US admin’s statement positive outcome, gives confidence on recovery of money

Nazara Tech, whose two step-down subsidiaries have Rs 64 crore deposits in Silicon Valley Bank, on Monday said the US administration’s statements on protecting depositors for the entire amount is a “positive outcome” and gives confidence about the recovery of money.

The two subsidiaries have working capital to meet their requirements, including payroll, Nitish Mittersain, Founder and CEO of Nazara Technologies said as he categorically ruled out the possibility of layoffs within the company as a result of the Silicon Valley Bank crisis.

In fact, the current environment yields “many opportunities”, and Nazara Tech intends to double down on its efforts to look for “good companies to acquire and invest” given the attractive valuations.

“The statement by Yellen (Treasury Secretary Janet L. Yellen) saying all depositors will be protected for the entire amount, is a very positive outcome and makes us more confident that we will recover all of this money,” Mittersain told PTI.

On Friday, the dramatic collapse of the Silicon Valley Bank – the default bank for many high-flying startups – roiled global markets, marking the largest bank failure since the 2008 global financial crisis.

Federal Deposit Insurance Corporation had seized the assets of Silicon Valley Bank after clients – many of them venture-capital firms and VC-backed companies that the bank had cultivated over time – began pulling out their deposits, creating a classic run on the bank.

The Biden administration on Sunday promised that customers of the failed Silicon Valley Bank will have access to all their money.

After receiving recommendations from the boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, and consulting with the president, Treasury Secretary Janet Yellen on Sunday approved actions enabling the FDIC to complete its resolution of the Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors, an official statement said.

“The depositors will have access to all their money starting Monday, that is, March 13. No losses associated with the resolution of the Silicon Valley Bank (SVB) will be borne by the taxpayer,” said a joint statement issued by the Department of the Treasury, Federal Reserve, and FDIC.

In a related development, the UK government announced on Monday that it has facilitated London-based banking major HSBC to buy the embattled UK arm of Silicon Valley Bank for 1 pound, securing the deposits of more than 3,000 customers worth around 6.7 billion pounds.

The failure of Silicon Valley Bank had left many start-ups, tech companies, entrepreneurs and VC funds nervous and jittery.

Nazara Technologies, a diversified gaming and sports media platform, on Sunday said two of its step-down subsidiaries – Kiddopia Inc and Mediawrkz – hold cash balances of around Rs 64 crore at the SVB.

Nazara Technologies asserted that both subsidiaries continue to be well-capitalised and are generating positive cash flows along with profitability. Hence, Nazara Technologies said, it expects no impact on its day-to-day operations, business performance and growth plans due to the SVB event.

On Monday, Mittersain assured that the question of layoffs within the company as a result of the bank collapse does not arise.

“Nazara has a 23-year history of being in business, and we have been through many such cycles, and have learnt our lessons in the past…build resilience and all our businesses are profitable. Even excluding this money, we have Rs 600 crore of cash reserves,” he said and adding that the company is, in fact, activity recruiting in many of its businesses.

Mittersain noted that the valuations were, as it is, coming down this year. Given the SVB collapse and related developments, “some of the pressure will only increase” which is a “great opportunity” for acquisitions, for Nazara Tech.

The two subsidiaries – which have deposits in SVB – will not require support from Nazara Tech.

Mittersain said that the company will be happy to engage with the Government on consultations in the tech space.

Nazara is an India-based, diversified gaming and sports media platform with a presence in India and across emerging and developed global markets such as Africa and North America, and has offerings across interactive gaming, eSports, ad-tech and gamified early learning ecosystems.

“Silicon Valley Bank has been focused on tech start-ups. Even for Indian start-ups having subsidiaries in the US, the onboarding of accounts was far more easier,” he said.

Given that Silicon Valley Bank was a reputed bank, and among top 20 US banks, “we did not see any large risk”, Mittersain said when asked why the company had chosen to have accounts there.

The chain of events that unfolded last week took Nazara by surprise, he conceded.

“In the hours before it closed down… we did try to withdraw our funds through various wire transfers. It showed us as processing but did not get processed,” Nazara’s top executive said.

The two subsidiaries have “enough working capital” with them, in other bank accounts, and there is no reason for concern.

Shares of Nazara Technologies declined by 0.58 per cent to close at Rs 514.75 on Monday as against a steeper 1.52 per cent drop in benchmark Sensex. PTI