Nazara Technologies Ltd

NSE:NAZARA

Earnings Call Transcript 2023-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Q2 FY '23 Earnings Conference Call of Nazara Technologies Limited hosted by ICICI Securities.

This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call.

These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Abhishek Banerjee from ICICI Securities. Thank you, and over to you, sir.

[Abhisek Banerjee, analyst]

Yes. Thanks, [indiscernible]. Hello. Welcome, everyone, to the Q2 FY '23 Results Conference Call of Nazara Technologies. We are -- the management here is Mr. Nitish Mittersain, Joint Managing Director; Mr. Manish Agarwal, our CEO; Mr. Rakesh Shah, group CFO; and Ms. Anupriya Sinha Das, Head of Corporate Development.

I would hand over the call to Mr. Nitish Mittersain for his opening comments. Over to you, sir.

[Nitish Mittersain, executive]

Thank you. Good morning, and a very warm welcome to all of you to Nazara's Q2 and H1 FY '23 Earnings Call. First of all, I would like to wish all of you a very Happy Diwali and festive season. We have already uploaded our results presentation on the exchanges, and I hope you all have had an opportunity to go through the same.

On behalf of Nazara, I'm happy to share that for Q2 FY '23, we generated revenues of INR 2,638 million, up 104% year-on-year and an EBITDA of INR 214 million, up 9% year-on-year and a PAT of INR 169 million, up 11% year-on-year. Similarly, for H1 FY '23, we generated revenues INR 4,869 million, which is up 87% year-on-year and EBITDA of INR 514 million, which is up 4% year-on-year and a PAT of INR 334 million, up 17% year-on-year.

Our approach to capture growth opportunities across segments has been instrumental in us achieving better numbers in our growth estimates. And we continue to reinvest our profits or faster growth to achieve revenue scale and market leadership. At the same time, maintaining healthy and positive cash flows and profitability to provide stability to the business. Given the strong H1 FY '23 performance, we revised our revenue growth estimates upwards. We had earlier guided 50% growth for FY '23. We are now revising this upwards to 70% to 75% for FY '23. And we will achieve this while maintaining our EBITDA margins at a minimum of 10%.

As you would have already read, our CEO, Manish will be stepping down effective November 30th, and I would like to take this opportunity to thank him for all his efforts over the years at Nazara. I will take over as CEO effective December 1, '22 and look forward to many opportunities to interact more closely with all of you in the days to come. I would also like to extend a warm welcome to Sudhir Kamath, who has joined us as Chief Operating Officer and will work closely with me going forward. Sudhir has 20 years of experience in strategy consulting, private equity investing and running companies. His responsibilities will include developing and executing the strategy for us, working closely with our subsidiaries and working with me on the M&A side.

I would request Sudhir to introduce himself post which we will walk you through the quarterly highlights. Sudhir, over to you.

[Sudhir Kamath, executive]

Nitish, thanks for a very warm welcome, and good morning to everyone. I'm very excited to be part of Nazara. I think Nazara's clearly the pioneer in the Indian gaming ecosystem and has built a great platform. But I do believe there's a lot of potential in the coming years and I look forward to working closely with Nitish and the entire leadership team as we continue to build a large and profitable business. I'm looking forward to having great interactions with all the analysts and others on this call. I request Manish to take or Nitish.

[Manish Agarwal, executive]

Good morning. Hope everybody is doing well. Again, wishing you a very happy Diwali from team Nazara. It is a great kind of results, which I'm very happy to have a real sign off with essentially kind of a growth and very, very privileged to be working with Nazara for the last 7.5 years and working with Nitish and the entire leadership team of our founders to be able to kind of build a platform, which can deliver these kind of growth and not just the revenue growth, but also operating cash flows as well as profitability increase.

So very, very happy to share that, and I'll again reiterate that all our multiple growth engines strategy is really kind of firing and which is all contributing to this growth. We grew 104% in the quarter 2 year-on-year, and we grew 87% in first half year-on-year, which are amazing numbers. As the company continues to grow in size and scale, maintaining that kind of growth. Usually, people really are very, very skeptical, and we are very happy to really revise our estimates on revenue growth from 50% plus to 70% to 75% plus.

