Nazara stock dips 3% after TN bans online betting games

Shares of diversified gaming and sports media company Nazara Technologies Ltd fell 3.05% to ₹658.70 on the Nation Stock Exchange (NSE) today after the M.K. Stalin-led Tamil Nadu government passed an ordinance to ban online gambling games in the state.

The stock, which has been losing for the last three days and has fallen 12.89% in the period, touched an intraday low of ₹653.45 (-3.91%) today. The decline, however, is in line with market sentiments, with BSE benchmark Sensex falling 0.07% today.

With the Tamil Nadu government coming up with an ordinance against online gambling games, the Supreme Court, too, has initiated hearings on a similar petition filed by the state government. The plea was filed after the Madras high court overturned a similar ban order passed during online gaming games of the previous AIADMK government. A similar plea was also filed by the Karnataka government in the apex court.

The T.N. government's decision to bring an ordinance came after a four-member committee, which was led by Justice K Chandru (retired), recommended that such games should be prohibited. The government had also sought further suggestions from the general public and the key stakeholders. Not only Tamil Nadu, but other states like Andhra Pradesh, Karnataka, Kerala and Telangana are also seeking a ban on online gambling games.

The centre, however, is considering regulating such games rather than banning them altogether. Finance minister Nirmala Sitharaman-led GST Council in June decided to defer bringing online gaming under GST after some issues were raised by Goa. She said the GoM will get more time to hear stakeholders from online games.

The Centre in June 2022, however, had issued an advisory asking print, electronic and digital media to refrain from advertising online betting platforms in “larger public interest”. The guidelines were issued in light of several instances where ads of online betting websites and platforms appeared in print, electronic, social and online media.

Nazara Technologies has presence in India and across emerging and developed global markets such as Africa and North America. It works in interactive gaming, eSports, ad-tech and gamified early learning ecosystems. It owns platforms like WCC and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin and Sportskeeda in eSports and eSports media, and Halaplay, Openplay in skill-based, fantasy and trivia games and and Datawrkz in digital ad tech.

Nazara had recently acquired U.S.-based children’s interactive entertainment firm WildWorks for $10.40 million shareholders in an all-cash transaction.

In a separate development, the Director General of Goods and Services Tax (DGGI) has slapped a whopping ₹21,000 crore tax notice on Bengaluru-based Gameskraft Technology (GTPL), accusing it of GST evasion on online betting games. The department has accused the startup of providing back-dated invoices so as to avoid taxes.

The tax amount demand has been calculated based on 28% GST on the total betting amount, which amounts to around ₹77,000 crore. The gaming company, however, said the notice is a "departure from well-established law of the land". Launched in 2017, Gameskraft runs online betting games like Rummyculture, RummyPartner, gamezy.

A Gameskraft spokesperson said the authorities have applied a 28% tax on such games based on chance and lottery. However, says the company, they should have sought 18%, which is applicable on them as they are based on skills rather than chance. The company said it'll respond to the notice with their full satisfaction.