Following the recently concluded IPO, Rakesh Jhunjhunwala-backed Nazara Technologies shares will list on stock exchanges on March 30, 2021. The mobile gaming leader’s public offering was oversubscribed 176 times and sold at a price range of Rs 1,100-1,101 per share. Nazara Technologies shares were seen quoting a high grey market premium of Rs 690 ahead of their bourse debut. In the grey market, the shares were trading at Rs 1,791, up 62.67 percent from the issue price. The high grey market premium does not necessarily mean a favourable listing result. This week, the company completed the share distribution.
Ajit Mishra, VP-Senior Technical Analyst at Religare Broking Ltd, advised against speculating solely for the purpose of profiting from the listing. Investors should keep the stock for a medium to long time. Nazara Technologies is best known for the Chhota Bheem and Motu Patlu series, which are based on the World Cricket Championship. WCC and CarromClash in mobile games, Kiddopedia in gamified early learning, NODWIN and Sportskeeda in esports and esports media, and Halaplay and Qunami in skill-based, fantasy, and trivia games are some of the IPs it owns.
The first gaming company to be listed on the stock exchanges would be Nazara Technologies. It provides a diverse range of gaming items in emerging markets, including social gaming, eSports, and a gamified early learning ecosystem. The company of Nazara Technologies is divided into five segments: subscription-based business, freemium business, eSports, gamified early learning, and real-money gaming. As of FY20 and 9MFY21, it had a total of 40.17 million and 57.54 million monthly active users across all sports. The IPO is priced at 12.6x FY20 EV to earnings, which appears to be higher than some global gaming companies like Tencent Holdings and Electronic Arts,” says the study.
However, given the enormous potential for top-line growth in the future, as shown by 1HFY21 sales, the issue appears to be fairly priced. Tencent Holdings and Electronic Arts trade at 5.5-6x CY22E on EV/sales, and with NTL expected to rise 35-40% in revenue over FY20-FY23, EV/sales valuations appear to be rational. “The stock will continue to be in demand as the first mover in the online gaming space to be listed in India, and we remain optimistic on the stock,” Jain added.
Nazara Tech may go public at a price higher than Rs 1,650.
According to Manan Doshi, Co-Founder of UnlistedArena.com, which deals in Pre-IPO and Unlisted Shares, Nazara Technologies, as the first gaming company to list, may receive premium valuations due to its operations in a niche sector and strong growth prospects in the future. Nazara may be the newest member of the digital theme stocks club, which is booming in the listed space. We’ve seen sentiments in primary markets cool a little as a result of a few dampened listings,” Doshi said. “However, in my opinion, Nazara Technologies may list at a magnificent premium, leading to a listing anywhere above Rs 1,650. The gains would be significant if it were to list at such premiums.
(The recommendations in this story are by the respective research and brokerage firm. Inspyre Club does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)