (RCB Epic Cricket) and got 2018 rights to develop ‘Oggy and the Cockroaches’ game. 2018 Expanded Operations in Kenya for Real Money Gaming after securing betting license 2018 Invested in Instasportz, VR entertainment company, for 8.67% stake at Rs. 10mn 2018 Acquired 27% stake in CrimzonCode (Total Investment: Rs. 17Mn) World Cricket Championship 2 (WCC2) has been featured among the Top 10 Games for Monthly Active Users 2019 by App Annie Report 2019 Made second investment in Halaplay 2019 Invested BakBuck (Vernacular social contesting platform) for Rs. 8mn (15% stake) 2019 Acquired 67% stake in Sportskeeda for Rs. 440Mn 2019 Invested Rs. 56Mn in Sports Unity which owns Qunami (short format, multiplayer quiz game in India) 2019 Acquired 51% stake in Paper Boat Apps for Rs. 835Mn 2020 WCC IP reached 110mn downloads worldwide and partnered with MPL 2020 Acquired further stake in Halaplay Technologies for Rs. 146Mn WCC3 won the ‘Google Play Best Game of 2020 award’ in the ‘Users’ Choice’ category and IGDC “Studio Game 2020 of the Year” 2021 Plutus Wealth & Associates purchased stake worth Rs. 5Bn from WestBridge 2021 Krafton (Maker of PUBG) invested $22.5mn in Nodwin Gaming. (Nazara’s Current Stake: 50.11%) Raised Rs. 1000Mn funding from Hornbill Capital for 3.84% stake at Mkt valuation of Rs. 27bn (Rs. 862 per 2021 share) 2021 IPO in March’21 – Offer for sale of Rs. 5.82Bn @1100 per share for 3.75% stake at Mkt valuation of Rs27bn 2021 Acquired Publishme, a gaming marketing & publishing agency in Turkey & MENA, for Rs. 200mn Source: DART, Company, Acquisition Amount highlighted in the table includes Earnouts Value. The stake highlighted in the table may have been diluted in further rounds June 28, 2021 6 Nazara Technologies

Investment Thesis Indian Mobile Gaming Industry to see exponential growth Indian Gaming Industry to set to grow at 30%+ CAGR (as per Frost and Sullivan) led by increasing smartphone penetration (smartphone scaling up on configuration) and a strong set of consumption drivers (low data cost, quality games) and structural advantages (young population, low cost smartphones & data cost, availability of high speed data, ease of payment solutions). This growth will be driven by increase in gaming penetration building a strong base of casual gamers (500mn+ by 2025) and movement of these causal gamers to more active gamers (mid and hardcore gamers) thus improving the proximity of spending more money on gaming and consuming gaming as a content.

Indian Gaming Industry is valued at $1.5Bn (grown at 32% CAGR over 2016-2020). Currently, it is much smaller market if compared to likes of USA (Gaming overall $39bn – Mobile gaming $11bn) and China ($42bn – Mobile gaming $25bn) but holds much better growth prospects viz. ~30% CAGR for India v/s 12% for these markets. Thus, offers strong potential given the booming acceptance towards this megatrend that is at intersection of gaming, social networking, sports, streaming, profession, leisure and entertainment.

Gaming as an activity has come-out an alternate to the other Media & Entertainment areas. Individuals are now spending time in gaming (other than music or movies) as a recreational activity. This trend is visible on multiple touchpoints across the globe 1) higher growth in gaming industry than other media & entertainment sub-verticals, 2) Improvement in Hours Played (8.6hrs per week from 6.4hrs YoY), (3) strong trend in live streams and 4) Increase in Professional Gamers. The average gamer in India is 24 years old (KPMG, 2017) which sets the industry well for a holding up as a recreational activity for them and also bringing potential improvement in Per Capita spend per user, as these gamers ages into earning members with much better disposable incomes (average age for Gamer in US/China is ~31 years).

Indian Gaming Industry to grow at 30%+ CAGR

4.0 40.0 43 3.5 40 3.0 35.0 38 33.3 33.3 35 2.5 33 2.0 29.6 28.6 30 1.5 25.0 28 1.0 25 0.5 23 0.5 0.7 0.9 1.2 1.5 2.0 2.7 3.5 0.0 20 2016 2017 2018 2019 2020 2021E 2022E 2023E

Indian Gaming Industry ($ Bn) Growth, YoY % - RHS Source: DART, Company, Frost & Sullivan

June 28, 2021 7 Nazara Technologies

Indian Gaming Industry Growth is driven by

Tailwinds in Indian Mobile Gamers (Mn) 340 330 320 300 290 280 270 260 240 230 220 200 200 180 2016 2017 2018 2019 2020

Source: DART, Company, Frost & Sullivan

Which will be driven by strong set of structural factors …

Global Median Age Trend (India has 2nd youngest population) 55 48.6 50 47.8 46.5 45 40.6 40 38.4 38.5 35 33.2 28.7 30 24.1 25

USA

Italy

India

Brazil

China

Japan Germany

Philippines Source: DART, Company, World Factbook

Improving Internet Penetration in India

75 70 70 65 62 60 54 55 50 50

(%) 45 41 38 40 35 35 30 28 25 20 2016 2017 2018 2019 2020 2021E 2022E 2023E

Source: Company, DART, Datareportal June 28, 2021 8 Nazara Technologies

Mobile Data Cost in India is lowest Globally (per GB data in $ terms)

9 8.00 8 7 6 4.77 5 3.91 4.06 4

$ cost per GBper cost$ 3 1.39 2 1.01 0.61 0.52 0.64 1 0.09

India

Brazil

China

Japan

Russia

Mexico Germany Indonesia Source: DART, Company, cable.co.uk

Indian Data Usage is increasing (in GB/month) 30

5 2.8 5.7 9.7 11.2 14.0 17.5 21.8 27.3 0 2016 2017 2018 2019 2020 2021E 2022E 2023E

Data Consumption (GB per user/month) Source: DART, Company, Ericsson Mobility Report, Cisco, DRHP

Internet Speeds have improved. Thus, improving accessibility 40 38.9 35 29.1 30 26.5 25 20 18.2

15 10.9 12.2 8.8 9.9 10 6.2 4.5 5 0 2016 2017 2018 2019 2020

Fixed Broadband (Mbit/sec) Mobile (Mbit/sec) Source: DART, Company, Ookla, Frost & Sullivan Analysis, DRHP

June 28, 2021 9 Nazara Technologies

Time Spent on Internet has increased (Average Hours)

10 9.29 9 8.36 8.01 8 7.47

7 6.31 6.29 6 5.52 5.46

5 4.37 4 3.45

on any device (Hours:Minutes)device any on 3

Avg Time per day spent on internet on spent day per Time Avg

India

Brazil

China

Japan

Russia

Mexico Germany Indonesia Source: DART, Company, businessfibre.co.uk

Urban Internet Penetration has peaked and Rural is improving – India (connections per 100 person) 120

100

33 32

40 30

13 13

20 11

102

104

106

102 104

3QFY15

4QFY15

3QFY16

4QFY16

3QFY17

4QFY17

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

Q1FY20

Q2FY20

Q3FY20

Q4FY20

Q1FY21

Q2FY21 Q3FY21 Urban Internet Subscribers per 100 population Rural Internet Subscribers per 100 population

Source: DART, Company, TRAI

Growth to accelerate as casual gamers become mid & hardcore gamers Mid and Hardcore Gamers are gamers who are more willing to spend on games, play more engaging games (which need skills) and actively consume gaming as content (live streaming, tournaments). Casual Gamers (forms 94% of all gamers) are gamers who play to pass some time (play less frequently, usually don’t spend money). Hardcore gamers (forms 2%-3% of all gamers) are gamers to play games to build skills (invest time in games) and have passion around games (play more frequently, very likely to spend money on gaming). Mid Core Gamers (forms ~6% of all gamers) are in between both these categories (they still play frequently and are willing to spend some money). Mid and Hardcore gamers both having aspirations to be better gamers (play to improve skills) consume gaming as content (playing games & watching others play). The Mid & Hardcore gamers are the relevant people that create monetization potential and will propel the growth for the industry. Hard Core gamers also take their games seriously like any professional sportsmen and thus care for their performance as many a times these are also streamed and as a result the need for InApp purchase becomes a necessity to buy more tools from the gamestore to enhance the performance or just to improve the esthetics (just like you would wear Tuxedo to Casinos).

June 28, 2021 10 Nazara Technologies

Current Indian Gamers Mix (Mn) in 2020. Creation of Mid & Hardcore Gamers

10 Particulars 2018 2020 2025E 25

Hardcore Gamers 5 10 30

Mid Core Gamers 15 25 100

345 Casual Gamers 100 345 500 Hardcore Gamers Mid Core Gamers Casual Gamers

Source: DART, Company, Frost & Sullivan, This data includes PC Source: DART, Company, this data includes PC and Console Gamers, and Console Gamers Company has highlighted the Casual gamers figure as 250mn and Mid core figure as 35mn in 2020 in Investor Presentation. We have used Frost & Sullivan data in the DRHP which is different.

This shift of casual gamers to Mid & Hardcore is being led by several factors Smartphones have become more affordable and capable to run hardcore and midcore games. Now, even 10K phones can play hardcore and mid-core games. Thus, opening accessibility to such games for vast majority of potential gamers. Also, game publishers are releasing games that are hosted on cloud and requires very modest configurations (PUBG can run on Android 5.1.1 with 2GB RAM – such phones are available for less than $150 in India).

Smartphone Price to Performance have improved Launch Price Perf. Value (Price / Smartphone Launch Period Benchmark Score (Rs. Abs) Benchmark) Asus Zenfone 2 Laser 2015, August 23,711 12,999 1.8 YU Yureka Plus 2015, July 36,117 9,999 3.6 Lenovo K3 Note 2015, March 46,190 9,999 4.6 Lenovo K6 Power 2016, September 35,787 9,999 3.6 Xiaomi Redmi 3s Prime 2016, August 35,910 6,999 5.1 Xiaomi Redmi Note 4 2017, January 61,841 9,999 6.2 Realme C1 2018, September 57,529 7,999 7.2 Xiaomi Redmi 6A (32GB) 2018, June 55,277 6,999 7.9 Realme 3 2019, March 1,34,297 9,999 13.4 Xiaomi Redmi Note 7 2019, January 1,35,068 9,999 13.5 Xiaomi Redmi 9 Prime (4GB) 2020, August 1,98,612 9,999 19.9 Realme C12 2020, August 1,14,007 8,999 12.7 Realme Narzo 30A 2021, February 1,78,633 8,999 19.9 Motorola Moto G10 Power 2021, March 1,40,230 9,999 14.0 Source: DART, Company

The launch of Mid-Core and Hardcore Games (like Free Fire, Clash of Clan) and India centric sports games (like Teen Patti) has increased the playtime of users in India and has aided in gradually turning casual gamers into mid and hardcore gamers. These games have longer stickiness (games need more strategy & skill, so users play more) and more propensity to pay for Indian audience than the top downloaded games like Temple Run, Subway Surfer, Candy Crush, etc. In 2019, PUBG Mobile was making revenues of $7mn-$8mn per month (Source: Entracker, however, IGN highlights $3mn) from India (had 23-30mn MAU and 13mn DAU in India and 100mn MAU Globally). Industry experts are highlighting that Free Fire makes $1mn a month in India.

June 28, 2021 11 Nazara Technologies

Casual Games are most Downloaded but not Spent on! Top 10 Ranking for Games in India by MAU Op 10 TRanking for Games in India by Consumer Spend Ludo King (Launched: 2016) Free Fire (Launched: 2017) PUBG Mobile (Launched: 2017) PUBG Mobile (Launched: 2017) Free Fire (Launched: 2017) Coin Master (Launched: 2015) Candy Crush Saga (Launched: 2012) Teen Patti (Launched: 2013) Carrom Pool (Launched: 2019) Clash of Clans (Launched: 2012) Subway Surfers (Launched: 2012) Call of Duty Mobile (Launched: 2019) Bubble Shooter (Launched: 2013) Teen Patti Gold (Launched: 2014) Hunter Assassin (Launched: 2019) Lords Mobile (Launched: 2016) Callbreak Multiplayer (Launched: 2018) Candy Crush Saga (Launched: 2012) Temple Run 2 (Launched: 2013) Gardenscapes - New Acres (Launched: 2016) Source: DART, Company, State of Gaming 2021

The pandemic has accelerated the shift from casual to mid & hardcore gamers and also brought more casual gamers to the ecosystem. As per InMobi (Ad-Tech Player) Pulse Gaming Survey India, Feb’21, 45% Indians started playing mobile games due to the pandemic and existing gamers have witnessed 30%-40% increase in Time Spent and Variety of Games Played.

Usage Statistics have also improved

Source: DART, Company, InMobi Audience Intelligence Platform based on collected data signals from over 200 million users in India. Note: InMobi considers Jan 2021 period as Post Lockdown. However, it we don’t consider the same. Pictorial Representation of Indian Mobile Pictorial Representation of Indian Mobile Gamers in Pre-Lockdown period Gamers in Post-Lockdown period

Source: DART, Company, InMobi Audience Intelligence Platform Source: DART, Company, InMobi Audience Intelligence Platform June 28, 2021 12 Nazara Technologies

Improving Per Capita Income will drive Gaming Spends in India The improving per capita income especially for the young population (15-35 years old) of India will support and drive the spends growth in gaming by gamers in India. Gamers will be able to spend more in buying games and doing In-App Purchases. Interestingly, the addressable market for Indian Gaming Industry is huge and is well poised to witness much higher growth in industry revenues over the average per capita income growth. Young population of India, is all set to invest in Games as they upgrade themselves to smartphones, high speed data plans and so on (competitive factors, esthetics factor – both key from Social Networking point of view).

Just for the comparison an average gamer in India is spending about $8.8 (gamer base of 380mn) in a year compared to $35 in China (gamer base of 650mn) and $73 in US (gamer base of 166mn). This number basically improves as more casual gamers become Mid/Hardcore gamer and also as sense of competitiveness get builds up.

Net National Income Per Capita (India) 1,00,000 95,000 90,000 85,000 80,000 75,000 70,000 65,000 60,000

55,000

68,572

72,805

77,659

83,003

87,828

92,085 94,954 50,000 2014 2015 2016 2017 2018 2019 2020

Per Capita NNI (Rs. Abs) Source: DART, Company, RBI Data, Based on Constant Prices

Demographic Dividend of India 2020 Demography Dividend 2025

Working Annual Working Annual Population Income Population Income

0.5 mn $300k Movers & Shakers 0.6 mn $460k

Govt. 10 mn $19k Employees 9 mn $27k

Urban while 21 mn $13k collar/SME owners 24 mn $20k

39 mn $6k Educated urban mass 46 mn $9k

121 mn $3k Urban blue collar/migrant workers 147 mn $5k

118 mn $2.3k Rural landowners 112 mn $3.3k

252 mn $0.8k Rural labourers & emerging 264 mn $0.9k

Source: DART, Company June 28, 2021 13 Nazara Technologies

Positioning of Indian Gaming Industry in the Global Context

Global Gaming Industry is growing at ~12% (India at ~30%) 170 13

160 12

150 11

140 10

130 9

120 8

110 7 116.0 125.4 140.5 157.3 100 6 2017 2018 2019 2020

Gaming Industry ($ Bn) Growth, YoY % - RHS Source: DART, Company, Frost & Sullivan

Global Gaming Industry Breakup (size in bn$) 80 70 63.6 60 50 45.2 40 36.9 30 20 13.7 10 USD Revenue USD Revenue Size ($bn, 2020) 0 0.0% 5.0% 10.0% 15.0% 20.0% 2020 Growth Rate PC Gaming Console Gaming Mobile Gaming Tablet Gaming

Source: DART, Company, Newzoo

In India, Mobile is a stronger growth driver 3.5 55% 50.0% 50.0% 3.0 50%

2.5 41.7% 45% 2.0 40% 35.3% 34.8% 33.3% 33.3% 1.5 35%

1.0 30%

0.5 25% 0.3 0.4 0.6 0.8 1.2 1.7 2.3 3.1 0.0 20% 2016 2017 2018 2019 2020 2021E 2022E 2023E

Indian Mobile Gaming Market ($ Bn) Growth, YoY Source: DART, Company, Frost & Sullivan

June 28, 2021 14 Nazara Technologies

Indian Growth to be dominated by Mobile Gaming ($ mn)

3,500 110 315 3,000 106 2,500 291 2,000 102 273 1,500 98 3,100 256 94 2,284 1,000 239 91 1,661 87 223 1,191 500 84 207 836 193 572 272 384 0 2016 2017 2018 2019 2020 2021E 2022E 2023E

Mobile Console PC Source: DART, Company, Revenue in $Bn, Frost & Sullivan

Indian Gaming Market Mix (%)

100 3.1 10.3 8.0 6.3 5.0 4.0 90 15.3 12.8 10.9 8.9 16.6 13.4 20.4 80 25.2 30.5 70 35.2 60 50 87.9 40 81.6 85.2 71.5 77.1 64.6 30 56.6 49.5 20 10 0 2016 2017 2018 2019 2020 2021E 2022E 2023E

Mobile Console PC Source: DART, Frost & Sullivan

Global Mobile Gaming Growth to compound at 15% (lower than India) 130 23.2 24 116.5 120 110 101.3 22 100 88.1 90 20 76.6 80 66.6 18 70 57.9 60 50.4 15.0 15.0 15.0 15.0 15.0 16 50 40.9 40 14.9 14 30 20 12 2016 2017 2018 2019 2020 2021E 2022E 2023E

Global Mobile Gaming Market (bn $) Growth, YoY % - RHS Source: DART, Company, Frost & Sullivan

June 28, 2021 15 Nazara Technologies

Nuances of Gaming Industry . Global Industry growing well led by Mobile: Gaming Industry in India is growing at a fast pace with ~30% CAGR in the last four years and holds potential to achieve market size of $3.5Bn by 2023. Globally, gaming industry has also delivered strong growth of ~10% CAGR over the same period with Mobile Gaming leading the pack at 15.8% CAGR. . Non-Mobile Segments grow slower: PC gaming clocked revenue of $36.9Bn globally in 2020 (up 4.8%) and is set to reach $40Bn (3% CAGR) by 2023. Console Gaming Market is also doing well with 6.8% YoY growth ahead of PC gaming. PC and Console Gaming Platforms are more expensive than Mobiles. Games for both platforms are expensive than Mobile Platform (have higher APRU than Mobile Platform). Although, the industry has a healthy mix of F2P (free to play) and Paid games ($30 to $70 per game), but long game development period (multiple years) and high development cost remains a constraint for growth. Yet it remains a popular platform with 56% of developers developing PC games globally, this may change as developing markets grow wherein large set of population prefers to play on Mobile. . Fastest Growing Mobile Gaming: Mobile Gaming is the fasting growing industry with revenue of $76.7Bn and base of 2.5Bn mobile gamers Worldwide (Source: Newzoo). There are a few reasons why mobile gaming has and will enjoy more growth than both PC and console gaming: Mobile gaming has the lowest barrier to entry: more than two-fifths of the global population owns a smartphone (Cost of Smartphones have become lower and processing power and features have vastly improved). Mobile is cheapest alternative (Mid-range mobile phones cost: Rs. 15,000), compared to much expensive Console and PC Gaming (PS5 Rs. 50,000, PS4 Rs. 30,000, Gaming PC Rs. 70,000). Moreover, consumers already own a smartphone so there is no incremental cost.

Region Mix of Global Gamers Platform Wise Mix of Global Gamers North America

210 Europe 377 0.8 386 266 China Mobile Gamer India PC Gamer 417 2.5 650 1.3 Console Gamer Other APAC 380 Latin America

Source: DART, Company, Newzoo Source: DART, Company, Newzoo, there is an overlap in the data. Hence, total doesn’t add up. i.e. PC Gamer can be mobile gamer . Low Entry Barriers Mobile Game Development: The mobile game development process is less complex, less costly and less risky. On account of these relatively low entry barriers to developing mobile games; new competitors (developers) have entered the market and as a result existing competitors are allocating more resources to developing and marketing competing games and applications. . Hit or Miss Business: Mobile Gaming industry has mixed stickiness with games as trends change quickly. Consumer preferences for mobile games are usually cyclical and difficult to predict, and even successful titles remain popular for only limited periods of time, unless refreshed with new content or otherwise enhanced. It is a hit or miss business like movies. Casual Games have lower shelf life and Mid & Hardcore have higher shelf life. In order to remain competitive, Companies have continuously update mobile games with new versions (Angry Birds 2, 3) or introduced enhancements (PUBG Season 2 ,3, etc).

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The strong demand in gaming has also led to creation of other gaming related industries in parallel such as: Esports, Gamified Learning and Streaming.

. Creation of Esports industry: Esports is a form of competition in video-game which is largely taken in form of multiplayer matches between individuals or teams. Esports Tournaments are related to Gaming, as IPL is related to Cricket. Esports largely involves a competition (for a $ prize) in video games which is watched via streaming apps (online) or in indoor stadiums by many audiences (offline). Just like any other sporting event, Esports organizers generate revenue via sale of Media Rights (to OTTs), Sponsorships, Ticket Sales, etc. Globally, Esports had 495mn viewers in 2020 and grossed annual revenues of $1.06Bn (this is in its nascence and thus can scale significantly given large gaming market and viewership). However, its growth potential remains strong as even large game publishers have started and committed to Esports. Take-Two Interactive Inc. (maker of GTA and NBA) has highlighted in their Annual Report 2020 that “We are very excited about the continued success and growth of the NBA 2K League (this is its esport league), which has the long-term potential to enhance engagement, and to be a driver of profits for our Company”. . Creation of Streaming industry: Gamers have been accepting watching gaming as a form of content consumption. This has been visible in from the fact that Twitch (one of the global streaming platform) has reached 6.5mn con-current viewers (avg con-current viewers is 2.8mn) count on its platform. India has also witnessed similar growth in Streaming on Youtube. . Creation of Gamified Learning Industry –: Games hold a strong ability to retain and attract the attention span. Use of Game related elements in Learning along with use of Technology has helped in a long way to improve learning. Gamified learning is an ideal solution that comes at an intersection of a child’s increased screen time for entertainment and parent’s prerequisite for offering the rightful educating content. Gamified learning is an entertainment app that imparts learning subconsciously.

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Gaming Industry History in India . Started as an Outsourcing Hub: Gaming Industry in India started as an outsourcing hub for game development in the early 1990’s and 2000s period. Most companies were largely focused on developing games / gaming content for international gaming giants such as Electronic Arts (EA), Ubisoft, Zynga etc. . Indian Market was not ready: In 1990’s and early 2000s, select companies did attempt to develop games (too early for Indian Markets) for mobiles and PCs games but faced several issues as 1) Piracy was rampant, 2) PC was a must and 3) poor Internet Penetration and Speed were low. In the late 90’s, Dhruva Interactive, Indiagames and Nazara started developing and publishing games in PC or feature mobile phones domain. . International Focus on the Market: By 2005-06, the situation gradually improved and International Companies started to increase their focus on India. EA announced 15 games for India and Sony localized 6 games for India. Despite this improvement, several large issues still remained (Low internet penetration, power issues and piracy). . Game Development led growth: In 2006-10, the industry for game development grew gradually in 2006-2010 as Gaming Industry started to realize the underlying potential in India. Gamiana Ltd. was started in 2008 focusing on Indian Content Games by Vishal Golia, was First Indian Company to release games on Facebook, (also developed games for Warner Brothers, Cartoon Network, and others). Another company, Zapak was launched as a casual gaming portal to target web based games on PC. Reliance Games was started in 2006. . First Phase of Structural Improvements: The industry gradually improved as democratization of game publishing started with iOS and Android App Stores. Anyone could become a developer as an individual in App stores. Multiple Game Development Studios were started during this period largely focus on arcade and causal games for novice gamers. (Octro: 2006, Hashcube: 2008, MadRat Games: 2010, MoonFrogLabs: 2013, Hashstash: 2011, Rolocule: 2010,). Many game developers used the popularity of Bollywood and made star or movie based games to garner installs (1st Localization of Content) During this period, Foreign Giants scaled the Indian presence for game development in large international games. One of the most successful games was Tambola that was launched on Facebook by Indian Developer Bingo Bash. . Funding for the industry remained a challenge: While Early-stage investments were raised by a handful of start-ups (listed some of them above), investors remained skeptical of backing young game developers as gaming remains a hit-or-miss kinda business similar to movies and understanding of the business was limited. . Mobile Gaming got India onto global scene: By 2013-15, Smartphone Cost started declining and accessibility of smartphones improved. However, Gaming consoles (priced as a luxury product for Indian Markets), PCs (expensive due to taxation and customs) remained expensive and weak internet connectivity remained as issue. The market growth was mobile driven as large part of population don’t have access to console and PC while mobile is accessible to all. Hence, the number of gaming startup (development companies) have also increased to 250 and funding to gaming companies by PE and VC funds also increased. In 2016, India joined top 5 countries for highest app downloads in Play Store and App Store combined. In fact, localized ‘Teen Patti’ game was able to give tough competition to international games such as ‘Clash of Clan’ and ‘Clash of King’ game in Indian downloads trend for Nov’2015.

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. Second Phase of Structural Improvement: While games usage improved, inability of people to pay for in-app purchases (due to low credit card penetration, lower propensity to pay, lack of easy payment method) and patchy ad revenue from freemium models was still a challenge. Note: the number of paying users were very small as credit card was still the sole payment mechanism for iOS and Android and India’s credit card payment penetration was low. So, Monetization was a challenge. There were select billing solutions like carrier based billing selectively. The Minimum in-app purchase on Google Play was Rs 55. Even, Data was expensive. The advent of Jio and UPI brought two strong sets of structural change for Mobile Gaming Industry: Jio brought low data rates and stable 4G speeds. This coupled with low cost smartphones, much higher retention for gaming apps; leading to higher and longer engagement not only in Tier I, but in Tier II and Tier III cities as well. UPI brought ease of payment method and change in Google Play minimum purchase rule to as low as Rs. 10 brought ease to purchases (bringing down affordability of purchase-unit for entry level). . Localized Content Grew: For the past few years, casual audiences have preferred games with localized content which allows for a more immersive gaming experience. Games like Indian Rummy, Teen Patti, Andar Bahar, Carrom, Ludo etc have attracted a strong set of audience. Today, there are 400 gaming companies in India aiming to develop the next ‘Flappy Bird’ or ‘Candy Crush’. . International Game Publishers Entered India: To capture the gaming potential in India & other emerging markets, large developers (Blizzard, Supercell) entered the market with mobile focused games. India was a largely casual gamers market. But with launch and increased usage of Mid and Hardcore games, share of mid & Hardcore gamers (IAP focused games) started growing. With the launch of PUBG Mobile (2017), the growth of hardcore gaming in India took a strong turn, with an estimated 34 million Indians playing the game daily and the game achieved over 175 million downloads (2019 stats). . Funding: India’s online gaming industry has already attracted over USD 350mn in investments from venture capital firms between 2014 and 2020. This was mainly in Nazara, Dream11 and Octro. Even during the COVID period itself, industry has witnessed more investments ($625mn in Dream11, $95mn in MPL, plus Hornbill/Kraftons collective investment in Nazara of about $35mn).

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Gamified Early Learning (38.7% of Rev, PBT Margin 3.0%) Nazara acquired 50.91% stake in Paper Boat in Oct’19 (integrated from Q4FY20, Jan- 20) for Rs. 835mn to enter in the Gamified Early Learning Industry. Paper Boat is the creator and publisher of Kiddopia, an award winning, subscription based preschool edutainment app. Kiddopia operates the gamified early learning app targeted largely towards US market (accounts for 90% of Revenue). Kiddopia is a gaming and interaction based learning app targeted towards children in 2 to 6 years of age. Kiddopia (launched in August 2017) offers interactive games and activities that fosters cognitive development, self-expression and also social emotional learning in kids. This app has 5mn+ downloads and 340,282 active paying subscribers (93% of customers are iOS based). There is an initial trial period of seven days on Kiddopia and for the paid subscriber it offers monthly and annual subscription plans for US Market priced at USD 7.99 per month and USD 64.99 per year (Pricing for India market is much lower at Rs99/Monthly and Rs 400/Annual). Gamified learning is an ideal solution that comes at an intersection of a child’s increased screen time for entertainment and parent’s prerequisite for offering the rightful educating content. Gamified learning is an entertainment app that imparts learning subconsciously.

Gamified Early Learning Industry . The introduction of technology has brought significant impact on education. With technology, there has been a considerable shift in the way educational content is created, packaged, distributed, and consumed in today's world - Such as Introduction of Online Classes, Teaching on FB, Interactive Sessions, Google Notes, Gamified Learning etc. . One of the key change technology has brought to early education is gamified learning. Gamification has been defined as the use of game design elements in non-game contexts such as education and gamified early learning tries to bring in the element of fun to learning for kids. It brings various elements of game play to the learning landscape to make it more entertaining and engaging. In simple words, it imbeds teaching into an attractive game which keeps the engagement level high. . Gamified early learning does not replace teachers, or deter the classroom education system, but rather works in tandem with the new age digital techniques to enhance the experience of learning by integrating game elements. . For kids, gamified learning market is more attractive proposition as 1) ABC & 123 are easier to explain using interactive elements and 2) Smaller Kids need more interactive environment to learn than older kids.

The Global Gamified eLearning market has grown strongly across regions. This growth has largely come in from increased use of interactive material led by increased usage of smartphones and increased funding from VC/PE Capital. USA has been the largest contributor to this growth. With the global pandemic creating a stay-at-home learning ecosystem, parents have been more keen to their kids try an app based learning method.

COVID led disruption: The COVID-19 reshaped the education-landscape thus positioning ‘Apps’ at best-situated to deliver learning as pre-school & school remains closed and are operating on remote basis. This was visible in US Education App Downloads reaching 53Mn+ v/s previous peak of 40Mn (pre-pandemic). However, it is yet unknown whether this growth will be a blip (spike) or will sustain when pre- schools re-open.

