Nazara Technologies – Should you put money in the IPO?

Nazara Technologies Ltd Logo Nazara Technologies – Should you put money in the IPO?If you are game for a gaming stock, this could be your answer, but remember that gaming stocks are not understood too well in India. On the other hand, there is not much of an industry benchmark that you can really use. It has marquee investors like Rakesh Jhunjhunwala on its rolls as an existing shareholder and a slew of institutional shareholders including IIFL and Plutus Capital. Some of them are also participating in the OFS. The entire issue is by way of offer for sale and there is no fresh issue component.

Key terms of the Nazara Technologies IPO

Nazara Technologies is coming out with an offer for sale of 52,94,392 shares with an issue size of Rs.581.92 crore. The entire issue will be an offer for sale by some of the early-stage investors and hence there will be no fresh funds coming into the business.

Key IPO DetailsParticularsKey IPO DatesParticulars
Nature of issueBook BuildingIssue Opens on17-Mar-2021
Face value of shareRs.4 per shareIssue Closes on19-Mar-2021
IPO Price BandRs.1100 – Rs.1101Basis of Allotment date24-Mar-2021
Market Lot13 sharesRefund Initiation date25-Mar-2021
Retail Investment limit13 Lots (169 shares)Credit to Demat26-Mar-2021
Fresh Issue SizeNilIPO Listing date30-Mar-2021
Offer for sale (share)52,94,392 shares  
Offer for Sale SizeRs.581.92 crorePre issue promoter stake24.16%
Total IPO SizeRs.581.92 crorePost issue promoter24.16%
Listing onBSE and NSEHNI Quota15%
QIB Quota75%Retail Quota10%

Data Source: IPO Filings

A brief on Nazara Technologies

Nazara Technologies was Incorporated in 1999 and it is today a leading mobile gaming company in India. Its offerings include Interactive gaming, eSports and gamified early learning ecosystem across. It has market outreach to Africa, South East Asia, Middle East and Latin America, apart from the Indian market. Some of its marquee online offerings include CarromClash, World Cricket Championships (mobile games), Kiddopia (gamified early learning), Nodwin, Sportskeeda (eSports) etc.

In terms of business model, the company gets its revenues predominantly from subscription revenues. For example, Nazara derives maximum revenues from the subscription fees that it charges customers under the gamified early learning and eSports segments. These account for nearly 71% of revenues in the six months to Sep-20.

Does the company have a positioning edge?

This is a business segment where it does not have any peer that can be mentioned as a dedicating gaming site. Hence peer group comparisons may not be relevant. Here are some of its key business strengths.

  • Nazara is the leading eSports companies in India. It is also one of the few players in the organized gaming segment.
  • The company’s offerings are diversified across product offerings and also across geographies, thus reducing risk overall.
  • Apart from the fact that it has a stable management support, it is also backed by a slew of marquee investors including Rakesh Jhunjhunwala.
  • The company’s business model is relatively asset light and that is favourable for ratios like ROE and ROCE, going ahead.

Investment view on Nazara Technologies

It is a tough task to give any valuation perspective because this business is very new in India and you also don’t have any real peer group. However, as we have seen in the past, this is a segment that is subject to a lot of competition from players where the entry barriers may not be too tight. Traders must look at this IPO as a medium to high risk bet on the gaming industry.

 

 

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