According to founder and CEO of Nazara Technologies, Nitish Mittersain, the company plans to review its risk management strategy and further diversify its cash reserves to protect against events like the sudden failure of Silicon Valley Bank (SVB) in the United States.
Mittersain said, “At a group level, we have almost Rs 600 crore – Rs 700 crore reserves. We usually do not have more than 10 percent exposure to a particular bank in the Nazara group (Nazara Technologies and its subsidiaries). What we will probably reduce that to maybe a five percent threshold for further diversification,” according to moneycontrol.
“We will also explore various avenues to see how we can strengthen our risk management strategy, which includes considering buying insurance on our bank deposits since we don’t want to be in a similar situation again,” he added.
Nazara Technologies recently revealed that two of its step-down subsidiaries, Kiddopia and Mediawrkz, held cash balances of around Rs 64 crore in SVB. Nazara owns a 51.5 percent share in Paper Boat Apps Private Limited, which owns Kiddopia, and a 33 percent share in Datawrkz, which owns Mediawrkz.
While half of the reserves for these subsidiaries were held in SVB, Mittersain has reassured that both are lucrative and have positive cash flows, so there is no need to panic as the operations are unaffected.
The latest investor presentation revealed that Kiddopia by WildWorks produced 24% of the company’s total income during the first nine months of FY23, while Mediawrkz contributed 14%.
Mittersain said that it would not have impacted their plans even if the money were not recoverable. The US regulators have also stated that all SVB depositors will have access to their money.
Mittersain said, “This money was lying unused for a long time. But we were stressed that $7-$8 million is a decent sum of money that got stuck and could have gotten lost. So obviously, we were not happy about that situation. Now, of course, after what’s happened overnight, we are far more comfortable that we should be able to recover this money.”
“I think this was like a stress test because it allows us to see whether we are resilient enough to take such external hits occasionally. There was no such big issue for us. Obviously, for smaller and younger startups, the situation is different because they depend on running the day-to-day business on potential funds that got locked in SVB,” he added.