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Global Gamified Early-Learning Market growing at 40%+ 30 45 44.1 25 44

20 43 42.0 42.0 41.8 15 41.7 42 40.8 40.8 10 41

5 40 2 3 5 7 10 14 20 28 0 39 2016 2017 2018 2019 2020 2021E 2022E 2023E

Global Gamified early learning Market ($Bn) Growth, YoY (%) - RHS Source: DART, Company, DRHP

US Gamified Learning Market has largest share of global market 14 48.1 48.3 50 46.5 48 12 45.0 46 10 42.1 44 8 40.0 42 40 6 35.7 38 4 36 34 2 1.4 1.9 2.7 4.0 5.8 8.6 12.6 32 0 1.0 30 2016 2017 2018 2019 2020 2021E 2022E 2023E

USA Gamified early learning Market ($Bn) Growth, YoY (%) - RHS Source: DART, Company, DRHP

Primary Target Market (USA) has ample opportunities 25

25 24.5

24.3 24.2

24 24.1

24.0

23.9 23.9 24 23.9

24 23.8 23.6 24 23

24.6

24.5

24.6

24.7

24.6

24.4 24.3 23 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Kids Age 0–5 (Mn) Kids Age 6–11 (Mn) Source: DART, Company, Childstats.gov.

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Kiddopia App Overview Kiddopia is largely known for adding fresh content every month (also have two major releases every year) and covering many games in a single app (versus many games available individually on App store). The content for Kiddopia is conceptualised and designed in-house and features multiple sections focusing on Math, Linguistics, Spelling, Colour, Basic Games in alignment with Pre-School and Kindergarten section spread over different levels of difficulty. It has a tracking system to track progress of kids. Kiddopia’s early learning offerings use a reward system to encourage users for continued learning, which allows them to unlock special items, including home decorations and wall stickers. Compared to peers, Kiddopia is most easy to use, kid- friendly app in our view (largest pure-peer is ABC App, which has much inferior app but 8x in paying subscribers base).

Kiddopia has witnessed strong growth in subscribers

370,000 340,282 345,000 316,428 320,000 295,000 280,891 270,000 245,000 220,000 197,552 195,000 170,000 145,000 115,220 120,000 104,923 86,994 95,000 70,000 Sep-19 Dec-19 Jan-20 Mar-20 Sep-20 Dec-20 Mar-21 Source: DART, Company, Sep-19 is Pre-Acquisition

Despite Increase in Subscription Price as Content has also improved Particulars Cost Monthly / Annual / Lifetime Nov-17 $4.99 / $35.99 /$49.99 Jul-18 $4.99 / $35.99 / $49.99 Sep-18 $5.99 / $44.99/NA Oct-18 $6.99 / $59.99/ NA Jan-20 $6.99 / $59.99/ NA May-21 $7.99 / $64.99/ NA Source: Company, Subscription cost as of Date, Lifetime Option was removed from after Sept 2018

Mix of Monthly and Annual Subs is stable, despite strong growth in Subs Particulars Jan-20 Dec-20 Mix in Jan-20 Mix in Dec-20 Monthly Subs 79,433 2,16,775 68.9 68.5 Annual Subs 35,787 99,653 31.1 31.5 Total 1,15,220 3,16,428 100.0 100.0 Source: DART, Company Competitive Landscape – Kiddopia “The Disruptor” . The space of kids learning app is filled with thousands of apps on the App Stores with many apps entering the market. The successful and the well- known Apps are fairly limited to the ones which are highlighting in App Store in “Top Free”, “Top Paid” & “Top Grossing” or as a “Editor’s Choice App”. The top 5 players in the Kids Education (US) have less than 50% Market share (Approximation from Sensortower data). . June 28, 2021 22 Nazara Technologies

. Segment Leader: The most downloaded is “ABCMouse”. It has been a well- known app as is visible by its Top Downloads Ranking for several years (since 2017). ABCMouse is the only real competitor for Kiddopia as both cover wide range of learning content while most other apps are covering just certain sections. ABCMouse has roughly 8x Revenue of Kiddopia. However, on our comparison, we found the UX of the app to be clunky and having a non-kid friendly UI despite having one of the largest library of content. (Note: Downloading and using both apps will give better view on this aspect). . Kiddopia - Well Performed Since Launch: Kiddopia has scaled very well since its launch in Q2CY17. By CY19, it reached the top 10 Download Ranking. (Exhibit 33 & 55). It has delivered a similar feat by reaching the Top 10 section of Highest Grossing Apps in US Kids Education Space. (Highest grossing means highest Revenue from IAP and App Purchase combined, Exhibit 55). This performance is largely driven by Kid Friendly UI, Consistent Updates to the App (45 Updates since Launch), Interactive and highly Engaging Content covering most spaces. . Nazara – stimulated the momentum: Post-Acquisition by Nazara in Oct-19, the company further fueled up its investments in marketing (advertising) to scale and test the app. This was visible with early 1Q2020 metrics of Download Ranking and Gross Revenue Ranking. The company also converted the business model of Kiddopia from pure subscription based to In-App purchase (IAP) based which helped in significant increase in downloads. With investments, Nazara today has scaled up the Kiddopia to be the 3rd Highest Grossing App in Kids Section. . Current Ranking: Kiddopia is now ranked 3rd highest grossing app in kid’s section 1 rank behind ABC Mouse (8th Most Downloaded in same section, higher than ABC Mouse). Note: 1st Rank is not comparable as it is a Role- Playing Game App for Kids. The reason for this success with a very well positioned App and advertising investments by Nazara to scale it. (Ranking as of 12th June, 2021). In The Education Section, it is ranked 12th and ABC Mouse is Ranked 8th in Gross Revenues.

Top US Kids Education Apps by Downloads Download 2017 2018 2019 Q1 2020 June’21 Ranking 1 ABCmouse.com ABCmouse.com ABCmouse.com ABCmouse.com Toca Life World 2 Nick Jr Epic PBS KIDS Games Epic Youtube Kids 3 PBS KIDS Video PBS KIDS Games Epic Adventure Academy Messenger Kids 4 ABC Kids PBS KIDS Video Noggin Kiddopia Toca Hair Salon 4 5 PBS KIDS Games Nick Jr PBS KIDS Video PBS KIDS Games Barbie Dreamhouse 6 Peppa Pig: Paintbox Noggin GoNoodle Noggin Seek Lingokids - 7 Epic GoNoodle Homer Reading GoNoodle playlearning 8 Starfall ABC Kids Nick Jr PBS KIDS Video Kiddopia Pizza Maker 9 Noggin Starfall Kiddopia Kids A-Z Cooking Games 10 Kids A-Z Homer Reading Pinkfong Baby Shark Khan Academy Kids ABC Mouse.com Source: DART, Company, Sensor Tower, Data available till 21st June 2021; for kids section in USA for iPhone (on iPad rank 7th)

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Quarterly (estm) Downloads Trend for Kids Education Apps in US

Source: DART, Company, Sensor Tower, Data available only till Q12020. ABC Mouse Downloads scaled to ~2.4mn Top US Kids Education Apps by Gross Revenue Top Grossing 2017 2018 2019 Q1 2020 June’21 Rank 1 ABCmouse.com ABCmouse.com ABCmouse.com ABCmouse.com Toca Life World 2 Epic Epic Epic Epic ABC Mouse 3 Noggin Noggin Homer Reading Noggin Kiddopia 4 PlayKids Homer Reading Noggin Homer Reading Lingokids 5 Homer Reading ABCya Games Kiddopia Kiddopia Epic-Kids 6 ABCya Games PlayKids ABCya Games Speech Blubs Noggin 7 Speakaboos Kids Academy PlayKids Adventure Academy Homer – Learn 8 Kids Academy TinyTap TinyTap ABCya Games Animal Jam 9 Curious World SplashLearn codeSpark Academy Lingokids Boomrang 10 Hooked on Phonics codeSpark Academy SplashLearn SplashLearn Barbie Dreamhouse Source: DART, Company, Sensor Tower, Data available till 21st June 2021 for kids section in USA on Iphone (4th on Ipad) Quarterly (estm) Gross Revenue of Top Kids Education Apps

Source: DART, Company, Sensor Tower, Data available till 1Q2020 June 28, 2021 24 Nazara Technologies

Kiddopia (estm) Monthly Downloads and Gross Revenue

Source: DART, Company, Sensor Tower, Data available till 1Q2020

Comparison with Market Leader Particulars Kiddopia ABC Mouse App Size 1.1GB 750MB iOS Store Rating 4.4 4.5 PlayStore Store Rating 4.2 4.1 $9.99 (has $60 Discounted Annual Plan, Monthly Cost $7.99 $30 - 6M Plan) Has Assessment Center for $99 Annually Additional Revenue Sources No (Multiple Apps to target Kids) Content Has less content than ABC Mouse ABC Mouse has widest range of content Clunky UI (Confusing for Kids, Old UI Best UI (Easy to use for kids) Graphics) Songs No Has Multiple Kids Songs Books No Has Wide range of Kids Books Multiple Login Allows Multiple Login Allows Multiple Login Lowest Parental Protection (Age Has account creation and multiple Parental Protection Verification) parental / kids data for analytics Last 12M Rating 3.9 3.5 Source: DART, Company, Last 12M rating considers only US iOS reviews: Kiddopia ~600 reviews and ~1200 ABC Mouse reviews Impact of iOS Update . Apple in its update (iOS 14.5) launched a new feature called App Tracking Transparency highlighting a specific “Opt Out” Option (explicit consent) for Apps which restricts the app from tracking users on other apps/websites to collection more data on the user & improve advertising. In its essence, this feature reduces the insights and data on the users which is prerequisite to make ads more relevant/contextual (potentially reduce conversion accuracy). As per the study, 12% of Global iOS users and 4% of US iOS users have allowed app tracking. . Kiddopia conducts campaigns to target the “relevant” users (kids, young parents) for iOS platform (93% of Subscribers). With the new update, the ability to collect more data (or track users) to deliver Kiddopia ads is “uncertain” or to say the least, potential has reduced. This could be a direct risk to the business model of Kiddopia.

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. Post the Apple update, Nazara has highlighted that first party solutions (direct ads on Apple App Store) are delivering conversions. However, the third party platforms are facing no visibility on actual download of app and advertising to a potential user. . With this update, the CAC can potentially increase. Moreover, the target market for Kiddopia is unusually small (2-6 kid or his/her parents) in the whole pool of iOS users making campaigns more difficult to run. . We remain cautious over this factor as it may impact the CAC and change the profitability dynamics of the business.

Our View: We like the Gamified Early Learning business given that its’ incumbent Kiddopia app which has scaled up well and competed well against established apps in the market and reached top 5 in Kid’s top grossing apps. Kiddopia’s clean UI, good depth of content, monthly updating of content (45 updates since initial release) are well set to tackle competitors and capture the further opportunity in Kids learning market (25mn kids in US alone in its target age bracket, implying about 1-2% market penetration). The structural advantages of India-housed Content Team ensuring low cost and strong ability to understand the preferences for US Market gives a good content advantage to Paper Boat. While there could be risk of decline in users (or momentum) once the schools re-open and things normalize to usual, we think usage of apps to aid learning in kids is a secular trend. Also, the average time spend by a kid on the app is 20-25 minutes which can co-exist as a post-school activity.

Similar Listed Company iHuman Inc, is a leading childhood edutainment company in China with a product portfolio of online learning apps, products for educational organizations and learning devices (targets kids and schools). The China is the 2nd market consumption of gamified learning after USA. It is Ranked as #1 the bestselling education apps in China (for Apple iPad). It has a Revenue of $77mn in CY20, EBIT Margin of 6.7% and 1.68mn paying users (Q1CY21). It trades at 5.3x on TTM revenues of $105mn and a Market Cap of $552mn.

Ownership and Acquisition Details . Nazara acquired 50.91% of Paper Boat for Rs. 835Mn in Oct-19 of which Rs500mn was the upfront payment and Rs 235mn was through Earn-outs component. Of this pay-out, Cash / Stock mix for acquisition was Rs 400mn of the cash consideration and the balance through equity issuance worth Rs. 435mn via share swap (Nazara Price was Rs728 per share).

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Kiddopia Acquisition deal contours Particulars (Rs. Mn) Cash Shares Upfront Tranche Total Comment Bought 650 shares of Paper Boat for Rs. Tranche 1 100 100 100 100mn Acquired 4,772 shares of Paper Boat from Tranche 2 200 300 500 500 Promotors for Rs. 200mn and swap of 412,088 shares of Nazara where Nazara Shares were valued at Rs. 728 per share Tranche 3 of Rs. 135mn in shares (where Nazara shares are valued at Rs. 742 per Tranche 3 135 135 135 share) given to Promoters after 12 months of acquisition or achieving 80% of the second closing revenue target $7.5mn within 12 months Tranche 4 of Rs. 100mn in shares given to Tranche 4 100 100 100 Promoters after 12 months of acquisition or achieving 80% of the second closing revenue target $7.5mn within 12 months Total 400 435 600 235 835 Source: DART, Company

Kiddopia– Shareholding Pattern Particulars Stake (%) Nazara 50.9 Anupam Dhanuka 24.5 Anshu Dhanuka 24.5 Total 100.0 Source: DART, Company Business Model The business has only one revenue model where it earns subscription revenue on the Kiddopia app on Monthly ($7.99) and Annual Basis ($64.99). The billing is done via respective App Store operators (iOS is 93% of subs) who charge commission of about 28% (Commission is charged as cost in the P&L). The Life Time Value (LTV: Total Revenue from a user over his/her lifetime) on a Kiddopia user is $44 (After App Store Commissions). Acquisition of a user via advertising and promotion costs around $30 for Nazara which is recognized upfront while revenue is on accrual basis (about 30% of all subscriptions are annual). Apart from this it incurs Content Cost (Updating App, making new content) which is about 8-10% of Revenue. Thus, it has implied profitability of 20%+ in this business but on a reported basis it will not reflect that as the excess cashflows from annual subscription sit as unearned revenues and is marked as contract liabilities, while the company continues to invest this excess cashflow into its marketing spends (CAC).

Company is no urgency to make immediate profitability in this segment and thus may have flattish reported margin performance. The focus is clearly on the unit economics wherein the company has its eyes on balancing the desired LTV-CAC ratio. If the conversions are strong it will accelerate the marketing spends which in turn may result in increased subscriber growth in the quarter or slightly higher quarterly profitability. Ironically, higher Gross Subscriber Addition can potentially bring in higher loss upfront as the acquisition cost recognized/incurred during the quarter while revenues are earned over time (CAC is $30, Potential ARPU in one Quarter is $21-$24). Growth and Profitability have to be balanced based on the favorable unit economics. Also taking into account churn rate 5-6% (implied churn rate is 8%).

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Unit Economics Particulars $ (Abs) Lifetime Value (24 months) 61 (less) App Store Commissions 28% Net LTV (24 months) 44 (less) Cost of Subscription 30 Gross Profit 14 Gross Margin 32% Content Cost 8-10% EBITDA Margin (as explained by company) 22-24% Actual implied EBIDTA Mgn (based on reported rev – pre commission basis) 12-14% Source: DART, Company, Note the EBITDA Margin calculated by Nazara is based on the Net LTV while Revenue is recognized Pre-Commission (LTV). Actual EBITDA Margin on LTV is ~12-14%

Understanding on how one subscription impacts margins Particulars ($ Abs) LTV Basis Q1 Q2 Q3 LTV (24 month) 61 20 20 20 Commission 17 6 6 6 Revenue after Commission 44 14 14 14 Acquisition Cost 30 30 0 0 Content Cost (10% of Revenue) 6 2 2 2 EBITDA 8 -18 12 12 EBITDA Margin % 12.8 -88.0 62.0 62.0 Source: DART, Company, this is hypothetical scenario which closely represents Paperboat’s Revenue, Cost Model and Accrual Accounting.

Every Gross Subscription adds the CAC cost upfront (this includes cost per trial or CPT of $24 and activation ratio of nearly 70%-75%). The key is to maintain the fine balance between LTV, CAC and Churn ratio. Nazara has guided that they will attempt to keep a balance between growth and profitability.

Nuances of the Business Model . Revenue: The users can subscribe to Kiddopia for a price of $7.99 per month or buy an annual subscription worth of $64.99. . Appstores Commission: Apple or Google charges commission cost of 28% on the download of their appstore. So the Net Revenue is only 72% of Subscription Price from the cashflow perspective. . Customer Acquisition Cost: Customer Acquisition Cost (CAC) is the major expense for Kiddopia App. Customer Acquisition cost is the advertising expense done for getting potentials users to subscribe for the App. This CAC is recognized upfront as an expense and not over the life of the customer. Promotion expenses are largely spent in user acquisition campaigns with ads on Google, FB and App-stores. It is dependent on two major factors: Cost Per Trial (Cost of making a user subscribe to the trial of the app: involves advertising on various medium) and Trial to Activation Ratio (Percent of People who continue their subscription after trial period). The Cost per Trial hovers in 22$-26$ range (stood at $21.75 in 9MFY21) and Trial to Activation ratio has remained around 70% in FY21. . Content Cost: The residual cost in the business is the content cost (largely the employee base) which is relatively low as the content team is in-housed in India (10-12% of Revenue). The team releases monthly updates for the App and 2 major updates in a year.

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. This business although currently has a single digit EBITDA Margin (includes business’s other income) of 7.1%, as the balance between growth and profitability to settles, margins will gradually improve.

A Look into Financials of Paper Boat Apps Income Statement of Paper Boat Apps (Acquired Company) Particulars (Rs. Mn) FY19 FY20 Revenue 183 572 Expenses Selling and Distribution (App Store Commission) 53 162 Business Promotion (Customer Acquisition Cost) 122 403 Employee Expenses (Content Cost) 18 35 Other Expenses (Content Cost) 10 14 EBITDA (20) (41) Margin (%) (11.0) (7.2) Depreciation and amortization 2 4 EBIT (23) (45) Margin (%) (12.4) (7.9) Other income 0 8 Finance costs 1 2 Profit Before Tax (23) (39) Tax Expense (0) 0 Profit After Tax (23) (39) Margin (%) (12.4) (6.9) Unearned Revenue (Liability) 66 236 Change in Unearned Revenue 62 170 Adjusted Revenue Adj 244 742 EBITDA Adj 42 129 EBIT Adj 39 124 PAT Adj 39 131 EBITDA Margin Adj 17.1 17.3 EBIT Margin Adj 16.1 16.8 PAT Margin Adj 16.1 17.6 Source: DART, Company

. Revenue Growth: Paper Boat App (The acquired entity) has grown phenomenally over the last 3 Year (almost 10x in 2 years). Paper Boat Apps grew 207.3% YoY to Rs. 1,758mn in FY21. The Revenue in FY20 was Rs. 572mn and in FY19 was Rs. 183mn. (App was launched in Aug-17, Q3FY18). . Unearned or deferred Revenue: There is another way to analyze the Revenue Traction. Given, the subscription business, it has about 31% of users that opt for annual subscription. The Annual Subscription builds the Unearned Revenue for the Business. We attempt to view the Revenue Traction by Adding the increase in unearned Revenues (increase in accrued annual subscription revenue). Ex: The FY20 Adjusted Revenue stood at Rs. 742mn up almost 3x in 1 year after factoring in deferred revenues of about Rs236mn in FY20 and Rs66mn in FY19. . Depreciation & Amortization: D&A expense in Paper Boat subsidiary is limited to just Rs4mn in FY20. However, on consolidated basis we need to add additional D&A charges which is pertaining to amortization of intangibles that has been created by Nazara’s acquisition of Paper Boat. Ex: In Nazara’s Books it is about to Rs. 56mn in FY20 and Rs30mn in H1FY21 (all data from RHP and subsidiary financials).

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. Taxation: The expected tax rate for Paper Boat’s Business is 25.17%. The FY19 and FY20 tax rate was 1.5% and 0% (likely due to existing tax credits). . German, French Market: Kiddopia has already expanded to German & French Market as the structural levers remain the same (High Penetration of Phones & Tablet, High Capita Income, Propensity to aid learning for kids via internet). However, currently it has not found the right product market fit.

Where does the money go?

-7 9 Comission (28%) 28

Advertising (70%)

Content Cost (9%)

EBITDA Margin (-7%) 70

Source: DART, Company, Based on Paper Boat Financial Statements of FY20. In FY20 Paper Boat was loss making but it is not loss making in FY21 (on a PBT Level).

Revenue Growth Trend of Paper Boat (Rs mn) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 36 183 572 1758 0 FY18 FY19 FY20 FY21

Source: DART, Company; Note: Paperboat revenues were integrated for only 1 quarter in FY20 – so only Rs 191.3mn is integrated in Nazara’s FY20 financials Understanding the LTV and CAC Dynamics The business model is all about increase the gap between LTV and CAC. Higher the LTV, more money the business makes from the user and a Lower CAC means a lower cost to acquire the subscriber. For Kiddopia, Net LTV is $48 (back tested for last 24 months) and CAC is $30. LTV is driven by the ability to retain a subscriber for a longer period of time and the subscription price. CAC is driven by the advertising cost and conversion accuracy. . LTV is the life-time earnings from that user. For Kiddopia, it is the amount of subscription revenue it can earn from its subscribers before they unsubscribe from the App. LTV for Kiddopia can be highlighted as LTV or Net LTV. LTV is before app store commission & Net LTV is after commission.

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. Calculation of LTV: Nazara calculates the LTV based on different period till date on its subscriber database. Refer Example in Exhibit 45 wherein the Net LTV of $48.3 for Sep-18 implies revenue earned on average per subscriber over next 27 months’ period ending Dec’20 calculated based on the Revenue earned from a Subscriber in Sept-18.

Net LTV & CPT for the subscriptions for that Month 26 60 23.5 24 50 21.9 22 20.2 40 20 19.2 30 18 20 16 14.7 14 10 48.3 42.5 34.8 23.5 7.0 12 0 Sep-18 Mar-19 Sep-19 Mar-20 Dec-20

Net LTV till date ($ Abs) - RHS CPT ($ Abs) - LHS Source: DART, Company, Example: An average subscriber in Mar-20 has contributed $23.5 in Revenue till date and had a CPT of $19.2

. Avg Subscription Period as of Q4FY21: Kiddopia has the LTV of $61 (for 24 months) and Net LTV of $44. Based on the pre-commission LTV of $61, it implies a subscription tenure of 8-9 months based on a subscription price of $7 per month. This tenure is fairly decent tenure given kids of 2-6 age are targeted. Any Engagement for the app for 6+ months is very good in our view. . Annual and Monthly Subs add same Value: The Annual Subs contribute around 60$ for 1 year. The LTV is also the similar ($61). This implies that Annual and Monthly paying users are contributing on same level.

Retention & Activation Metrics During May-18 to Oct-20 Particulars (%) Retention Post- One month 82.0 Retention Post - Six months 48.9 Retention Post - One year 31.6 Retention Post - 18 months 21.2 Average Trail to Activation Ratio 75.6 Source: DART, Company

. Post-Acquisition in Oct’19, Nazara scaled the customer acquisition to test the profitability and growth mix for the business. During Dec-19 to Dec’20, Trial to Activation rate was 73.56% (Monthly Sub) and 63.13% (Annual Sub). Gradually, conversions didn’t not scale down despite increased scale in the business. Similarly, Monthly Subscriber retention rate after one year was 25.82% for subscribers acquired in Dec’19. . CAC is the cost of bringing the customer to the business as a subscriber or doing a purchase. The Customer Acquisition Cost for Kiddopia is driven by 1) advertising cost of driving a potential user to install the app and start a trial (CPT: Cost per Trial) and 2) Ratio of a Trial Users continue the subscription. (Trial to Activation rate).

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. Marketing Spend: Kiddopia spent $5.84mn and $9.42mn in FY20 and 9MFY21 for letting users install and start a trial of the App. This marketing spends resulted in users starting a trial out of which 70% stayed after the trial. The CPT is largely consistent around $20 to $22 for Kiddopia.

Marketing Spends and New Subscribers Trend Particulars FY20 9MFY21 Marketing Spend ($mn) 5.8 9.4 New Subscribers 1,88,758 3,01,133 Calculated CAC ($ Abs) 30.9 31.3 Source: DART, Company

. Churn Rate: Churn Rate is the rate of attrition for customers. For Kiddopia, it is the % of subscribers (% is calculated on beginning period) who leave the subscription service. Nazara has highlighted that the monthly churn rate for Subscribers is 4% to 6%. The calculated churn rate for 9MFY21 will come around ~8.5%. This discrepancy is as the gross additions by Nazara considers reactivations as fresh additions (If a user has unsubscribed from Kiddopia and joined again after 2 months, it is counted in gross subscriber again).

New Subscriptions and CPT Trend 3,50,000 24 3,01,133 3,00,000 20.8 22 20.2 21.8 2,50,000 20 1,88,758 2,00,000 18

1,50,000 16

1,00,000 64,673 14 11.7 50,000 12 9,806 52,785 1,97,552 3,16,428 0 10 FY18 FY19 FY20 9MFY21

Total Subs New Subs CPT ($ Abs) Source: DART, Company Way Forward – Gamified Learning Multiple levers to ensure hyper-growth revenue momentum Going forward, Kiddopia should sustain hyper growth momentum given:

1) Increased subscription pricing by a dollar to $8 (effective jump 15%), 2) Low penetration in the segment in the US market (has sampled only 4% of the 25mn population base of 2-6-year-old). 3) Opening up new markets that can scale up – UK, Australia, Germany, Spain wherein it is already active just trying to optimize the LTV-CAC balance, 4) Inorganic opportunities such as eyeing partners in large potential market such as China and 5) Planning to slowly venture into newer segments such as 8-12-year age bracket (little difficult segment as content is not homogenous and taste are individual led, and apps are chosen by Child not their parents).

We expect Gamified Early Learning to deliver Revenue CAGR of 58.5% over FY21-25E and segment margins to reach 20.9% by FY25.

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Gamified Early Learning to deliver 58.5% CAGR over FY21-25E 12,000 819.0 11,108 900 800 10,000 700 8,000 7,479 600 500 6,000 4,608 400

4,000 2,799 300 1,758 200 2,000 59.2 64.7 62.3 48.5 191 100 0 0 FY20 FY21 FY22E FY23E FY24E FY25E

Gamified Early Learning (Rs. Mn) Growth, YoY Source: DART, Company, FY20 includes only 3 month Revenue of Kiddopia as Acquisition was closed in Jan-21.

Profitability will be function of organic pull Although the revenue traction would continue to remain robust for Kiddopia, the company would not press for profitability in near future and rather continue to invest back to get higher market share. However, in case the company scale up big time on its strong Reviews (review base is 1/10th of that of ABC App on Apple Appstore) which may create strong referencibility and network effect. But it is very difficult to understand when the company might hit the ‘tipping point’. However, we are sure that the business would continue to deliver strong growth with positive cash flows and will continue to build visibility by driving up retention and overall LTV of the customer.

Gamified Early Learning Segment Margins bump up in FY22E

2,450 19.4 20.9 25 14.1 15.7 20 1,950 15 10 3.0 1,450 5 0 950 -5 -10 450 -20.5 -15 -20 -39 53 395 723 1,450 2,324 (50) -25 FY20 FY21 FY22E FY23E FY24E FY25E

PBT (Rs. Mn) PBT Margin (%) Source: DART, Company

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eSports (37.4% of Revenue and 11.0% PBT Margin) eSports includes two sub-segments for Nazara: 1) Nodwin (eSports – Revenue of Rs. 1,357mn) and 2) Sportskeeda (Sports news portal) – FY21 Revenue of Rs. 343mn.

Nodwin Gaming (80% of eSports revenues) To capture the growing eSports potential in India, Nazara in 2017 announced to invest $20mn over 5 years in the Indian eSports ecosystem. Later in Jan-18, it acquired 54% stake in Nodwin Gaming for Rs. 770mn. Founded in 2014, Nodwin was pioneer in the Indian eSports ecosystem and one of the largest eSports player in India with an exclusive partnership with ESL (World’s Largest Esports Company). Nodwin has been gradually scaling up in eSports industry with further partnerships with game developers to host their official eSports tournaments in India (Tencent, Krafton, Riot Games) and attract more gamers with ground level events. Today, it has reached a market share of ~80% (calculated based on prize pool, unique IPs, Event days, unique event) held in India with a Revenue of Rs 1.35Bn in FY21 and EBITDA margin (including other income) of 10.1%.

What is eSports? eSports is an umbrella term for a hosting of electronic games played on a competitive landscape in a multiplayer mode. Nazara earns money by organizing such competitive tournaments/events. Nazara’s business is a-kin to managing, hosting, media-management of a sports league (Eg: Wimbledon, IPL, EPL etc). Nazara’s eSports offerings do arrangements with game publishers (for game rights), arrangements with broadcasters for live streaming of offline and online tournaments (earn media rights) and secure Sponsorship from Advertisers (more viewers, more sponsorships). Game-enthusiast come together to watch the competitors (local, national heros) play in the tournament. This eSports business competes with other forms of live sports viewing and media consumption for watch time. In nutshell, eSports is a glorified marketing arms of Game Publishers. eSport company can technically make a normal game into Top game with deep penetration by right positioning and community activation.

Globally, eSport industry is pegged at ~$1bn in 2020 of which Sponsorship revenues accounted to USD 623 million and are by far the largest contributor for the eSports revenue segment. Media rights follows with a value of USD 174 million. Merchandize and tickets contribute to USD 61 million and publisher fees amount to USD 112 million. The digital and streaming components contributed to USD 31 million and USD 20 million respectively. Why people watch eSports? Why eSports will grow? Where is it going? . Highly Addictive: People watch eSports because it is highly addictive (like how watching cricket is addictive for some!) and they can cheer and interact with their e-athletes watching them in real-time. Some e-athletes or players have certain fan base which follows them around tournament (i.e pro players bring their fan base, more viewers!). . Mid & Hardcore Gamers are largely viewers: The fan base for teams and viewers is made up mostly of people who are gamers (mid and hardcore) themselves. Regular players of certain games usually watch tournaments involving those games. Many Esports fans watch professional contests at least partly to improve their own gaming skills (learning to aim better –in gaming world it is called as ‘strafing’). . Audience Pool Growing: The audience pool for eSports is going to increase with more tournaments, rise of mobile gaming, investments by game

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developers in eSports ecosystem and improved visibility with winning of large international tournaments. (Example: Cricket’s popularity in India boomed with winning of 1983 World Cup). . Growth in Live streaming an early indicator: Coupled with eSports, Live Streaming, watching players playing a game live via Twitch and YouTube, has also scaled up very well, highlighting that people/fans like to consume watching gaming as content and some even willing to spend money to support them (Superchat – Donate Money via UPI). . Asian & Olympic Games to drive popularity: There’s been a big push to include eSports in the Olympic Games for 2024 and for 2021 games, the Olympic committee has announced creation of the Olympic Virtual Series (but not a medal event!) which will host eSports events in disciplines such as cycling, rowing, and baseball (not proper games yet!). In the meantime, eSports are already an official part of the 2022 Asian Games (medal event!) and will feature ten eSports tournaments in popular games such as League of Legends, League of Legends: Wild Rift, PUBG Mobile, Mobile Legends: Bang Bang, FIFA Online 4, Free Fire, Arena of Valor and CrossFire in Nov- Dec’21.