We are also very pleased to achieve this high trajectory of growth, while maintaining a positive EBITDA margins as well as operating cash flows, and while the revenue growth, we are unbury revising, we are also maintaining that we would deliver a 10% thereabouts EBITDA margins for the year to come. And I would request Anupriya to walk you through the key highlights of segments. And as in the past, we have found that the interactions and conversations through Q&A is a much better opportunity for us to explain with you various nuances of business. We would spend [ consumer all ] time of Q&A, and Anupriya, over to you.

[Anupriya Das, executive]

Thank you, Manish. Good morning to everyone. So I'll quickly walk you through our segmental performance, and then we'll take on questions. So if you look at eSports, our revenue growth for the quarter has been around 174% and 132% for half year. As Nodwin revenues grew by 240% in the quarter, and 144% in H1. Sportskeeda revenues grew by 76% in the quarter and 89% in H1. The growth in Nodwin is driven by growth in media revenue, led by [indiscernible] along with strong growth in the gaming accessories business.

At Sportskeeda, we continue to grow our U.S. revenues, which grew by -- grew 2.66% in the quarter driven by increase in video revenues and strengthening offering in eSports as well as core American sports like American football, basketball, tennis and baseball. Nodwin EBITDA has reduced to 0.8% in H1 versus 4.8% in H1 FY '22 due to: one, an investment in the gaming accessories business, where we have achieved leadership position within the gaming headphone category on Flipkart within a very short period of time. Also, we have built new IPs like playground. Both of these initiatives require investment and have resulted in a revenue growth of 240% year-on-year in Q2. Benefits of operating leverage will kick in as we scale the media input focused gaming accessories business, providing us a little bit EBITDA margin for Nodwin.

Now if you look at our gamified early learning business, the Kiddopia CPT has stabilized at 37.9% in the quarter as the company optimized the channel mix for user acquisition. We will now scale the user acquisition cost to drive further growth. We've also acquired 100% stake in WildWorks for $10.4 million on 30th of August 2022. In the month of September, the WildWorks revenues was INR 65 million and INR 12 million in terms of EBITDA.

Our growth strategy at WildWorks is focused on migrating the core business by increasing user acquisition spend to drive subscriber growth as well as accelerating content update to drive engagement. Moving on to the ad tech segment. So we added ad tech as a new business segment in the previous quarter. This segment contributed to around 14% of overall revenue in H1. The business grew by 38% in Q2 and 52% of revenue in H1 and has added 23 new clients. Now our skill-based real money gaming segment with OpenPlay which has strong revenue and EBITDA growth in H1. Within the premium business, Next Wave witnessed around 51% growth in Q2 and 41% in H1 FY '23.

I would like to reiterate all our major business segments are EBITDA positive and cash generating, and we are happy to announce that our H1 FY '23 EBITDA was 514 million, leading to an EBITDA margin of 10.6% for 6 months period. I close my remarks here and open to the call for Q&A and request Manish and Nitish to join me for the Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Nitin Jain from Fairview Investments.

[Unknown Analyst]

Yes. Congratulations on the good revenue growth. So my question is -- questions are relating to the profitability. So as we can see that this quarter, the margins have dipped below the last quarter guidance of 12% to 14%. Now we know that the management keeps reinvesting for growth, but was the reinvestment not factored into the guidance that was given last quarter? And also a follow-up on that is what gives us the confidence that the 10% guidance will be defended until the end of FY '23?

The next question is related to Nodwin. So during the Q1 call, the management was confident that the Nodwin margins should revive to about 5% to 6%, but they have dropped further below 1%. So can you provide some more color on that? And does the guidance of 5% to 6% still hold?

[Nitish Mittersain, executive]

This is Nitish and I'll answer your questions. So firstly, on the earlier guidance of 12% to 13%, it was linked to our revenue guidance of 50% for the year. But however, as the year has gone by, we have seen many more opportunities for growth. And we took a strategic call that we want to press that accelerate versus optimize or achieve higher margins because we have this unique opportunity to really build for market leadership and for scale. And therefore, it's a very conscious decision, which you can see, our actions reflecting in our revenue guidance, increasing from 50% to 70% to 75% and also the much higher-than-expected revenue growth.

