Why did Nazara spend Rs 44 crore to acquire 67% stake in Sportskeeda?

Mobile games and sports media company, Mumbai-headquartered Nazara Technologies has acquired 67 per cent stake in multisport web publication, Sportskeeda. Founded by Porush Jain, the website started its journey in 2009 from Delhi and later shifted to Bengaluru.

“Our DNAs match in terms of running businesses with low capital and then scaling organically. We liked the founder, the team and the business. We found a lot of synergies with what we are doing currently and that is why we went ahead and made the investment,” asserts Nitish Mittersain, founder and managing director, Nazara Technologies.

While Sportskeeda has its internal team of journalists and content writers, there also have contributors from around the world writing on a revenue share model. Sportskeeda has a user base of 25 million monthly active users. According to media planning experts, the programmatic inventory is sold to Indian viewers at Rs.15 per CPM (Cost Per Mille) while the direct sale rates are higher at Rs.100 per CPM. “The direct sale inventory is packaged with many add-ons, which varies depending on the deal. It is a 50-50 mix of direct and programmatic revenue at this stage,” estimates the planner.

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Absolute Sports, the incorporated organisation that runs Sportskeeda reported a total income of Rs. 13.4 crore in FY 18 which went up from Rs. 10.2 crore reported in FY 17. They are yet to submit their filings in Registrar of Companies (RoC) for FY 19. Valued at approximately Rs. 66 crore close to four times its total income is a decent valuation, believes a portfolio manager associated with a global financial services firm.

"Sportskeeda is a reasonably mature business model and Nazara is clearly betting on multiple horses in this space. Their own business is not in best of its shape and so they are deploying the cash to get exposure in the newer areas,” says the analyst. “Their focus is clearly to have a good mix of businesses, preferably profitable and leaders in their respective category. Sportskeeda fits the bill,” he adds.

As an investor, Nazara has acquired a majority stake in Next Wave Multimedia, NODWIN Gaming and HalaPlay Technologies. Nazara’s other investee companies include Mastermind Sports, Moong Labs Technologies, Bakbuck, CrimzonCode, InstaSportz and NZWorld (NZWorld Kenya Ltd.) to set up operations for real money gaming in Kenya. Its latest investment, Sportskeeda currently serves content in English, Hindi, and Tamil and will soon be launched in five more languages. Apart from the regional expansion, Nazara aims to make it popular in the international markets by leveraging its existing partnerships.

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“We hold a majority stake in Next Wave, which owns the WCC (mobile game) franchise. They themselves have 30 million monthly active users. We hold an investment in HalaPlay, which comes second to Dream11 in India, when it comes to real money fantasy play revolving around cricket and football. So, we have a number of assets around sports through which we want to drive Sportskeeda's traffic. At the same time, we will use Sportkeeda’s content to drive engagement on other platforms,” says Nitish Mittersain.

To start with, Sportskeeda will have a section on its website which will have a fantasy sport-related content. Through that, Nazara wants to push HalaPlay to Sportskeeda's user base. "Our first target will be the 50 million sports enthusiasts that we have across various assets. We believe that will be the first phase of growth for Sportskeeda. In the next six to eight months, we will be able to double its reach by simply cross-promoting it within the group. The next leg will be international expansion,” Mittersain reveals.

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Sportskeeda relies on advertising for its revenue but Nazara has different plans. “They have healthy revenue today and we expect it to scale up and contribute to our profitability. At this stage, Sportskeeda is dependent on advertising but we are evaluating other revenue streams like premium service, among others,” says Mittersain.

Porush Jain rejoices the moment as a “landmark one” adding that 25 million users is just scratching the surface. He remembers, “When I started 10 years ago, I did not imagine we will be at this stage today. We want to be a large international platform which caters to 200-300 million monthly active users and Nazara’s international presence will help us do that,” he adds. He will continue to run the show from Sportskeeda’s Bengaluru office and the management will remain the same.

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So far, Nazara has raised Rs. 330 crore from IIFL, Rs. 180 crore from Rakesh Jhunjhunwala and Rs. 26.5 crore from Turtle Entertainment. Mittersain says Nazara will continue to make “synergistic investments” in order to grow its presence. “We believe we have the right momentum to continue investing in more companies as we scale up. We currently hold significant stakes in about 11 companies and we will continue going down this path in the coming years,” he adds.

If sources close to the deal are to be believed, Nazara and Porush Jain’s future estimate is to grow the publication’s revenue by 50 per cent before 2020. “We would like Porush to continue growing the business and make good value for him,” Mittersain concludes.