Another way to look to eSports Growth - The Funnel With increase in internet users, penetration of Mobile gamers has reached 48% in 2020. The total gamer count has reached 330mn but of these only 5% are eSport viewer or in a way hardcore gamers.

The Funnel for Indian eSports Particulars 2016 2017 2018 2019 2020 Internet Users (Mn) 375 422 462 560 687 Mobile Gaming Penetration (%) 53.3% 54.5% 58.4% 51.8% 48.0% Mobile Gamers (Mn) 200 230 270 290 330 eSports Viewers (Mn) 4 6 9 13 17 eSports Penetration (%) 2.0% 2.6% 3.3% 4.5% 5.2% Source: Indian Internet Users data from Datareportal, Mobile Gamers, eSports Viewers data from DRHP, Only Mobile Gamers have been considered in Indian Esports Ecosystem is largely driven by Mobile.

Structural Drivers: The growth of eSports Viewers in India is and will be largely led by penetration of Internet, Increase in Number of Mobile Gamers in India (creates casual gamers!) and finally number of gamers becoming eSports Viewers (becoming mid and hardcore gamer from casual gamer).

Casual Gamers pool growing well: The first two levers (Internet Penetration, Mobile Gamers Penetration) of this growth have been performing well and it has created a decently growing pool of casual gamers. Casual Gamers are first-time gamers and gamers will play to pass time (They stick to casual games, low propensity to pay).

Mid & Hardcore Gamers to build Viewership: The last lever of Esports Penetration (Casual Mobile Gamers turning into eSports viewers) will be led by more of Mid and Hardcore Games (More Free Fire, COD Mobile, Cash of Clan type games than Temple Run), increased tournaments (creating viewers and more players) and improvement in eSports ecosystem (more sponsorship, more prizes to make gaming as a profession sustainable). Today, eSports is largely driven by PUBG and Free Fire but many other mid and hardcore games (Brawl Stars, Valorant, Clash Royale, etc) are also investing in eSports to build a user base in India. While Globally, eSports Viewership is dependent on PC + Mobile Games. In India, Mobile largely drives the eSports Viewership in India (Mobile is cheaper, PC or Console is expensive).

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Comparison with US and China

eSports Stats for US, China and India Online Esports Gaming Esports Esports Viewers Particulars Internet Gamers Viewers Penetration Penetrati as % of Internet Users (Mn) (Mn) (Mn) (%) on (%) Users China 904 650 213 71.9 32.8 23.6 USA 313 166 32 53.0 19.3 10.2 India 687 380 17 55.3 4.5 2.5 Source: DART, Company, Online Gamers include Non-Mobile Platforms. Hence, Esports Penetration is different than the previous table. USA eSports number of viewers at 32mn is forecasted of CY21 not actual.

Lower Penetration: Indian eSports ecosystem has much lower penetration compared to two largest regions in the eSports Industry. Around ~25% of China’s Internet Users consume eSports Content. In USA, 10% of Internet Users consume eSports Content. Indian lags behind both in scale and growth.

Lagged Growth: Indian Esports Industry grew 54% from CY18 to CY20 while China Esports Industry grew 134%. This is due to late entry in eSports and late-stage improvement in infrastructure (Jio revolution started in 2017!). Another reason for the lag is lack of right ecosystem of games to create mid and hardcore gamers (very active gamers). In India, games like PUBG, Free Fire, etc have developed many casual gamers into Mid-to-hardcore gamers (entered in ~2017). Mid and Hardcore Gamers are the key enthusiast who forms the base for Esports Viewership.

Solution: Tournament Organizers and even Nodwin is investing in the ecosystem by doing more regional tournament to build a strong base of mid and hardcore gamers. More tournaments are leading to prizes and making gaming as profession sustainable (more e-athletes, more varied gameplay, more fan-base)

Even Nodwin has introduced a pyramid strategy of Hosting Nodwin Gaming Open to drive more Esports Players and Viewers to the ecosystem. It has the ability to reach more people at the grassroots level (college, university) With Open Gaming, Nodwin has reached to 2.2mn players in FY20 (FY19: 0.45mn)

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Nodwin Event Matrix to boost Viewership

Source: DART, Company Understanding the Industry Dynamics of eSports eSports cannot be developed in isolation; it needs an ecosystem of prizes, players, sponsors and competitiveness. Any investment in the eSports ecosystem by game publishers will be done when they witness strong mid & hardcore user growth (Volume) and IAP revenue growth (Value). eSports essential aid in delivering these metrics by creating the mid and hardcore gamers. It’s a circle of life. In India, there is a small group that pays and a larger group that engages but that gap is bridging as more eSports teams & eSports tournaments are starting in India and more IAP Revenue is making is worthwhile to invest further in Indian ecosystem.

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eSports Ecosystem

Source: DART, Company, this smartchart includes international brands and players. In India, Audi, Arbys don’t advertise India. “Publishers” in the center represents popular games in Global Market but India Market has different popular games: PUBG Mobile (banned), Free Fire, Battlegrounds Mobile (replacement of PUBG yet to be launched), COD Mobile, Valorant, CS GO and LOL. Similar, In Platforms section for India, major players for Hotstar, Youtube, LOCO, FB Gaming.

In all there are six key constituencies that collectively form esport ecosystem they are 1) Game Publishers, 2) esports teams, 3) Brands, 4) Streaming Apps, 5) Tournament Organizers and 6) Viewers

1) Game Publishers: For Game Publishers, eSports tournaments act as a catalyst for their games. A game needs regular updates (new content) and an active player base to elongate its shelf life. With eSports tournaments, more audience is attracted to a game (bringing new players) and the active player base is also more engaged (some attempt to play more professionally, some follow eSports celebs). Every tournament helps publisher improve the active player base (volume & paying both). eSports helps game publishers to build a good paying user base of gamers for a game. IAP Revenues by game determine the ability of publisher to invest in eSports ecosystem. Game Publishers mostly outsource the event organization to third parties (like Nodwin-Nazara). Most publishers if they organize an official tournament, they bring larger prizes and stronger viewership.

Skewed but improving: Indian eSports industry is witnessing skewed growth led by only few games that are widely watched/followed (Pubg/Freefire/Counter Strike). If India has only 2-3 games doing large scale eSports then the growth for eSports will be limited and if the number of games increase, then the growth can compound. Today, other developers have also invested in eSports, but they will gradually scale as they see investments (in eSports) delivering results in Revenues (userbase + spending by gamers through InApp Purchases).

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FY20 Domestic Prize Pool Mix Others 16%

R6 Siege 4% Valorant 6% PUBG Mobile 53% CS GO 11%

Free Fire 11%

Source: DART, Company, AFK Gaming

Perspective for Nazara: Nodwin Gaming is in an advantageous position v/s other tournament organizers as it is an early entrant in organizing eSports Tournaments in India, and has demonstrated capability to organize large scale events (6K-10K offline and 28Mn on Online). Other players have relative much smaller scale and have started organizing events recently.

2) eSports Teams: eSports Teams are companies which contract players for certain period of time to play in tournaments and/or create content via live streaming. In exchange, players receive a salary, coaching and gaming equipment for practice (better GPU, CPU, Mouse, Monitor), etc. eSports Teams earns via 1) Winning Prize of Tournaments (Portion of it is shared with players, this share is varied, some give 50%), 2) Brand Sponsorship (Logo on T Shirts, Logo on Live Streams) and 3) Ad revenue on Player’s live stream. eSports Teams and players have a certain level of following with them (people see tournaments and live streaming to watch their favorite players and teams). More and More Teams have started in 2019 and 2020 in India to play and build their career in eSports. The increase in eSports teams count essentially highlight growth in eSports ecosystem. What eSports Teams target and focus is on winning more tournaments, possibly one that are larger prized and official international tournaments. Such events bring more visibility, prizes and recognition from brands (potentially more brand deals).

Growing but long road ahead: As the Indian eSports scene has started heating up, International eSports Team Companies like Fanatic, PTW have started investing in local teams and brought necessary coaching, player salary, gaming equipment for training. Multiple teams have received sponsorships as well. While there has been strong growth in eSports Teams in recent 2-3 years, the income for majority eSports players have been below global industry average due to low prize money, lower salaries for players (Tier-1 Player gets Rs. 50K-100K per month while Tier 2 players get Rs. 5K-25K per month). Gaming as a profession in India is not sustainable yet. However, with increase in tournaments, more prizes, the state of affairs is improving.

Global State is well set: International eSports Team have grown well as gaming has reached a level to sustain itself as a career. Moreover, teams are now valued in upwards of $100mn. TSM (Team SoloMid) is valued at $410mn with estm Revenue of $45mn, Cloud9 is valued at $350mn with estm Revenue of $30mm, Team Liquid is valued at $310mn with estm Revenue of $28mn. Many teams have also received large sponsorship deals: TSM eSports won $210mn over 10 years’ sponsorship deal for their naming rights.

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Perspective for Nazara: Increasing number of eSports Teams essentially is a sign of stronger ecosystem of eSports in India. Increasing popularity of eSports Teams bring in more audience (Example: TeamMortal have a big fan following). The audience will grow more eSports Teams form and participate. Nazara being the largest player in the ecosystem with big prize offerings and visibility (largest events in India), Nodwin’s tournaments are and will be the aspirational goal for Teams.

Key Esports Teams in India Esports Team Sponsors Gaming Social Media Founded

Entity Gaming HyperX, Omtex CSGO, PUBG, and Dota 2 YT 2017 Beyond Infinity NA Valorant, PUBG NA NA Overwatch, CS GO, DOTA 2, [GE] Team India NA RS6, PUBG PC, Apex Legends, YT, FB 2017 Fortnite

Team Brutality Intel, Dell, Alienware Tekken, CS GO, Street Fighter FB 2010 Orange Rock (owned by Pole To Win International) NA PUBG Mobile YT 2019 TSM Entity (owned by Team Logitech , GEICO, Legion, SoloMid, US) Game Fuel PUBG Mobile YT 2018

Fnatic India (owned by Fnatic) Oneplus, AMD, Monster Drink PUBG Mobile IG 2019 TeamIND Hyvesports PUBG Mobile IG, YT 2019

s8ul.esports GIGABYTE COC ,FREEFIRE and VALORANT YT NA Valorant, Clash of Clan, COD Resilience Esports$ Lenovo Mobile YT 2018 Team Mahi corsair, ZOTAC Valorant YT NA GXR Celtz (owned by Galaxy Racer, UAE) NA PUBG Mobile YT 2020 Valorant, PUBG Mobile, Free Enigma Gaming NITCO Ltd, Monster Energy Fire, CODM IG 2020 CS GO, Rainbow Six Siege, LOL, Samurai Esports Computech Valorant YT 2021

Total Gaming NA Fire Free, PUBG Mobile YT 2020 PUBG Mobile, Clash Royale MegaStars# NA and Clash of Clans. YT 2019 Nova Godlike (owned by Nova Esports) NA PUBG, COD and Valorant IG NA

Marcos Gaming NA PUBG Mobile, Clash of CLAN YT 2019

Blind Esports NA CODM, COC, PUBG Mobile IG 2021 CS GO, Rainbow Six Siege, KIRA Esports NA Fortnite, PUBG PC and Mobile YT 2020 Source: DART, Company, $ Also does own Small Tournament for Development of Esports (RESILIENCExBLEET), #Disbanded on 2020-09-07

3) Brands: Brands that invest in eSports Tournaments and its ecosystem are the ones who intend to capitalize on its young age viewership. There are multiple brands which are advertising on Esports Tournaments, Sponsoring eSports Teams (Logos on T-shirts), Sponsoring Live Streams on Youtube on a consistent basis. Brands which advertise on eSports can be divided as gaming & gaming related brands (gaming and computer peripherals companies) and other companies (Mercedes Benz, Monster Drinks). Brands (Advertisers and Sponsors) pay based on the quality of the audience, viewership, whether the event is online or offline (Example 1: Brand don’t pay much for Freefire events as its typical audience is 12-14yr old kids that are not valuable for these brand). Given its rising popularity, more and more traditional brands have also started Advertising in eSports.

Multiple Sponsors have lined up with the growth of eSports ecosystem in India: Mercedes Benz – India ESL Gaming, Kingston –Hyperx (RAM Maker) – Entity Gaming Esports Team, OPPO – PUBG Mobile tournaments, Nippon Paint – Skyesports, Oneplus – Multiple Youtubers.

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Perspective for Nazara: Nazara is the holder of strongest IP partnerships and the biggest benefiters as more brands start investing in the eSports ecosystem.

4) Streaming Platforms: Streaming platforms are streaming websites (Twitch, Youtube Gaming, FB Gaming) or OTT websites (Hotstar, Voot) who stream tournaments or live game play of streamers. The business model for Streaming Platforms in eSports and Game Streaming is different. OTT apps earn via Users subscriptions and Streaming Platforms earn via 1) Part of Ad Revenue 2) Gain Subscriptions (attract eSports viewers to subscribe to OTT and also from IAP that are made to highlights message/shouts on stream pages)

Perspective for Nazara: As more and more OTT’s focus on eSports streaming increases; Nazara is likely to benefit with higher media rights revenue.

5) Tournaments Organizers: Tournament organizers are companies who organize tournament for a particular game or set of games for certain prize amount which attracts eSports Teams to play. The Revenue Sources for a tournament organizers are 1) Sponsors (Title Sponsor, Other Key Sponsors), 2) Advertisers, 3) Stall Money (Offline events have stalls), 4) Ticketing (offline events have tickets), 5) Media Rights, 6) Merchandise, and 7) White-labelling Fees (only given if event is white labeled). The main focus of Tournaments is to attract audience (viewers) to drive sponsorship and advertising revenue.

State of Affairs in India: Multiple eSports Tournament organizers have started who intend to invest in the eSports ecosystem (are offering decent prizes, some of them have sponsors). Most of the new tournaments organizers have joined the ecosystem from 2019 / 2020 and are focused on online events as offline events require very different set of capability and scale. Ability to hold large scale events and have content creation (having engaging watchable content) is the key USP of any tournament organizer. There are multiple online events which are organized by small players and gaming corporations. Multiple companies (Tournament organizers) have been started with the focus to build the Esports eco-system. However, Nodwin is the one of the few players to have capability to organize large scale offline events. Other players are Modelling Cops, The Esports Club, SkyeSports which have largely focus on own IP (self-branded events) events and have started hosting offline event recently and have very limited scale). Many other events which are being organized currently have lower prize, lower viewership (as per industry experts). Nodwin’s strength is the viewership it garners from strong IPs of ESL, Dew Arena, PUBG Mobile (was banned in India but relaunched as Battleground) and capability to organize events offline at large scale.

Perspective for Nazara: Nodwin is the only company in India to have rights over IP and assets across grassroot, regional, national and international eSports. Compared to other Esports Tournament Organizers, Nodwin has best IP partnerships (ESL, Mountain Dew Arena, Krafton) which makes it position much stronger compared to peers. As entry of players will help in better education of the prospective audience thus helping in creating wider market base.

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Other Key Esports Events in India (not hosted by Nodwin) From Tournament Organiser Prize Pool Sponsors Games Year GameEon Tournament GameEon Studios Rs.3.5 Lakh Noctua CS GO, Valorant 2021 Disney, Flipkart, LOCO, Valorant, PUBG Mobile, ESports Premier League India Today Gaming Rs.25 Lakh HyperX, WD Black, Call of Duty Mobile, Dota 2015 Oneplus 2, Free Fire, FIFA Yes Bank, Monster Cobex Masters* Cobex Gaming Rs.1crore Energy DOTA 2, CS GO 2018 AUS ROG, Mountion CS GO, Dota 2, Fortnite, Dew Arena Nodwin NA Dew Super Smash Bros. 2016 eXTREMESLAND NA Zowie NA CS GO 2016 Battlegrounds Mobile (Krafton)# Not Disclosed NA NA Battlegrounds Mobile 2021 Pubg Mobile Pro League$ Tecent NA NA PUBG Mobile 2020 Skyesports League 2021 / WD Black, AMD, Loco, Other Tournaments Skyesports Rs.15Lakh Act Broadband Valorant 2019 Fortnite, PUBG, Valorant, GAMERCONNECT Gamerconnect NA Nvidia COD Warzone 2019 Free Fire India Garena International Championship 2021 (Whitelisted Event) NA NA FreeFire 2020 Tecent (Nodwin PMCO$ Gaming) RS.1.2Cr VIVO PUBG Mobile 2019 MCSS Events ModellingCops Rs.2.5Lakh NA PUBG Mobile 2019 The Esports Club HyperX, Booyah, RS6, Valorant, CS GO, Invitational The Esports Club NA UtraGear COD Mobile 2019 Source: DART, Company, *Cobex Gaming was headed by Mr. Sandip Gupta & Rajdip Gupta, founders Route Mobile but company has not announced any event after one event in 2019, #Krafton is yet to announce an Esports Event, $ PUBG Pro Mobile League and PMCO stopped in India after Ban of PUBG. 6) Viewers: Indian eSports ecosystem has a target audience base of about 17mn in FY20. Viewers are the backbone of the ecosystem. India with its strong structural levers (deep mobile user penetration, favorable data pricing, broadband connectivity, high-bandwidth and low-latency connections, and the growth of digital payments) and the largest millennial and Gen-Z youth populations, which form the one of the largest potential user base for mobile gaming. India has strong potential for eSports industry as a whole.

Indian eSports Audience (Viewers)

18 16 14 12 10 8 6 4 2 2 4 6 9 13 17 0 2015 2016 2017 2018 2019 2020 Indian eSports Audience (mn) Source: DART, Company, This is most likely the sum of viewers in all tournaments held in India. The actual unique audience will be lower as one person can/could have attended multiple event.

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Perspective for Nazara: Nazara has partnership with strong eSports IP (ESL, Mountain Dew Arena) and Game developers (Krafton) which gives Nazara access to best and highest audience in any organized tournament. Number of registered players participating in tournaments organized by Nodwin in FY20 is at 2.2mn (0.45mn in FY19). Live streams from the events got 28mn live stream views (Note: this covers viewers in South Asian region) in FY20 across OTT platforms (v/s 6mn view in FY19). Today it has widest reach and has brand visibility amongst most eSports Viewers in India.

Growth of Viewers . Mid and Hardcore Players: Growth will be led by creation of larger base of Hard and Mid Core players in India. Hard and Mid-core players in India mostly like to be the active gamers and content consumers of Esports tournament in India. . Levers for up-move started: This creation of Mid and Hard Core Gamers is nothing but upmove of Casual Gamers to Hard/Mid Core Gamers category which can be driven by consistent flow of open for all tournaments and strong set of mid and hardcore games. Both activities have started happening in India with craze of large IP Games like PUBG Mobile, Free Fire, Valorant, Teen Patti, Clash of Clans and with a slew of Esports Tournaments. . Another angle is publisher focus on views: Viewership of an eSports Tournament can be driven by User Base of that Mid &Hardcore game. Active players are driven to the tournament by interest. Moreover, game developers have started sending in-game alerts (Banner, in-game notification) of an eSports tournament to boost viewership. As per this view, going forward will be largely skewed towards top 2 games as the remaining games have not reached the userbase yet.

Ecosystem is building up in Esports Gaming ecosystem is emerging in India with many players attracting interest (money) from VCs to get a pie in the nascent and booming Esports Arena. Following are some of the key participants in this space: . Loco.gg: It is an eSports/Live Game Streaming App with 10Mn+ installs, owned by Pocket Aces (also owns Dice Media, FilterCopy YT Channel) that is funded by Sequoia Capital, DSP Group and 3one4 Capital. Loco.gg has rolled out programs to assist streamers and player’s platform with regional language content and programming. During pandemic its popularity increased significantly as it witnessed a six times growth in daily active users (DAUs) in September’2020 (1Mn viewers daily). Business Model: Loco makes money from advertisements, which it integrates into its streams; it also makes money from subscriptions. It has signed deals with esports teams (Fnatic India, Team IND, and Marcos Gaming) and hosted online events Eg: PUBG tournament with over 3mn views, a ‘COD’ Mobile event in partnership with Activision Blizzard, partnered with Redbull with its esports events and PC Gaming tournament with LogiTech. It is now focused on creating its own IP tournaments. . Rheo TV was another entity that has built a game streaming platform in 2019 with $2Mn in funding from Sequoia Capital (2Mn downloads). . Mobile Premier League (has 70mn users), a gaming platform company entered the e-sports tournaments space by acquiring GamingMonk (has 1.3Mn users). They plan to create national, regional and global tournament IP and broadcasting capabilities. It conducted four tournaments for games such as pool, chess, and WCC (Cricket), they recorded the number of

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livestream views crossing 5 million, with over 70,000 participants registering for the tournaments. . Garena (maker of Freefire game) officially launched BOOYAH!, a dedicated app for gaming videos in India in May’20. The app allows its users to livestream gameplay among other things and currently features broadcasts for the event ‘Free Fire India Scrim Wars’ – which boast about 6.5mn subscribers in India. . Paytm First Games had partnered with Riot Games, Garena, Supercell, ESPL to focus on Esports in 2020. It hosted Clash Royale, Teamfight Tactics and Ludo tournament in 2020. Although, it has not started any tournaments since then despite highlighting a ‘Valorant’ tournament in early 2021. . Reliance Jio has also started hosting tournaments for Call of Duty Mobile, Free Fire (Mobile Games). They have key sponsor (Qualcomm) and streaming is available with JioTV, Facebook Gaming and Youtube. Interestingly the visibility is low but the prize pools are high (Rs. 25 lakh for a single event). . Game developers: Some big game developers are also starting to setup their own tournaments as the popularity of their game is getting more and more established.

Lead indicator: Streaming Gaming Live Streaming growth in India is an indicator that Indian gaming audience is ready for content consumption in gaming. Majority Streaming in India happens on Youtube while for international markets streaming is done on ‘Twitch’. This is due to Youtube App being more mobile friendly and Indians largely watch on Mobile.

Below data highlights that Live Stream viewing has also scaled up very well in India and Indian Audience is already consuming live gaming.

Many Top live streamers by views in 2020 on YT Gaming are from India YouTube Channel Country Major Content Streamed

NOBRU Brazil Free Fire (Mobile Game)

MortaL India Multiple Games (PC & Mobile)

Dynamo Gaming India Free Fire and PUBG (Mobile Games)

Scout India Multiple Games (PC & Mobile)

VEGETTA777 Spain Free Fire (Mobile Game)

TheDonato Venezuela Free Fire (Mobile Game)

Total Gaming India Free Fire (Mobile Game)

Gyan Gaming India Multiple Games (PC & Mobile)

LazarBeam Australia Free Fire (Mobile Game)

SOUL Regaltos India Free Fire (Mobile Game)

MrStiven Tc Colombia Free Fire (Mobile Game) Source: DART, Company, Not Ranked (In no Particular Order)

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Monthly Views for Indian Gaming Youtubers (top 3 popular channels) 3,50,000 3,00,000 2,50,000 2,00,000 1,50,000

1,00,000 Montly Views (inK) 50,000

Jul-19

Jul-20

Jan-19

Jan-20

Jan-21

Sep-19

Sep-20

Nov-19

Nov-20

Mar-19

Mar-20

Mar-21

May-19 May-20 TotalGaming Mortal Techno Source: DART, Company, Note: All 3 are Indian Youtube Channels

Subscriber Count for Indian Gaming You-tubers 25,000

20,000

15,000

10,000 Subscriber(inK) 5,000

Jul-19

Jul-20

Jan-19

Jan-20

Jan-21

Sep-19

Sep-20

Nov-19

Nov-20

Mar-19

Mar-20

Mar-21

May-19 May-20

TotalGaming Mortal Techno Source: DART, Company, Note: All 3 are Indian Youtube Channels Nodwin’s Competition Positioning We believe with the Strong IP partnerships and Nodwin’s arrangement with official game developers (Krafton and Valorant), it is very well placed to tackle competition and still achieve strong viewership base. Nodwin’s early entry in the ecosystem has given it many early mover advantages which cannot be easily replicated (Premium Content, Demonstrated Capability, Multiple Established IPs, Existing Relationships with global game publishers).

1) Premium Content: eSport hosting is the business of making premium content where-in it focuses on top professional esport players in India and builds content around that. Playing or Viewing a Nodwin event has aspirational value (it is a goal for any player in India to play at such large event or in any official tournament). Any new event doesn’t hold that aspirational value that Nodwin has already built over the years.

2) Demonstrated Capability to Hold Large Scale Tournaments: Nodwin Gaming is one of the early entrants to the eSports Ecosystem and holds a longer track record of success and has large demonstrated capability to host viewers in offline and online domain. This position will attract many new game developers who want to host official game tournaments (already has Krafton for Battlegrounds Mobile, Riot Games for Valorant, Tencent for

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PUBG Mobile outside India) in India and South East Asia Region. At present, Nodwin hosts tournaments in India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan, etc. Nazara has had 28mn live stream viewers in FY20 3) Piggybacking on Peers success: Nodwin Gaming holds one of the largest collection of IPs and official tournaments rights for key games. With any improvement in viewership of the eSports ecosystem in India, the official and large IP owned events are likely to be benefitted in terms of more viewership. Thus, as competitors will make the eSports gaming as a more popular activity, Nodwin in turn will gain more prominence given its leadership position in this space (Eg: ecommerce market). In a way, MPL, Gamemonk, Skyesports are a feeder for Nodwin. How it would work: If a new gamer becomes eSports viewer by attending tournaments by other eSports organizers, he is most likely going to attend a larger IP or Official tournament of a Game that might be hosted by Nodwin Gaming. 4) Content Development: An eSports Tournament is like similar to a Reality TV Show in a way. It depends on engaging content to drive and hold viewership. Nodwin has already set strengths in strong content development to attract and hold viewers. This includes having the right set of influencers, commentators, creating the buzz on social media and so on. Thus, in this way Nodwin aims to build a very strong library of content which may help it scalp huge potential Media rights from publishing eventually. 5) Offline Tournament Players: Offline Tournament Organizing competitors have just started in last two years, and are focusing on creating own IP and have limited funding to scale fast. Nodwin already is years ahead of them in industry. 6) Competition from Well-Funded Players: Till now well-funded players (Jio & Loco.gg) have not entered offline tournament system. The online tournaments despite having large prizes doesn’t much push on visibility yet. We will closely watch the moves of big players to see the change in Nodwin’s competitive positioning in the ecosystem.

7) Competitor Games: One downside for Nazara is that competing games may not select Nodwin Gaming for organizing tournaments. (Example 1: If Nodwin is chosen by mobile based shooting game in India, another competing shooting game may not partner with Nazara for organizing its own tournament, Example 2: Nodwin was selected to organize tournaments for PUBG in India and nearby countries but FreeFire chose a different tournament organizer). While Nodwin’s positioning may remain strong as it is pioneer with strong partnerships, its market share can likely decrease due to rise in other eSports Organizers.

Business Model of Nodwin Gaming Nodwin gaming is an eSports Tournament Organizer in online or offline mode. The Revenue Model for eSports Segment is largely based on earning Sponsorship and advertisement fees from advertisers and selling the media rights to OTT platforms. The number of audience in a tournament drive both 1) sponsorship fees and 2) media rights value. The strength of any tournament business is visible by share of Sponsorship Revenue and number of viewers it can garner. The revenue breakup for Nodwin Gaming is 55% from Media Rights, 15% from Sponsorship Revenue and 30% for Whitelabelling Fees (earned for hosting events for game-publishers). Many game developers outsource tournament organization to third party tournament organizers in exchange in Whitelabelling Fees (Fixed Fee). The cost of any tournament largely involve production cost of conducting the event (Game Licensing, Online Production Cost, workforce for management of events, equipment Cost, leasing location (for offline event), Prize Pool and Advertising and Promotion Cost of marketing the event. June 28, 2021 46 Nazara Technologies

In our view, the costs are not fully linear to the Revenue on the longer run as the value of media rights increases. Revenue is scaled by audience and quality of audience while cost will not increase to the same extent for a larger event or more viewership. Nodwin earned a EBITDA Margin (includes segment’s other income) of 10.1% in FY21 (up from 9.3% in FY20). Margins were higher in FY21 as no physical events were hosted for last few quarters, more sustainable margins in near term of ~5%.

Global eSports Revenue Mix

3% 2%

6% Sponsorship 11% Media Rights Publisher Fees Merchandize & Tickets Digital 17% 61% Streaming

Source: DART, Company, Frost & Sullivan Analysis, DRHP

Global eSports Market would grow as it evolves like traditional sport 1,700 1,600 30 1,600 25.9 23.3 1,500 1,387 25 1,400 18.9 1,300 20 1,200 1,151 20.5 1,100 1,021 962 15 1,000 15.4 900 780 12.7 800 10 656 700 600 521 6.1 5 500 400 0 2016 2017 2018 2019 2020 2021E 2022E 2023E

Global eSports Market ($mn) Growth, YoY % - RHS Source: DART, Company, Frost & Sullivan Analysis, DRHP

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Indian eSports Market ($mn) 110 108 105 100 95 92 90 85 80 75 70 70 65 60 2018 2019 2020

Indian eSports Market ($mn) Source: DART, Company, DRHP

eSports Revenue - Nazara 1,500 1,357 210 1,400 188.5 1,300 190 1,200 170 1,100 1,000 150 900 775 800 130 700 600 492 110 500 90 400 75.1 300 170 57.6 70 200 100 50 FY18 FY19 FY20 FY21

eSports Revenue (Rs. Mn) Growth, YoY % - RHS Source: DART, Company

Nodwin manages multiple events either directly or as whitelisted events. Nodwin started in 2014 and now is the largest event organizer covering Mobile and PC Games in India. Nodwin has exclusive partnerships with ESL (which has also invested in Nazara Pre-IPO stake is 0.25%) and manages gaming events such as the ESL India Premiership (ESL’s flagship event in India), KO Fight Nights, etc. Nodwin was also the first operator to host Dreamhack event in Asia (India was 1st Country in Asia to launch this mega gaming event) and also launched an eSports Tour in partnership with Airtel. Nazara has built multiple partners over the years.

