Beyond Screens: Why Nazara Is Doubling Down On Offline Gaming

India’s gaming boom has largely unfolded on mobile screens and livestream platforms. Now, gaming major Nazara Technologies is betting that the next phase of growth will happen offline. Through its Funky Monkey centres, the gaming major is building a network of indoor play arenas, a strategy that promises faster cash flows, stronger brand touchpoints, and insulation from platform volatility.

While Nazara is widely recognised for its mobile games, esports platforms and global IP portfolio, its offline gaming business is now scaling up as the company is opening one to two new centres every month. What began as an experimental vertical is increasingly being positioned as a core pillar of Nazara’s long-term strategy, at least the company has indicated so in its Q3 earnings call.

In Q3 FY26, Nazara reported a revenue of ₹30.4 Cr in its offline gaming segment which includes Smaash and Funky Monkey. In the quarter, Smaaash contributed the larger share of offline revenues with ₹24.3 Cr in revenue and ₹7.1 Cr in EBITDA, compared to Funky Monkeys’ ₹6.1 Cr in revenue and ₹3.7 Cr in EBITDA.

While Smaaash currently drives a higher topline, Nazara is increasingly sharpening its focus on Funky Monkeys, given its faster scalability, quicker breakeven, and stronger unit economics.

It is to be noted that Nazara acquired a majority stake in Mumbai-based Funky Monkeys Play Centers Private Limited for ₹43.7 Cr last year. On the other hand, it acquired insolvency-ridden Smaaash Entertainment for a total consideration of ₹126 Cr last year.

From Screens To Physical Play

The appeal of Funky Monkey lies in its simplicity: safe, structured indoor play spaces for children and families, combining soft play zones, arcade-style games and experiential activities.

But behind the colourful slides and ball pits is a tightly optimised operating model. “Our Funky Monkey centers have been expanding pretty rapidly. We’re launching about one to two new centers per month currently. These centers have a break-even period of less than one year, so we can continue to see rapid growth over there,” Nazara management said in its recent earnings call.

In a sector notorious for long payback cycles and heavy capex, that sub-12-month breakeven is striking. Each new outlet typically requires an investment of INR 1–2 Cr. Yet management believes steady-state margins of 35–40% are achievable once centres mature.

“I think on a steady-state basis, 35–40% is what we should project,” the company spokesperson said, adding that operational discipline and scale efficiencies are already showing up in margins.

Nazara is targeting an aggressive nationwide rollout, with management indicating that the company could scale Funky Monkey to as many as 200 centres across India over the next few years, underscoring its intent to build a large-format physical gaming network at pace..

Even conservative internal projections point to at least 100 centres over the next few years, tapping into India’s fast-growing middle-class appetite for structured family entertainment.

Why Offline, Why Now?

The timing is deliberate. India’s digital gaming market has exploded, but monetisation remains uneven. While the country leads the world in mobile game downloads, it still lags in per-user spending. Offline entertainment offers something different: predictable footfalls, tangible experiences, and cash-flow-positive unit economics.

Nazara sees Funky Monkey as complementary, not competitive, to its online portfolio.

Physical centres act as brand touchpoints, introduce younger audiences to Nazara’s IP, and create opportunities for merchandising, events and cross-platform engagement. Over time, management expects tighter integration with its broader gaming ecosystem, from character-led experiences to themed activations based on popular franchises.

This hybrid strategy mirrors global trends, where gaming companies are increasingly blending physical and digital worlds, such as Pokémon Centres in Japan or Nintendo’s theme parks.

For Nazara, the move also provides diversification away from platform risk.

The company has recently felt the volatility of algorithm-driven digital businesses, particularly after Google search updates impacted its sports content vertical. Offline centres, by contrast, offer a direct-to-consumer channel insulated from sudden traffic shocks.

A Capital-Light Growth Engine

Perhaps most notable is how Funky Monkey fits into Nazara’s broader capital allocation strategy.

The company currently holds approximately INR 700 Cr in net cash, earmarked for organic growth, new IP launches, and gaming studio acquisitions. While much of that war chest is expected to fuel M&A and content development, offline gaming requires comparatively modest investment.

Unlike large esports tournaments or international studio acquisitions, each Funky Monkey outlet represents a small, repeatable bet, one that pays back quickly.

This allows Nazara to scale methodically, funding expansion largely through operating cash flows while reserving its balance sheet for higher-risk digital plays. It also gives the company a physical footprint across urban India, something few gaming firms possess.

Learning From Past Missteps

Nazara’s push into offline gaming comes after a period of strategic introspection.

Management has been unusually candid about previous mistakes, most notably a failed attempt to build a European business out of Germany, which dragged margins and diverted focus.

“The reason why we were clouded in the last one year was this attempt that we had made to go ahead and build a European business in Germany,” the company admitted. “That did not work out, and that was a drag on everything.”

The experience has reshaped Nazara’s approach to growth. Rather than chasing international expansion at any cost, the company is doubling down on areas where it sees clear product-market fit, including India’s offline entertainment segment.

At the same time, Nazara has formalised its internal incubation model. Roughly 50% of experimental IPs are deliberately culled after the first year, with successful titles typically taking three years to mature.

“Year one is what we call an experiment… we have a 50% culling rate in IPs,” management explained, highlighting the high-attrition reality of building gaming franchises.

Operational Challenges Ahead

However, scaling physical infrastructure is not without risks. Launching one to two centres per month requires operational depth, from site selection and real estate negotiations to staffing, safety compliance and customer experience consistency. Unlike digital products, offline expansion is labour-intensive and geographically fragmented.

Nazara management has acknowledged this constraint. While it is accelerating Funky Monkey’s rollout, management has stressed the need to build internal capabilities before pushing harder on expansion.

“Because launching new centers is operationally heavy, we want to make sure we are well geared to do that before we really scale,” the company noted .

There’s also the question of sustaining margins as competition intensifies. India’s family entertainment space is attracting new players, from mall-based arcades to experiential learning centres. Maintaining differentiation will require continuous reinvestment in themes, equipment and IP-driven experiences.

Capital return cycles, though short today, could lengthen if real estate costs rise or footfalls soften during economic downturns.

[Edited by Nikhil Subramaniam]

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