I think for a company like us, it's very important. We are working in very nascent businesses like eSports and achieving market leadership, we are already market leaders. But building on top of that, running way ahead of competition at this point is extremely important for us. At the same time, as you know, our stated objective always has been that we will prioritize growth over margins but at the same time, we do not want to drive growth by burning money or by making losses.

So I think as long as we are able to maintain positive margins as we have guided right now, we will maintain a minimum level of 10% and maintain positive cash flow that we have done in this quarter as well as H1. We are very comfortable prioritizing the growth and really going up to scale. So I think that's on the overall basis.

In terms of the Nodwin margins, I think there are very similar aspects in play over here, but I think deep dive a more. In Nodwin, in this quarter, we have taken on significant investments, 1 in building new IP. It includes IPs like playground, which we have launched and which have been received well. There is also, if you would remember, Nodwin usually has seasonality Q3, Q4 are much larger -- are larger quarters for them with higher margins. And also the gaming accessories business that we have launched, Q2 was the peak period for that because of the festive season, and we have aggressively spent money in marketing and building the brand over there.

So I think, again, you will see the same approach that we are investing to build our IPs. We are investing to build our brands. And if we see opportunities, we will aggressively go after them even if that means that we need to reduce our margins by a bit. I hope that answers your question.

[Unknown Analyst]

Yes. That's quite clear. Just 1 last question. So many congratulations to Manish for moving on. Just wanted to clarify whether the entrepreneurial venture will be in competition with Nazara?

[Manish Agarwal, executive]

So I'm very, very excited always in building nascent areas much earlier ahead. And I think blockchain is some of that area, which over the next 7, 8 years, will evolve. And there are a lot of [ TV ] issues on basic blockers or ecosystem friction. And I'm very excited always to build those blockers and look at those ecosystem play. And so from that perspective, building blockchain gaming space in India is so, so nascent that it will take a lot of time and more and more entrepreneur risk appetite.

And that's why I'm really stepping out to build that. However, what is important to underline here is that I will continue to be on the Board of the data subsidiaries that have always been there. And plus, I'll continue to work with Nitish because it's a relationship of 10 years and formalizing. We'll work together as an adviser to Nazara, I'll continue to be associated. It is important to note that my significant holding is there in Nazara and I have not sure that anything -- that's where my interest and heart lies.

[Operator]

The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited.

[Jinesh Joshi, analyst]

I have a question on a Kiddopia. I think we spent about INR 3 million on Kiddopia in marketing in 2Q. So with these kind of things, are we back to hitting the trial figure, which we used to get the pre-Apple policy change. So basically just a thought of asking as your activation in churn is more or less constant? And does the 3rd trial figure have improved, there should be no further subscriber losses from these levels? Because internationally even if I look at our subscriber base, it is more or less constant as such. And from here on, I mean, how should we look at the subscriber growth, given the fact that [ PPG ] has stabilized at about $37, $38?

[Nitish Mittersain, executive]

Sure. Thanks for that question. This is Nitish, I'll just answer this one. So with Kiddopia, what we are feeling very good about is. If you see in this quarter, we spent $3.1 million, which has been higher than the preceding quarters. Our spend has dropped after the Apply ID [indiscernible] issue. And if you will see the cost per trial has actually declined from $39.3 to $37.9. What it really shows is now we are able to scale back spend not at the cost of increasing our trial cost, but actually improving it.

So I think we are very comfortable, as we've also mentioned in the last call with the $37 to $38 cost per trial because of our LTV increase, which is now starting to reflect in the ARPU, if you see this quarter's ARPU is $6.8 and is increasing, and we expect this to continue to increase as more and more users coming at a new price point. So I think to answer your question, yes, I think with this spend level we expect Kiddopia user base to be stable. Any further decline to be stemmed. And we expect that we should start showing growth in the coming quarters. And we also expect that we will increase these spend as we get the opportunity to do so.

[Jinesh Joshi, analyst]

Sure. One last question from my side. After Google allows the pilot to download the [ fantasy sports ] and revenue on its app store. Is it possible to share what kind of [indiscernible] customer acquisition cost and the organic discovery will improve meaningfully? Because if I look back at this quarter, we have given the customer acquisition cost at about [ INR 1,977 ]. So how can -- what content can we decline? And also how has been the response too far in terms of download the [indiscernible]?