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Nodwin Partners and Advertisers

Source: DART, Company

Key Nazara Managed Events in India Recent Media Name Games Period Rights 2016, 2017, 2018, ESL India Premiership CS GO, FIFA 21, Clash of Clans Hotstar 2019, 2020 CS GO, PUBG, Street Fighter V, Tekken 7, DreamHack India 2018, 2019 Voot Super Smash Bros KO Fight Nights (part of DreamHack Street Fighter V, Tekken 7, and Super 2018, 2019, 2020 Youtube India) Smash Bros Ultimate CS GO, Dota 2, Fortnite, Super Smash 2016, 2017, 2018, Mountain Dew Arena Hotstar Bros. 2019 Airtel India E-Sports Tour (esp. Northeast Call of Duty Mobile, Free Fire, CS GO, 2020 NA Sports Sumit) FIFA 20, Cash of Clans Airtel XStream, Call of Duty Mobile India Challenge 2020 Call of duty Mobile 2020 Facebook, Youtube Source: DART, Company, Nazara also operates PUBG Mobile Pro League Event. however, it is whitelisted event. Valorant Conquers Gaming Event is also whitelisted. We not included Game Awards 2020.

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Business KPIs and operating metrics for Nodwin Particulars FY17 FY18 FY19 FY20 IPs Globally Licensed IP 1 1 3 3 Joint / Owned IP 0 1 4 4 White Label Work 5 5 6 8 Events Metrics Events 5 7 12 17 On Location Days 18 26 47 68 Online Event Days 32 69 182 51 Event Footfall (in K) 65 120 260 510 Locations Covered (Cities) 5 14 147 242 Prize Pool ($mn) 0.1 0.2 0.6 1.9 Reach Metrics Yearly Video (mn) 1 6 28 175 Social/ Digital (mn) 4 35 208 512 Gamers Registered (in K) 88 450 2200 6900 Clients / Partners 3 8 18 27 Business KPIs Sponsorship + White Label +Data Services Revenue ($mn) 1.3 2.3 6.4 7.2 Media Rights Revenue ($mn) 0.0 0.1 0.6 4.1 Total Revenue ($mn) 1.3 2.4 7.0 11.3 Other KPI Countries 1 1 2 5 Staff 3 7 32 55 Source: DART, Company

The number of Partners and Clients with Nodwin Gaming have increased overtime as more tournaments are played (36 partners as of H1 – with total prize pool of $1.2mn). This is the count of sponsors and tournament partners. Partner increase implies larger content base over time which in turns can lead to strong and valuable content library, thus in turn driving revenue potential.

Number of eSports Clients / Partners for Nodwin Gaming 40 36 35

30 27 25

20 18

10 8

0 FY18 FY19 FY20 H1 FY21 Source: DART, Company

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Battlegrounds Mobile (erstwhile PUBG Mobile) . PUBG Mobile, one of the highest grossing game, having 50mn MAUS in India got banned in Sept’20 in India due to “security concerns”. Later on the company (Krafton) behind “PUBG” has cut its ties with Tencent, “a Chinese Game Publisher” and is set to re-launch the game in India in June’21 (launched on 18th July). . PUBG Mobile had 65mn DAUs Globally. With the Ban of PUBG Mobile in India, the DAUs declined by more than half to 30mn. The nearest competitor Free Fire has ~8mn+ DAUS in India (industry experts). . PUBG Mobile was the driving force behind Esports Tournament in India (~50% Market Share in Prize Pools). Nodwin was the tournament organizer for official PUBG tournament in India (now stopped). . As the game returns with its new Korean publisher company (Krafton) and renamed title ‘Battleground Mobile’. Nodwin is best placed to take advantage of the same. Official events of Battlegrounds Mobile could be hosted by Nodwin (but not contracted yet) as it has the capability to host large events offline and Krafton has invested $22.5mn in Nodwin in Feb’21 to get ~15% stake. This has resulted in dilution for Nazara in the company to 50.11% (Earlier 54.99%). . With Krafton, Nodwin will continue to have largest share of prize pool (to attract players) and viewers.

Battlegrounds Mobile India Launch: The App has been launched (18th July) with some changes yet the core game is the same. The changes are: 1) Blood Color has been changed to green leaves animation effect. 2) New pre-game announcement that “Krafton Battlegrounds is not real-world based game, it is a survival simulation in a virtual world” 3) 2nd Pre-game announcement related to limiting the hours spent on the gaming (take regular breaks, etc).

Nuances of the Business Model . IP Creation: Nodwin is in the business of creating strong IPs and premium content which drive the value of media rights. IP here implies the specific tournament which would drive viewership for that tournament (ESL India Premiership, Dreamhack, etc). Nodwin focuses on creating and maintaining the largest IPs to create premium content which the media rights buyers (OTT, etc.) will pay for showcasing the same on their platform. Any IP takes 3-4 years to break-even in terms of cost. Nodwin’s IP renewal with ESL is due in FY23 (5 year contract was signed in FY18). . Current IPs: The current key IPs held by Nodwin – ESL, Dreamhack, Mountain Dew Arena, etc.ly are its own IPs where it has just paid (like royalty or fees) to get the brand name of ESL, Dreamhack, etc. The revenue earned by IPs is its own revenue and is not shared with these players. . Media Rights Bucket: Nodwin views the cost and profitability of the Own IP where it doesn’t do individual P&L of any event but checks the value of media rights bucket (+sponsors) and the cost of events (Total Cost, cost per hour of premium content). The plan is to grow the value of the media rights bucket as a whole while investing (increasing) in the IPs it owns. In the long term, Sponsorship could just cover the cost of events and Media-rights would be pure profits. Media Rights are generally reviewed after two years.

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. White-Label Events: White-Label events are event which are done for the game publisher and Nodwin makes a fixed margin on that business. These are done to do community based activation for the game publisher. Example it is doing grassroot events and large events to attract more gamers to the specific game. . Online & Offline: In the tournaments, it organizes the preliminary rounds in an online mode and later on final rounds of the tournament (or qualifier rounds for international tournaments) are conducted offline / in-studio (Pre- COVID) which are streamed live and also attract an offline audience. Example: ESL preliminary rounds of the eSports tournaments organised by Nodwin Gaming are held online, with participants playing from their individual computers. The later stages of the tournaments are held at large offline events which attracts a live viewer audience. The entire tournament is also broadcasted on the web (on OTT such as Hotstar, Voot, MTV, Viacom) and was also broadcasted on TV on DSports (now shut down) that brings more viewer interest from gaming enthusiasts. . Marketing: Marketing for the eSports tournaments is primarily undertaken via 1) influencer marketing – people with 6-8mn followers (Esports Team and Player announcement that they will playing “X” event, enticing the fans to watch) and 2) Event marketing on social media platforms such as YouTube, Facebook, Instagram, Twitter and its own SportsKeeda website. . Sponsors: Nodwin attracts various popular brands for eSports events. As per the agreements with sponsors, the latter agrees to pay Nodwin a fixed amount, in certain cases, upon completion of pre-determined milestones. Some of the sponsors (like Game Equipment Company provide its own gaming products for brand visibility) also provide equipment for use in the event, such as monitors, as a part of the arrangement. Like any other real event shows, Nodwin highlights the logos of the sponsors in banners, introduction videos, waiting screens, and signs at offline events and in the games being played by the gamers. They also mention and callouts of the sponsor names by stage hosts, analysts and commentators. . Seasonality in Biz: Nodwin conducts events online and offline in agreements with game publishers which mainly occur in June and December Month (avoided in Q4 given examination time in India). These agreements are event specific and provide a fixed payment on event basis. . Technology: Nodwin uses publicly available technology platform like ESL Play, Smash.gg, Toornament, Challengermode & Sostronk for hosting gaming tournaments. . Cost: The largest cost for events is the prize pool, land cost for events, production cost and advertising cost.

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EBITDA Margin (%)

1,600 10.1 12 9.3 1,400 10 1,200 8 5.4 1,000 6 800 4 600 2 400 0 -3.3 200 -2 170 176 492 465 775 703 1,357 1,220 0 -4 FY18 FY19 FY20 FY21

Revenue (Rs. Mn) Operating Expenses (Rs. Mn) EBITDA Margin (%) Source: DART, Company, EBITDA Margin for FY20 & FY21 includes Other Income of Esports Business as reported by Nazara. FY19 and FY18 as based on Financials of Nodwin Gaming and doesn’t include other income. Operating Expenses for FY20 and FY21 include (Other income).

Where did the money go? Breakup of Rs. 100 in Revenue

Advertising & Promotion 5.0 5.1 Event Cost 6.2 35.1 6.6 Employee Cost

Other Cost

Share of Nazara in EBITDA Margin 42.0

Share of Minority Owners in EBITDA Margin

Source: Company, This is an approximation of the Cost breakup based on the Nodwin’s Financials in FY20 Way Forward Nazara plans to continue its investments in the eSports space in different geographies and different domain capabilities. Further investments in Indian eSports would be largely towards strengthening the business around payment ecosystem (for PC Gaming), bringing influencers on-board (individuals with large fan following on social media).

Our View on eSports Business: We believe eSports business is well positioned for growth given its leadership position in the nascent industry some of the factors that would ensure hyper-growth trajectory in this segment are:

1) More Hardcore/Midcore gamers: The move of casual gamers to mid and hardcore gamers category led by investments (hardcore gamers count can go to 300mn from 50mn in 3-5 years) done by whole industry participants, would support continued growth in the viewership. Nodwin work with Top200 e-athletes to create the content that can create large following.

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2) More Games/More IPs: With strong IPs and official game tournament rights, Nodwin Gaming is well set to gain from investments done by peers and itself in the industry. Today it is largely working on 2 games but tomorrow more game publishers may reach out to Nodwin for activations. This will happen as In-APP Purchase in India improves for certain games, which will attract more investments from peers. It is like a B2B2C model and thus more length/breadth of partner is ley to grow the business.

3) Virtual Social status: With players getting more prize money, more followers, hours of streaming, they will be forced to spend on In-App Purchases to give constant refresh to their virtual avatar.

4) Relaunch of PUBG: With the launch of Battlegrounds Mobile (replacement of banned PUBG Mobile) as well, Nodwin is well-set capitalize on the growth impact the game brings on all facets of the industry.

5) New markets: We also like the early investments it has done in South Africa (which is also in the nascent stages in eSports, where it can replicate its success of India Playbook). Next few focus markets are SriLanka, Bangladesh, Middle East and Africa.

6) Pricing improvement in Media Rights and Advertisements – currently it is at 0.1x compared to that on TV.

We expect Esports (Nodwin) Revenue to grow at 37.9% over FY21-FY25E with PBT Margin of 6.1% by FY25E.

eSports – (Nodwin) Segment to grow at 37.9% CAGR over FY21-FY25E 6,000 75.1 80 70 5,000 60 4,000 44.4 44.9 50

3,000 31.0 32.0 40 30 2,000 20 1,000 10 775 1,357 1,960 2,840 3,719 4,909 0 0 FY20 FY21 FY22E FY23E FY24E FY25E

eSports -Nodwin (Rs. Mn) Growth, YoY Source: DART, Company

Profitability: This business has little longer gestation (IPs take 3-4 years to break even) for creating profit pools, and also have certain elements such as white-label events that creates cash flows and fix profitability. But the real essence lies in how many IPs you can create, which in turns create a powerful repository/library of the content that grow exponentially in its Media-Rights value over time as the number of viewer count increases beyond a threshold (Eg: Value of IPL Media Rights have quadrupled in 12 years since inception).

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Nodwin Gaming - Profitability to be driven by media rights value 350 7 6.2 6.0 6.1 300 6 250 5 200 3.8 4 3.0 150 2.8 3 100 2 50 47 84 54 86 142 299 0 1 FY20 FY21 FY22E FY23E FY24E FY25E (50) 0 PBT (Rs. Mn) PBT Margin (%) Source: DART, Company Ownership and Acquisition Details . Nazara acquired 54.99% of Nodwin Gaming for Rs. 770Mn in Jan-18 of which Rs. 355Mn was in terms of cash (subscribing to additional Nodwin Gaming shares) and Rs. 414mn was for exchange of Nazara shares (Valued at Rs. 547 per share). . In FY21, Nazara invested Rs. 150mn in Nodwin Gaming for further 831 shares. . In Q4FY21, Krafton (Maker of Battlegrounds Mobile, owner of PUBG IP) invested $22.5mn (Rs. 1,646mn) in Nodwin Gaming for 15.0% stake on diluted basis (16.3% otherwise). Krafton purchased 2,457 shares for Rs 0.67mn each (from Nazara: 1,638, GGIT: 590, Jetsynthesys: 229). Post this transaction, Nazara owns 50.11% on diluted basis. Acquisition Table Particulars (Rs. Mn) Cash Shares Upfront Earn-out Total Comment Subscribed to 3,414 equity shares of Tranche 1 355 355 355 Nodwin Gaming (25.45%) stake for Rs. 355.32mn. Swap of 3,962 shares of Nodwin Gaming split equally between GGIT and Tranche 2 414 414 414 Jeysynthesys in exchange of 376,927 shares each of Nazara (Valued at 547 per share) Total 355 414 770 0 770 Source: DART, Company Nodwin Gaming Ownership Particulars Shares Diluted Ownership (%) Pre-dilution (%) Nazara 8,207 50.1 54.5 Krafton., Inc. 2,457 15.0 16.3 Jetsynthesys Private Limited 1,870 11.4 12.4 GGIT* 1,598 9.8 10.6 Pratithi Investment Trust** 920 5.6 6.1 GGIT*** (These shares not counted for Diluted Ownership) 1,326 8.1 8.8 Total 16,378 100.0 100.0 Source: DART, Company, GGIT is Good Game Investment Trust whose trustee is Akshat Rathee. GGIT also has 1,326 shares which are partly paid (Only Rs. 0.1mn per share paid). Sudha Gopalkrishnan holds shares of Nodwin Gaming on a beneficial basis for the Pratithi Investment Trust, in the capacity of its trustee. June 28, 2021 55 Nazara Technologies

SportsKeeda (20% of eSports Revenue) Nazara acquired 63.9% stake in Absolute Sports which owns SportsKeeda, a sports and eSports news destination website, for Rs. 438mn in June-19. SportsKeeda has over 42Mn MAUs and is the largest eSports NEWS destination website. It generates content via freelance sports journalists covering WWE, Cricket, Soccer, Basketball and Esports while images are sourced from IP-holders (also working on Video content off late). In India, it is the largest eSports website and 3rd largest overall sports site. Sportskeeda generates revenue by displaying advertisements (plans to introduce subscription revenue model at a later stage – currently only 1-2% of its visitors are power users – typically do 10-15 visits in a day) on its website, which are sourced through leading ad-networks and programmatic-demand-channels. SportsKeeda has a Revenue of Rs. 343mn and EBITDA Margin of 48.8%.

Strong Transformation Post Acquisition by Nazara Sportskeeda has witnessed a big turnaround in its performance post its acquisition by Nazara. The Revenue has grown by 141.4% YoY in FY21 along with a EBITDA Margin (includes other income) jump to 48.8% from 9.5% in FY20. The MAUs for Sportskeeda has doubled to 42.4mn in FY21 (from 17.8mn). This implies that Sportskeeda has made more regular readers. 3 key driver for success for Sportskeeda are 1) Moving to US market as further growth in India was limited as India market only earns stronger ad revenues post 50- 60mn DAU reach, 2) Since focused moved to US, the content was also altered with more articles based on that region (WWE, esports, also hired head for Soccer segment – articles visibility on TimeSquare and so on), budget also was enhanced from Rs20-Rs30mn a month to Rs100mn a month towards content authoring and 3) as content quality improved, SEO gains started kicking in as US is largely programmatic based advertising market (for Sportskeeda today 90% is eCPM from 50% in FY20).

Key Metrics for Sportskeeda Website Particulars FY18 FY19 FY20 9MFY21 FY21 MAUs (mn) NA NA 17.8 38.2 42.4 Visits per month (in mn) 28.8 34.2 47.3 59.0 87.9 Average session duration (Sec) 129 143 228 192 199 Source: DART, Company

Sportskeeda MAU Trend 80 68 70 60 59 55 60 52 51 48 50 38 40 30 30 23 19 20 10 10

Jul-20

Jan-21

Jun-20

Oct-20

Apr-20

Sep-20 Feb-21

Dec-20

Aug-20

Nov-20 Mar-21 May-20 Source: Company, DART, This data is approximated from Investor Presentation Sportskeeda MAU chart.

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. We believe this growth in the business is due to increased focus on developed economies (US, UK, Canada) where advertising rates are higher than India and increasing the variety of content (cover more sports). (Exhibit 32, Row 8). . The traffic mix for Sportskeeda has also changed with a more varied variety of sports genres to target a larger pool of audience. The focus on eSports is also visible with share of eSports related traffic being 42% of traffic in 9MFY21.

Traffic Mix - Sportskeeda Particulars FY20 9MFY21 WWE 17.4% 16.2% eSports 3.6% 42.0% Cricket 58.9% 28.6% Other Sports 20.1% 13.3% Source: DART, Company Business Model . Like most news websites, Sportskeeda earns revenue via advertising. The Advertising Revenue is driven by number of visits the website gets and advertising rates in that country. Sportskeeda has witnessed consistent growth in visits per month over the years (doubled in 3 years). The FY21 Year has witnessed strong growth in Revenue due to change in geography mix (Developed Countries have higher advertising rates) and also by increased focus on improving the content quality (leads to repeat visits (organic) and longer duration per visit.

Revenue and Visits per month Trend 375 65 59 350 60 325 55 300 47 275 50 250 45 225 40 34 200 35 175 29 30 150 25 125 132 154 142 343 100 20 FY18 FY19 FY20 FY21

Revenue (Rs. Mn) Visits per month (in mn) - RHS Source: DART, Company, Revenue in FY20 declined over FY19 on account of decline in advertising rates in India.

. Sportskeeda also witnessed significant improvement in its EBITDA Margins (reached 49% in FY21, from 9.5% in FY20). This has been largely led by strong control on operating expense and operating leverage on its content cost (cost for authoring). Example: With content cost being same for an article, the same article will generate more revenue with more views (especially when views are from high advertising rate region).

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SportsKeeda Financial Summary Particulars FY18 FY19 FY20 FY21 Revenue (Rs. Mn) 132 154 142 343 Growth, YoY % NA 16.6 (7.9) 141.3 Operating Expenses (Rs. Mn) 114 146 129 176 EBITDA (Mn) # 18 8 13 167 Growth, YoY % NA (55.0) 62.3 1142.8 EBITDA Margin (%) # 13.9 5.4 9.5 48.8 Source: DART, Company, As acquisition was done in FY20, Nazara has included only 6 months of Sportskeeda Revenue in FY20. We have compared full year financials of FY20. The EBITDA & its Margin of FY20 and FY21 includes Other Income. Similar, Operating Expenses for FY20 and FY21 needs to be adjusted for Other Income.

Where does Rs. 100 in Revenue go?

13.1 22.5 Employee Cost Finance Cost 9.7 Depreciation and amortization 0.5 Other Expenses 6.4 Tax 15.9 MI PAT After MI 31.9

Source: DART, Company. This is based on H1FY21 Financials of Absolute Sports in RHP where Revenue includes Other Income.

. The Cost Model for SportKeeda is largely dependent on Cost of Content (Cost of making articles). Content on Sportskeeda is largely from different freelance sports journalists in India and Overseas. It has a fixed contract relationship with well-known writers and variable contract with 2000+ bloggers (variable pay related to different metrics like number of visits, views, etc.). Editorial Team of Sportskeeda guides the freelance writers (based on topics which have more views). It also has a direct India-focused sales team which works with brands and media agencies for sponsored content. . Content Investments: In the last 12 Months, Sportskeeda has increasingly focused getting more quality content on-board to drive the retention, time spent and visits metrics. Sportskeeda plans to increase the number of sports game covered and get more unique content (like Interviews with well-known player, etc) to drive further improvement in viewership. . SEO: Another aspect of news website business is how healthy is the content so that it could generate organic traffic through efficient SEO (Search Engine Optimisation). SEO in simple terms is process for a website to increase its visibility based on search engines algorithms. Better, SEO you have, better visibility of the articles on search engine, more organic views and more revenue. Sportskeeda has in-housed the SEO capabilities.

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Competitive Landscape Sportskeeda ranked 3rd in Sports Category in India and 18th in USA (Source: Similarweb). However, in terms of, engagement metrics it still falls behind the large peers wherein it is getting most of its traffic from Search Results (88.2%), the bounce rate is also higher than larger peers (high bounce rate means user reads only 1 page and then leaves). The MAU and Visits of 42mn and 59mn also imply that number of visits per user are low.

Comparison with Larger Peers Particulars SportsKeeda CricBuzz ESPN Global Rank 1056 246 103 Country Rank 714 NA 35 Category Rank (Sports) 18 NA 1 Total Monthly Visits (mn) 53.7 238.3 433.7 Avg Visit Duration 1m22s 8m8s 9m16s Pages per Visit 2.30 2.53 3.27 Bounce Rate 65.0% 38.1% 44.5% US 32.3%/ India 14.6% /UK 5.7% / Country Mix India 76.1%/ Bangladesh 7.7% US 86.6% / Canada 3.5% Canada 5.6% /Australia 3.0% / US 4.4% Key Traffic Source Search (88.2%) Direct (73.6%) Direct (74.2%) Source: DART, SimilarWeb.com, Country is for USA & Category Rank is for Sports in USA, as of 3rd June, 2021, Nodwin holds a minority stake in AFK Gaming.

SportsKeeda is one of the biggest websites in eSports. (~42% of Traffic in 9MFY21) and it also has much better website metrics compared to its peers.

Comparison with eSports Websites Particulars SportsKeeda Dexerto Thesportsrush Dotesports AFK Gaming ESTNN esportsobserver eSportsinsider Total Monthly 53.7 16.2 10.1 8.8 1.6 1.2 0.3 0.2 Visits (mn) Avg Visit Duration 1m22s 48s 31s 52s 58s 17s 23s 1m2s Pages per Visit 2.3 1.6 1.2 2.1 1.5 1.5 1.2 2.6 Bounce Rate 65.0% 79.8% 90.0% 67.2% 75.1% 63.7% 85.0% 73.8% Key Traffic Source - 88.2% 81.7% 91.6% 84.3% 80.8% 92.5% 63.9% 68.9% Search Source: DART, Nodwin holds a minority stake in AFK Gaming.

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Advertising Rate Comparison Website Mode Banner Cost (Per Impression) Reach Sportskeeda Website Rs 0.08 42MAU in FY21 Sportskeeda Mobile Rs 0.16 42MAU in FY21 Cricbuzz Mobile Rs 0.09 NA Cricbuzz Website Rs 0.08 91Mn MAU Hotstar IPL 21 App Rs 0.09 260Mn Reach Cricket Country Website Rs 0.12 1.3Mn Impressions / Month Crictracker Website Rs 0.06 30Mn+ pageviews Ten Sports Mobile Rs 0.10 415K impressions / month CricPick Website Rs 0.16 1.1Mn Impressions / Month Cricket Country Mobile Rs 0.08 800K Impressions / Month Sportstar (The Hindu) Website Rs 0.14 227K Reach / Month Hotstar IPL 21 Hindi App Rs 0.08 260Mn Reach Cricbuzz# Website Rs 11,50,000 91Mn MAU Sportskeeda# Website Rs 7,00,000 42MAU in FY21 Sportskeeda# Mobile Rs 2,00,000 42MAU in FY21 Source: DART, Company, #Holds the cost for Pop-Up on Website Our take on key rationale for SportsKeeda acquisition . An eSports and gaming NEWS website is another way to play the eSports growth story. With growth in viewers in eSports and mid and hardcore gamers in India and the US, the usage of news website for specific content will increase. Example: Gamers check news website multiple times for an awaited update of a game or new content. Updates and News of eSports players and tournament can also be checked on the platform. . An eSports news section can help Nodwin Gaming to update their viewers about their own content and update. They can have greater control on their eSports updates and marketing. Similar, case can be for Freemium Games and the Real Money Gaming Portfolio.

Ownership and Acquisition Details . Nazara acquired 63.9% of Absolute Sports for Rs. 438Mn in June-19. Out of this, Rs95mn was in new issue and Rs. 343mn were in shares swap with Promoter and Other Investors in the company. . On 22nd April 2021, Nazara further acquired 1.4% stake for Rs. 9.6mn from the CTO, Sankalp Sharma (sold his whole stake). As on 22nd April 2021, Nazara was holding 65.3% stake. . In Q4FY21, Nazara acquired further 3,000 equity shares in Sportskeeda at Rs. 3,195 per share and now holds 74.3% stake in the business. During FY21, 26,000 ESOP shares got expired and remained unallocated. This led to partial increase in stake without anyone getting diluted.

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Sportskeeda - Acquisition deal contours Particulars (Rs. Mn) Cash Shares Upfront Earnout Total Comment 381,160 Nazara shares were issued to CDC Group, 65,855 Nazara shares to Srinivas Cuddapah (Founder), 24,725 Nazara shares to Porush Jain Tranche 1 6 343 349 0 349 (Founder) and in exchange of 109,327 equity shares of Absolute Sports and Rs. 6mn in cash. Nazara shares were valued at Rs. 728 per share. Tranche 2 Invested 89mn in Absolute Sports for 89 89 0 89 27,846 shares of Absolute Sports Total 95 343 448 0 448 Source: DART, Company

Absolute Sports Ownership Pattern Particulars As of Apr’21 (%) As of Q4FY21 (%) Nazara 65.3 74.3 Porush Jain (Founder) 19.8 14.4* Absolute ESOP Trust 13.5 10.1* Srinivas Rowjee Cuddapah (Founder) 1.4 1.2* Sankalp Sharma (CTO) 0 0* Total 100.0 100.0 Source: DART, Company; * Shareholding for minority holders is reduced in ratio of dilution as the data for selling shareholder is not given.

Our View: Sportskeeda’s NEWS business has scaled up well in FY21. It is at 18th rank in Sports website in USA and 3rd in India (by traffic). Sportskeeda can growth further led by increased viewership for traditional sports and eSports both. We are encouraged by its performance in FY21 but will see how sustainable is its EBITDA Margins and any further improvement in Website Metrics. We expect Revenue growth of 28.6% over FY21-FY25E and PBT Margin of 48.4% by FY25E.

Sportskeeda to grow at 28.6% over FY21-25E 1,000 414.5 450 900 400 800 350 700 300 600 250 500 200 400 300 150 200 51.5 100 25.0 20.0 20.5 50 100 67 343 520 650 780 940 0 0 FY20 FY21 FY22E FY23E FY24E FY25E

eSports -Sportskeeda (Rs. Mn) Growth, YoY Source: DART, Company

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Sportskeeda PBT Margins to gradually improve with op. leverage 500 60 450 48.4 46.5 50 400 43.8 42.3 350 40 300 29.9 250 30 200 150 20 100 10 50 103 228 275 363 455 0 0 FY21 FY22E FY23E FY24E FY25E

PBT (Rs. Mn) PBT Margin (%) Source: DART, Company. For FY21, PBT Computed based on EBITDA split in weights of Sportskeeda and Nodwin EBIDTA on annualised basis - between SK (55%) and Nodwin (45%).

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Telco Subscription (16.5% of Revenue, PBT Margin of 10.1%) Telco Subscription Business is Nazara’s legacy business where it is a gaming services provider (VAS) to Telecom subscribers. This legacy business scaled up very well till FY16 and has been on a gradual decline ever since. This is largely attributed due to 1) Increased availability of free casual games on App Stores (consumer trend going to free games) 2) Pricing structure change for Telco in India to bundled services (Jio Bundled offers, other followed, VAS component was removed), 3) Decline in partnerships with Telco operators (due to exit from markets with high customer acquisition cost) 3) Now given the disruption in the business from increased availability of free games on smartphones (why pay, when games are free!), the Telco business is expected to remain in flat-to-declining curve.

This business provides a catalog of 1,021 games (Android & HTML) which are bundled and provided to Telco subscribers under sachet pricing model (daily, weekly, per game subscription in Sub Rs. 100 bracket). The USP of the business is the availability of multiple games under one miniscule cost (which attracts users).

Telco Subscription Revenues have been declining since FY16 2,200 75.1 80 61.1 2,000 60 1,800 36.1 1,600 40 1,400 20 1,200 1,000 (10.6) 961 (8.4) 0 (17.7) (14.9) 800 -20 (37.3) 600 542 874 1,530 2,082 1,862 1,532 818 749 400 -40 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Telco subscription (Rs. Mn) Growth, YoY (%) - RHS Source: Company, Old DHRP’s Subscription/download of games/other content Segment taken as Telco Biz which includes some portion of Freemium segment but variance should be only of max 5%, FY18 has Rs. 375mn Revenue from Iran was not available in future due to US sanctions. Largely Exited Bangladesh (Rs. 13mn) and Nigera business (Rs. 70mn) in FY19 and FY18.

Country Wise Revenue (Rs. mn) Country Wise Revenue Mix (Rs. mn) 100 1,800 3.3 8.8 348 18.7 24.5 23.3 30.2 1,500 80 17.1 34.0 375 475 25.5 19.0 22.6 1,200 60 33.7 20.0 13.3 900 347 373 224 40 20.0 138 247 34.3 22.0 27.6 600 324 38.8 23.8 153 595 164 20 300 604 277 229 180 145 32.4 57 20.9 19.2 27.8 25.1 216 184 227 118 14.1 0 169 107 0 FY17 1HFY18 FY18 FY19 FY20 1HFY20 FY17 1HFY18 FY18 FY19 FY20 1HFY20 India* Middle east* Africa APAC Latin America* India* Middle east* Africa APAC Latin America* Source: DART, Company, For 1HFY17 & FY17, India includes Sri Source: DART, Company, For 1HFY17 & FY17, India includes Sri Lanka, Nepal, Bangladesh. Latin America Region is Caribbean Lanka, Nepal, Bangladesh. Latin America Region is Caribbean Islands. Revenue from Iran is included under Middle East. Islands. Revenue from Iran is included under Middle East.

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The Telco Business has declined as it is visible with the decline in number of countries and partner Telecom Operators. The decline is largely due to exit from markets where the higher advertising cost was making the business unsustainable. Yet, today it is still well spread globally.

Number of Countries served Partner Telecom Operators 70 120 113 61 58 110 60 57 100 50 90 40 80 40 70 30 60 30 52 50 20 40 FY15 FY16 FY17 1HFY17 1HFY21 1HFY17 1HFY21

Source: DART, Company, Old DRHP Source: DART, Company, OLD DRHP

Business still well spread covering the Emerging Economies

Source: DART, Company

The pricing is under sachet model to attract users. The pricing is affordable and games are set to target late-internet users and casual gamers. The offering in India is available via Idea-Vodafone TSP. We believe that the pricing has deteriorated over time (Indian Region in 2013 was INR 5/Day, 30/Week and 3/Game). The games are available under Gameshub, GamesLounge or GamesClub (Africa) names under different regions. Today, the business is largely conducted on Android Phones (ditched feature phones in FY18). There is no app on Play Store, Nazara uses Telco website for download of APK (Android packages) of the games (Side-loading).

