Why investors like Nikhil Kamath aren’t exiting Nazara Technologies after the real money gaming ban

Synopsis: Nazara Technologies’ stock fell over 27 percent after India banned real money gaming, with Q2FY26 showing a Rs. 34 crore net loss. Still, top investors are staying invested as the company shifts to interactive games, AI-powered development, and offline entertainment, aiming for 20-25 percent growth and similar EBITDA margins.

The gaming industry has seen plenty of regulatory storms, but few have shaken investor confidence the way the recent crackdown on online money gaming did. Nazara Technologies’ stock tumbled, business models were disrupted, and uncertainties piled up overnight. Yet, even after the upheaval, some of India’s sharpest investors are refusing to walk away. What do they see that the market doesn’t?

About The Company 

Nazara Technologies remains the only pure play gaming company listed in India. Its portfolio spans Curve Games, Kiddopia, Animal Jam, and Fusebox Games, the studio behind titles such as Love Island, Big Brother, and Bigg Boss.

It also owns World Cricket Championship and Sportskeeda, along with offline entertainment formats like Funky Monkeys and Smaaash Entertainment, and operates Datawrkz, its digital ad-tech business. With a presence across India, North America, and multiple global markets, the company is focused on building a worldwide gaming ecosystem anchored in strong IP, publishing capabilities, and operational depth. The stock currently trades near Rs. 225.65, giving the company a market valuation of about Rs. 8,359.54 crore.

The Real Money Gaming Ban 

The Government’s action against online money gaming moved very quickly in August 2025. On 19 August, the Union Cabinet approved the plan to bring in a new bill. On 20 August 2025, the Promotion and Regulation of Online Gaming Bill, 2025 was introduced and passed in the Lok Sabha. The Rajya Sabha cleared it the next day, on 21 August. It received the President’s approval on 22 August 2025, and became the Promotion and Regulation of Online Gaming Act, 2025. The law came into effect on 1 October 2025.

The Act puts a full ban on online money games in India. This includes games of chance, games of skill, and anything that mixes the two. It also bans advertising and promotion for such games. Banks and payment companies are not allowed to process payments for these platforms. Authorities can also block access to these websites under the Information Technology Act, 2000.

According to Q1FY26 data, only 8 percent of the company’s revenue comes from India, with the bulk coming from the US and other international markets. However, the company earned around Rs. 191.8 crore from skill-based real money gaming through PokerBaazi, owned by Moonshine Technologies which is a subsidiary of Nazara, making it the highest revenue segment. However, this segment reported an EBITDA loss of Rs. 73.9 crore in, mainly due to front-loaded marketing expenses related to the IPL during the quarter.

How Badly Did It Hit Nazara? 

During the period when the RMG Bill was passed, Nazara Technologies’ shares dropped sharply by about 27.24 percent as investors grew cautious. In Q2FY26, the company recorded strong revenue growth, with sales rising 64.89 percent to Rs. 526 crore from Rs. 319 crore a year ago. Despite this, operating profit declined from Rs. 24 crore to a loss of Rs. 164 crore. Profit before tax fell sharply from Rs. 20 crore to a loss of Rs. 42 crore, and net profit swung from Rs. 16 crore to a loss of Rs. 34 crore.

Following regulatory changes in the online real money gaming segment, Nazara Technologies recognized an impairment loss of Rs. 914.7 crore on its investment in Moonshine Technologies (PokerBaazi), based on the fair valuation as of Q2FY26.

In Q2FY26, Nazara’s stake in NODWIN Gaming also declined to 47.66 percent, leading to its de-subsidiarization under Ind AS 110. As a result, Nazara measured its retained stake at fair value and recorded a one time gain of Rs. 1,098.5 crore under Other Income. Following the de-subsidiarization, NODWIN is now accounted for as an associate using the equity method under Ind AS 28. 

Accordingly, Nazara recognized Rs. 206.3 crore as its share of loss from NODWIN for the period 13 August 2025 to 30 September 2025, mainly due to a provision for impairment relating to Freaks4U. In addition, for Q2FY26, Nazara recorded Rs. 17.5 crore as its equity share of loss in Moonshine Technologies (PokerBaazi).

What Are They Doing After The Ban? 

After the regulatory changes that impacted its real-money gaming operations, the company has shifted its strategic focus toward strengthening its core identity in interactive entertainment. Management explained that the new brand positioning, represented by the identity “Enter. Magic.”, is built around the belief that gaming can offer relief and joy in an increasingly stressful world.

With more than 500 million people in India engaging with mobile games, the company sees a massive opportunity to deepen player engagement through immersive experiences. It believes that rapid technological progress in areas such as artificial intelligence and virtual reality will push gaming experiences to evolve and become more powerful, and the company intends to align itself with this trajectory.

A major pillar of its strategy is the expansion and utilisation of its gaming IPs across emerging platforms. The management emphasised that owning IPs allows the company to adapt them easily to new technologies. For example, it is currently developing a project that brings Animal Jam to the Roblox ecosystem, while also exploring the possibility of building immersive Animal Jam environments in the metaverse. Going forward, the company plans to invest more in such technological and creative developments, but aims to do so with discipline. The approach remains pragmatic, ensuring it does not enter nascent areas too early or commit excessive capital before the timing is right.

To strengthen execution across all its gaming studios, the company has built multiple centres of excellence focused on key functions such as user acquisition, artificial intelligence, data analytics, and growth. It has also brought in senior global talent to lead these capabilities. Management believes that these centers will become a core competitive advantage, enabling its studios to scale faster and operate more efficiently. 

