Nazara Technologies IPO: Is It Worth Investing?

This IPO frenzy is not going to leave us any time soon. On that note, this week will be phenomenal as approx 3000 crores worth IPOs are all set to enter the markets. Of them, one of the most eye-catching IPO is of the Nazara technologies, which is backed by the market guru, Rakesh Jhunjhunwala himself. 

So you might be wondering what's so special about the company? And whether it will make a good fit into your portfolio? Let's see the details of the IPO and address a few queries that might pop-up in your mind.

Nazara Technologies IPO – Details

Incorporated in the year 1999, Nazara technologies which is going for an Initial public offer, will open for subscription on March 17th 2021. The price of the same has been fixed as Rs. 1100-1101. This will be the second time the company is trying to make a market entry after 2018, which it withdrew calculatedly owing to the conditions prevailing. The lockdown, which confined many of us to our mobile screen, helped the company grow and opened numerous doors of possibilities. And the IPO now seems apt. The last date for the subscription for the same has been fixed as 19th March, 2021. 

Nazara Technologies Issue details

The book-building IPO, which will be entering both the markets, the NSE and the BSE, is aimed at raising about 582.91 crores by the sale of 5,294,392 equity shares. 

The promoter holding, which is now at 24.16%, will drop to 20.70% post the issue. A lot of its existing shareholders, such as IIFL, Good Game Investment Trust, etc., will part with a portion of their shares. However, Rakesh Jhunjhunwala, one of its key stakeholders, has shown his interest to continue with the company. Note that IIFL mutual funds will be the major beneficiary as it holds a major portion of the company's stakes via various avenues. 

The ultimate aim of the issue is to achieve the listing benefits. Further, the issue will include about 2 crore worth shares, which will be blocked for subscription by its employees. Employees of the company who fulfil the conditions of the checklist can buy the shares at a discount of 10% from the issue price.

The face value of the share is Rs. 4 per equity share. A retail investor can opt for a minimum of 1 lot containing 13 equity shares which will cost him Rs. 14,313. A maximum of 13 such lots, having a total of 169 shares, can be opted for. This would amount to Rs. 186,069.  

Pricing details

The allotment is expected to be made on March 24, 2021. The company will be listed on the markets on March 30th 2021. ICICI Securities Ltd, IIFL Holdings Ltd, Jefferies India Pvt Ltd and Nomura Financial Advisory and securities ltd will be acting as the lead managers for the issue. 

About the company

Have you ever played Carrom Clash or the World Cricket Championship? That means you are a user of this company's services. Yes, you guessed it right. Nazara Technologies is one of the leading gaming tech companies headquartered in India. Right from gaming to eSports to gamified learning, the company offers a wide range of diversified services. Some of its notable games include Sportskeeda, Kiddopia, Halaplay, etc. The company offers both subscription and freemium based models.

The company aims at catering to mobile gamers with social multiplayer and interactive gaming modes. With the Indian gaming industry growing at a rate of 41% approximately, the company is looking forward to good opportune growth. 

Financials of the company

As you can see from the table above, the revenue has been increasing constantly in the last three years. Though the EPS in the last year is negative, that of the last 3 years stands at 1.88.

Should you subscribe?

The company is led by good management, with some good investors showing their intentions to ride along. It is one of the country's leading eSports companies with a global presence in Africa, South East Asia and the Middle east. The company's asset-light business model goes easy on its balance sheet, acting as a major advantage. Nazara Technologies does not depend upon a particular game or field but has a diversified portfolio of services. 

Apart from that, the following are certain things which you will have to take into consideration while making your decision.

• Two of the company's games have unsecured loans on them, which might kick back at any time, causing an impact on the financials of the company.
• The company is seeing a negative rate of cash flow as per its past records. Despite the rosy picture painted around it, if the company slips somewhere, then a severe liquidity crunch might be underway.
• The company conducts its operations on the third party leased premises. Lack of a stable outlet might cause disruptions in the day-to-day operations of the company. 
• The gaming industry in India is highly competitive, which will demand a lot from the company.

Final thoughts

Though there is a lot of noise created around the issue, a lot of factors, when given a close look, fails to meet our expectations. However, if you set aside the drawbacks and give it a go, listing gains will be what you'd better look forward to. Anyway, use your own intuition and rationale to make the decision.

Happy investing!