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Current Pricing under Sachet Pricing Model Country Main Currency Pricing INR Pricing Monthly 400MK / Weekly 150MK / Daily 30MK Monthly INR 37.7 / Weekly INR 14.2 / Daily 2.8 Malawi (Africa) Download: 30-100MK Download: INR 2.8 - 9.4 Monthly 150 NGN / Weekly 50 NGN / Daily 20 Nigeria (Africa) Monthly INR 27.2 / Weekly INR 9.1 / Daily 3.6 NGN Monthly 3200 Ushs / Weekly 1100 Ushs / Daily Monthly INR 66.3 / Weekly INR 22.8 / Daily INR Uganda (Africa) 270 Ushs 5.6 Gabon (Africa) Monthly 750F / Weekly 250F / Daily 100F Monthly INR 28.1 / Weekly INR 9.4 / Daily INR 3.7 Weekly SLR 120 / Daily SLR 20 / Pay per Play SLR 3 Weekly INR 46 / Daily INR 7.6 / Pay per Play INR Sri Lanka (APAC) / Game Purchase SLR 200 1.1 / Game Purchase INR 76.6 Source: DART, Company, Airtel Website, Currency Conversion as of 27th April ,2021.

Racing Games available under GamesPortal

Source: DART, Company, Telecom Website Portal, MK is Malawian Kwacha Currency. One MK is 0.091 INR Business Model The segment has just one revenue model wherein it earns subscription revenue on daily, weekly or per game basis from a Telecom subscriber. The billing is done via Telecom operators who also a take a pre-determined commission of the sale value. Revenue is recognized after the commission (or gross basis in certain cases). Under the Cost Model, there are 3 key items: Customer Acquisition Cost, Content Cost, Other Overheads (largely employee cost). Customer Acquisition is largely the advertising cost where acquisition of subscribers is done via advertising on carrier portals and popular websites by a third party (Ad Tech) at a fixed cost (ranges about ~33% of Revenue in good markets and higher in declining markets). The Content Cost is the cost of “leasing” (bringing the games to the platform from the publisher). The games are bought via agreement with games developers. This games cost (Content Cost) is around 7-8% of Revenue. The remaining cost is largely the manpower cost and the business overheads of Nazara business (Note: in Q4FY21, Nazara allocated all corporate overhead to this business). The Business earned a EBITDA of 18.3% in FY21.

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Nuances of the Model . Revenue from telecom subscribers in exchange of providing a collection of games (at low cost) which it is the USP that attract subscribers. Nazara has set strategic partnership (1-2 year agreements) with multiple telecom operators in different regions and the subscribers of these telecom can access games on per game or subscription basis via the telecom portal. The billing is managed by telecomm with a commission (i.e. revenue sharing between Nazara and Telecos) . The user base is attracted via ads on the telecom portal or ad campaigns on 3rd party websites (~33-40%% of Revenue). The subscription can be cancelled by an SMS from the user to the telecom operator. . The games are aggregated by non-exclusive partnerships (1 year – fixed contracts) with third party game developers where-in out of ~1000 games, 50 are made available and they change some after certain interval (like a month). These are usually not very well established games and usage of the games is low on individual basis (Indie Games). The game developers get a platform for publishing games (improve usage) and good licensing fees. This format ensures that consumers get access to large number of games at low cost (Very low content acquisition cost: 7% of revenue). Based on FY13-FY17 financials and our management interactions, the content cost has largely remained fixed (Abs Cost wise). . Nazara uses Data Analytics with Nazara Content Management Platform (NCMP) which manages monitoring content, customer care and reporting and auditing. It also ensures that NCMP is used to determine consumer preference and aggregate right set of games and bring enhancements. It also reduced the time to market which led fast growth in telecom partners across the globe.

Process Flow

User is directed to the User receives Service WAP billing Portal for Post confirmation downloading Confirmation, SMS from games or User Lands on User is Company with consumption Subcription directed to service portal of Content User Clicks on Confirmation Telecom URL Ad Banner on Page Operator 3rd Party Consent Mobile WAP gateway for Site billing

Source: DART, Company, this is an indicative flow chart and the customer flow differs based on the policies of telecom partners.

Business against popular consumer trend We believe that current level of users (Subscribers + one-time game download) in the Telco Business have reduced significantly from the peak subscriber base it achieved of about 4mn with ARPU of about Rs58. However, this business has lagged behind the changing consumer behavioural trends and also got disrupted in certain markets such as India (Jio bundled VAS+Voice as one plan). To revive the trend company has announced partnership with Disney to refresh its ‘me too’ content with branded and appealing content which may possibly help it arrest the revenue fall. June 28, 2021 66 Nazara Technologies

Profitability has gradually declined over the year The Business has witnessed decline in profitability over time. This is likely to due to the large chunk of cost remaining fixed in nature (Content + Employee Cost) while the business witnessed a Revenue decline of 50%. The current profitability of the business is at 18.3% (down 700bps YoY) which largely attributed to 8.4% YoY decline in Revenue as the Operating Expenditure was largely flat (Rs. 612mn). We believe that the business will now witness further gradual decline. However, it will be partially negated by further Operating Expenditure reductions (as the business scales down. Note: FY20 and FY19 EBITDA Margin is not comparable as FY20 figure is restated to include large chunk of Corporate Cost (~Rs. 58mn in FY20).

EBITDA Margin for Telco Business (%) 49.1 50 46.4 45 42.3 40 38.3 36.0 35 32.1 32.9 32.2 30 25.2 25

20 18.3

15 FY13* FY14* FY15* FY16* FY17* H1FY18* FY18 FY19 FY20# FY21# EBITDA Margin (%) Source: DART, Company, *using Company Level EBITDA Margins as Telco is the largest Segment. Variation should be <200bps. #FY20 and FY21 data is adjusted by Company to include corporate overhead cost and share of Other Income in the business. In FY20, Prior to this Adjustment EBITDA Margin was 32.1% (v/s Current 25.2%) Our take on the Nazara’s plan to revamp the business . In H2FY21, Nazara acquired a Disney contract for exclusive distribution of their games of Star Wars IPs and Disney IPs (characters including Star Wars, Frozen, Big Hero 6, Cars, Duck Tales, Finding Dory, Toy Story) on telco platforms. The contract is done on Revenue sharing basis with a minimum revenue guarantee (typical price point would be Rs5 or equivalent). . In our view, the Disney’s IP content portfolio is strong enough to attract viewers (gamers!). With the attractiveness of the Disney games, user acquisition could be easier (improving) and conversion efficiency in marketing (lower Advertising cost). The rights for the games have been acquired in 101 countries (higher than current countries served: 58). Management has highlighted potential for revival will be dependent on performance in coming quarter. . However, we have limited belief on any medium to long success of this strategy as target market (late adopters of Internet) is still moving to freemium / free games on smartphones. Hence, the product positioning is weaker despite Nazara acquiring strong IP products under the portfolio. The structural issue of free casual games already available for free is still present. . A move to an (iOS & Android) App based Model with Premium Games is the natural progression of the business. Business Model will be similar like offering games on subscription mode in an app. There is a company (BeMobi) which has done the same and achieved some success. Note: BeMobi doesn’t compete with Nazara as it is more LATAM market focused.

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. BeMobi is attempting to emerge as the “Netflix of Mobile Games”. BeMobi partnered with 150 publishers (Disney, Viacom CBS, Gameloft) to provide their premium games (29 % of all the Apps in the club has reached rank #1 in their category and 77 % of the Apps have reached the Top 100) and has partnership with 65 carriers in LATAM, SA, SEA, Africa for carrier billing. It provides games on a subscription model (Model is similar to Nazara’s). It has reached 32.2mn users (had 6mn in 2015), Revenue of $47mn in CY20 (Bloom estm of $85mn in CY23), EBITDA Margin of 38.0% (Bloom estm of 38.8% in CY23) and a ARPU of $1.66. BeMobi has recently got listed in Brazil and it trades at 16x of CY23 Earnings (as of 11th June,21). We don’t expect Nazara to aggressively move towards to Premium games as their stance on the business clear that it’s is against consumer trend. . Nazara has guided for flat growth in this business (assumed no traction from Disney Deal). However, we expect a decline of 5-7% CAGR over time the structural challenges we see in the business.

Our View: This business was the fastest growing for Nazara and it delivered strong profitability till FY17. With disruptions (Jio Entry, Iran Sanctions) and structural weakness, the business has faced steep decline during FY18 to FY21. Now, it is on a path of gradually declining with limited to no negative surprises. As the legacy business faces several challenges in terms of structural issues, we expect Revenue CAGR of 1% over FY21 to FY25E and PBT Margin of 7.7% by FY25E.

Telco to remain flat over FY21-FY25E (1% CAGR) 850 8 5.2 5.4 5.1 800 6 750 4 700 2 0 650 -2 600 -4 550 -8.4 -6 500 -8 -10.6 450 818 749 670 705 743 781 -10 400 -12 FY20 FY21 FY22E FY23E FY24E FY25E

Telco Business (Rs. mn) Growth, YoY Source: DART, Company

Telco Margins to remain soft given modest growth 160 18.4 20 140 18 16 120 14 100 10.1 12 80 10 7.7 60 5.7 8 4.5 6 40 3.4 4 20 151 75 23 32 43 60 2 0 0 FY20 FY21 FY22E FY23E FY24E FY25E PBT (Rs. Mn) PBT Margin (%) Source: DART, Company

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Freemium Business (4.3% of Revenue & -15.5% PBT Margin) Nazara is one of the largest mobile gaming publishers in India. Initially, Nazara started as a game publisher focusing on casual games with a joint IP to attract players (RCB Cricket Game, Chota Bheem, Bollywood star related games). Later in Dec-2017, it acquired 52.38% stake in Nextwave Multimedia, a gaming studio holding a mobile cricket IP (WCC or World Cricket Championship), for Rs. 528mn.

Today, Nazara has offerings covering simple games focused on children under age of 11 (Choota Bheem, Motu Patlu, etc) and several mid-core games with one of strongest mobile cricket IP of World Cricket Championship. Nazara has made investments in the WCC IP with newer releases and its recent launch was WCC 3 in June’20 (which won Google Play Users Choice Game of 2020 in India) and gave regular updates to previous WCC games. Nazara intends to focus on the WCC IP to target the midcore gamers in India and capitalize on the cricket craze in India (reached 150mn+ installs in Cricket, Carrom and TT Games combined). Freemium Segment has a Revenue of Rs. 195mn, MAU of 12.73mn (in Sports Simulation) and EBITDA Margin of 21.2%.

Freemium business for Nazara should be more pertinently compared to Sports Simulation Games Industry that is begged at $10bn-$15bn at max. Top two games company here are 1) EA (total revenues $5bn, of which FIFA accounts for about $750mn) and 2) NBA2K with $1bn revenues by Take Interactive (Total revenues $3bn).

Indian Mobile Gaming Industry . Mobile gaming is industry is the largest gaming segment (77%) of Indian gaming industry. In India, mobile gaming industry is growing very well led by increased mobile gamers (led by structural drivers – internet & mobile penetration, payment solutions, etc) and increasing propensity of mid and hardcore users to spend on hardcore games and fantasy sports (largest piece in India).

Indian Mobile Gaming Industry 1,400 49.0 50 1191 48 1,200 46.2 46 1,000 836 42.5 44 800 41.2 42 572 600 40 384 400 272 38 200 36 2016 2017 2018 2019 2020

Indian Mobile Gaming Market ($Mn) Growth, YoY % - RHS Source: DART, Company, Frost & Sullivan

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Indian Mobile Gamers (Mn) 340 330

320

300 290

280 270

260

240 230

220 200 200

180 2016 2017 2018 2019 2020 Source: Company, DART, Frost & Sullivan

. Highest Game Downloads: Game Downloads have gradually increased in India over the years (Android). With the lockdown, India had the highest number of mobile game installs during 9MCY20 at 7.3Bn game downloads (17% of mobile game installs globally) (Source: Sensor Tower). . Game Dev Studio Increased: Led by the strong levers of growth in the mobile gaming industry, the number of mobile game development companies have reached 250+ (from 25 in 2010). These are companies attempting the next “viral” game. Game Development business is a hit or miss business Examples: In US, Flappy Bird game was suddenly a hit/viral. Launched in 2016, LUDO KING become viral in India during COVID-19 (DAU: 50mn, MAU: 185mn, Company Revenue: $20mn in CY20). Indian publishers have mostly focused on evergreen games. . Revenue Model: There are four revenue models in India: 1) Advertising Revenue (Earning revenue via in-game ads) 2) Paid Apps (Earning revenue via sale of app) 3) In-App Purchase (Earning revenue via in-app purchases of in-game items or subscriptions). In India & Globally, a mix of advertising model and in-app purchase is the most used model for publishing apps.

What would work for Indian Simulation Gaming Industry . Growth in Hardcore games/gamers: Lately, Indian Gaming Industry’s growth is driven by hardcore games (Free Fire, COD Mobile, etc) driving inapp purchases and downloads, localized traditional games (Ludo, Teen Patti, Carrom, etc) and fantasy apps (MPL, Dream11, etc). . Usage Metrics: 1) Hardcore Games: For Free Fire, 10% of MAUs in India are paying users. PUBG Mobile had ~28mn DAUs (pre-ban period, industry expert view). 2) Traditional Games: Octro Inc, one of the top 3 grossing publishers in India, has reached +200mn users across its games. 3) Fantasy Sports Apps: The fantasy sports games have more than 100mn users of India. 46% of users in Fantasy Sports are paying users (Have bought something once, KPMG, 2019). . Ad dependency: Today, India is largely dependent advertising revenue for Games and the penetration of In-App Purchases is limited (India Ad:IAP revenue Mix is 70:30, Global Ad:IAP Mix is 30:70 – Industry View). India is on the right path but has a long way to go. Despite having highest downloads, it is not a big spender (IAP + Paid). Top 3 spender countries on games are US, Japan & South Korea – per capita basis (Source: Android).

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. IAP Penetration Wave: IAP Penetration in any country happens in stages. First stage is the Real Money Games (already happened in India) then Hardcore games (showing good uptick), 3) Third in line is Midcore Games (WCC in this category) and lastly Casual Games fall in the next phase to witness uptick in IAP Spends but are still 3-4 years away to see major uptick in IAP Penetration.

5 Phases of IAP Penetration in India Phased Growth of IAP Comment Fantasy Games (Real Money) Fantasy Games witnessed IAP Penetration in 2017 Hardcore Games Hardcore Games also witnessed IAP penetration in last 2 years Localized Teen Pati type Games (Non-Real Money) This segment witnessed IAP penetration in last 1 years Midcore Strategy Games This segment is yet to witness in any material uptick in IAP Revenue Midcore Games (WCC is in this category) This segment is yet to witness in any material uptick in IAP Revenue Casual Games This segment is yet to witness in any material uptick in IAP Revenue Source: DART, Company

Top Grossing Games in India (Android) Top Grossing Apps Publisher Origin Game Type Free Fire Garena Singapore Hardcore Ludo King Gametion India Localized Game (Midcore) 3 Teen Patti Octro India Localized Game (Midcore) Coin Master Moon Active Israel Midcore Call of Duty Activision Publication USA Hardcore Clash of Clan Supercell Finland Hardcore Candy Crush Saga King Sweden Casual Lords Mobile IGG.COM China Hardcore eFootball PES 2021 KONAMI Japan Midcore Top War: Battle Game Topwar Studio China Midcore Source: DART, Sensor Tower WCC IP . Why Buy WCC: World Cricket Championship (“WCC”) games have seen tremendous success since its launch in 2015. One of the reasons to acquire the WCC IP is to get access to midcore games which have higher shelf life (unlike casual gamers users here don’t leave the game early) and higher propensity to get IAPs from users. IAP driven Revenues are sustainable and better than ad revenue which are much low in India. . Continued Investments: Post-acquisition, Nazara has invested in the IP over the years to update and refine the gaming interface, introduced consistently apps updates, get new content within and launched new versions (WCC 3) of the WCC games to ensure continued relevance with game players. Today, Nazara has WCC, WCC 2, Beach Cricket, Bat Attack Cricket and WCC 3 games under WCC IP. . eSports: Nazara is also undertaking eSports tournaments via multiple partners for WCC (MPL, SkyeSports, etc). In most Nodwin Events, WCC is present. eSports presence of WCC essentially help to improve the visibility of the game. . Metrics: WCC Games have received 140mn+ installs across devices till date. Today the sports simulation portfolio has 13mn MAUS and 2.3mn DAUS (Peak: DAU was 3.5mn). The newest game WCC 3 (launched in Q2FY21) is receiving 100,000+ installs per day (largely organic). WCC had an average of 4 million downloads per month with an average time spent per day per user of 31 minutes 9MFYF21. For other children’s games, average MAUs for Financial Year 2020 were 8.48 million. June 28, 2021 71 Nazara Technologies

DAU (mn) Trend in WCC 3.0 2.9 2.8 2.6 2.5 2.5 2.4 2.3 2.2 2.2 2.2 2.0 2.0 2.0 1.8 1.7 1.7 1.7 1.7 1.6

1.4

Jul-20

Jan-21

Jun-20

Oct-20

Apr-20

Sep-20

Feb-21

Dec-20

Aug-20

Nov-20 Mar-21 May-20 Source: DART, Company

Usage Metrics are improving for the freemium mobile game portfolio 47 50 45 45 41 39 40 34 35 33 30 26 26 25 20 15 10 5 0 FY18 FY19 FY20 YTDFY21

Freemium Games Usage (Min/day/user) WCC Usage (Min/day/user) Source: Company, DART

WCC Games Download Metrics are improving consistently 40 1,01,239 1,05,000 97,606 35 1,00,000 30 95,000 90,000 25 80,538 85,000 20 80,000 15 72,239 75,000 10 70,000 5 65,000 26.4 29.4 35.6 27.9 0 60,000 FY18 FY19 FY20 YTDFY21

Total Installs (in mn) Installs per day Source: Company, DART

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Overview of Nazara’s Portfolio of Games Nazara has released more than 50+ Games on licensed IPs, acquired IPs, traditional games on the Android Platform (available also on Apple platform). Nazara has released several games both in Hindi and English. In FY20, the Cricket related Games achieved installs of 52Mn and kid related games achieved installs of 51Mn. Nazara has several casual games under its portfolio as well. They have garnered good download metrics (Helped Nazara be in Top 10 Download section in 2016, 2017, 2018, 2019) and are driven by well-known cartoon IPs (Chota Bheem, Motu Patlu, etc). However, the Revenues are driven by advertising (low ad rates in India) and Games have a lower shelf life. Advertisement to InAPP Purchase mix for Nazara is in ratio of ~78:22 in H1FY21.

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Key Games by Nazara + Nextwave Downloads IAP Range Release Name Publisher Last Month Last Update (Rs. Abs) Period (in K) World Cricket Championship Lt Nextwave Multimedia 10 - 308 June,2011 900 41 Days World Cricket Championship 2 Nextwave Multimedia 49 - 4,299 July,2015 800 50 Days CSK Battle Of Chepauk 2 Nextwave Multimedia 65 - 200 April,2018 700 2 Months September,20 World Cricket Championship 3 Nextwave Multimedia 39 - 7,999 600 18 Days 20 ग Nazara Games Ltd 20 - 6,700 January,2017 400 3 Monthsﴂ छोटा भीम गति रेत December,20 Big Bash Cricket Nextwave Multimedia 10 - 2,500 300 17 Months 19 WCC लाइट Nextwave Multimedia 10 - 1,750 January,2019 200 22 Months Oggy Go - World of Racing (TheOfficial Nazara Games Ltd 10 - 150 June,2018 200 3 Months Game) Motu Patlu Fun Run 3D PuzzleGame Nazara Games Ltd No IAP March,2020 100 4 Months ग Nazara Games Ltd 20 - 6,700 October,2017 100 4 Monthsﴂ मोटू पिलू स्पीड रेत Epic Cricket - Realistic Cricket Simulator Nazara Games Ltd 20 - 1,000 August,2016 90 4 Days 3D Game November,20 Chhota Bheem Race Game Nazara Games Ltd 10 - 360 80 27 Months 15 Vir the Robot Boy & Eena MeenaDeeka November,20 Nazara Games Ltd 10 - 250 80 3 Months Fan Game 19 November,20 गल रन Nazara Games Ltd 10 - 250 60 3 Monthsﴂछोटा भीम ज 13 Beach Cricket Nextwave Multimedia 10 - 1,750 June,2012 50 54 Months Shinchan Speed Racing : FreeKids Racing Nazara Games Ltd 50 - 550 May,2020 50 3 Months Game Motu Patlu Truck Simulator Nazara Games Ltd No IAP May,2017 50 3 Months Chhota Bheem : The Hero Nazara Games Ltd 20 - 360 February,2016 50 4 Months गल ाहत क खेल Nazara Games Ltd No IAP March,2017 40 44 Monthsﴂमोटु ज Real Carrom - 3DMultiplayer Game Nextwave Multimedia 49 - 999 February,2016 30 2 Months TopQuiz - क्वि焼 खेले और रो焼 पै ा जीिᴂ Nazara Games Ltd No IAP March,2017 20 9 Months लूडो गेम Nazara Games Ltd No IAP May,2017 10 26 Months December,20 कैरम बोडड गेम Nazara Games Ltd 20 - 3,250 10 4 Months 18 Street Cricket Nextwave Multimedia No IAP January,2012 7 74 Months WCC Rivals Nextwave Multimedia No IAP NA 5 31 Months Bat Attack CricketMultiplayer Nextwave Multimedia 65 - 349 March,2016 5 46 Months Goats and Tigers 2 Nextwave Multimedia 65 - 131 August,2015 5 68 Months World Table Tennis Champs Nextwave Multimedia 70 - 1,999 October,2018 5 2 Months बकबक - भारिीय क्वि焼, गेम्स और जीि December,20 Nazara Games Ltd No IAP 5 15 Months Paytm कै श 18 Rangpur Riders Star Cricket Nazara Games Ltd No IAP October,2017 5 42 Months Source: DART, Sensor Tower, Only Android data included, Excluded Inactive Games: which are no longer available on PlayStore. 5K Downloads means Less than 5K in the last month. Data as of 2nd June, 2021.

Business Model Most Freemium Games earn via large portion of their Revenue via advertising (In- Game Ads – Banner, Short Video, etc) and a smaller portion from In-App Purchases. (New Content, No Ads Option, New Cosmetics, etc). Nazara has a Revenue of Rs. 195mn from Freemium Business (Mix of Ad and IAP for FY20 at 90:10, H1FY21 at 78: 22). The Cost for the business are largely content cost (making new games) and marketing costs (advertising games on social media and app store). The costs are semi-linear in nature. As once a game is made, only regular cost updates are required

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to sustain the user base (Fixed Cost), advertising cost are done to attract more base (variable in nature) but advertising is not a necessary expenditure as some app have their own organic pull. Freemium Segment earned an EBITDA Margin of 21.2% in FY21. Increased revenues and margins were led by increased Daily Paying Users (DPU) within Daily Active Users (DAU); which is currently 0.1% but has improved nearly 10x from 0.01%. Company believes that even if achieves the 0.5% penetration in IAP user base it can remove ads from its revenue model, as InApp is stickier and generates higher ARPU. Popular games like PUBG/FreeFire just have 2-3% of their user base as IAPs, rest all play for free. On an Average 7%/10% gamers in US/China have done IAPs.

Nuances of the Business Model . Advertising Revenue: Advertising revenue is dependent on user market, time spent on game, number of users and frequency of advertisements. Advertising is also affected by advertising rates in the country. Example: India witnessed a decline in advertising rates in H1FY21 which led to a decline in advertising revenue for Nazara’s freemium business to Rs. 70.3Mn in H1FY21 from Rs. 178.9mn in FY20 despite only slight MAU decline to 13.14mn users from 13.9mn users in FY20 (Also, DAU and MAU hitting peak in CY20). . In-App Purchases: The In-App Purchases (IAP) are driven by type of game (hardcore and midcore games have higher IAP share), items offered under IAP (Cosmetic changes, New Content, No Ads), Genre of the game (multiplayers have higher IAP Revenue – as peers look at vanity items). Nazara’s Freemium business has witnessed strong growth in IAP Revenue to Rs. 20.0Mn in H1FY21 (IAP exit run-rate: $1,652 per day) from Rs. 18.8Mn in FY20. With the launch of WCC 3 Cricket game which is largely focused on generating IAP, IAP revenue can see some further growth in IAP (DPU/DAU has gone up by 10x with 0.1% of its current user base now done IAP – Average daily IAP has doubled in last 8-9 months from $815 in May’20 to $1694 in Dec’20). . Content Cost: The content cost (Largely employee cost) is the cost related to updating the game with new content and launching new games. Today, Content Cost is a spend which every game developer incurs to ensure that existing active users don’t leave the game. Regular wave of new content is strategy that most developers used to retain users on the game. . Key Metrics: Daily Active Users and Monthly Active Users are the one of key (visible) drivers of Freemium Business as they determine the advertising revenue. DAUs and MAUs are also one of the key driver for IAP Revenue (other is Conversion rate). WCC Portfolio has an MAU of 12.7mn and DAU of sub-2mn.

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IAP is the future Globally Mobile Gaming Apps earn ~65% of Revenue from IAP and ~35% from Advertising. India stands at the opposite end where Apps in India earn ~70% from Advertising and ~30% from IAP. In reality, excluding the Top 10 Grossing Apps (excluding top 10 Apps, it’s a long tail), ratio would be much worse. With the gradual improvement in IAP penetration (Exhibit: 95), over 3-4 years WCC would mostly like witness much high IAP Revenues. IAP are the better proposition for users and the game publisher: IAP ensure that the users are retained for longer interval and no ads bring much less distraction for gamers.

In India, even the top grossing games have just 2-3% user base as paying users while in USA and China 7% and 10% overall is the paying userbase. In WCC, the paying user base is just 0.1% of DAUs.

As the paying users of WCC increase, the app will witness massive growth in terms of Revenue. Nazara expects the portion of paying users (out of DAUs) to reach 1% by FY25. From current levels, this growth itself can be 5x-10x growth in number of paying users (even on the same DAUs base). However, like we have highlighted the IAP penetration story is 3-4 story.

IAP Conversion Rate (% of DAUs) 0.170 0.15 0.150 0.13 0.13 0.13 0.12 0.130 0.12 0.110 0.10 0.09 0.09 0.090 0.08 0.07 0.070

0.050 0.04

0.030

Jul-20

Jan-21

Jun-20

Oct-20

Apr-20

Sep-20

Feb-21

Dec-20

Aug-20

Nov-20 Mar-21 May-20 Source: DART, Company Ownership and Acquisition Details . Nazara acquired 63.90% of Nextwave Multimedia for Rs. 528Mn in Dec-17. Out of this, 300mn was done in cash and 80mn was fresh investment in Nextwave.

Nextwave’ Acquisition deal contours (Dec-17) Particulars (Rs. Mn) Cash Shares Upfront Earnout Total Comment Subscribed to 4,335 shares of Next Tranche 1 80 80 80 Wave (13% of Paid-up Capital) for Rs. 80mn Purchased 12,918 shares of Next Wave Tranche 2 220 220 220 (37% of Paid-up Capital) from Promotors at Rs. 220mn Purchased 1,204 shares of Next Wave Tranche 3 22 22 22 from Plutus Advisory in exchange of 3,263 shares of Nazara Total 300 22 322 0 322 Source: DART, Company, The total acquisition cost is Rs. 528mn but the remaining tranches are not shared by management.

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Next Wave Multimedia Ownership Particulars Ownership (%) Nazara 52.4 PR Rajendran 28.0 PR Jayashree 16.7 R Kalpana 3.0 Total 100.0 Source: DART, Company

Our View: Freemium Business has a strong portfolio of casual (Licensed IP) and midcore games (Own IP) to attract kids as well as young sports enthusiasts. Nazara’s expects the IAP opportunity to drive the Freemium Biz (making it more stable in terms in DAUs and protect from decline in ad revenue). However, in India, it is a long road ahead as IAP opportunity for midcore game has not scaled up yet and is on a gradual path of growth (unlike hardcore games). With decline in DAUs in the post lockdown scenario and no uptick in MAUs, we prefer to hold on and observe the traction more closely. We understand the hit or miss and freemium ad-based nature of the mobile game development which brings the potential of sudden virility of a mobile game (like Ludo King). We believe that similar scenario of boost is potent for WCC’s Cricket games given cricket craze in India (it’s an optionality).

Triggers for revenue traction in medium terms are:

1) Increased in DPUs from large base of DAUs – today at just 0.1% (Paid guys on WCC are paying 250-300 per month). This is led by superior content that came in with launch of WCC3. Average daily IAP has doubled in last 8-9 months from $815 in May’20 to $1694 in Dec’20 (annualized run rate of $0.6mn). 2) Improved Ad revenues as DAUs increases, engagement increases (time spent). Also increased eCPM rates can drive up revenues from advertisements. 3) Positive LTV – Nazara is working on getting the right LTV-CAC ratio, currently getting 0.1mn daily downloads without cash burn – so now with increased iteration it can improve its LTV and user base significantly. 4) New markets – other commonwealth countries where Crocket is popular and IAP behavior is better (Australia/South Africa).

Revenue are expected to grow exponentially hereon with increased DPU (grew 10x in FY21 in WCC3) and higher spends from existing IAP users. We expect revenue CAGR of 25% over FY21-25E.

Profitability: Next few years in this business would be more focused on improving the IAP and thus would see stable profitability hereon (current year profitability is impacted by shift of cost from Capex to Opex as it is done with the development program). We expect segment to achieve Breakeven by FY24/FY25E.

