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Integration of BT & BP acquisition to drive re-rating

We cut our FY27E EPS estimate by 37% after revising our margin assumptions to reflect higher user acquisition (UA) spending at Blue Tile (BT) Games over the next 9 months and after accounting for the dilution impact arising from preferential issue. Further, we had consolidated BT & BP into our projections for 12 months, but the consolidation is likely to happen from 2QFY27E leading to a sharp cut in earnings. On the other hand, our FY28E EPS has been cut by 15% as we expect some debt on the BS given pay-outs linked to BT & BP acquisition have been accelerated (entire consideration of INR29bn is likely to be paid by April-27). NAZARA IN’s topline performance was marginally better than our estimates while operational performance was sub-par at 10.8% (PLe 13.4%) led by increased investments in new title signings at Curve Games (with nearly 60% of investments allocated towards new signings) and continued spending to scale Big Brother. Further, increased share of loss from associates at INR624mn & impairment charge of INR218mn dragged the bottom-line. Led by the acquisition of BT & BP games, we expect sales CAGR of 54% over FY26-FY28E with EBITDA margin of 14.2%/15.6% in FY27E/FY28E. We have incorporated dilution arising from preferential issue of INR7,335mn to arrive at a SoTP based TP of INR378. Retain BUY

Revenue decreased

14.0% YoY: Revenue decreased 14.0% YoY to INR4,288mn (PLe INR4,209mn) due to de-consolidation of Nodwin. E-sports revenue declined 82.0% YoY to Rs278mn (PLe Rs265mn). Ad-Tech revenue increased 18.9% YoY to INR1,261mn (PLe INR1,200mn) while gaming revenue increased by 14.1% YoY to INR2,749mn (PLe INR2,744mn). Gaming segment reported EBIT of INR78mn while Esports and Ad-Tech reported EBIT loss of INR5mn and INR18mn respectively.

EBITDA margin at 10.8%:

EBITDA declined marginally by 2.0% YoY to INR465mn (PLe INR562mn, CE INR584mn) with a margin of 10.8% (PLe of 13.4%) as compared to an EBITDA margin of 9.5% in 1QFY26. Miss at the EBITDA level was on account of higherthan-expected advertisement expenses at INR1,527mn (PLe INR1,136mn). Loss after MI stood at INR799mn. After adjusting for impairment, adjusted loss came in at INR581mn (PLe PAT of INR128mn, CE PAT of INR183mn) as compared to an adjusted loss of INR125mn in 1QFY26. Increased share of losses in associates at INR624mn (PLe INR88mn) and impairment expense of INR218mn led to losses at the bottom-line level

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