Early results are already visible, particularly in user acquisition, where newer technologies have started to yield stronger outcomes. This progress is reflected in improvements seen in certain IPs like Kiddopia, whose impact is expected to become more evident in future quarterly numbers.

Alongside these initiatives, the company remains focused on acquiring and developing profitable global gaming IP. It views strong IP ownership as critical in an AI-driven environment, where well-established brands can be leveraged to build content quickly, iterate faster, and deliver superior player experiences. The combination of enhanced capabilities from the centres of excellence and a strategic emphasis on high-value IP ownership forms the core of the company’s long-term direction as it moves forward after the ban.

Why Are The Ace Investors Still Holding?

Ace investors such as Madhusudan Murlidhar Kela, who owns 1.18 percent of the company, and Zerodha Co-Founder, Nikhil Kamath, who holds 1.62 percent through Kamath Associates, have continued to remain invested despite the sharp correction and near-term losses. Their conviction appears tied to the company’s restructuring discipline, improving unit economics across key acquisitions, and a multi-year roadmap that management believes can rebuild momentum across gaming, media, and offline entertainment.

Freaks4U: Cost Control and Loss Containment

One of the strongest signals of the company’s renewed discipline has been its stance on underperforming subsidiaries like Freaks4U. Management has already written off the entire value of the business and has made only a small provision for potential follow-on losses. They have decided not to fund the business further and have clearly communicated that Freaks4U must either sustain itself internally, cut costs drastically, or move toward insolvency if required. With most of the financial damage already absorbed and with stringent cost reductions underway for several quarters, the company expects losses from this entity to moderate significantly going forward.

Moonshine Technologies’ Strategic Optimisation

A similar approach has been taken with Moonshine Technologies, the parent of PokerBaazi. The company has written down the entire asset value except for the cash on its books, which currently exceeds Rs. 100 crore. Moonshine continues to evaluate strategic options, supported by a strong poker platform that has already proven its scale in India and is attracting interest from global players.

The subsidiary is exploring partnerships with international operators, new offerings for its Indian user base, and the licensing of its existing technology platform to external parties. Although some losses may continue into Q3 FY26, management expects optimisation efforts and early revenue recovery to reduce the drag over the next one to two quarters.

Management’s outlook for Moonshine Technologies reinforces this optimism. The platform has strong product-market fit, a loyal, high-value Indian user base, and a technology stack capable of competing globally. The team is exploring two major directions: leveraging its domestic user base to launch new offerings, and expanding globally through direct consumer products or B2B partnerships with international RMG platforms. More clarity is expected in Q3.

Technology as a Driver of Efficiency

The company is also leaning heavily on technology to bring long-term cost efficiency. It has adopted AI tools across development and operations, including creating the upcoming WCC 4 entirely through AI-assisted coding using Claude. Management believes such technologies will lower production costs, improve productivity, and accelerate game development timelines, which could materially strengthen margins over time.

Revival of Key Intellectual Properties

Its key IPs are also showing signs of revival. Kiddopia, which struggled for years after the IDFA changes, is now stabilising. The company has rebuilt the leadership team, strengthened internal capabilities, and leveraged its centres of excellence to improve performance. As a result, subscriber numbers have begun to grow again, churn is reducing, ARPU is moving upward, and management expects Q4 to deliver sustained subscriber growth. 

In parallel, Sportskeeda is recovering from a major hit taken during a recent Google Core update, which affected publishers globally. With another algorithm update expected in November or December, management anticipates a rebound similar to Pro Football Network’s three-quarter recovery cycle and expects traffic and revenues to lift once the update stabilises.

Guidance

Alongside this recovery, the company is targeting 20-25 percent annual growth in its core gaming business, supported by a similar 20-25 percent EBITDA margin target. This provides long-term visibility into a more profitable and scalable operating model.

Expansion in Offline Entertainment

Offline entertainment has also emerged as a major growth lever, particularly through Funky Monkeys and Smaaash. Funky Monkeys is now expanding aggressively, with one to two new centres being launched every month. From the current 14 locations, management believes the brand can scale to 100 centres over the next few years. 

Smaaash, acquired through NCLT, is undergoing cleanup, optimisation, and new hiring. A reimagined Smaaash 2.0 is under development, with pilot launches planned before scaling. These offline ventures provide diversification and predictable cash flows while aligning with India’s growing demand for family and experiential entertainment.

Gaming Studio Expansion and IP Franchises

The company’s gaming studios have also scaled rapidly. The studio that once operated with a single title now runs four franchises, including the recent Bigg Boss game and the globally licensed Traitors IP. These expansions are expected to drive meaningful growth into FY27, particularly as Indian IP-based games gain traction among the country’s large mobile gaming population.

Nodwin’s Long-Term Vision

Finally, the long-term aspiration for Nodwin remains significant. The subsidiary has outlined a vision to become a USD 1 billion revenue company within the next five to seven years, supported by four pillars: live events, content, esports, and influencer-led engagement. The goal is to stay deeply connected to youth culture and operate wherever young audiences spend their time.

Outlook

Taken together, the company’s sharper capital discipline, emerging signs of recovery in key IPs, technology-driven margin expansion, global opportunities in Moonshine and Nodwin, and strong visibility in both online and offline gaming ecosystems present a long-term trajectory that may explain why prominent investors continue to hold the stock despite its recent challenges.

-Manan Gangwar

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