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Freemium growth to gradually improve as IAP Penetration increases 36.9 600 35.1 40 35 500 28.6 30 400 25 15.9 20 300 15 200 10 5 100 -1.3 0 198 195 251 291 393 538 0 -5 FY20 FY21 FY22E FY23E FY24E FY25E

Freemium Business (Rs. mn) Growth, YoY Source: DART, Company

Margin improvement to be driven by operating leverage 40 10 7.4 6.5 30 5 20 0 10 -4.6 15 35 0 -5 -30 -30 -36 -18 (10) -12.0 -12.4 -10 (20) -15.5 -15 (30) (40) -20 FY20 FY21 FY22E FY23E FY24E FY25E

PBT (Rs. Mn) PBT Margin (%) Source: DART, Company

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Real Money Gaming (17% of Revenue and is loss making) Nazara has entered into Real Money Gaming via Halaplay (acquired majority stake in March-19) and other investments (Sports Unity). Real Money Gaming (RMG) offers games where user can win or lose real money based on real outcome of game or any aspect of the game via combination of ‘Skill and/or Luck’. Real Money Gaming is fastest growing segment in the Indian Gaming Industry which reached 100mn players in 2020 from 2mn players in 2016 and accounts for ~70% of the Indian Mobile Gaming Industry ($700mn in Size). However, the RMG industry faces several forms of regulatory risk due to unclear (subjective) understanding of skill v/s luck based games by Judiciary and Legislative committees and also Gambling being a State subject, it is marred with unclear taxation law. Given these risk, Nazara has taken a cautious approach on real money gaming by slowing down on aggressive (customer) acquisition spends and focusing near-term profitability. RMG Segment clocked Revenues of Rs. 138mn and PBT loss of Rs. 97mn.

What is Real Money Gaming? How does it work? . Real Money Games are the games which rewards players for winning based on outcomes of skill or chance. Example 1: Players bet money on a certain team winning or certain set of players scoring the highest. All the bet money is combined in a prize pool. Players winning the bet (or players whose select players win the highest) receive the prize pool money. For Rs. 1000 bet, one could win Rs. 1mn (hypothetically) Example 2: There are Real Money Quizzing Apps where players bet certain amount and play against each other for a quiz on their choice of topic (Bollywood Quiz). The winner wins whole prize pool. Example 3: Online Poker, Rummy, Indian Poker etc. . Platform Fees: The RMG App (or the platform) earns a platform fees which is a pre-determined certain percentage on the amount that has been put on the bet. Example: If total betting amount collected is Rs. 100mn, the prize pool will be Rs93mn post deduction of 7% platform fees by RMG company. Halaplay typically charges ~7% as a platform fees. . Network Effect: Real Money Games need large pool of players to maintain a large prize pool. Also, a large prize pool attracts more users to play even though odds of winning gets much lower. Example: Bet Rs. 100 and get Chance to win 10 Lakh will gain more players than Bet Rs. 100 and get chance to win Rs. 1000. Note: Odds of winning are lower in the former outcome but player see the risk-reward favorable assuming they are lucky. In some cases, people play for small amount of such tournaments just for fun for excitement. . Chance or Skill: The games where outcome cannot be influenced are considered as games of chance while games where outcome can be influenced based on skill, judgement, etc. are terms as game of skill. Games of Skill doesn’t fall under the gambling laws. According to the laws in the country, winning prize money on games of skill is legal. While betting on games of chance is not. Example: The Supreme Court of India issued a ruling which states that games like Rummy cannot be considered games of chance like 3-card games such as flush or brag, because Rummy requires players to have a certain level of skill particularly when it comes to memorization.

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RMG placed in the ‘Skill’ Bucket Given that pure gambling is banned in multiple states, RMG companies have placed themselves as ‘games of skill’ by betting on the set of players who earn highest score (Eg: make a team of 11 players in a cricket match/league; if they score highest on cumulative basis, they win the prize money) compared to betting on win/lose outcome of the game (which is more like a change event). Real Money Games are based on judgement, ingenuity, pattern recognition. Thus, many RMG are terms as “Fantasy Sports” targeting the sports fans (largely cricket, football) in India. However, this interpretation of skill or chance is subjective and have received different outcomes at State level and in Courts. Some States have allowed skill based games while some States have outright banned skill or chance based games (Sikkim, Assam, Odisha, Telangana, Nagaland, Andhra Pradesh and Tamil Nadu). The Real Money Gaming industry also includes some players using poker, rummy, Ludo in this space. In FY20, fantasy sports players collectively reached a Revenue of Rs. 24Bn from Rs. 9.2Bn in FY19 (FIFS-KPMG Study).

Regulation is needed . The Fantasy Sports companies have reached scale and visibility very quickly as this is the first and foremost genre that gets adopted in the Gaming categories (as it pulls in people with Gambling itch). Many players (with VC funding) have been able to rope in big celebrities to market their products. Some of the companies are now associated with BCCI and title sponsors of IPL and IPL cricket team. . Currently, the industry is using self-regulation (SROs: Federation of Indian Fantasy Sports (FIFS) and The Online Rummy Federation). Yet the industry as whole needs regulation and clarity on a national level. Regulation is still needed for this sunrise sector to ensure that all the operators are following guidelines for safe advertising highlighting risks (addiction, financial risk). Example: Some players have crossed ethical norms by advertising the product without highlighting financial risks involved and also marketed products to young/elderly citizens.

Unclear Regulations leads to Binary Risks Real Money Gaming Operators is witnessing huge demand from the players making them a great success however on the other hand, they are facing high regulatory risk on three fronts: 1) legislative level, 2) judiciary level and 3) unclear tax laws. . Legislative Risk: Gambling is a State subject wherein each state can create their own rules. Each state has its own democratic representatives (Ministers) who can have a different understanding or limited understanding of ‘chance and skill’ based games. This has brought different view on laws in each State with several States banning real money games completely. Some states have banned ‘games of chance’ and some have banned RMG games irrespective of ‘chance or skill’. Further, gambling being considered a “sin” and cause of deaths (Link) is also impacting the decision making at legislative level. . Judiciary Risk: The interpretation of skill or chance is also different in Indian Courts. The Supreme Court of India had developed a guiding principle – games where chance dominates over skill are prohibited while games where skill dominates over chance are permitted. But without an objective test to characterize games of skill and chance, different lower courts (read: High courts of India) have applied this principle differently to different facts. Moreover, certain State judiciary has asked the state government to enact laws on gambling. Example: A classic example is Poker which is a chance game as per Gujarat and Bombay High Courts but a skill game as per Karnataka High Court.

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. Taxation: The taxation laws are yet not clear for real money gaming apps. Currently, the tax (GST) is paid on the platform fees. However, the tax regulation on online gambling is not clear yet. GST may conclude to include the prize pool under tax norms or implement a different valuation norm for taxation. If that happens then the viability goes away in the business as platform fees is typically 5%-10%, while GST on prize money at higher rate can take away entire revenues in case it is charged on prize pool amount instead of platform fees.

Early Green shoots in Regulatory Clarity . In May’21, government has setup a 7-member panel of state level ministers to examine the issue of value of services provided by casinos, race courses, and online gaming portals. This committee would submit its report to GST Council in 6 months. The committee consist of Maharashtra Deputy Chief Minister Ajit Pawar, West Bengal Finance Minister Amit Mitra, Arunachal Pradesh Deputy Chief Minister Chowna Mein, Goa Transport Minister Mauvin Godinho, Karnataka Home Minister Basavaraj Bommai, Tamil Nadu Finance Minister P Thiagarajan and Gujarat Deputy Chief Minister Nitin Patel. This report may then be taken up for further deliberations by the GST Council. . In Dec’20, NITI AYOG has proposed a draft paper “Guiding Principles for the Uniform National-Level Regulation of Online Fantasy Sports Platforms in India” for setting up regulatory guidelines, including an independent oversight body and uniform operating standards and country wide laws for sports fantasy. This is the first step towards the regulatory clarity in the fantasy gaming space. . Rising Popularity of Fantasy gaming has caught attention of PMO as at one hand the segment if flourishing as India is emerging as Mobile-First economy with key operator raising money at record valuations, while on other hand States are banning these Apps due to several adverse outcomes coming out of it (financial risk, productive money going into gaming during lockdown as well as Suicide cases). This may possibly lead to end of uncertainty around it.

Regulations imposed across states Area Comment Kerala Kerala Government banned online rummy for stakes but has exempted other skill based games Tamil Nadu Tamil Nadu banned online 132 gaming websites including Fantasy Sports, rummy and poker Andhra Pradesh have banned both online fantasy gaming and online card games involving betting Andhra Pradesh and wager. Karnataka High Court has asked state government to take a stand on any action (ban) on online Karnataka betting and gambling Utter Pradesh has also announced to strengthen the Public Gambling Act under preview of online Uttar Pradesh gambling and bookies. The Meghalaya government has formally legalised gaming with stakes for both games of skill and Meghalaya chance, while explicitly stating that rummy, poker, teen patti, and even prediction of sporting events are games of skill. Nagaland has allowed games of skills after operators obtains a license in Nagaland under the its Nagaland Gambling Act Bombay High Court has recently ruled that activities undertaken in the case of online fantasy games do not amount to gambling or betting. It is skill based. Bombay High Court has seek the Maharashtra Maharashtra government’s response on whether Ludo is a game of chance or skill as app was hosting prize pool for Ludo game. Source: DART, Company, outlook India, Bar and Bench.com; lexology.com, medianama, thebridge.com

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Business Model . Nazara operates in the Real Money Gaming space mainly via its subsidiary Halaplay (Sports Fantasy App). It operates via trivia games (Qunami), Carrom Clash and WCC Rivals Clash (real money multiplayer cricket games) and BigPesa (real money and betting platform in Kenya). Halaplay had 9mn users in CY20. . In the Halaplay business (~88% of Revenue in FY20), Nazara offers a fantasy sports platform where in it targets sports fans India (Cricket, Football, Kabaddi). The platform allows users to form their own teams of players (which are ranked on real-life performance of players) and bet certain amount with a pool of players. . The combined fees within a pool of player’s minus after a nominal fee of 7% “platform fee” is total prize pool. The Pool Prize (minus platform fees) is divided among top ranking players. Example: Out of 800 players, top 60 players win prizes. The platform also runs a format where prize pool is given to one single winner. Example: Last Man Standing Leagues where one player out of 500 players wins or one out of 2-3 players wins. . It recognises the platform fees as revenue at the conclusion of league or match. The aforesaid is primarily on account of (a) as Company do not have any control on the deposit received from the players and (b) total value of the game played on the online platform by the players is merely treated as ‘transaction of money’ between the players over which Nazara does not have any title or interest, either present or future. . During a game, the sports feed, including audio, visual, data and textual feed, is provided by official feed providers in the App. The users can withdraw their winnings from the accounts via bank transfers. . The Platform Fees earned is the Revenues for Halaplay. And thus revenues scales up as the the prize pool generated gets larger, this happens during an event. Major Cost of the business are the customer acquisition cost which are in the form of advertising, providing total prizes higher than the amount collected (cash burn) or double bonus on registration fee (cash burn) for any tournament. . Given the regulatory risk involved, Nazara has taken a cautious approach: Avoided cash burn for user acquisition till the clarity assumes but would keep the platform updated with small revenues so that it can scale up fast when clarity emerges while remain profitable in the interim. Company expects to grow this business although at a softer pace as it is using geo-tagging, increased KYC, etc. to ensure it is rightfully targeting users in states that have relaxed forms on such games.

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Competitors landscape – Fantasy Sports and Trivia Based Games Application Users / Downloads Fantasy Sports Players Users Dream11 100mn MPL 60mn Paytm First Games 25mn MyTeam11 18mn Halaplay (Nazara’s App) 10mn Fanfight 6mn Baazi Games 5.5mn 11wickets 3mn PlayerzPot 2.5mn Trivia Based Games Downloads Loco 10mn+ Brainbaazi 10mn+ Qureka 10mn+ Zupee 5mn+ Qunami (Nazara’s App) 400K Source: DART, Company, Baazi Games User base includes Poker + Fantasy user base.

Revenue and PBT Trend

500 426 0% 400 -20% 300 223 200 138 -40% 100 -69.9% -60% 0 (100) FY19 FY20 FY21 -80% -97 (200) -90.6% -100% (300) -286 -120% (400) -386 (500) -128.2% -140% Revenue (Rs. Mn) PBT (Rs. Mn) PBT (Margin) Source: DART, Company, For FY18, we have used the Revenue and PBT of Halaplay. From April 8, 2019, Halaplay was not longer an associate and its Revenue were included in Real Money Gaming. Ownership and Acquisition Details . Nazara has invested total Rs. Rs. 578mn in Halaplay over 3 years for 74.02% stake in Halaplay. Founder of the company has left the company as his plans for the company was different. . Nazara currently owns 64.7% (from 74.02%) as Halaplay (in April-21) raised Rs. 180mn from several investors. Out of this Rs. 180mn, Rs. 90mn was from Milan Ganatra (Serial Investor) and remaining amount was from Gaussian Networks (Delta Corp) and several other small investors. . Ownership: Nazara owns 64.7%, Milan Ganatra owns ~9.3% and large chunk of remaining stake is owned by Gaussian Networks (Delta Corp) which used own ~24% before this fund raise.

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Nazara Acquisition of Halaplay – Deal contours Particulars (Rs. Mn) Cash Shares Upfront Earn-outs Total Comment Tranche 1 318 318 318 Nazara had made several investments in Halaplay since Sept-17 till FY20 In June-20, Done a share swap of 20 Seed Equity Shares and 26,065 compulsorily convertible preference Tranche 2 146 146 146 shares of Halaplay for 201,020 Nazara shares (Valued at 728 per share, Rs. 146mn) Nazara invested Rs. 84mn to acquire Tranche 3 84 84 84 further stake in Halaplay from promoters. Tranche 4 30 30 30 Nazara infused Rs. 29.5mn in Halaplay Total 432 146 578 0 578 Source: DART, Company

Our View: Real-Money-Gaming or Fantasy Sports Gaming is the biggest piece of the Indian industry and thus is the most crucial segment to operate into. However, the company has been judicious in its stance and has not got into ‘cash-burn’ mode given the uncertainty involved also the potential pay-offs given hyper competition from VC-backed peers. We believe the company possess certain strengths given its involvement around the gaming ecosystem which will ensure it can grow consistently although on a very small base, and thus would not move the needle in the interim. This remains just an option value at the moment which can give a big payoff at some point in future

Triggers for revenue traction in medium terms would come from 1) Clear and consistent policy framework for stance on RMG across states, its legitimacy and its taxation so that strong business models can be created around it. Current large players in the segment are growing but again getting flat-lined as some more states put a ban in their region. Also, 2) inorganic: Company plan to invest directly into an established player (stable and profitable) rather than building brand and user base.

In the interim we expect Revenue CAGR of 25% over FY21-25E on a depleted revenue base of FY21 and break-even profitability. This numbers holds significant upside risk as regulations turns favorable for the RMG segment.

Real Money Gaming to scale-up as regulatory clarity emerges 450 100 75.3 400 80 350 47.1 60 36.0 300 40 250 20 200 0 150 -29.9 -20 100 -40 -67.5 50 -60 426 138 97 170 250 340 0 -80 FY20 FY21 FY22E FY23E FY24E FY25E

Real Money Gaming (Rs. Mn) Growth, YoY Source: DART, Company

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Profitability to improve when scale increases 100 40 50 19 57 20 0 (50) -97 -70 -26 16.9 -384 7.8 0 (100) -20 (150) -15.1 (200) -40 (250) (300) -70.0 -71.8 -60 (350) -90.0 -80 (400) (450) -100 FY20 FY21 FY22E FY23E FY24E FY25E

PBT (Rs. Mn) PBT Margin (%) Source: DART, Company

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Other Investments Nazara’s interest to invest in other gaming startups in India started in 2013 with a creation of dedicated “seed fund” of Rs. 100mn. The intent was to solve the issue of shortage of funds, inability to raise funds (VCs didn’t have confidence / had limited knowledge of mobile gaming space in India and revenue scale was also small). These investments led to the “Friends of Nazara ecosystem” (detailed in Outlook Section). Nazara has made multiple large (strategic) and small (incubation) investments in the gaming ecosystem over the years. Apart from the large acquisition of Kiddopia, Nodwin Gaming, Nextwave, Halaplay, Nazara had made many small bets at incubation level. Most of the small investments have been written off (~Rs. 41mn out of Rs. 106mn*. It has recently invested in Publishme acquisition to buy majority stake in June-21 for ~Rs200mn.

Hashcube (12.4% Stake at Rs. 22mn) Hashcube, founded by Deepan Chakravarthy and Ramprasad Rajendran in 2008, is a mobile game developer focusing on casual games. Hashcube has developed on puzzle related games to keep users engaged for longer period of time. The most known games built by Hashcube are Mahong Quest, Sudoku Quest, Unblock Quest (Tile based game), Cricket Tile Match, Spider Solitaire, FreeCell, 15 Puzzle (numbers based puzzle game).

Stake Purchase: In Oct-14, Nazara bought 12.38% stake in Hashcube, mobile gaming developer, for Rs. 22mn ($0.36mn). This was in a funding round of Rs. 42mn ($0.7mn) where Indian Angel Network (IAN) and Blume Ventures, besides ah! Ventures and CDMA Development Group founder Perry LaForge participated.

Mastermind Sports (26.0% Stake at Rs. 26mn) Mastermind Sports, founded by Pratik Shah and Thomas McCall (left the company) in 2013, was creating a second screen experience for cricket and football in their App Sportsie. The second screen experience enabled them to watch cricket scores & stats. It also had a sports betting option via virtual currency (Not Real Money). Currently, Mastermind’s tech platform is used for Halaplay’s betting platform (Mastermind earns platform fees for it) and the Sportsie app service is also given to VAS to certain Telcos. Note: This investment has been written off.

Stake Purchase: In April-16, Nazara bought 26.0% stake in Mastermind Sports, owner of Sportsie, for Rs. 26mn in five tranches.

Financials of Mastermind Sports Particulars FY18 FY19 FY20 1HFY21 Revenue and Other Income 4.2 7.7 11.9 1.1 Other Expenses 9.2 6.8 10.4 6.1 Depreciation and amortization 0.0 0.0 0.2 7.3 PBT -5.1 1.0 1.3 -12.4 Tax 0.0 0.0 0.4 0.0 PAT -5.1 1.0 0.9 -12.4 Source: DART, Company

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Moong Labs Technologies (24.4% Stake at Rs. 10mn) Moong Labs, founded in 2013, is mobile game developer focused on making freemium games and specializes in simulation games for cricket (which holds global interest). Moong Labs currently has 3 active games under their portfolio (2 Cricket Games & 1 FPS Game). It’s most popular game of Cricket is ranked 6th on keyword search of “cricket”. Nazara had bought 26% stake (diluted later) in Dec-17 for Rs. 10mn.

Financials of Moong Labs Particulars FY20 1HFY21 Revenue and Other Income 3.4 1.1 Other Expenses 7.8 2.9 Depreciation and amortization 0.2 1.3 PBT -4.5 -3.1 Tax 0.0 0.0 PAT -4.5 -3.1 Source: DART, Company Crimzoncode Technologies (100% Stake at Rs. 30mn) Crimzoncode, founded in 2017, a real money gaming mobile developer. Its primary app is TopQuiz (published by Nazara) which provides daily real money for winning quizzes.

Stake Purchase: In April-18, Nazara invested Rs. 16.85mn in CrimzonCode for 35.5% Stake. Later in Nov-19, Nazara acquired further stake in Crimzon Code in a share swap wherein Devavrat Jatia was allotted 17,995 shares of Nazara (Valued at Rs. 728, Total Value of R. 13mn). Nazara now holds 100% Stake in Crimzoncode with total investment of ~Rs. 30mn.

Instasportz Consultancy (8.6% Stake at Rs. 10mn) Instasportz Consultancy, founded by Bigith Nambiar and KR Rahul in 2016, is an offline VR lounge company which does the business of running sports and virtual reality entertainment zones across India (started in Bangalore). Nazara seed funded Instasports for Rs. 10mn for a stake 8.67% stake in July-18. This investment has been written off as the pandemic severely impacted this offline business.

Khichadi Technologies (16.7% Stake at Rs. 8mn) Khichadi Technologies, founded in 2018, is a Social Gaming App- called ‘Bakbuck’ (with Real Money Prizes) which focuses on traditional Indian games like ‘Antakshari’, ‘Saanp Seedhi’ and ‘Tol mol ke Bol” in Hindi. Khichadi Technologies was founded by Abhinay Jain, Shashank Kakrecha and Rohit Naidu to provide a safe platform for women to connect with each other (70 percent of its users being female :2019). In Feb-19, Nazara invested in Khichadi via Compulsory convertible preference shares of Rs. 7.5mn for 15% stake (16.7% on diluted basis). Nazara has taken full impairment for this investment as despite good engagement metrics, the business was not profitable.

Sports Unity (63.6% Stake at Rs. 56mn) Sports Unity, founded in 2016, is the owner of Qunami which was one of the top real money quizzing apps in India. Qunami had estimated 0.6mn users (40K MAUs). Sports Unity was founded by Seemant Shankar. In Feb-19, Nazara invested Rs. 56mn in Sports Unity for 63.6% stake. Nazara has taken impairment for this business.

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Publishme (69.8% Stake at Rs. 200mn) Publishme is the first investment/acquisition of Nazara after IPO. Publishme, founded in 2018, is a Turkey based full-service games marketing and publishing agency. MENA is one of the fastest growing gaming markets, with an estimated market size of $4.8bn and has over 160mn gamers in the region (of which 100mn are mobile gamers). This business is led by CEO Mr. Özgür Özalp, the former publishing head for emerging markets with EPIC Games, the company has a strong clientele including Garena, My.Games, Lokum Games and also works with several brands in Turkey and MENA region including Turkcell, RedBull, Hepsiburada.com, KFC, ASUS, Yemeksepeti. Nazara has acquired 69.8% stake in Publishme for Rs. 200mn. (Financials have not been disclosed yet)

What it does: It works with game publishers in Turkey and MENA region for marketing of a game in the region. It does multiple activities (nearly end to end services) for a game publisher which cover conducting tournaments (eSports), Marketing Games via Influencers, Content Localization (language changes, voice over, etc), grass root events (for gamer activation). Given the language barrier in Turkey and MENA region, Publishme helps the game publishers to market games due to its superior understanding of local nuances.

Rationale for Acquisition: Publishme and Nodwin Gaming hold multiple synergies and Publishme’s presence in MENA and understanding of that market gives Nazara access to MENA region. Nodwin holds access to a strong set of brands and media rights buyers while Publishme has its strength in relations with gaming publishers (The idea is that the servicing business can become 4x and 5x in few years led by cross-capability synergies). Publishme has leveraged well in using influencers and content localization. Moreover, the overlap of game publisher relationships and sponsors is also limited. Potential Playbook can be: Creation of IPs in Turkey and other markets in MENA region over 4-5 years and help in getting more gaming publishers partnerships in India for gamer activation (Blizzard, Supercell are popular in MENA region but Tencent, Krafton are not). More use of Influencer Marketing in India. (Content Localization is not required, most of the target market in India knows English).

Case Studies of Publishme Avg Influencers Game Activity Concurrent Social Media Total used Viewers Reach Viewers (Youtubers) 70K @ (Reached Did Gamer Activation via Single Brawl Stars Brawler Challenge 50K No 1. in Youtube 2.3mn 11 Trend) COD Warzone Did Gamer Activation via COD 26K NA 5.9mn 18 Warzone Turkey Community Cup Did an Tournament for Gamer NA 4K$ 40K* 50K# Race Activation PES 2020 Did a sponsored tournament "Gillette 900K 6mn 1.15mn 4 PES 2020 Influencer Tournament" PUBG Did a sponsored Tournament for PUBG 8K* 1.15mn 46K 20K# PC "Arko Men PUBG Tournament" Did a sponsored Tournament for Fall Fall Guys Guys "Knorr Fall Guys Influencer 26K 430K 228K 10 Invitational" Did a sponsored Tournament for Fortnite Fortnite "Arko Men Fortnite NA 1.4mn 22K 10K# Tournament" Source: DART, Company, *Participants, #Prize Pool for Tournament in Turkish Riyal, $Discord Engagement, @ Peak Con-current Viewership

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Acquisition Summary (Nazara Gaming) Current Amount via Amount via Cash Name Date Cash Equity Infusion Deal Structure Stake (%) (Rs. mn) (Rs. mn) (Rs. mn) Nazara.com Portal NA May, 2000 0 8 NA Issue of Shares at FV of Rs. 10 Infused Rs. 80mn in Next Wave for 13% stake. Bought 37% stake from Promotor for 200mn. Done share Next Wave 52.4 Dec, 2017 300 22 80 Multimedia swap of 3,263* (Pre-Bonus/Spilt) Nazara shares (Valued at Rs. 22mn) with Plutus Investment Advisory for remaining stake in Next Wave. Infused Rs. 355mn for 25.45% stake. Done share swap of 376,927 shares (547 per share, Valued at Rs. 412mn) with founder and Jetsynthesis for Nodwin Gaming 50.1 Jan, 2018 355 412 355 29.54% stake. Sold 1,638 Nodwin shares to Krafton (at 0.67mn each) and Infused Rs. 150mn in Nodwin for 831 Nodwin shares in FY21 to retain min. 50% stake. Done share swap of 381,160 shares (Rs. 728 per share, Rs. 343mn) and Absolute Sports 74.3 June, 2019 95 343 93 6mn in cash to buy stake from Founder, CDC Group. Infused Rs. 89mn in Sportskeeda Infused Rs. 17mn for 35.5% stake. Done share swap of Issue of ~18k CrimzonCode 100.0 April, 2018 17 13 17 Nazara shares (Valued at Rs. 728 per share, 13mn) to Founder for remaining stake. Infused Rs. 100mn in Paper Boat for 650 shares of Paper Boat. Acquired 4,772 shares from Promotors for Rs. 200mn and swap of 412,088 shares Paper Boat 50.9 Oct, 2019 400 435 100 of Nazara (Rs. 728 per share, Valued at Rs. 300mn). 2 Remaining Tranches of Rs. 100mn in Cash and Rs. 135mn in equity (Nazara shares at Rs. 728) completed later. Made multiple investments in Halaplay 64.7 Multiple 432 146 NA Dates Halaplay since Sept-17. Hashcube 12.4 Oct, 2014 22 22 Infused Rs. 22mn for 12.38% stake Acquired Convertiable Perf. Shares Khichadi 15.0 Feb, 2019 8 8 for Rs. 7.5mn (Diluted Stake is 16.7%) Sports Unity 62.5 Feb, 2019 61 61 Bought majority stake of Rs. 61mn Mastermind 26.0 April, 2016 26 26 Sports Infused Rs. 26mn for 26.0% stake Moong Labs 24.4 Dec, 2017 10 10 Infused Rs. 10mn for 24.4% stake Instasportz 8.7 July, 2018 10 10 Consultancy Infused Rs. 10mn for 8.7% stake Bought 69.8% stake via cash infusion Publishme* 69.8 June, 2016 200 NA NA and equity mix. Source: DART, Publishme Mix of Cash and Equity not disclosed.

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Outlook Over the last 5 years, Nazara has successfully positioned itself as a diversified gaming company. With several early stage acquisitions, it is now established as a leader in eSports, Gamified Learning and Mobile cricket market as companies have scaled well within each space. With the core management (the MD & CEO) spending 70-75% of the time (existing time in other business except Telco Biz) finding new potential companies, acquisition and investments is clearly a key component of their growth strategy. These investments will be largely around – capabilities within each business segments, different geographies, complementary products and increasing stake in existing businesses.

An investor in Nazara is not only buying the existing businesses but also putting faith in the core management to scale its acquisitions well and that too profitably. Nazara in a way acts like a PE/VC but has some distinct edges over them. What separates Nazara from the VC/PE Chain is 1) Cash Flow focused approach (avoiding cash burn), 2) Ability to limit risk or avoid undue risk (stopped Real Money business given binary risk), 3) Strong understanding of the Gaming Industry (two decades of experience by leadership team), 4) Ecosystem of Gaming Businesses with potential cross-synergies and 5) model of “Friends of Nazara”, which is partnership of equal and allows associate/subsidiary to retain minority stake and also offers Nazara’s equity to align the goal congruence.

Keeping aside, the future success of these investments and future investments which has its own business risk, rest of the edges in the model, bodes well for the risk appetite for listed market participants.

Friends of Nazara Ecosystem The “Friends of Nazara” ecosystem is one of the key pieces of the Nazara’s Business model wherein its adds strong synergistic value of its two-decade presence in the Gaming industry. Nazara is bringing in founders onboard as a team with Nazara’s business and developing a strategic alignment with the business (founders still hold sizeable minority stakes; some are also given Nazara stock) and connecting the businesses for synergies. In most large acquisitions, founders still hold sizeable minority stakes. It is the string of pearls strategy by investing and acquiring many companies to create a very strong network of gaming companies and enhance overall execution capabilities. Nazara holds regularly combined meetings for founders to interaction and identify possible synergies. This is a key element in its acquisition strategy as it attempts to create more value with businesses aiding each other, wherever relevant. This model has a higher success rate as all the acquisitions are bilateral and not auction based with common thread of retaining ‘skin-in-the-game’.

Some of the examples of leveraging the combined network within Nazara Group are: 1) Use of Sportskeeda App/portal to promote existing businesses (eSports + Real Money), 2) WCC Game is being played at most Nodwin Events for more visibility, 3) Khichadi and Crimzoncode used ‘Nazara brand as game publisher’ for one of their game to reach a wider audience or gain better user confidence and 4) Mastermind Sports’ Tech platform is being used for Halaplay’s Real Money Gaming.

Way Forward . Continued Acquisitions to fill Gaps: Management will continue to the strategy of building the Friends of Nazara ecosystem. Today, the MD & CEO spend 70-75% of the time (existing time in other business except Telco Biz) finding new potential companies will cover remaining gaps in geography, demography and capabilities in Freemium, Gamified Learning and eSports domain (where it has expertise).

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. Focus on decent size businesses: Nazara will now look at $4mn to $8mn Revenue size businesses for Investments with cash and equity (Avoiding smaller sized or incubation businesses due to time/work involved) . Continued IP Building in eSports: Nazara will continue to build more and more premium IPs in eSports leveraging its already dominant position to drive the media rights revenue. Will also focus on partnering with more game developers for activations. . Geographically Expand the GEL biz: Nazara intends to expand the gamified learning play-book (expanding Kiddopia or finding new partners in GEL) to different countries where it finds strong demand and good LTV and CAC balance. . Close watch on Real Money Biz: Nazara believes that Indian Market for Real Money Gaming holds binary risk at this point, as the nation-wide policy on Real Money is not clear yet. Despite investments in multiple Real Money Companies (Halaplay, Qunami, Khichadi Technologies), Nazara will follow “no cash burn strategy” for RMG Business at the moment. However, it will continue to invest in the product to stay relevant but will not flush-in money in customer acquisition till more clarity emerges.