[Nitish Mittersain, executive]

Sure. So look, with the -- currently apps being allowed on Google Play and our Classic Rummy went live just a week or 10 days back. So very early for me to share specific data or stats for you. We are also still optimizing and accessing the data. But I think if you zoom out, there are going 2 be major benefits of promoting the app or advertising the app on Google versus offtake as we've to do earlier. One is the friction for people to download an APK outside of the Google Play store was a lot and that gets eliminated when the user is downloading via Google Play. And therefore, the funnel should improve significantly, which means we should see lower cost per trials of us for paid users, I would say, depositing user.

The other benefit of Google potentially is the discovery, right? There are millions of users that actually go to Google Play every day. And you could also see like we see in Kiddopia and other apps, which are there on the app stores, you could start seeing organic discovery and organic downloads for our RMG apps, which means overall blended costs should come down also significantly. So this will help in 2 ways. It will either increase the number of users we're able to acquire or it will decrease the cost at which we are acquiring or most probably both. But I think next quarter will be the first quarter where we'll be able to present a specific data to you on this trial.

[Operator]

The next question is from the line of Deep Shah from B&K Securities.

[Deep Shah, analyst]

My first question is around this BGMI event that we had. So yes, I think it's very clear that the band might not be over any time shown. So what is the way out now? Do we hold these events somewhere else? Or do we host other games as part of the same IP? What is the idea there? That is one.

Second, you have highlighted that premium will be a focus area for acquisitions. So any update on that? And the Halaplay integration now done, how should we think about [ realme ] gaming ?Are we still looking to add more apps to increase liquidity on that portal? So any update on that would be really helpful.

[Manish Agarwal, executive]

Thanks for asking, Manish here, how are you doing?

[Deep Shah, analyst]

I'm good Manish, and also all the best for your new role.

[Manish Agarwal, executive]

So you have asked 3 questions, let me answer them. BGMI ban is a hit for the entire eSports later in the market because when you have a very large wave, it creates some storms massive amount of viewership, influencers, the entire ecosystem activity really keeps growing. And that's where the eSports, such events are not great for high -- highly very, very early days kind of an ecosystem, which has a very strong tailwind of consumer behavior. The good thing is there are 3 levers which Nodwin have. One, the gamers are really kind of playing and that the -- if you look at what is popular in India in the first person shooter and there is 100 million odd people who are really paying that. And these guys are now trying to look at playing Red Alert or playing Call of Duty: Mobile or even if you look at PUBG: New State, which is still there. So you see an audiences, which is playing.

The second lever which we have is the South Asia, where we run PUBG championships. The teams, local teams in India are very, very keen to be part of the South Asia championships. And maybe we relocate them to the Dubai or relocate them to some other because there are 2 parts of eSports, one is the tournament. And 1 is the players. Another is the tournament and viewership. I think the tournament and viewership can continue to happen through a broadcasting while the teams are located outside India, viewership is not an issue. So that's the second lever.

The third lever is our ability to find a create and leverage this whole excitement amount getting entertained with gaming context is what we are looking at creating IPs like play ground which are not based on live tournament content, but which are in on-demand content. So that's how we are really continuing to work in this ecosystem to keep growing. Why? Not even suggesting that BGMI is a setback for the whole ecosystem and the entire industry should work together to really create right frameworks so that these things can keep hampering the growth of eSports.

So that's on the BGMI part. On the premium part, M&A, we are absolutely working on that. As you know, that our M&A is something which doesn't happen in it. We'd like to really engage with the different, different teams. Their thought process, there -- how they really look at growth levers, what's there software ambitions and then only kind of little move. So these are very important capital allocation decisions for us. So we are having a very healthy pipeline, but we don't have anything concrete, which we have also already announced today on the premium part.

On the Halaplay, OpenPlay, I think to kind of link it to the previous question, we are very excited about the whole Google Play [ fee ] and fantasy is 1 of the large volume consumer driver with the platform integration of OpenPlay and tech being in place. I think we -- as Nitish said, it's early days, but we are very excited about leveraging OpenPlay, tech platform and the opening of Google play to see what could be done in Halaplay, though, I would like to caveat that space is a very strong network effect space, and they are very large incumbents. So again, how much benefit can accrue to us, we'll only come to know in coming quarters.

