Today, Rakesh Jhunjhunwala-backed Nazara Technologies is open for its Rs 583-crore initial public offering. Marketing experts, while speaking with Moneycontrol, praised the Nazara IPO and gave it thumbs up for investment.
Nazara Starts its IPO Sale
Nazara already got a positive response from its anchor investors. Goldman Sachs India, Government of Singapore, Fidelity Funds, Nomura, Abu Dhabi Investment Authority, Aberdeen Standard Asia Focus, Steadview Capital Mauritius, Eastspring Investments, Hornbill Orchid India Fund, and Cohesion MK Best supported Nazara in its growth.
Analysts expect double-digit growth for the online sports industry in the coming years. Nazara is one of the oldest online gaming companies with a wide presence worldwide. It also has plenty of products and services to woo gamers. Nazara also became the first company who started its IPO and has a pure gaming portfolio in India.
In 2020, the Global e-sport sector size has grown to $157.5 billion, whereas the movie+music industry has a cumulative size of $97 billion.
Globally, the gaming industry saw a growth of 11% Year on Year from over the year 2017-2020, whereas the Indian online gaming industry saw a whopping growth of 29% to $1.5 billion.
What Brokerage Houses Say about Nazara IPO?
Talking about the Nazara IPO, Aditya Birla Capital said:
“The IPO is valued at 8.3x on H1FY21 (annualized) price/sales which we believe is reasonable when compared to the newly-listed technology stocks (average around 13x). We assign subscribe rating on the issue.”
It further added:
“The gaming industry is set to witness over 30 percent CAGR over 2020-2023 on the back of high mobile penetration, increasing internet penetration, and an increasing number of gamers. Nazara has a widespread presence both in terms of geography and product portfolio which offers strong growth visibility,”
BP Equities also talked positively about the Nazara IPO growth.
“The company’s leading position in the industry, presence across emerging and developing countries, ongoing bullish sentiment, and appetite for new IPOs. Therefore, we assign ‘subscribe’ rating to this IPO issue (only for listing gains).”
Angel Broking, one of the known brokerage firms, provided a high rating to Nazara’s growth due to its strong growth potential.
“It has been reporting losses as they have increased their spending significantly on advertising & promotion since FY20. This will help drive strong topline growth for the company, going ahead.”
In the last 3 financial years, Nazara started new business operations that have immense growth possibilities. These new business operations include eSports, gaming – World Cup cricket, HalaPlay – Fantasy Sports.
GEPL has also advised the investors about the Nazara IPO future.
“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 to a path of steady growth.”
The analysts feel that currently, it may look aggressive at a price/sales multiple of around 7.95x on the annualized sales of H1FY21 but it has great potential for growth in the long term.
KR Choksey strongly recommended the Nazara IPO investment with a strong point of exponential online gaming growth in the future globally.
Choice Broking, Chola Securities, Marwadi Shares and Finance, and AUM Capital also talked positively related to subscribing to the issue.
The Rs 583-crore public issue will close on March 19. From the current IPO subscription, All money will go to the shareholders who are selling the stake. The share price range is between Rs 1100-1101.