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Risks Given the multiple business segments Nazara operates into, it faces multiple risks across its business lines. We will attempt to break the risk across the businesses.

Telecom Business . Changed Consumer Trend: The Telco subscription business is related to providing sachet of games to Late-stage Internet Adopters. However, the Consumer Trend has changed where multiple games are now available for free on App Stores (why to spend when free is available!) . Advertising Risk: The Telco business currently advertises (acquires customers) on a fixed CPCU Model (pays x amount only if conversion happens!). Given the declining addressable of the market, it is possible that the Ad-Tech partner may ask for higher CPCU rates. Thus, impacting the profitability and can cause potential exit in those markets as well. (Already happened in some markets for Nazara). . Competition: One of larger peer (Like BeMobi) in LATAM Market (where it doesn’t compete directly with Nazara) is already expanding to other regions and markets. Entry of the competitor in overlapping regions may potentially impact Nazara’s positioning in the market as such competitors have a more premium collection of games.

Gamified Early Learning Business . Vast Competition: Gamified Early Learning is one of the fastest growing space which is witnessing intense competition among existing players (Apps!) and more and more apps are entering the market. Moreover, if any existing player or new app launches better features than Kiddopia, it could face more severe competition. . Advertising Risk: With the Apple’s iOS Update, Kiddopia is witnessing difficulty in attribution metrics on customer acquisition (which in turn may potentially lower down the conversions and increase CAC). This is due to the inability to find relevant users for advertising as user identification is not possible now. We remain cautious to understand precise impact of the iOS update on CAC and Gross Subscriber Addition in coming quarters. . LTV & CAC Risk: There could be a potential risk of decline of LTVs of the business, in case churn rates goes higher. CAC cost can also change as CPT increases (more likely given IDFA) or trial to subscription ratio deteriorates (currently ranges 70-75%).

eSports Business . Skewed Growth of Industry: The eSports industry is currently only driven by growth of select games. For the industry to grow and scale, the number of large player base games have to increase. . Ban of Select Games: PUBG Mobile was recently banned over “security concerns” and for its violent content. With the successor of the game being launched by its original Korean IP owner, the game has come back moreover in the same form (some content is changed as per requirements of the Indian markets). However, there is potential risk of the game getting banned again. The PUBG IP is potentially one of the biggest driver of eSports tournaments in India. If the game is banned again, then eSports industry growth is likely to suffer in the near-term.

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Freemium Business . Low Advertising Rates: Freemium business is currently largely driven by advertising revenue (78% in H1FY21). The business is susceptible to advertising rates in India which are already low. In FY20, the business witnessed 19.0% YoY decline due to decline in advertising rates in the country. Any further decline in advertising rate can impact growth/margins. . Low Penetration in IAP: The growth potential of the Freemium business is largely to be driven by higher IAP Penetration in India. If the IAP Penetration in doesn’t scale-up meaningfully in midcore games, then Freemium will not see any significant traction. . Competition: The cricket genre in mobile gaming is a niche genre. However increasingly competition from other mobile games and other cricket games has been intensifying.

Real Money Gaming . Regulatory Risk: The Real Money Gaming faces regulatory risk related to applicability of the skills or luck based game where each state has its own purview. . Taxation: The taxation (GST-Indirect) for the real money gaming industry is also not very clear and thus remains a risk. Many state Govt. incrementally looking for higher collection from this segment.

Overall Business Risk . Acquisition Risk: Acquisition is one of the key strategies of Nazara. Historically, Nazara has seen mixed success in its acquisitions. (Nodwin and Kiddopia scaled, Nextwave and Halaplay didn’t, small investments were not successful. Failure of Acquisitions is one of the key risk that Nazara faces. . Key Man Risk: Top leadership, especially CEO and MD. . Low Stake: Nazara holds only ~50% stake in most key acquisitions. Any need for liquidity by other investors will cause Nazara to purchase additional stake at higher valuation (also brings higher liquidity needs).

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About Company IPO Details Nazara IPO’ed with listing price of Rs. 1,101 and offered 5,294,392 shares for sale (Valued at Rs. 5,829mn at listing price of Rs. 1,101). It involved sale of stake by multiple participant but mainly IIFL Special Opportunities Fund and the sale of stake by Promoter worth Rs. 762mn (2.3% stake). Nazara got listed on 30th March’21.

Selling Shareholders Value @ Rs.1101 Selling Stake Current Existing Name Selling Shares per share (%) Stake (%) IIFL Special Opportunities Fund 43,87,863 4,831 14.4 5.5 Mitter Infotech LLP (Promoter) 6,91,900 762 2.3 17.3 Good Game Investment Trust (Trustee: Akshat 1,50,000 165 0.5 0.2 Rathi, Founder, Nodwin Gaming) Seedfund 2 International (CDC Group) 25,000 28 0.1 1.1 Porush Jain (Founder, Sportskeeda) 23,725 26 0.1 0.0 Azimuth Investments Limited 14,959 16 0.0 0.03 Seedfund 2 India (CDC Group) 945 1 0.0 0.04 Total 52,94,392 5,829 17.4 24.1 Source: DART, Company Fund Raising History Nazara has raised Rs. 126.3mn (in two tranches – 2005 and 2008) from WestBridge and Rs. 765mn in 2018 from several HNIs (pre-ipo plans, however IPO was called off at that point) and ESL Gaming. Most recently, it has raised Rs 1Bn from Hornbill Capital just before IPO at Rs862 per share.

Fund Raising History Amount Date Name Comment (Rs. mn) Sep-05 WestBridge Ventures 66 Issued 8,68,211 OCRP Preference Shares for Rs. 75.8 Each Jan-08 WestBridge Ventures 60 Issued 3,82,993 OCRP Preference Shares for Rs. 157.87 Each The 1,251,204 OCRP Preference Shares were converted to Equity at FV of Rs. Mar-16 WestBridge Ventures 0 10 Issued 8,27,387 Nazara Shares at Rs. 604 per share to Amit D Thacker, Mehul M Shah, Nisarg Vakharia, Kiran Vyapar Limited, Akshara Motors, Jan-18 Mutliple HNIs 500 Mentor Capital, Diam Organic Chemical Industries, Speed Power P Ltd, Bahram Navroz Vakil, Cyrus Nallaseth,Suresh Bhatia (HUF), Meena Ashwin Kothari Turtle Entertainment Issued 4,85,018 Nazara Shares at Rs. 547 per share to Turtle Entertainment Jan-18 GmBH (ESL Gaming) 265 (ESL Gaming) Feb-21 HornBill Capital 1,000 Issued 11,60,093 Nazara Shares at Rs. 862 per share to Hornbill Capital Source: DART, Company

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Shareholding Breakup (%) Particulars (%) FY21 Promoters i) Promoter Shareholding 20.7 Bank, FIs, Insurance Companies & Mutual Funds i) Mutual Funds 14.2 ii) FIs & Banks 0.2 iii) Insurance Companies 0.2 iv) FIIs 13.6 v) Non-Institutional Investors 26.8 vi) Other 24.3 Source: DART, Company, Non-Institutional Investors includes Manish Agarwal (CEO) stake of 1.42%

Top Share-Holders Name Stake (%) Mitter Infotech LLP (Promoter) 17.28 Arpit Khandelwal 11.32 Rakesh Jhunjhunwala 10.82 Plutus Wealth Management 6.57 Instant Growth Limited (Hornbill Capital) 3.81 Nitish Mittersain (Promoter) 3.32 IIFL Special Opportunities Fund 3.50 Deutsche Bank A.G. 2.64 Emerging Investment Limited 1.81 Riyaz Suterwalla 1.64 Turtle Entertainment Gmbh 1.59 Manish Agarwal (CEO) 1.42 CDC Group (Seedfund2 International) 1.12 Nippon Life AMC 0.88 Standard Life Aberdeen 0.66 Kotak AMC 0.50 Goldman Sachs 0.40 Baroda Mutual Fund 0.34 HDFC AMC 0.27 SBI Funds Management 0.25 Aditya Birla Sun Life AMC 0.18 ICICI Pru AMC 0.18 BOI AXA Investment Managers 0.14 Chirag Shah 0.14 Alps Advisors 0.10 Talasila Vamsi 0.09 Sundaram AMC 0.09 BNP Paribas AMC 0.08 Neerja Vikash Mittersain (Promoter) 0.06 Axis AMC 0.04 Source: DART, Company

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Board of Directors and Key Management Personnel

Board Composition Nazara Remuneration Board of Directors Key Information (Rs. Mn - FY20) Vikash Mittersain is the Chairman and MD of Nazara Technologies. He has been associated as Director of the Company since its incorporation. He holds a diploma in industrial electronics from Walchand College of Engineering. He has Vikash Mittersain 5.60 several years of experience in multiple business sectors. He is also the Founder and President of the India Business Group, a non-profit organisation focussed on furthering Indian businesses’ interests. Nitish Mittersain is the Joint Managing Director and Founder. He is the son of Chairman and MD. He holds a bachelor of commerce degree from the University of Mumbai. He is also a trustee of the Dr. B. K. Goyal Heart Foundation and India Nitish Mittersain 28.48 Business Group (Chamber of Commerce). Nitish is also served as the Chairman of the Mobile Value Added Services Committee of the Indian Merchants Chambers. He also holds investments in Briyani By Kilo, goStops, myHQ. Kuldeep is Non-Executive and Independent Director since 2013. He is CA and an IIM A graduate. He has over a decade’s experience in a global consulting firm Kuldeep Jain 0.11 and was a partner at McKinsey & Company, Inc. He is currently the managing director of Clean Max Enviro Energy Solutions Private Limited. Sasha Mirchandani is a Non-Executive and Independent Director since 2018. He holds a bachelor degree from Strayer University. He has more than a decade’s Sasha Mirchandani 0.18 experience as an angel investor. He is the co-founder of Mumbai Angel Venture Mentors. He is the founder and MD of Kae Capital Management. In the past he has also worked at Blue Run Ventures and MIRC Electronics Limited. Shobha Jagtiani is a Non-Executive and Independent Director since 2018. She has an arts and law degree from university of Bombay. She has more than 45 Shobha Jagtiani 0.27 years of experience as a lawyer and is a member of the ITAT Bar Association. She is currently a partner at D.M Harish & Co. Probir Roy is a Non-Executive and Independent Director since 2018. He holds a bachelor’s degree in Eco & stats from St. Xavier’s, Mumbai and PG degree in Surrey. He has more than a decade’s experience in the field of Information Probir Roy 0.27 Technology and communications. He has held several senior positions including the post of vice president, MIS, CTO & COO and communications - India at Star TV, RSCG Advertising, News Television (India) Limited. Rajiv Agarwal is a Non-Executive Director. He holds a bachelor’s degree from BHU. He has experience and deep understanding of B2B and B2C businesses spanning consumer, education, digital entertainment, media, financial services, Rajiv Agarwal 0.00 payments, auto components, and oil drilling businesses which form a part of RaRe Enterprises' PE portfolio. He is a nominee director on Board of Aptech, Alchemy Capital Management, Concord Biotech, Hungama Digital Entertainment, Fullife Healthcare, Cinestaan Entertainment and Equirus Capital. Karan Bhagat is a Non-Executive Director. He holds an PG diploma from IIM B. He is the Founder, Managing Director and Chief Executive Officer of IIFL Wealth Management Limited. He joined IIFL Holdings Limited to set up IIFL Investment Karan Bhagat 0.00 Managers in 2008. He was also associated with Kotak Securities Limited and Kotak Mahindra Bank Limited in the past. Karan has more than 16 years of experience in the financial services industry. Source: DART, Company

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Management: Nazara Gaming Management Key Information Vikash Mittersain is the Chairman and MD of Nazara Technologies. He has been associated as Director of the Company since its incorporation. He holds a diploma in industrial electronics from Walchand Vikash Mittersain College of Engineering. He is also the Founder and President of the India Business Group, a non-profit organisation focused on furthering Indian businesses’ interests. Nitish Mittersain is the Joint Managing Director and Founder. He is the son of Chairman and MD. He holds a bachelor of commerce degree from the University of Mumbai. He is also a trustee of the Dr. B. Nitish Mittersain K. Goyal Heart Foundation and India Business Group (Chamber of Commerce). Nitish has also served as the Chairman of the Mobile Value Added Services Committee of the Indian Merchants Chambers. He also holds investments in Briyani By Kilo, goStops, myHQ. Rakesh Shah is the CFO of Nazara Technologies. He is a qualified Cost Accountant and an associate member of the Institute of Chartered Accountants of India. He has more than 24 years of experience Rakesh Shah in financial, administration and management accounting. He has been associated with Yahoo India, ANZ International, Electronic Data Systems, Vinmar International India, Mazda Colors Limited. Manish Agarwal is the CEO of Nazara Technologies. He holds a PG from IIM A. He has approximately 20 years of experience in various fields including the gaming space and marketing. He was associated Manish Agarwal with Zapak Mobile Games for more than four years as CEO and as COO of Zapak Digital Entertainment. He was also associated with UTV Software Communications as CEO, Rediff.com India as VP-Marketing, Hindustan Lever Limited. Pratibha Mishra is Company Secretary of Nazara Technologies since Jan'21. She is an associate member Pratibha Mishra in Institute of Company Secretaries of India and also holds a degree in law from GLC, Mumbai. Prior to joining the Company, she was associated with CEAT Limited from 2016 for a period of four years. Anshu Dhanuka is the co-founder and Chief Product Officer of Paper Boat Apps since 2013. She holds a bachelor’s degree from University of Mumbai. Anshu Dhanuka manages various departments Anshu Dhanuka including game concept, game design, graphics, animation and marketing. Earlier, she was associated with Walnut Labs which was involved in the business of developing solutions for computer software and hardware. Anupam Dhanuka is the co-founder and Chief Executive Officer of Paper Boat Apps since 2013. He holds a master’s degree in information networking from Carnegie Mellon University. he is responsible Anupam Dhanuka for the general management and operations of the company and also leads the engineering team. Earlier, he was associated with Walnut Labs which was involved in the business of developing solutions for computer software and hardware. Porush Jain is the founder and the CEO of Absolute Sports since 2013. He holds a MBA from Symbiosis Porush Jain International University, Pune. He has experience in various fields including content strategy, coding and marketing and sales. He has worked for two years with Infosys. Pratik Shah is an additional director of Halaplay Technologies. He has been associated with Halaplay Technologies since 2020. He holds a bachelor’s degree in engineering from Vishveswaraiah Technology Pratik Shah University. Pratik has over 16 years of experience in building software products including the last seven years in sports gaming. He is the co-founder of Mastermind Sports. In 2013, he founded Zootr Sports and in 2011 he co-founded Pingaala Technologies LLP. Jayashree Poochi Ramaswamy is the co-founder and Chief Operations Officer of Next Wave Jayashree Poochi Multimedia. She holds a master’s degree in arts from University of Madras. She has over 25 years of experience in various fields including digital media and gaming. She has handled several roles within Ramaswamy the Next Wave Multimedia Private Limited including that of a 3D animator, programmer, client service manager, international business development. Rajendran Poochi Ramasamy is the Co-founder and CEO of Next Wave Multimedia Private Limited since 1995 and is currently responsible for product development. He holds a bachelor’s degree in arts Rajendran Poochi from Osmania University. Rajendran started Next Wave Multimedia Private Limited which provides Ramasamy digital marketing and communication solutions to top companies in India and Europe and has created many digital campaigns for Fortune 100 companies in Europe covering web and mobile applications. He has created nearly 200 games for brands and OEM app stores. James Savio Saldanha is the CEO of Nazara Technologies FZ-LLC– (Middle East and Africa). He has been associated with Nazara Technologies FZ-LLC for over 10 years. He holds a Bachelor of Commerce degree in economic legislation and business management from Kanpur. He has more than 10 years of James Savio experience in media and mobile entertainment and has been associated with Arvato Mobile Middle Saldanha East FZ-LLC, Channel [V] and City 7 TV. James Savio Saldanha is responsible for the planning and the execution of Nazara’s business interests in Middle East, Africa and Caribbean Islands with a focus on setting a strategic direction to drive mobile gaming revenues, market penetration, partner alliances and establish growth priorities with differentiated propositions, products and marketing initiatives. Akshat Rathee is the Co-founder and Executive Director of Nodwin Gaming since 2014. He holds a Akshat Rathee MBA degree from Global Business School, New Delhi. He was also associated with at PGM Entertainment and Ernst & Young prior to co-founding Nodwin Gaming Private Limited. Source: DART, Company

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Peer Group As Nazara has multiple business sub-segments within gaming, we have attempted to find peers in each of these groups for better understanding of the landscape.

Gamified Early Learning Business’ Peer Group . Age of Learning: Age of Learning, founded in Feb-17, is the owner of the 2nd highest grossing kids section App - ABCMouse.com. It also has 2 other apps for targeting the 2-6 aged kids. The subscription price for ABCMouse is $9.99 per month. In 2017, Age of Learning had raised $150mn in equity capital at the pre-money valuation of $850mn (post money at $1bn) from ICONIQ Capital, Chan Zuckerberg Initiative and Angel Capital Management. ABCMouse was the Top Grossing Kids Education App in 2017, 2018, 2019 and is currently in Top 3 Grossing Apps. . iHuman: iHuman is a leading childhood edutainment company in China with a product portfolio of online learning apps, products for educational organizations and learning devices (targets kids and schools). It is Ranked as #1 the bestselling education apps in China (for Apple iPad). It has a Revenue of $77mn in CY20, EBIT Margin of 6.7% and 1.68mn paying users (Q1CY21). . Toca Boca: Toca Boca is a Gaming IP which holds multiple Toca Boca Role Playing Games. One of these games (Toca Life World) is the top grossing games in kids’ section. The Toca Boca franchise has 50mn MAUs (Free+Paid users, up 137% YoY) and the top grossing Toca Boca App has 30mn MAUs. Toca Boca is currently owned by a Spin Master, Canadian kids toy and entertainment company. It was acquired for $30mn in April-2016. . Lingo Kids: Lingo Kids is another kids learning app for age 2-8 and is largely focused on usage of audio to learn alphabets and numbers. Currently, it is ranked 4th in top grossing kids section and has a monthly subscription model of $14.99 per month (Also, has a basic feature for free where kids have access to 3 games out of 600 games for free). Founded in 2014, Lingo kids has raised $62.5mn till date (9 funding rounds). In the most recent round (June-21), It raised $40mn. . HOMER: Homer is a learning app for kids aged between 2 to 8. It is currently, 7th highest grossing kid’s app in App Store. It has a subscription price of $9.99 per month (can be used for 4 kids, provides printable content). Founded in 2013 in its last funding round, Homer has raised $50mn in Sept-2020. . EPIC Kids App: EPIC Kids app is a kids book reading app. It has 40,000+ audio books, videos and kids’ books available under the subscription of $9.99 per month. EPIC kids has raised $52.2mn till date. Its most recent funding round was of $30mn in Jan-19.

Our take: Kiddopia App has many competitors but this is a very fast growing space and thus many peers will only create the market wider at this point. High competition is not much concern as Kiddopia content is at par/superior compared to peers (in our view). Also, most peers are priced 20-25% higher compared to Kiddopia which leaves room for it to increase price in future. eSports - Core (Nodwin Gaming) Peers . ESL Gaming: ESL Gaming is the world’s largest eSports Company. The company operates high-profile, branded international leagues and tournaments under the ESL Pro Tour, including Intel® Extreme Masters, ESL Pro League, Dream hack and other preeminent, stadium-size tournaments such as ESL One (Also does grass root events). In 2015, Modern Times Group acquired 74% stake (from initial investment having 8% stake) in ESL for $87mn (later merged with Dreamhack, another eSports company under MTG). June 28, 2021 98 Nazara Technologies

. Modern Times Group: MTG is a pure-play eSports and gaming entertainment company. MTG has also had a story similar to Nazara (moved from traditional media to digital entertainment). It acquired 100% stake in Dreamhack and 74% stake in ESL in 2015 and further built its portfolio in gaming (InnoGames & Kongregate) and eSports (ESL, Dreamhack & ESEA) by investments (Fund has 20 more investments) and acquisitions. Since inception, it has made investments of 4Bn SEK (~$0.5bn) and divested/cashed-out investments worth 6.1Bn SEK (~$0.7bn) in traditional media business. It had a revenue of S SEK 3.9bn ~$0.46bn in CY20 (out of which eSports Revenue was SEK 1.3bn or $150mn). The eSports Segment EBIT Margin stood at -22% in CY20 and -25% in CY19. It does own IP tournament and Publisher led events for gamer activation. . Huya: Huya is a live streaming platform in China with a large and active game live streaming community. It also partners with eSports companies and is a buyer of media rights. It has a revenue of $1,672mn in CY20 (up 29.3% YoY) with EBIT Margins of 6.6%. It has MAUs of 75.5mn and Paying MAUs of 5.9mn. Tencent owns ~30% stake in HUYA. . Douyu: Douyu is a one of the leading gaming centric live streaming platform in China. It has a Revenue of $1,472mn (up 31.8% YoY) and EBIT Margin of 2.4%. It has a MAU of 191.9mn and paying QAU of 7mn. Tencent owns ~30% stake in DOUYA. Huya and Douyu are expected to be merged in H2FY21. . VSPN: VSPN is an eSports tournament organizer in China. Founded in 2016, Versus Programming Network has 70% market share of premium eSports events in China. VSPM has raised $160mn till date ($100mn from Tencent and other investors in Oct’2020, $60mn from VCs in Jan’21). It holds tournaments in 4 countries, has 20+ brand partnerships, and multiple gaming publishers (Tencent, Supercell, Blizzard, etc.) as partners. In March’21, VSPN acquired a live streaming talent agency which will work as an independent brand. . Super League Gaming: Super League Gaming, founded in 2015, is a listed eSports tournament organizer. Super League is focused on targeting competitive amateur players to their small scale eSports tournaments in online (from home) and offline events. It has 3.4mn registered players, 1mn MAUs players and 180mn monthly video views. It has a Revenue of $2mn and an operating loss of $18.7mn in CY20 (Note Q1FY21 Revenue was $0.78mn and operating loss of $4.6mn).

Our take: We believe there is no relevant sizeable peer in India market and thus have mentioned only international names. This space is also growing rapidly across regions thus increased popularity of these players will bring in more followers/viewers in the segment which in turn will drive up valuations of content/Media Rights in this business segment for players such as Nodwin.

eSports – Media Business’s Peers (Sportskeeda) . Enthusiast Gaming: Enthusiast Gaming is a digital media network target towards gamers. It has different news channels: Destructoid (Games News Website), PCIInvasion (PC Games and related news), Upcomer (eSports News), Siliconera (International video game news). It has a revenue of $59mn where $49mn is generated from its media and content (news website and Youtube Channel). It has 17.8mn MAUs and 7.9 views per visit. It also owns an eSports Team with rosters in 7 different games. Our take: We believe Sportkeeda competes with many traditional sports-news apps but also have certain edge as it also covers up a very niche space when it comes to creating content on esports, WWE etc. also, the kind of user customizations it offers makes the overall experience better on SK app. June 28, 2021 99 Nazara Technologies

Freemium Business’s Peers . Octro: Octro is an Indian mobile game developer. It owns several popular games IP in India such as PlayRummy, Teen Patti, Indian Rummy, Tambola, etc. Teen Patti by Octro’s games have already been played by over 200M players. Sequoia Capital had invested $15mn in 2014 in this company. . Moonfrog Labs: Moonfrog Labs, founded in 2013, is an Indian mobile game developer. It owns Teen Patti Gold, Ludo Club Games. Moonfrog had raised $15 Mn from Tiger Global and Sequoia Capital in 2015. In Feb’21, Moonfrog was acquired by Stillfront, Sweden based free to play studio, for $90mn (91% stake). . Gametion: Gametion is an Indian mobile gaming developer. It owns Ludo King which has crossed 500mn downloads mark globally. It has DAUs of 51mn and MAUs of 142mn. Gametion has a revenue of $20mn in CY20 (up 400% YoY). . Supercell: Supercell, founded in 2010, is a Finnish mobile game development company. It owns several globally top grossing games like Clash of Clans, Clash Royale, Boom Beach, Brawl Stars (Mid-core games). In CY20, it had a Revenue of $1.55bn and Profit of $486mn. Tencent and other investors owns 81.4% of Supercell (Bought at $8.6bn). . Tencent: Tencent is a multinational tech conglomerate in China and offers several online services such as games, social network (Wechat App), music, web portals, ecommerce. It is one of the largest video game vendors. It owns several gaming companies via its early investments or acquisitions (Riot Games, Supercell, Epic Games). . Netmarble: Netmarble, founded in 2000, is South Korea’s largest mobile gaming company (focused on RPG – Role-Playing-Games). It has a Revenue of $2.2bn and an operating profit margin of 10.9%. It earns two third of its revenues from US and Korea. . Activision Blizzard: Activision Blizzard is an American video game company focusing on all three gaming platforms (PC, Console, Mobile). It owns Call of Duty, World of Warcraft, Overwatch and Candy Crush. It has 390mn MAUs across all 3 platforms. It has a Revenue of $8bn and Operating Margin of 33.8%. . Glu Mobile: Glu Mobile, founded in 2004, is a US based mobile game developer. It has 10+ mobile gaming apps (Real Life based games, Sports based games). It has a Daily payer conversion ratio of ~5.1% (Q3FY20), DAU of 2.9mn and MAU of 14mn. It had a Revenue of $540mn and PAT of $20.4mn. Glu Mobile was acquired for $2.1bn in Enterprise Value by EA. . Electronic Arts: EA is an American video game company focusing on all 3 platforms (share of mobile revenue is ~10%). It owns several strong IPs like FIFA, Battlefield, F1, etc. It has a Revenue of $5.6bn and operating margin of 18.5%. . Rovio: Rovio is the maker of Angry Birds game. It has a Revenue of $325mn (87% Revenue from IAP) and operating margin of 15.6%. It has 27.3mn MAUs and 0.47mn Monthly Paying users. . Sea Ltd: Sea Limited is a leading internet company in China with access to games, ecommerce, digital financial services. It owns Garena (maker of mobile game ‘Free Fire’). The revenue for Garena is $2.0bn (overall 4bn$ for the company) and operating income of 50.4%. The quarterly active users for Garena is 648mn and quarterly paying users are 79.8mn.

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. Take 2 Interactive: Take-Two Interactive Software, Inc. is an American video game holding company. It owns two major publishing companies: Rockstar Games and 2K. Take-Two's portfolio includes franchises such as BioShock, Borderlands, Grand Theft Auto, NBA 2K, and Red Dead among others. It has a Revenue of $3.5bn. . Ubisoft: Ubisoft is a French Video Gamer maker. Its video game franchises include Rayman, Rabbids, Prince of Persia, Assassin's Creed, Far Cry, Watch Dogs, Just Dance, and the Tom Clancy's series. It has a player base of 121mn and Revenues of $2.65bn.

Our take: Nazara currently is a very tiny player in this huge market, however, it holds very strong strong brand WCC3 which is the most followed Cricket-simulation game and thus have potential to replicate success of FIFA (for EA) and NBA (2K) for Nazara.

Telco Business’ Peer Group (Subscription revenue model) . BeMobi: BeMobi, founded in 2009, is a listed mobile games subscription company in LATAM. It offers premium mobile games to users via the Telco platform on a subscription model. It has 32.2mn paid users and 29.6mn carrier paid users (where this subscription is bundled under the carrier plan) across 76 carriers and 39 countries. BeMobi has a revenue of $48mn (where 76% of Revenue is related to Apps Subscription) and a EBITDA Margin of 38.7% in CY20. BeMobi has collection of premium games (2000+ Games) from several marquee developers like Ubisoft, SquareEnix, Rovio, Disney, Zepto Lab, HalfBrick, etc with no Ads and IAP revenue model. . Apple Arcade: Apple Arcade is a gaming subscription service available on Apple Devices by Apple Inc. It costs $4.99 per month and $49.99 per year (this varies across markets – In India it is Rs99/month). It includes 180+ Apple approved games and “classic games” like Cut the Rope, SEGA, Star Trek, NBA 2K21 Arcade Edition etc. with no Ads and IAP. All games are completely exclusive. Any of the game featuring on Apple Arcade will not be available on any other platform. Based on certain estimates, the Apple Arcade service have about 12mn subscribers. . Google’s Play Pass: Google Play Pass is Google’s Game and App subscription service for $4.99 monthly and $30 annually (Prices again varies based on regions). It offers 800+ Apps and Games as part of the Games collection package. . GameClub.io: GamesClub.io is gaming subscription service for Android and iOS users for $5 per month. GamesClub.io offers PC games on mobile by re- working and updates old classic games for new hardware. It has 100+ exclusive premium games with no ads and IAP. It also offers a free to play mode with ads and locked content.

Our take: Apple Arcade, Play Pass, Gameclub.io are not direct comparable as they have focused more on premium mobile games and are available on their respective app store (not via telecom). BeMobi is not present where Nazara is present (it also focuses on premium games) and works with Telco partners. Nazara is strengthening this cash-cow business with launch of Disney character based gaming content to revive its subscriber base in this segment.

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Real Money Business’s Peers The Indian Real Money Gaming space is flooded with multiple sports fantasy operators (30+) and cards based real money gaming apps.