[Operator]

[Operator Instructions] The next question is from the line of Abhishek Kumar from JM Financial.

[Abhishek Kumar, analyst]

First, Manish, for your future and

[Operator]

I'm sorry to interrupt you, Mr. Abhishek, but you are not clearly audible.

[Abhishek Kumar, analyst]

One minute. Yes, is it better now?

[Operator]

Yes, much better. Please go ahead.

[Abhishek Kumar, analyst]

Yes. So congratulations and all the best to Manish for your new role, and welcome to Sudhir to Nazara family. My first question is on guidance, Nitish. So first half of this year, we have grown at 87% Y-o-Y. So that essentially looks like there is going to be some deceleration in the second half, which is traditionally the stronger quarter. And also the fact that we have actually acquired WildWorks and some of the other acquisitions, which are not there. So any specific areas where we're seeing trends slowing down, which has resulted in -- or is there just some conservatism built in the guidance?

[Nitish Mittersain, executive]

No. So I think there are a couple of things here. One is if you see our numbers, right, usually, Q3, Q4 have been larger numbers even in the previous year, which means that the base is much higher compared to Q1, Q2. Q2, in fact, for last year, if you look, it was a much smaller number compared to the increase in Q3, Q4. The Q2 growth has been higher because with our gaming accessories business and wins, Q2 now becomes a key peak period, I would say, because of festivals. The major sales happened through Flipkart and Amazon, and they run these large sales and business really happened in this quarter, which means you are seeing Q2 catch up much faster in posting 104% growth but it's coming off of a smaller base last year and you've got a new product, which kind of peaks in this second quarter.

So I think that's 1 key reason why you are seeing the 104% growth but a 70%, 75% growth for the entire year. I think if you look at our overall business, even if you were to exclude DataWorks and WildWorks, which have been our recent acquisitions, we would have grown 70% in this quarter and 58% in H1 over next year. So I don't really see a deceleration happening, but I think more of normalization happening over the year.

[Abhishek Kumar, analyst]

Sure. That's helpful. Now 1 question specifically on DataWorks. I mean the company used to grow at well over 100% before the acquisition. And I think the first half you have grown around 50%, 54%. Also, if we look at globally, what is happening in ad-driven businesses, like Snap, for example, the missing estimates, dropping guidance, et cetera. So is there any challenge in that ad tech world because of -- either because of demand or change in Apple's policy, the impact are we seeing on DataWorks growth as well?

[Nitish Mittersain, executive]

Again, I'll answer on 2, 3 fronts over here. One is, even in DataWorks business, there is a seasonality. Q3, Q4 are usually larger than the first 2 quarters, because we run into the festive period in the U.S., whether advertising spends are more. So I think that's 1 reason. The second is -- the second reason really is the growth lever in DataWorks in the last few months has been since the acquisition being a lot more aggressive in acquiring new clients, and we believe that growth will come in.

Now you have to remember in a very, very large industry of U.S. of $700 billion advertising industry, DataWork is just a $15 million, $20 million business. So I don't think macro levels will expect DataWork a lot today. And also as advertisers cut spend, I think DataWork with its operations out in India provides a significant arbitrage and cost benefit for many clients. So I think as efficiencies become more important, DataWork should benefit going into FY '24 rather than suffer from the overall market climates. So we remain very bullish about this business. We think there is a lot of scale up opportunities here and we will continue to work very closely with the team over there to achieve this.

[Operator]

[Operator Instructions] The next question is from the line of Ankit Dave from JM Financial.

[Unknown Analyst]

So I have a couple of questions. One on -- if you can just help us with the revenue split in Nodwin next to OML and D2C? And other 1 being there is 1 line item on balance sheet as to borrowings of [ $106 million ]. So can you just help us with that?

[Manish Agarwal, executive]

Yes. Let me take the second 1 firstly, Manish here. On the borrowing part, yes, there is a brand [indiscernible] which is our gaming accessories business, which has a working capital spent always because you are kind of ordering your stocks before and you are paying to our manufacturers and all that stuff. So that company would continue to have working capital requirement, and that's what you see in your balance sheet items, which in other parts of the Nazara's business is not required.

