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Nazara Expands with Big Acquisitions Despite Revenue Drop
Nazara Technologies is moving forward with its largest-ever acquisitions, planning to buy Bluetile and BestPlay. This deal aims to add a large casual gaming portfolio and 22 million monthly active users to its global platform. The acquisition includes an upfront investment of about $100.3 million and is designed to boost Nazara's growth prospects for fiscal year 2027. The acquired companies reported $153.6 million in revenue and $27.7 million in EBITDA for calendar year 2025. The deal values them at 1.3 times their 2025 gross revenue and 7.2 times their 2025 EBITDA. However, these forward-looking deals come as Nazara's own recent financial performance shows a decline. In the fourth quarter of fiscal year 2026 (ending March 31, 2026), Nazara's revenue fell 24% year-on-year to ₹397.78 crore. Net profit, however, jumped 196% to ₹46.96 crore, mainly due to a significant increase in 'other income'. This contrast between falling revenue and rising profit raises caution for investors.
Valuation Concerns and Analyst Views
Nazara's current market valuation is facing questions. Reports show Nazara's price-to-earnings (P/E) ratio varies widely, from about 36.06 to over 180.96. The average P/E for its sector is much lower, at 38.37. This difference suggests debate over the quality of its earnings and what the market expects. In January 2026, MarketsMOJO downgraded Nazara to a 'Sell' rating, pointing to weak fundamentals and stagnant financial trends. While some analysts still rate Nazara as 'Buy' or 'Hold,' the average 12-month price target from 10 analysts is around ₹286.40. This suggests only a modest potential gain and falls short of the ₹400 target mentioned in some reports. Looking back, Nazara's stock has underperformed the broader Sensex over the last year, dropping 12.16% while the Sensex fell 8.14%. However, it has performed better over three-year periods.
Integration Risks and Wider Market Challenges
Nazara's plan to acquire and integrate Bluetile and BestPlay carries inherent risks. Successfully integrating these international businesses, making their AI capabilities work, and achieving expected revenue growth are crucial to justify the acquisition's high price. Some analysts have raised concerns about management and company quality, scoring them 'Poor' on certain fundamental measures. Additionally, the Indian technology sector faces major challenges, including worries about AI disruption and slower global IT spending. This has pushed the Nifty IT index to a three-year low. This tough market environment could slow Nazara's growth, particularly as it depends on these new acquisitions for future expansion. The heavy reliance on 'other income' to boost quarterly profits, combined with slowing revenue, points to potential weaknesses in Nazara's core business operations.
Looking Ahead: Growth Prospects and Challenges
Despite current difficulties, Nazara Technologies highlights its shift towards becoming a diversified, gaming-focused company. Gaming accounted for about 90% of its fiscal year 2026 EBITDA. Nazara expects revenue to accelerate in fiscal years 2027 and 2028. This growth is expected from integrating its new acquisitions, improving its gaming intellectual property, and expanding its gaming franchises. The company is also setting up 'Centres of Excellence' for user acquisition, data analysis, and AI to improve how it makes money and keeps players engaged. Achieving these future goals will depend on successful integration of the acquisitions, navigating the tough market, and improving its core financial performance, which has recently shown weakness.