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    Nazara Technologies IPO opens today: Brokerages recommend subscribing to the issue

    Nazara Technologies IPO opens today: Brokerages recommend subscribing to the issue

    Nazara Technologies IPO opens today: Brokerages recommend subscribing to the issue
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    By Ankit Gohel   IST (Updated)

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    Rakesh Jhunjhunwala-backed Nazara Technologies’ initial public offering (IPO) opened for subscription on March 17 at a price band for the issue at Rs 1,100-1,101 per equity share. The company aims to raise Rs 583 crore through its public offer.

    Rakesh Jhunjhunwala-backed Nazara Technologies’ initial public offering (IPO) opened for subscription on Wednesday (March 17) with a price band for the issue at Rs 1,100-1,101 per equity share. The company aims to raise Rs 583 crore through its public offer.
    The public offer will close on March 19 (Friday). The company has already raised Rs 262 crore from anchor investors on March 16 ahead of the IPO.
    Nazara Technologies is the leading 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.
    Analysts expect Nazara to witness strong growth for the next 2-3 years given its recent acquisitions and first-mover advantage.
    Given their market-first position in India across sports simulation and eSports, Nazara is well placed to leverage the opportunity that interactive mobile games, eSports content, and gamified early learning apps offer, experts said.
    Rakesh Jhunjhunwala-backed Nazara Technologies IPO opens: Key things to know before investing
    The company has a well-diversified revenue stream from kids gaming, eSports, subscription through telcos to the freemium model. Its subscriber base in Gamified platform has grown from 9806 subscribers in FY18 to over 3 lakh as of H1FY21. Also, its partners for eSports offerings have grown from eight in FY18 to 36 in H1FY21.
    “Nazara has a wide-spread presence both in terms of geography and product portfolio which offers strong growth visibility. The IPO is valued at 8.3x on H1FY21 (annualised) Price/Sales which we believe is reasonable when compared to the newly listed technology stocks (Avg ~13x). We assign subscribe rating on the issue,” Aditya Birla Capital said.
    Indian mobile gaming market is expected to grow at 40 percent CAGR over 2020-23 versus 15 percent CAGR for the global market, led by rising adoption of smartphones, drop in data prices, increased internet penetration, high internet speeds, etc.
    Motilal Oswal said it liked Nazara Technologies given its leadership in highly underpenetrated mobile gaming, wide product portfolio, and strong relationship and network.
    “The issue is valued at 5.5x FY21 P/BV and 7.6x FY21 EV/Sales on an annualised and post-issue basis. The issue is a first of its kind listing and has no peer comparison in India. We believe that the market would like to give premium valuation to emerging growth stories like mobile gaming. We recommend subscribe,” Motilal Oswal said.
    Over the last three fiscals, the company has changed its gears and entered newer business segments with high growth potential through the inorganic route. The newer segments with high growth potential include – eSports, Gaming - World Cup Cricket, HalaPlay – Fantasy Sports.
    Although this growth has come at the expense of EBITDA margins and return ratios, the pivot was an essential strategy to foray into diverse lucrative opportunities, leveraging an ecosystem of partners and creating business moats. All these acquisitions were funded through internal accruals.
    “As the synergies and growth from these investments kick in, the margin profile and consequently return ratios will return back to a path of steady growth,” GEPL Capital said.
    The brokerage recommended a Subscribe rating to the issue saying, “The offer is priced at a Price/Sales multiple of ~7.95x on the annualized sales of H1FY21. This may seem aggressive but would be justified in terms of the growth prospects in the medium to long term.”
    Angel Broking also recommended subscribing to the IPO given the strong growth potential for the company.
    “The company has been reporting losses as they have increased their spending significantly on advertising & promotion from FY2020 onwards which will help drive strong topline growth for the company. At current levels, the stock is trading at EV/Sales of 11.6xFY20 revenues and we recommend a “Subscribe” rating to the IPO given strong growth potential for the company,” Angel Broking said.
    BP Equities expects a decent listing for the company’s shares and assigned a ‘Subscribe’ rating to the IPO only for listing gains.
    The company’s IPO will be the first pure-play gaming company that would get listed on stock exchanges, it said.
    “On the valuation front, the company is valued at 12.7x EV/Sales based on FY20 numbers. Considering its leading position in the mobile gaming industry in India with a presence across emerging and developing countries and ongoing positive sentiments for new IPO’s in the current scenario, we believe a decent listing gain is possible,” BP Equities said.
    (Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)
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