So that's the addition to the balance sheet line item. On the -- on your first question, which was around -- sorry, I forget.

[Unknown Analyst]

On the split of Nodwin.

[Manish Agarwal, executive]

So on the split of Nodwin, we have always given you 2 spaces, media and non-media and we do not want to [ adjust until ], give you further splits because each of those splits are still very, very small. And we do not want to really kind of get into any -- kind of more data information till we have very strong tangible, flectable, scalable levers prove it to ourselves.

And hence, that's point one. Point two, the true value creation is -- in Nodwin is on 2 points. One, how do you really kind of create and build IP and see the media numbers really growing because that's where your elasticity on margins will happen and your operating leverage will happen.

Second, the IP, which you build is access to community and how do you leverage in access to communities through more and more community-rated transactions. These are the 2 growth essentially value creation drivers and operating leverage drivers in the future. Media is something which we started looking at it 4, 5 years back, and hence, we have been giving that. The other levers access to the community as we concretize it and formalize it more and hence, then we will start spreading it. But not for now, we'll continue to give you media and non-media.

[Unknown Analyst]

Okay. Just if I can squeeze in 1 more. So there is a steep rise in other income line items during this quarter. So any reason?

[Nitish Mittersain, executive]

Can you speak a bit loudly, please?

[Unknown Analyst]

Yes. So there is a steep rise in other income during the quarter, any reason for the...

[Nitish Mittersain, executive]

The other income is -- you are seeing a spike because of our investment in Rusk Media. There was an external investor that came in at a much higher valuation. So that investment has been marked up, which has been included in other income.

[Operator]

The next question is from the line of Rahul Jain from Dolat Capital.

[Rahul Jain, analyst]

I have a couple of questions. Firstly, on this Animal Jam business, it's been some time this business has integrated now. So any input in terms of how the metrics or the strategy have evolved ever since it has come into our fold and what kind of growth or margin thought process we can think of in this business in the current fiscal?

Secondly, on the -- to the question specific to CU, basically is coming from a -- if my understanding is the right coming from a background from running kind of a business, which we has also created. While that kind of a business for us right now is pretty small. So any thought process in terms of how this would change with -- so they are coming in. And definitely, that question related to Manish, that given that we, as an organization, are acting very powerfully as a VC plus, the kind of a situation in the gaming ecosystem and with most of this transaction happening with Manish being around. So how we try to fill up this capability, which probably would see a gap once we have [indiscernible]?

[Nitish Mittersain, executive]

Sure. So let me answer all of them one by one. So on WildWorks, as you know, the acquisition has been fairly recent, less than a couple of months back. And we are in initial phase of understanding and integrating our persistent for that business. What we have already achieved is well, I would say, to some very crucial hires over there. For example, Director of Data Engineering was missing and data analyst was missing, and we found a very good resource who has already joined and started to throw up a lot more in-depth data, I would say, which can be actionable by as well as the WildWorks team.

So I think that's 1 thing we started. We started working with the UAE team at WildWorks. And also, naturally, with the --the way the transaction was done, WildWorks team is now able to refocus again a lot on to the TAM product. So small things like improving, increasing budgets for customer service, bringing down turnaround time to customer responses, et cetera, has started happening. And we are always -- a lot more updates have started happening regularly.

And we are already starting to see an uptick on that business. We did -- in this September, the business did $65 million in revenue and $12 million EBITDA. And we believe this should -- the business should grow well because it's also the festive business season in the U.S. I think WildWorks has a lot of potential to grow, which is the reason we really went into it. But it's very early to guide specific numbers, we would like to get a lot more gripe ourselves before we start guiding specific numbers there. But we remain very excited with the opportunity. The team is fantastic. The IP is fantastic. It has a very strong community of users, if you check on Instagram or Facebook or any social media, the fans and community is very engaged. And I think that's a great foundation to build on.

On the second question with regard to Sudhir coming in from an R&D background, I think how that will impact our R&D plans. I think we will, of course, surely engage with Sudhir takes inputs on direction, RMG is going in and how Nazara can scale up there. We're also very keenly looking to watch how the impact of Google Play -- a positive impact of Google play for our products. And we will evaluate this alongside our earlier stated objective of getting clarity on GST, et cetera, before we continue to scale this business, right?

