Nazara Technologies has become India’s first pure-play gaming technology company to make its IPO debut on the Indian public markets. As the Rakesh Jhunjhunwala-backed company kicked off its IPO on Wednesday, research analysts are recommending investors subscribe to the offer of 5.29 million shares being sold in the price band of Rs 1,100 to Rs 1,101 per equity share.
Broker research houses such as Aditya Birla Capital, Angel Broking, BP Equities, and Kotak Securities, are among others recommending investors subscribe to the Nazara IPO.
“The gaming industry is set to witness over 30 percent CAGR (compound annual growth rate) over 2020-2023 (estimated) on the back of high mobile penetration, increasing internet penetration and increasing number of gamers. Nazara has a widespread presence both in terms of geography and product portfolio which offers strong growth visibility,” said Aditya Birla Capital analysts.
The bid-offer which opens today has kept the price band between Rs 1,100 to Rs 1,101 per equity share of face value of Rs 4 each. The Floor Price is 275 times the face value of the equity shares and the cap price is 275.25 times the face value of the equity shares. Bids can be made for a minimum of 13 equity shares and in multiples of 13 equity shares thereafter.
The bids process will close on March 19, 2021. The IPO is expected to list on March 30, 2021.
Ahead of the IPO, on Tuesday, Nazara Technologies said it has mopped up a little over Rs 261 crore from anchor investors, including Government of Singapore, Abu Dhabi Investment Authority, Goldman Sachs India Ltd, Noumura Funds Ireland Public Limited Company, and Steadview Capital Mauritius Ltd.
In addition, SBI Mutual Fund (MF), HDFC MF, ICICI Prudential MF, Axis MF, Sundaram MF, Kotal MF, and Aditya Birla Sunlife MF too participated in the anchor book bidding.
Incorporated in 1999, Nazara Technologies Ltd offers a range of diversified gaming products across interactive gaming, live and on-demand eSports, mobile games and gamified early learning ecosystem among others. It is currently operational in emerging markets such as India, Africa, South East Asia, Middle East, and Latin America.
Some of its popular products are CarromClash, World Cricket Championships, Kiddopia, Nodwin, Sportskeeda, Halaplay, and Qunami, among others.
The company derives maximum revenue from subscription fees charged from customers under the gamified early learning and eSports business segments, which accounted for 71.03 percent of revenues for the six months period ended on September 30, 2020.
It claims to have been historically EBITDA positive and generated sufficient cash flows from its operations, due to which, its cash and bank balances as of September 30, 2020 were in the region of Rs. 184.28 crore.
According to research analysts, for the last three fiscal periods, Nazara has posted an average earning per share (EPS) of Rs. 1.88 and an average Return on Net Worth (RoNW) of 1.30 percent. The issue is priced at a price to book value (P/BV) of 6.54 based on its net asset value (NAV) of Rs. 168.47 per share as of September 30, 2020.
“With negative earnings for the past 18 months, the issue is being offered at a negative P/E. But due to the investment by big tycoon Rakesh Jhunjhunwala, this IPO is garnering attention,” said Dilip Davda, IPO analysts and contributing editor at Chittorgarh.com.
He believes that being a first mover, the Nazara IPO may get investor attention post listing, but believes the offer price is aggressive based on its financial data. As such, cash surplus, risk-savvy investors may consider investment at their own risk, he adds. However, the overall market sentiment remains positive for the Nazara IPO.