Nazara IPO: Motilal Oswal believes the market would give a premium valuation to emerging growth stories like mobile gaming while recommending a subscribe rating to the issue.
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The public offer of Nazara Technologies, a leading diversified gaming and sports media platform, had been subscribed 175.46 times on March 19, the final day of bidding, with bids received for 51.25 crore equity shares against the issue size of 29.20 lakh equity shares.
The portion set aside for retail investors has been subscribed 75.29 times and that of employees 7.55 times. The company reserved Rs 2 crore worth of shares for its employees.
Non-institutional investors’ portion was subscribed 389.89 times, while qualified institutional buyers had bid for 103.77 times of the shares set aside for them.
Backed by ace investor Rakesh Jhunjhunwala, Nazara Technologies, which has a presence in India and across emerging and developed global markets such as Africa and North America, is going to raise around Rs 583 crore through the issue that is an offer for sale by existing selling shareholders.
Also read the Moneycontrol’s Exclusive Research on Nazara Technologies IPO
Nazara is well diversified with some of the most recognisable IPs in its kitty—Kiddopia in gamified early learning (39 percent of revenue), Nodwin & Sportskeeda in eSports (32 percent), WCC & CarromClash in simulation games (5 percent), and Halaplay Technologies in real money games (3 percent), while telco subscription forms 21 percent of revenue.
The company enjoys leadership in eSports with an 80 percent market share and cricket simulation games, where WCC is India’s most awarded mobile game.
“We like Nazara given its leadership in highly under-penetrated mobile gaming, wide product portfolio and strong relationship and network. Nazara is expected to witness strong growth for the next two-three years given its recent acquisitions and first-mover advantage,” Motilal Oswal said.
The price band for the public issue has been fixed at Rs 1,100-1,101 per share. “The issue is valued at 5.5x FY21 P/BV and 7.6x FY21 EV/sales on an annualized and post issue basis. The issue is first of its kind listing and has no peer comparison in India,” said the brokerage, which is in the favour of subscribing the IPO.
Also read – Nazara Technologies IPO: 10 things to know
Nazara’s revenue grew at 20 percent CAGR during FY18-FY20, while in nine months period ended December 2020, it achieved around 81 percent of FY20 revenue. After negative EBITDA in FY20, EBITDA has started recovering in nine months ended December 2020 and would pick up going ahead as Nazara attains economies of scale, said Motilal Oswal. Its balance sheet is lean with minimal debt and working capital requirements but return ratios is negative as it is loss-making.
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