Nazara Expects Minimal Impact From 28% GST On Full Bet Value Of Online Gaming
In its 50th meeting on Tuesday, the GST Council approved levying 28% tax on full value of bets placed on online gaming platforms.
Nazara Technologies Ltd. expects a minimal impact on overall revenues due to the GST Council's decision to levy 28% tax on the face value of bets placed in online gaming.
The new taxation regime has rendered this business "unviable", Nitish Mittersain, founder of Nazara, told BQ Prime's Niraj Shah in an interview. But it won't impact the company. But 95% of the company's business, which is non real money gaming, "is growing" and "much of the growth came" from these verticals in the previous year, he said.
This tax, once implemented, will apply to the skill-based real-money gaming segment, Nazara clarified in an exchange filing on Wednesday. "The contribution of this segment to our overall consolidated revenues for the financial year FY23 was 5.2%," the mobile gaming company said.
"If this current policy sustains, and is actually implemented then we will have to take stock of our RMG (real money games) business," Mittersain said. "We have a strong team and I'm sure they will mitigate the impact of the extent possible. We are very confident that from an overall Nazara perspective, the revenue impact to us is going to be minimal."
The impact on revenue due to disruption in the real money gaming business will have to be offset in the coming year, he said. The current focus is to improve Ebitda margins, he said.
Online gaming firms have warnned that the move will kill the industry.
The existing valuations would crash and new capital will dry up if the new GST rates on online gaming are implemented, said Mittersain.
"This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses, and the only people benefiting from this will be anti-national illegal offshore platforms," said Roland Landers, chief executive officer, The All India Gaming Federation.
GST on gross gaming value is a "self-goal" that can potentially kill India's skilled online games industry, said Amrit Kiran Singh, chief strategy advisor to the founders of Gameskraft.
Shares of Nazara Technologies was trading 3.7% lower on Wednesday, compared to 0.07% rise in BSE Sensex. The stock opened gap down and fell 14.19% in earlier trade today, before recovering.
Among the analysts tracking the stock, eight suggest a 'buy' call, three have a 'hold' and one analyst recommends a 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 3.2%.
