Global economic performance picked up in 2017 after a five year period of relative muted growth and the current momentum is expected to continue into 2018. With strengthening economic activity, the global economy is estimated to have grown by 3.6% in 2017, in terms of GDP growth, driven by policy stimulus in emerging economies, solid employment gains, lower inflation rate, growth in investment and an upsurge in international trade.
Among all large economies, India is poised to deliver one of the highest growth on a sustainable basis, at CAGR of 9.46% from 2016-2021, driven by strong manufacturing led industrial expansion and consumption demands from
private sector. The country’s GDP is estimated to cross USD 3,000 Billion (‘200 trillion) by 2020 and in the event of accelerated manufacturing and investment, it could potentially grow to USD 3,600 billion (‘240 trillion).

The digital gaming market worldwide has seen a paradigm shift in distribution, adoption as well as user behaviour. In the late 1990s and 2000s, basic computer gaming evolved to a wide universe of serious followers who indulged in expensive CD/DVD-ROMs, cartridges, handheld devices, and gaming consoles such as the Xbox, Wii and PlayStations, despite the limited shelf-life of each game. But smartphones and internet connectivity changed that.
Since 2009, there has been a gradual shift towards mobile gaming. The availability of thousands of professional quality games with varying levels of difficulty on app stores, social media, and even pre-loaded on mobile devices and tablets popularized gaming among millions of users worldwide making it a dominant form of entertainment.
While leisure games increased multifold in usage, virtual professional gaming became more serious internationally than ever before.

The global games market generated revenue of $104.8 billion in 2016, up by 12.6% from 2015. Revenues will have potentially increased to $116.0 billion in 2017 and will continue to increase to $151.7 billion in 2021. Growth is expected to be driven from South-East Asia, Middle East and India as these regions have an advantage of optimistic economic outlook, favourable demographics and rising growth in smartphone penetration and internet.
The Indian gaming market is still relatively small, and contributed an estimated US$338.4 million in total revenue in 2017. Even by the standards of other large developing markets, the market share of mobile games is very large due to the lack of PC and console gaming legacy. With support from sustained local development, improved digital payment infrastructure and increasing affinity towards subscriptions the market is forecast to grow very strongly, reaching US$1.1 billion in 2021, almost entirely driven by growth in mobile gaming revenue.

South East Asia is one of the highest growth regions in the world in terms of gaming revenue and number of gamers, driven by increasing internet penetration rate, rising incomes and easy availability of budget smartphones. Overall gaming revenue in the region is forecast to grow from US$1.3 billion in 2016 to US$5.5 billion in 2021. The Middle East and Africa is also a high growth region in terms of gaming revenue and gamers, equally driven by increasing internet penetration rates, availability of budget smartphones, and rising incomes. Overall mobile gaming revenue in the region is forecast to grow from US$1.6 billion in 2016 to US$6.6 billion in 2021.

Sports has always been insulated from mega-trends disruptions and helped drive consistent growth for the entertainment sector across all platforms including Free to Air Television, Pay TV Services, On-Demand video, Internet live streaming, and Social Media. An interesting growing paradigm of this business is esports.

Esports goes beyond the realm of regular digital gaming into professional competition of virtual games drawing the attention of over 300 million people globally. The esports ecosystem consists of game publishers, hardware manufacturers, gamers, media companies (broadcast on linear TV), online streaming platforms (Twitch, YouTube, etc.), advertisers, events sponsors and event organizers. esports companies play a critical role in connecting the various stakeholders to exploit the monetisation potential in the online gaming market. Globally, ESL and Major League Gaming are the largest esports companies. The esports market is growing at a fast pace as it becomes more and more popular around the world. The global esports audience totaled 322 million in 2016, up 86 million since 2015. This number is likely have grown to almost 386 million in 2017 and will continue to increase rapidly, at a CAGR of 14.0%, reaching 665 million in 2021. The Indian esports audience has an estimated 2 million enthusiasts and 2 million occasional viewers, but is expected to grow more than fivefold by 2021.