There was a question around Manish on M&A. So I think on the M&A business, 1 is that me and Manish have worked very closely together on all M&A deals right from the start. And I think I will be taking the lead there on the M&A side, at least from a structuring valuation network perspective. The good part is, over the years, Nazara having executed many M&A successfully. We have built a brand -- we've also built a very strong soft asset in terms of how to be able to work with these teams and scale the business. And I think that is already attracting a lot of inbound M&A approaches to us. Our funnel has really increased. That said, also, we are starting to work with a lot of investment bankers because, not only in India but outside because we have our scale -- our potential scale of acquisitions is also increasing, and that is bringing a lot of interested parties to the table.

Lastly, Jain, as you would remember, we've also become an LTE in some gaming funds like different partners in the U.S. and with [ kraft ] here in Europe, which also provides us good funnel for us to invest in or potentially acquired companies. So I think I will be really taking the lead on the M&A side. Sudhir will work with me. We have a strong team. And at some point of time, we may also bring in a dedicated M&A head into the organization.

[Operator]

[Operator Instructions] The next question is from the line of Aparna Shanker from SBI Mutual Fund.

[Aparna Shanker, analyst]

Yes. Congratulations on good set of numbers Nitish. Nitish, just a small bookkeeping question. So what is included in media and what is included in non-media, I'm not looking at generally [indiscernible]

[Manish Agarwal, executive]

Manish here. [Foreign Language]

What is included in media is any money which you collect from the platforms such as OTT platforms, media TV platforms, that's the money which comes from media. What generates that revenue, your live content, your on-demand content, your talent and talent, okay?. So these are the things which you really look at in the part of media. And anything which is there on the non-media, it comprises of D2C. It comprises of white label events. It comprises of any brand sponsorship from your own IPs. And these are the 3 big components from your non-media. There we also plan the whole infrastructure for team and everyone. That's a very, very small component. So that's the fourth one. So that's -- these four things comprise of nonmedia part and the media part I explained to you.

[Operator]

[Operator Instructions] The next question is from the line of Raj Joshi from Ace Securities.

[Unknown Analyst]

Sir, there is an impairment loss of around $76 million, [ mainly ], it is related to what?

[Nitish Mittersain, executive]

Yes, this is Nitish. We took a write-down on [indiscernible] investment partially and this is impairment of that.

[Unknown Analyst]

Okay. And sorry, if this has been asked, but what level does these could starts making money as we had a very low EBITDA margin despite a substantial revenue growth?

[Nitish Mittersain, executive]

Yes. Well, eSports can start making money as of today also, it's up to the direction we want to take that business to. Like I stated earlier, I think being are us nascent market, which has become a very large market in Nazara being a market leader over there and not really being a market leader over there. Our priority today is to really drive scale and achieve market leadership.

The only [indiscernible] we have put is we do not want to achieve the same by going into losses. So you will never see large losses being incurred to achieve market leadership but trying to maximize margins to increase margins at this time at the cost of great -- at the cost of growth may also not be a very good idea. So we are trying to find the right balance over here. The priorities are these to increase our market leadership.

Also, as what is important to understand as the [ need force ] community for us grows our IPs become larger. The elasticity on value that we can generate will be much higher. And this eventually should turn into a very high-margin business. It's not a long term, it's not a low-margin business. while you see low margins today is because of reinvestment into growth. And as we will achieve scale, you will see much healthier margins.

[Operator]

[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

[Nitish Mittersain, executive]

Sure. I would once again like to thank all of you for joining the call. And I hope we have been able to address all your queries if there's any further information kindly get in touch with Anupriya or Archana or IR firm. I would like to sign off by saying that the opportunity in India's gaming landscape for Indian companies to dominate the global gaming landscape is huge. And I think Nazara has a fantastic foundation to continue building on. As the incoming CEO from December, I'm very excited about the opportunity. And I would like to sign off with a quote from my favorite post, Robert Frost, "The woods are lovely, dark and deep, but we have promises to keep, and miles to go before we sleep, and miles to go before I sleep". Thank you very much.

[Operator]

On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.