. Dream11: Dream11 is the largest fantasy sports app in India. Dream11 has the highest number of users in Fantasy Sports: 100mn users (had 75mn users Pre-COVID). Dream11 was the title sponsor for IPL 2020 and also various tournaments and leagues around the world have collaborated and have Dream11 as their sponsor. In a recent interview, the founder highlighted that Dream11 has turned profitable. Dream Sports, parent of Dream11, is currently valued at $5Bn after it closed a $400mn secondary investment round in March-21 (Valuation in Sept’21 was $2.5bn, $700mn in 2018). Dream Sports has also launched FanCode, a multi-sport aggregator platform which offers a mix of content, commerce, and community engagement. It also has stepped into the fiercely competitive payments segment with Dream Pay, which caters to online merchants. Dream Sports is Rumored to be listed next year in US via SPAC model. Also, its founder is the board member of one SPAC focused on Indian tech companies seeking to list in the US market. The SPAC is led by Founders of Elevation Capital and Think Investments Ravi Adusumalli and Shashin Shah respectively. . MPL: MPL is a fantasy gaming app which offers traditional fantasy Sports and real money gaming opportunities by competing with players on different gaming apps (50+ games). MPL has 60mn users on its platform in India and 3.5mn in Indonesia. In April-21, MPL purchased Gamingmonk to build its eSports Portfolio. In Feb-21, MPL raised $95mn on a valuation of $945mn. . FanFight: Fanfight, founded in 2016, is a sports fantasy gaming company focused on Cricket and Kabaddi. It has a registered user base of 6mn. It is funded by ACE2THREE which now owns a majority stake in Fanfight and has received total $6.3mn in funding. . PlayerzPot: PlayerzPot, founded in 2015, is a fantasy gaming app with 2.5mn users. PlayerzPot has raised $3.0mn for investments in the brand and technology. . Paytm First Games: Paytm First Games is the subsidiary of Paytm. It offers real money games based on cards (Rummy), Fantasy Sports and Horse Racing. In FY20, Paytm First Games grew its Revenue to Rs. 194mn from Rs. 125mn in FY19. It has 80mn registered users and 25mn MAUs. Paytm First Games even announced the creation of a Rs 100mn fund to provide a launchpad to indigenous developers. In 2019, Paytm First Games raised $25mn from One97 Communications for expansion and in 2021, they took a $30mn loan from Paytm. . Baazi Games: Baazi Games owns Real Money Poker and Rummy Apps and also has majority stake in BalleBaazi (a fantasy gaming app). It has total user base of 5.5mn users in Baazi Games (Pokerbaazi has 1mn users). In Aug-20, Baazi Games received $2mn in funding from existing investor at a pre-money valuation of $14mn. . DraftKings: DraftKings is an American daily fantasy sports contest and sports betting operator. It covers five major American sports (MLB, the NHL, the NFL, the NBA and the PGA), Premier League and UEFA Champions League soccer, NASCAR auto racing, Canadian Football League, the XFL, mixed martial arts (MMA) and Tennis. It also has newly started a sports betting information channels. It has monthly paid users of 1.5mn, ARPU of $61 and Revenue of $614mn.

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. Flutter Entertainment: Flutter Entertainment plc is an Irish bookmaker with a leadership position in online betting space presence in US, Europe and Australia. It owns the Pokerstars platform, and other games such as PaddyPower, etc. It has 1.6mn players globally in the online betting space. It recently acquired 50% of Indian Daily Fantasy operator Junglee Games (top 3 Rummy operator in India) for $66m. Flutter has also recently acquired 37.2% stake in Fanduel (top 3 daily fantasy games) in USA for $4.17Bn (now owns 95% stake). It has a Revenue of $7.3bn.

Our take: This segment is quite competitive and the Halaplay platforms that Nazara operate is a small player in this space and thus will take its time to make a mark but nevertheless given the large size of the market it will still hold potential to grow in India or other markets (entered Kenya through an acquisition).

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Peer Table Estm Market Reported Revenue Reported Estm EBIT Reported Estm PAT Forward Last Name Cap ($ Revenue of Next EBIT Margin of PAT ($ mn) of Estm PAT Trailing Forward EV / EV / EV / EBIT Reported mn) ($ mn) Period Margin Next ($ mn) Next Margin P/E P/E Revenue EBITDA Period ($ mn) Period Period Telco Peers BeMobi 400 48.9 49.7 24.9 33.7 8.1 11.4 23.0 NA 24.1 3.1 7.7 9.2 Dec-20 Average of sub-segment 400 48.9 49.7 24.9 33.7 8.1 11.4 23.0 NA 24.1 3.1 7.7 9.2 NA Gamified Early Learning Peers iHuman Inc 525 77.2 157.0 (8.4) (12.8) (7.0) (13.5) (8.6) NA NA 2.5 71.1 NA Dec-20 Average of sub-segment 525 77.2 157.0 (8.4) (12.8) (7.0) (13.5) (8.6) NA NA 2.5 71.1 NA NA eSports Peers Modern Times Group 1,397 436 603 1.1 8.0 (24.9) 6.0 1.0 NA 72.1 2.3 14.7 28.2 Dec-20 Huya 4,075 1,583 1,898 10.4 2.8 128.3 63.3 3.3 29.8 34.7 1.3 34.0 46.5 Dec-20 Douyu 2,300 1,393 1,531 4.2 (5.6) 70.4 (76.3) (5.0) 33.8 NA 0.8 15.9 22.1 Dec-20 Super League Gaming 201 2.1 6.2 (908.1) (298.5) (18.7) (18.8) (303.4) NA NA 26.7 NA NA Dec-20 Average of sub-segment 1,993 853 1,010 (223.1) (73.3) 38.8 (6.4) (76.0) 31.8 53.4 7.7 21.5 32.3 NA SportsKeeda Peers Enthusiast Gaming 700 54.3 127.8 (23.2) (19.6) (20.0) (22.5) (17.6) NA NA 5.4 265.0 NA Dec-20 Average of sub-segment 700 54.3 127.8 (23.2) (19.6) (20.0) (22.5) (17.6) NA NA 5.4 265.0 NA NA Freemium Business Peers Tencent 739,918 69,938 91,300 38.2 28.8 23,191 23,681 25.9 43.0 33.6 8.3 23.5 28.8 Dec-20 NetMarble 10,017 2,110 2,369 10.9 13.2 266 292 12.3 36.5 33.2 3.4 21.0 26.0 Dec-20 Activision Blizzard 71,688 8,419 8,707 39.9 42.7 2,197 2,546 29.2 26.6 24.5 7.6 16.7 17.8 Dec-20 Electronic Arts 39,600 6,190 7,383 33.5 30.6 837 931 12.6 24.1 21.7 4.8 14.0 15.7 Mar-21 Rovio 635 311 327 17.3 13.0 37 31 9.4 12.7 18.6 1.6 10.3 12.9 Dec-20 Sea 4,142 432 1,245 (55.3) 13.9 (312) 59 4.8 NA 69.1 4.8 15.6 34.9 Dec-20 Take 2 Interactive 20,193 3,553 3,456 26.7 15.6 589 381 11.0 25.1 36.6 5.1 25.2 32.7 Mar-21 UbiSoft 8,588 2,615 2,836 21.1 15.9 120 257 9.0 54.4 25.5 3.1 8.6 19.6 Mar-21 Average of sub-segment 111,848 11,696 14,703 16.6 21.7 3,366 3,522 14.3 31.8 32.9 4.9 16.9 23.5 NA Real Money Gaming Peers DraftKings 20,719 615 1,165 (129.3) (83.6) (844) (1,202) (103.2) NA NA 16.5 NA NA Dec-20 Flutter Entertainment 34,005 5,264 5,632 18.8 13.5 38 480 8.5 109.0 45.1 4.8 25.7 35.7 Dec-20 Average of sub-segment 27,362 2,939 3,399 (55.2) (35.1) (403) (361) (47.3) 109.0 45.1 10.7 25.7 35.7 NA Diversified Player Nazara 661 61.2 84.8 1.2 8.3 1.2 4.4 5.2 504.9 148.5 6.9 49.0 82.8 Mar-21 Source: DART, The EV/EBITDA for iHuman, Douyu, Enthusiast Gaming is based 2 year forward data. The EV/EBIT Data for Douyu is based on 2 year forward data.

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Financial Performance Well poised for growth: Nazara is poised for multi-year high double digit growth in revenue driven by momentum in early Gamified Learning and eSports Segment.

1) Gamified Early Learning segment is well-placed in high growth industry (40%+) with Kiddopia App which is currently in top 3 Grossing app in Kids Section (US). 2) In the eSports segment, Nodwin has established a leadership in the nascent space in India and is likely witness strong demand as more and more game publishers as they enter/ invest in Indian Gaming ecosystem and the number of mid and hardcore players increase. 3) Sportskeeda is also likely to witness from secondary (derived) growth from Gaming and eSports industry globally as viewership increase drives visitors to the news website. 4) In the Freemium, segment growth rates would accelerate gradually as many of its DAUs (12mn) can convert into paying users (current mix is 0.1%). However, with increased penetration over 4-5 year, it can witness a strong accelerated growth driven by higher IAP spends and IAP penetration. 5) In Real Money Gaming, we expect growth to revive over time as the space is very promising but is currently marred by regulatory ambiguity. Thus as more clarity emerges, Nazara would scale up sharply through inorganic initiative (targeting stable profitable peer) and in the interim can grow at 15- 20% on the small base organically by targeting customers in markets with no restrictions using Geo-fencing. 6) The Telco business is likely to remain subdued and all hopes now clings on potential play out of its relaunch effort through Disney games offering which can drive subscriptions over time (as against systemic decline in last few years). We have built-in revenue CAGR of about 5% over FY22-FY25E.

Revenue Growth Trend 20,000 83.5 90 18,000 80 16,000 70 14,000 60 45.9 47.1 44.2 12,000 38.6 39.3 50 10,000 40 8,000 30 6,000 20 4,000 -1.4 10 2,000 1,720 1,697 2,475 4,542 6,297 9,264 13,364 18,616 0 0 -10 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E Revenue (Rs. mn) Growth, YoY

Source: DART

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Historical Segment Revenues (Rs. mn) Segment Revenue goingforward (Rs mn) 5,000 20,000

4,000 1,758 15,000 11,108 3,000 191 138 10,000 7,479 2,000 426 1,700 4,608 152 492 842 5,000 2,799 1,000 244 198 1,758 5,849 1,532 195 3,490 4,499 961 818 749 1,700 2,480 0 0 749 670 705 743 781 FY18 FY19 FY20 FY21 FY21 FY22E FY23E FY24E FY25E Telco Freemium eSports RMG GEL Telco Freemium eSports RMG GEL Source: DART, Company Source: DART, Company

Revenue Mix changing in favor of GEL 100% 2.1 7.7 90% 8.9 29.0 80% 17.2 38.7 44.4 49.7 70% 56.0 59.7 14.4 60% 3.0 34.0 1.5 50% 1.8 89.0 1.9 40% 37.4 1.8 8.0 39.4 30% 37.7 56.6 33.7 20% 31.4 33.0 4.3 4.0 10% 16.5 3.1 10.6 7.6 2.9 2.9 0% 5.6 4.2 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E Telco subscription Freemium eSports Real money gaming Gamified early learning

Source: DART, Company

Revenue by Type 3,000

2,500

2,000 775 529 15236 46 1,500 492 244 58 178 17 426 63 1,000 227 1,532 1,176 500 961 984

0 FY18 FY19 FY20 H1FY21

Subscription Platform fees Advertising In app sales Sponsorship & Media rights Source: Company, DART

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Geography Wise Revenue Mix 5,000 4,500 4,000 3,500 1,908 3,000 2,500 363 302 136 2,000 327 318 94 206 1,500 445 224 180 835 347 324 164 1,000 229 118 1,862 595 1,461 500 827 825 0 334 FY18 FY19 FY20 H1FY21 FY21

India Middle east Africa APAC North America Source: DART, Company

Profitability improvement to be gradual: We expect Nazara to witness a gradual improvement in profitability from current level of 1.2% in EBIT Margin to 10.4% in FY23E and further gradual improvement from FY23E onwards to 16% by FY25E. Most of the businesses of Nazara are currently in a nascent stage and are yet to witness any operating leverage.

Gamified Early Learning is likely to witness the PBT level profitability improvement from 3.0% to ~16% in FY23E and 21% by FY25E as the base of subscribers scales up reducing the upfront customer acquisition impact and increased visibility over time driving organic subscriptions.

The eSports Business (Nodwin + Sportskeeda) business currently has PBT level profitability of 11.0%. It is likely to witness a decline in the near-term as Nodwin moves to offline events (higher cost) and Sportskeeda makes investments in Content (Quality and wider genre of sports). Over the longer term, Nodwin is likely to see higher profitability (10-15%) led by increased value of media rights and Sportskeeda will witness operating leverage driven by higher visits to the website.

The Freemium Business is currently loss making (-15.5% PBT level Margin) and would break-even as it witnesses higher revenue traction from IAP Penetration by FY24E. Thus, it is going to witness profitability gradually over 4-5 years. The Real Money Gaming business witnessed a PBT level loss of 69.9% in FY21. The management is cautious on the real money business and has highlighted that it is going to focus on staying profitable in near-term. We expect the PBT level profitability to remain low at 8% by FY24E and would scale up beyond that. The Telco Business has been declining given shift in consumer trends away from its offerings and thus would not see gains in profitability due to its modest growth prospects (PBT Margin of 10.1%).

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EBIT and EBIT Margin Trend (overall) 3,500 30 23.5 3,000 25 16.7 20 2,500 14.1 10.4 15 2,000 8.3 10 1,500 1.2 5 1,000 -1.9 0 500 -5 405 -32 -319 56 525 962 1,889 3,101 0 -10 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E (500) -12.9 -15 EBIT (Rs. mn) EBIT Margin (%) Source: DART, Company

PBT Margin Trend (Historical and Forecast) 3,500 17.7 20 15.4 3,000 12.0 15 2,500 10.4 7.4 10 2,000 6.4 3.7 1,500 5

1,000 0 500 109 128 -195 167 656 1,110 2,055 3,287 -5 0 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E (500) -7.9 -10 PBT (Rs. mn) PBT Margin (%) Source: DART, Company

PAT: We expect a PAT growth of 97% CAGR over FY21 to FY25E, led by improved segmental profitability. We expect the tax rates to inch up to ~22% as business scale up and become profitable. The Minority Interest to remain at ~45% of PAT before MI as the acquired businesses still have significant minority stake of founders.

PAT, MI and PAT margin trends

1,600 1,406 12 1,400 10 1,200 1,086 1,000 905 8 800 664 6 600 518 330 341 400 4 175 191 200 27 92 44 2 -21 0 -16 0 (200) -108 (400) -246 -2 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

PAT after MI (Rs. mn) MI (Rs. mn) PAT after MI Margin (%) Source: Company, DART June 28, 2021 108 Nazara Technologies

Capex: Nazara’s businesses are asset light in nature and have limited capex requirements. In last 3 years, Nazara has done a Capex of Rs. 148mn. Major chunk of this capex is towards the Freemium Business (Nextwave Multimedia) where Nazara has to capitalize the cost of building a game. Once, a game is launched the capitalized asset is amortized.

Capex and Acquisition spends trend 400 350 334 300 250 227 209 200 200 132 150 114 100 69 59 49 52 51 50 19 21 0 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

Capex (Rs. Mn) Acquisition (Rs. Mn) Source: DART, Company; FY22 cash outgo is towards Publishme acquisition

Cash position: The company is debt free and most businesses are well-set to generate enough positive cash flow to sustain themselves at the subsidiary level (Except Halaplay where it may need fund infusion to scale the business). The current Cash position is at Rs. 4.7bn and the Cash per share is Rs. 152 or 10% of market cap.

Cash and Investments 14,000 373 400

12,000 350 280 300 10,000 219 250 8,000 176 154 200 6,000 150 4,000 85 84 85 100 2,000 50 2,158 2,304 2,370 4,864 5,543 6,911 8,836 11,752 0 0 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

Cash + Investments (Rs. Mn) Cash per Share (Rs. abs) Source: DART, Company

RoE & RoIC: Nazara’s current RoE and RoIC (1.6% & 0.8% respectively) are subdued due to lower profitability. As the profitability improves over time the return ratios will also improve.

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RoE & RoIC to gradually improve 60 47.8 50

40 29.3 30

20 13.4 14.7 7.8 10 4.6 0.8 15.6 -6.0 11.5 0 4.9 7.2 1.6 0.8 -0.9 (10) -0.5 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

RoE (%) RoIC (%) Source: DART, Company

DSO: Nazara has witnessed a steep decline in DSOs (~100 days in FY21 to 55 days in FY21) as the Gamified Early Learning Business has scaled up. In the Gamified Early Learning, the App Store pays the subscription amount (net of app store commission – 28%) in 45 days. So as the mix of business improves towards GEL and eSports from Telco business, the DSOs are expected to improve. Note: Telco business is the area where payment cycle is long. At present company is operating on negative Working Capital cycle as it collects upfront cash in its subscription businesses (~55% of revenues).

DSOs to decline gradually 110

100

50 91 99 100 55 53 52 51 50 40 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

Source: DART, Company

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Change in Working Capital (Rs. mn) 400 306 300 200 147 87 105 100 -34 5 0 (100) FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E (200) -123 (300) (400) (500) (600) -519

Source: DART, Company

FCF: The FCF for FY18, F19, FY20, has been negative due to higher share of Telco Business and low profitability. FY21 FCF has been positive driven by higher share of GEL in business, improved profitability and release of WC (Rs. 306mn). Going forward, FCF is going to witness gradual improvement driven by the changing business mix and higher profitability.

FCF and FCF Yield (%) (to improve gradually) 3,000 5.5 6

2,500 5

2,000 3.5 4

1,500 2.4 3

1,000 2 1.1 0.7 500 1 -195 -108 -223 320 519 1,195 1,736 2,706 0 0 -0.3 -0.5 (500) -0.5 -1 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

FCF (Rs. mn) FCF Yield (%) Source: DART, Company

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Key Business Metrics Operating Metrics FY18 FY19 FY20 FY21 Gamified Early Learning Metrics Paying Subscribers (absolute) 27,760 52,785 1,97,552 3,40,282 ARPU ($/month) 1.6 5.5 5.0 7.2 Cost Per Trial ($) 11.7 20.2 20.8 21.0 Nodwin Metrics Revenues from Media Rights 4% 9% 32% 55% Number of Clients / Partners 8 18 27 NA Prize Pool Paid ($mn) 0.2 0.6 1.9 NA SportsKeeda Metrics MAUs (mn) 17.8 42.4 Visits / Month (mn) 28.8 34.2 47.3 59.0 Avg session duration (sec) 129 143 228 199 Freemium Metrics WCC MAU (mn) 13.9 12.7 Time spent in WCC games (Minutes/day/user) 26 34 45 46 Installs / day in WCC (Absolute) 72,239 80,538 97,606 1,00,000 Telco Metrics Number of Telco Games NA 1000+ Telco Partnership 113 52 Countries 61 58 Source: DART, Company, Cost Per Trial for FY21 is calculated using Cost of Subscription of $30 and Trial to Activation Ratio of 70% in Q4FY21 Presentation, The FY18 Telco Metrics are in 1HFY8

June 28, 2021 112 Nazara Technologies

Valuation Nazara’s unique portfolio model, hyper-growth prospects, deeper-wider reach and significant optionality in IPs should commands premium valuations. Given that the business scale at the moment is too small the ask multiples may appear steep but given its underlying potential it should compound its revenues by over 10x in 10 years. Taking these factors into account we initiate our coverage on Nazara Technologies with a DCF based price target of Rs2,400, implied 5.2x on EV/Sales in FY24E (implies PER of 84x and Price-to-Growth of ~2x).

The Financial performance may see volatility in the interim given the fast-changing consumer/tech trends in the segment however we do not see much risk on our estimates in long term given our stronger faith in Founder’s vision, aspirations and Nazara’s strategic positioning that should culminate into long term value creation opportunity in the stock, which reinforces our positive belief in the stock despite apparently rich valuations, which adjusted for growth are compelling.

DCF: Given the infancy stage of the gaming industry in India with Average Rev Per Gamer (ARPU) of just $9 per annum (versus US/China at $73/$35) we believe company can compound its revenues by 10x over a decade with modest profitability and cash generation in near term for next couple of years and thus believe DCF valuation as an ideal tool to value real long term potential of the business.

We have currently factored in Revenue CAGR of 42.3% over FY21-25E in its hyper- growth stage and gradual deceleration to 25.2% CAGR over FY25-30E, Average EBIT Margin of 17.1% and Terminal growth rate of 5%. Taking these assumptions, we have arrived at TP of Rs2,400 per share.

Key assumptions and Estimates Key Assumptions and Estimates INR mn FY21A FY22E FY23E FY24E FY25E Telco subscription 749 670 705 743 781 Freemium 195 251 291 393 538 eSports 1,700 2,480 3,490 4,499 5,849 Real money gaming 138 97 170 250 340 Gamified early learning 1,758 2,799 4,608 7,479 11,108 Total Revenue 4,542 6,297 9,264 13,364 18,616 YoY growth (%) 83.5 38.6 47.1 15.5 14.0 EBIT 56 525 962 1,889 3,101 EBIT margin (%) 1.2 8.3 10.4 14.1 16.7 PAT 92 330 518 905 1,406 EPS (Rs) 3.1 10.5 16.4 28.7 44.6 Source: DART, Company

June 28, 2021 113 Nazara Technologies

Growth rate factored in our estimates Metrics FY21A FY22E FY23E FY24E FY25E Telco subscription Growth YoY (%) (8.4) (10.6) 5.2 5.4 5.1 Freemium Growth YoY (%) (1.3) 28.6 15.9 35.1 36.9 eSports - Nodwin Growth YoY (%) 75.1 44.4 44.9 31.0 32.0 Sportskeeda Growth YoY (%) 414.5 51.5 25.0 20.0 20.5 RMG Growth YoY (%) (67.5) (29.9) 75.3 47.1 36.0 Gamified Learning Growth YoY (%) 819.0 59.2 64.7 62.3 48.5 INR Revenue growth (%) 83.5 38.6 47.1 44.2 39.3 EBIT Margins (%) 1.2 8.3 10.4 14.1 16.7 EPS growth (%) NA 239.9 56.9 74.8 55.3 Source: DART, Company Band Chart

Nazara Price/Sales Chart

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26-May-21 29-May-21 1yr fwd P/S Median Plus1SD Minus1SD Plus2SD Minus2SD Plus3SD Minus3SD Source: DART, Company

June 28, 2021 114 Nazara Technologies

Annexure

Industry Data Indian Gamers are spending ~8-9 hours on gaming per week. The time spent is now fairly-in line with global average.

Average hours spent a week by Gamers across different countries More than Average Country Less than 1 1-2 hours a 2-4 hours a 4-7 hours a 7-12 hours a 12-20 hours 20 hours a Hours Each hour a week week week week week a week week Week China 5.0 2.6 6.6 1.0 31.2 26.0 17.6 12.4 Germany 8.8 15.8 19.8 19.6 17.6 12.2 6.2 7.1 India 7.0 13.2 18.2 16.6 21.2 11.6 12.2 8.6 Indonesia 11.4 15.4 14.2 17.4 15.8 12.0 13.8 8.5 South Korea 20.8 22.8 16.0 15.2 11.2 5.0 9.0 5.9 UK 11.4 17.8 19.0 17.8 15.2 9.4 9.4 7.2 US 7.6 18.0 19.2 18.0 15.4 12.0 9.8 7.7 Vietnam 6.0 8.6 14.8 14.0 22.4 21.0 13.2 10.2 Global 9.8 14.3 16.0 16.2 18.8 13.7 11.4 8.5 Source: DART, Company, Limelight Networks, Survey of 4000 respondents, 500 from each country who play video games at least once a week. Avg Gaming Hours Trend Avg Gaming Hours each week Jan-Feb 2019 Jan 2020 Jan 2021 India 6.9 6.4 8.6 Global 7.1 6.3 8.5 Source: DART, Company, Limelight Networks, State of Gaming 2019, 2020, 2021 (Survey Based).

Time Spent on Gaming is now similar to time spent of OTT apps. Moreover, Gaming has a more underpenetrated market with potential of per capita spends growth.

Avg Hours on Online Video almost USA time spent on OTT platforms similar doubled in India to India 8.0 7.9 8.0 7.5 7.5 7.2 6.8 7.0 6.8 7.0 6.5 6.5 6.0 6.0 5.8 6.0 5.5 5.5 5.1 5.0 5.0 4.3 4.5 4.5 4.0 4.0 2016 2017 2018 2019 2020 2018 2019 2020 Weekly Avg Hours Spent on Online VIdeo (India) Hours Spent OTT (US) Source: DART, Company, Per week basis, Limelight Networks Source: DART, Company, Per day basis, E-Marketer

Gamers are spending good share of time in viewing games and Esports (content consumption). For Active Gamers, viewing others game or watching Esports events has also become an alternative.

June 28, 2021 115 Nazara Technologies

Hours Spent on Watching/Live per Week by Gamers Traditional Traditional Country Live Gaming Esports Sports on TV Sports on Online China 3.3 3.9 3.3 3.5 Germany 2.5 1.8 2.6 2.7 India 5.3 5.5 5.8 5.4 Indonesia 3.0 2.3 2.6 2.2 South Korea 3.4 2.1 3.0 2.5 United Kingdom 1.9 1.5 3.7 2.6 United States 2.3 2.0 3.9 2.4 Vietnam 3.1 3.1 3.0 3.4 Global 2.8 2.5 3.1 2.7 Source: DART, Company, State of Gaming 2021 Survey

June 28, 2021 116 Nazara Technologies

Profit and Loss Account (Rs Mn) FY20A FY21A FY22E FY23E Revenue 2,475 4,542 6,297 9,264 Total Expense 2,531 4,090 5,410 7,891 COGS 1,908 3,290 4,335 6,372 Employees Cost 319 487 738 1,066 Other expenses 305 313 337 452 EBIDTA (56) 452 887 1,373 Depreciation 263 355 362 411 EBIT (319) 56 525 962 Interest 12 9 8 8 Other Income 155 143 163 180 Exc. / E.O. items 0 0 0 0 EBT (177) 190 680 1,134 Tax 72 31 135 252 RPAT (21) 92 330 518 Minority Interest (246) 44 191 341 Profit/Loss share of associates (18) (24) (24) (24) APAT (21) 92 330 518

Balance Sheet (Rs Mn) FY20A FY21A FY22E FY23E Sources of Funds Equity Capital 112 122 122 122 Minority Interest 690 1,208 1,399 1,740 Reserves & Surplus 4,899 6,460 6,790 7,308 Net Worth 5,011 6,582 6,912 7,430 Total Debt 0 0 5 5 Net Deferred Tax Liability 284 214 179 144 Total Capital Employed 5,984 8,003 8,494 9,318

Applications of Funds Net Block 3,331 2,986 2,938 2,576 CWIP 0 0 0 0 Investments 81 42 42 42 Current Assets, Loans & Advances 4,105 7,153 8,576 11,129 Inventories 0 0 0 0 Receivables 681 686 914 1,320 Cash and Bank Balances 721 1,400 2,077 3,444 Loans and Advances 36 29 36 52 Other Current Assets 1,019 1,574 2,083 2,847

Less: Current Liabilities & Provisions 1,532 2,177 3,061 4,429 Payables 693 640 891 1,294 Other Current Liabilities 839 1,537 2,171 3,135 sub total Net Current Assets 2,573 4,976 5,515 6,700 Total Assets 5,984 8,003 8,494 9,318 E – Estimates

June 28, 2021 117 Nazara Technologies

Important Ratios Particulars FY20A FY21A FY22E FY23E (A) Margins (%) Gross Profit Margin 22.9 27.6 31.2 31.2 EBIDTA Margin (2.3) 10.0 14.1 14.8 EBIT Margin (12.9) 1.2 8.3 10.4 Tax rate (40.6) 16.1 19.9 22.2 Net Profit Margin (0.8) 2.0 5.2 5.6 (B) As Percentage of Net Sales (%) COGS 77.1 72.4 68.8 68.8 Employee 12.9 10.7 11.7 11.5 Other 12.3 6.9 5.4 4.9 (C) Measure of Financial Status Gross Debt / Equity 0.0 0.0 0.0 0.0 Interest Coverage (25.8) 6.2 69.0 118.8 Inventory days 0 0 0 0 Debtors days 100 55 53 52 Average Cost of Debt 304.0 162.0 Payable days 102 51 52 51 Working Capital days 379 400 320 264 FA T/O 0.7 1.5 2.1 3.6 (D) Measures of Investment AEPS (Rs) (0.7) 2.9 10.5 16.4 CEPS (Rs) 8.7 14.2 22.0 29.5 DPS (Rs) 0.0 0.0 0.0 0.0 Dividend Payout (%) 0.0 0.0 0.0 0.0 BVPS (Rs) 180.5 208.7 219.2 235.6 RoANW (%) (0.5) 1.6 4.9 7.2 RoACE (%) (4.5) 2.4 6.7 10.0 RoAIC (%) (7.0) 0.9 8.1 15.7 (E) Valuation Ratios CMP (Rs) 1559 1559 1559 1559 P/E (2091.1) 534.5 148.9 94.9 Mcap (Rs Mn) 49,154 49,154 49,154 49,154 MCap/ Sales 19.9 10.8 7.8 5.3 EV 46,784 44,289 43,615 42,248 EV/Sales 18.9 9.8 6.9 4.6 EV/EBITDA (835.1) 98.0 49.2 30.8 P/BV 8.6 7.5 7.1 6.6 Dividend Yield (%) 0.0 0.0 0.0 0.0 (F) Growth Rate (%) Revenue 45.9 83.5 38.6 47.1 EBITDA (134.3) (906.9) 96.2 54.9 EBIT 898.3 (117.6) 833.5 83.5 PBT (249.8) (207.6) 257.1 66.8 APAT (111.8) (544.5) 259.0 56.9 EPS (111.7) (491.3) 259.0 56.9

Cash Flow (Rs Mn) FY20A FY21A FY22E FY23E CFO (22) 674 833 1,244 CFI 89 (2,675) (316) (49) CFF 34 2,171 160 172 FCFF (223) 320 519 1,195 Opening Cash 533 721 864 1,541 Closing Cash 721 864 1,541 2,909 E – Estimates

June 28, 2021 118 Nazara Technologies

DART RATING MATRIX Total Return Expectation (12 Months)

Buy > 20% Accumulate 10 to 20% Reduce 0 to 10% Sell < 0%

DART Team

Purvag Shah Managing Director [email protected] +9122 4096 9747

Amit Khurana, CFA Head of Equities [email protected] +9122 4096 9745 CONTACT DETAILS Equity Sales Designation E-mail Direct Lines Dinesh Bajaj VP - Equity Sales [email protected] +9122 4096 9709 Kapil Yadav VP - Equity Sales [email protected] +9122 4096 9735 Jubbin Shah VP - Equity Sales [email protected] +9122 4096 9779 Yomika Agarwal VP - Equity Sales [email protected] +9122 4096 9772 Ashwani Kandoi AVP - Equity Sales [email protected] +9122 4096 9725 Lekha Nahar AVP - Equity Sales [email protected] +9122 4096 9740 Equity Trading Designation E-mail P. Sridhar SVP and Head of Sales Trading [email protected] +9122 4096 9728 Chandrakant Ware VP - Sales Trading [email protected] +9122 4096 9707 Shirish Thakkar VP - Head Domestic Derivatives Sales Trading [email protected] +9122 4096 9702 Kartik Mehta Asia Head Derivatives [email protected] +9122 4096 9715 Dinesh Mehta Co- Head Asia Derivatives [email protected] +9122 4096 9765 Bhavin Mehta VP - Derivatives Strategist [email protected] +9122 4096 9705

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