Nazara Technologies, a gaming and sports media platform in India and internationally, witnessed a significant decline in its stock price. The shares plummeted by approximately 14.20% to ₹606.25 per share during early trade on Wednesday, reaching a six-week low. However, the stock recovered slightly in trade and is currently trading at ₹677 apiece, down by 4.17%.
This decline was triggered by the decision made during the 50th meeting of the GST Council, where a 28% tax on online gaming, casinos, and horse racing was approved.
This tax levy applies to the entire face value of bets placed in these activities, impacting the gaming industry and leading to a negative market response for Nazara Technologies.
Explaining the rationale for the 28% tax on online gaming and casinos, Union finance minister Nirmala Sitharaman said it was impractical to meet the industry demand for levy of tax on platform fees as it was impossible for tax authorities to go after every player and find where all the bets have been placed.
Commenting on the Council's decision on online gaming, the All India Gaming Federation (AIGF), which represents companies like Nazara, GamesKraft, Zupee, Winzo, etc., said that the decision by the GST Council is "unconstitutional, irrational, and egregious".
"The decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities. This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses, and the only people benefitting from this will be anti-national illegal offshore platforms," Roland Landers, CEO of AIGF, told PTI.
In response to the GST rate, Nazara Tech in an exchange filing on Tuesday said "once this tax is implemented, it will apply only to the skill-based real-money gaming segment of our business. The contribution of this segment to our overall consolidated revenues for the financial year FY23 was 5.2%."
"The Company will proactively take steps to mitigate any potential impact on this segment of our business, and we anticipate minimal impact on our overall revenues," it added.
The company's shares have been performing well on exchanges for the last 16 weeks, gaining nearly 46%.36, moving from ₹492.60 to ₹721 apiece.
Earlier in March, ICICI Securities initiated coverage on Nazara Technologies with a "buy" rating, citing the company's strong growth opportunities.
The brokerage stated that the company has capitalised on its acquisition of NODWIN Gaming and is currently dominating the Indian eSports market with over 80% of the total market share in India.
Nazara Technologies is a gaming and sports media platform in India and internationally. The company operates through Gamified Early Learning, eSports, Freemium, Telco Subscription, and Skill-Based real-money gaming segments. The company is known for its games in the World Cricket Championship, Chhota Bheem, and the Motu-Patlu series.
In March 2021, the company's shares were listed on exchanges, resulting in one of the most successful IPOs of that year. The shares made a strong debut on the bourses, opening at Rs1,971 apiece, which was significantly higher than the issue price of ₹1,101 apiece.
The shares closed the first day at ₹1,576.8 apiece, which represented a listing gain of 43.2%. The IPO received a strong response from investors, as it was subscribed to nearly 175 times.
09 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.