Esports business models are slightly different from that of digital gaming and more similar to that of professional sports leagues. Three primary contributors are sponsorships for small to large sports events, media distribution rights (TV and digital), and in-app purchases by gamers for virtual merchandise. Global esports revenue is forecast to reach $1.68 billion in 2021, more than triple the total revenue in 2016. Sponsorship overtook advertising as the biggest revenue generator within the esports market in 2016 and will remain the biggest revenue generator for esports into 2021. Media rights will become the second-most important revenue
generator. As esports events are becoming bigger and attracting more revenue from the other channels, organizing events will become a profitable business on its own.

The Indian gaming ecosystem comprises mostly start-ups involved in various services in the value chain, such as developing, publishing, software services, advertising, marketing, payment systems etc. With most of the companies in the entire value chain being start-ups, the industry struggled to take off in the early 90s as investments were low. However, with majority of the Indian population increasingly consuming their entertainment content online or from
their smartphones, there is a spike in interest for mobile gaming, especially among the younger demography. Consequently, the ecosystem had a spurt of gaming start-ups with teams as small as 3-10 members. Investors such as Sequoia Capital, IDG Capital, Lightspeed, Blume Ventures, Kalaari Capital and Westbridge Capital among others also responded to this trend by showing more interest in this segment, thus, providing the necessary impetus to take
the industry forward. With the growth of the number of developers and number of games being published on app stores, need for local publishers has increased as developers face two big challenge namely getting their game discovered on the app store and getting game design mentorship to improve the player retention in their game. Majority of the developers in India
lack resources to fund paid user acquisition and also given the nascent stage of the ecosystem gaining access to right skill sets is also a challenge, which necessitates a need for publishers and developers to co-exist in the local ecosystem. Trend of more local publishers increasing in emerging markets will get further accentuated as consolidation of playing
users happen with few developers / publishers.

