NEW DELHI: In one of his most vivid childhood memories, Nitsh Mittersain reminisces taking overnight trains from Mumbai to Sangli in Maharastra to visit his grandfather's textile mill. That was a frequent exercise for the seven-year-old until his father, to divert his attention from the mill, got him a ZX Spectrum, a popular computer game that could connect with the television. "That was my first brush with the world of computers and gaming and got me hooked," says Mittersain. "Years later, I am doing the same thing."
Mittersain, 38, managing director of IPO-bound Nazara Technologies, is a long-haul horse, having started small with little money and while still in college when no one knew whether mobile gaming would work in India. "We spent the first three years incurring losses and the next three years recovering those," he recalls. Nazara is eyeing a valuation of Rs 3,000-3,500 crore at the IPO, which is aimed for the middle of next year and is touted as India's first public stock listing in digital gaming. Its earliest investors, Westbridge Capital, is likely headed for returns of 70-80 times on its Rs 20 crore investment.
Nazara, a rare, highly profitable company in India's digital landscape, is confident of delivering a profit after tax of Rs 100 crore for financial year 2019. The company has crossed gross customer billings of more than Rs 550 crore for its most popular game, Chhota Bheem, with profit after tax of Rs 66 crore.
The journey started in 1999 when there was huge excitement in anything digital and then came 2000, the year of the dotcom bust. Venture capital was not a well-known animal those days so the early years were the toughest. "It was only in 2004 when we started seeing Java mobile devices that a new market segment opened up," says Mittersain, who started up at 19 years. "Finally, the first instance of building credibility in the market happened in 2005, when Nazara struck its first deal to make mobile games around ace cricketer Sachin Tendulkar."
That was when Westbridge Capital Partners, from its $200-million fund, invested $1.5 million in the venture. It invested another $1.5 million two years later.
"It was an early bet in a company doing Rs 25 lakh in revenue but the real journey had just started around that time. What we liked was the focus on creating games with themes unique to Indians," said Sandeep Singhal, managing director at Westbridge Capital. "No one has built a real business in gaming so far. Success is rare since people expect it to happen in 2-3 years. It is actually a long-haul business that needs a patient mindset."
Nazara has raised Rs 550 crore in the last few weeks alone with its IPO being a mouthwatering opportunity for the likes of big bull Rakesh Jhunjhunwala. The 17-yearold company did not raise external capital for a long time. The business borrows its mantra from champion boxer Mohammad Al i— Float like a Butterfly, Sting like a Bee. The quote hangs framed high up at the Nazara headquarters in Mumbai. Mittersain explains: "We have focussed on being as asset light as a butterfly and grabbing every opportunity as and when it presents itself."
At one point, Nazara sold about 100 games of global gaming company Electronic Arts through telecom operators in India. "We would do anything to generate revenues," says Mittersain. "But (we were careful) not to be distracted or get carried away by the hype around something."
Nazara stayed away from multiplayer role-playing games that became popular in 2007-08 and maintained its focus on casual games since RPGs were tough to understand for Indians. "That was a big decision for the company and worked well for India since most gamers were to be mobile-first consumers, having not played console or PC games."
Nazara also experimented with micro-pricing or sachet pricing, which enabled customers to buy a game for as little as Rs 5.
Going forward, Nazara, which is now focussing only on building its own mobile games, is gearing up to leverage on the expected massive upsurge in digital entertainment on mobile phones in the next five years. With a couple of acquisitions in the pipeline, Nazara is investing in new areas as well as in new businesses that will go towards building a gaming ecosytem. All this, the company expects, will help it be the market leader in the 64 countries it is present in across South Asia, the Middle East and Africa.