Nazara is one of the leading mobile games companies headquartered in Mumbai, which is engaged in acquisition of, value addition to and distribution, of mobile games across emerging markets such as India, Middle East, Africa, South East Asia and Latin America. Its  operations comprise of its Subscription Business, Freemium Business and esports business.
Its subscription services were accessed by 130.43 million monthly visitors from 61 countries across emerging markets, and over 4.08 million paying users subscribed to its subscription services, and downloaded over 37.62 million games, in September 2017. As a part of its in house Freemium Business, it had 44.49 million downloads until September, 2017 in calendar year 2017 and 19.34 million downloads in calendar year 2016. Its recently
acquired Subsidiary, Next Wave had 64.30 million downloads in calendar year 2017, until September 2017 and 42.02 million downloads in calendar year 2016. The  Company’s in-house monthly active users (MAUs) in September 2017, were 8.66 million as compared to 2.79 million MAUs in September 2016, across its network of games on the Google Play Store and App Store. Next Wave’s MAUs in September 2017 were 11.02 million as compared to 5.98 million
MAUs in September 2016, across its World Cricket Championship franchise. Further, its recently acquired Subsidiary, Nodwin Gaming is a pioneer in esports in India with established relationships with global gaming publishers and platforms including market leaders such as ESL, the biggest esports organizer in the world and Valve Corporation. (Source: Frost & Sullivan Report)
Its Subscription Business is focussed on mass mobile internet users in the emerging markets, comprising largely of first time mobile gamers. In light of the low propensity of gamers to pay for online content in many of its markets, the  Company has tailored its product offerings to deliver maximum value for gamers at affordable price points. The “sachet pricing” strategy in its Subscription Business allows gamers to access its entire catalogue of over 1,000 android games, upon signing up for a daily, weekly or monthly subscription. Billing for its Subscription Business is channelled through telecom operators (carrier billing), which has eased the payment process for gamers and collection of revenue by the company. As on September 30, 2017, it was  offering its Subscription Business services through 113 telecom operators in 61 countries, including but not limited to Airtel, Vodafone and Idea in India; and Etisalat and Ooredo in the Middle East.Nazara believes that its Subscription Business has a lean operating cost model and a highly optimised consumer acquisition strategy, which has enabled it to consistently generate returns from low Average Revenue Paying User (ARPU) telecom subscribers, across emerging markets. For Financial Year 2017, and in the six month ended September 30, 2017, as per our Restated Consolidated Financial Statements, revenue from subscription/ download of
games/other contents was ‘1,861.75 million and ‘807.70 million, respectively.
As part of its in-house Freemium Business, it believes that its ability to understand local gamer behaviour in designing games and innovatively incorporating local, licensed, intellectual property to drive the growth of its network of games is one of its key strengths. Its localised gamer insights are reflected in the popularity of some of its mobile games on the Google Play Store, such as, ‘World Cricket Championship 2’, ‘Chhota Bheem Race’, and ‘Motu Patlu Game’. Its  games have consistently been part of the top three games on the top free charts on the Google
Play Store ahead of certain globally established names such as Candy Crush, Subway Surfer and Temple Run (Source: Frost & Sullivan Report). In nine of the first 10 months of calendar year 2017, nine of the  Company’s in-house games have been ranked among the top three games by downloads on the top free charts on the Google Play Store. For
Financial Year 2017, and in the six month ended September 30, 2017, As per its Restated Consolidated Financial Statements its in house, Freemium Business had revenue from advertising services of  INR 39.83 million and INR 31.23 million, respectively. Further, its recently acquired Subsidiary, Next Wave registered a total income of  INR 87.11 million and INR 49.90 million in Financial Year 2017 and in the six month ended September 30, 2017, respectively, on a consolidated basis. We believe that Nodwin Gaming is one of the leading enablers in the Indian esports market with a first mover advantage. In addition to hosting and managing IP based gaming events such as, the ESL India Premiership and Dew Arena by ESL, Nodwin Gaming also partners with other brands to create multiple gaming events intellectual
properties in India, such as Mountain Dew Arena, Indian Gaming Show and Asus ROG Masters. Further, Nodwin Gaming contributed 53.37% or over  INR 10.00 million of the cumulative Indian prize pool for esports, in calendar year 2017. (Source: Frost & Sullivan Report) For Financial Year 2017, and in the six month ended September 30, 2017, Nodwin Gaming had a total income of INR 90.41 million and INR 104.78 million, respectively, on a consolidated basis. The Indian games market with an estimated US$0.7 billion in total revenue in Financial Year 2017, is dominated by mobile gaming and is forecast to grow very strongly, reaching US$3.5 billion in 2021, almost entirely driven by  growth in mobile gaming revenue. Further, the rapidly increasing smartphone penetration will boost the number of mobile gamers, driving growth in the overall number of gamers. In terms of download volume of mobile games from Google Play and Apple’s AppStore, India is already one of the leading countries in the world in Financial Year 2017. A strong revenue growth will therefore almost certainly follow in the coming years. (Source: Frost & Sullivan Report) With the background of the expected growth in the mobile games market, Nazara  believes that it is well poised to exploit the large opportunity in gaming across its Subscription Business, Freemium Business and esports businesses, in emerging markets by leveraging its established presence across 61 countries, as on September 30, 2017, localised gamer insights and proven monetisation abilities. Further, to provide an impetus to its operations, the Company has made investments in synergistic game development companies, whereby the  Company provides financial assistance, through investments to indigenous game developers and small game studios to bring their game ideas into reality.
Its growth is driven by the efforts of Vikash Mittersain and Nitish Mittersain, its Promoters, who have over 15 years of experience in the mobile entertainment/ gaming industry, its CEO Manish Agarwal who has been associated with the Company since 2015 and has approximately 18 years of experience in various fields including the gaming space and marketing, and its experienced team of young professionals who play an active role in the business operations
of the  Company.

Nazara`s revenue from operations for Financial Years 2015, 2016 and 2017, and in the six month ended September 30, 2017, was INR1,529.75 million, INR 2,111.63 million, INR 1,901.58 million, and INR 838.93 million, respectively, and its restated profit for Financial Years 2015, 2016 and 2017 and in the six month ended September 30, 2017, was  INR 590.96 million,  INR 645.21 million,  INR 597.20 million and INR 198.45, respectively. The decline in its restated profit for the six month ended September 30, 2017, reflects the impact of one time employee benefit expenses for implementation of the ESOP 2016, and payment of tax on dividend income from our Subsidiaries in Dubai and Singapore into India. The Company has consistently remained debt free, and as of Financial Years 2015, 2016 and 2017 and the six month ended September 30, 2017, as per its Restated Consolidated Financial Statements, the Company had cash and bank balances and current investments of INR 866.22 million,  INR 1,291.58 million, INR 1,794.62 million and  INR 1,596.75 million.
Nazara has recorded 37.24% ROCE and 27.59% ROE, in Financial Year 2017, signifying a stellar performance in terms of profitability.