Nazara Technologies IPO Review and Analysis in Detail
Basis Structure of the Nazara Technologies IPO
Nazara Technologies IPO will be open for subscription from March 17 to March 19, 2021.
The Nazara Technologies IPO is sized at Rs. 582.91 crores. It is going public through the book-building process i.e, there will be a price band (Rs. 1100-1101 per equity share) and not a specific price.
The offering is a complete offer for sale.
The funds raised from this issue will be credited directly to the promoters and not to the company. After the IPO, the Nazara Technologies shares will be listed on the NSE and BSE.
The table below lists the details about the IPO. Things like Nazara Technologies IPO date, Nazara Technologies IPO size, Nazara Technologies IPO price and more have been summarised.
About the Company
Nazara Technologies is a 20-year-old company, launched in the year 2000.
It is a leading interactive gaming and sports media company headquartered in Mumbai, India. It has its presence in 64 countries which includes India, Asia, Africa and the Middle East.
Its offerings include eSports and gamified early learning ecosystems including World Cricket Championship (WCC) and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin in eSports and Sportskeeda in eSports media, Halaplay in skill-based, fantasy and Qunami in trivia games.
Nazara is aiming to cater to over billion-plus mobile internet players across emerging markets who believed interactive gaming as the best form of entertainment.
Nazara Technologies is the only company in India to have a portfolio of IP and rights over assets across national and international eSports.
It grew by 60% in FY2020 and grew by nine times in the last three years in the eSports segment.
Products and Services
Nazara Technologies offers a range of products based on age, entertainment, learning and other factors. The products can be categorized under the following segments.
1. Gamified Early Learning:
Nazara entered this segment through Kiddopia which brought over Rs 19 crore with the sale of subscriptions and digital products. First started in North America, it provides an interactive learning experience with its gaming expertise and bridging it to the education requirements.
eSports are considered to be the biggest disruptor of the traditional sports market. This segment brought the highest share of the revenue from sponsorships and media rights on its owned platform.
Nodwin, a product of Nazara in the eSports segment, collected Rs 84.16 crore during FY20 and contributes 34% of Nazara’s revenue.
Nazara occupied a lion share with over 80% of the total eSports market share in India.
3. Telco Subscription
Nazara has over 1,021 mobile games, under this segment. It focuses on first time mobile gamers and targets mass mobile internet users.
Nazara, through this segment, offers free mobile games that include children games that are based on cricket, Carroms, Table Tennis and Bowling.
Freemium model games brought over 8% of the revenues through advertisements.
5. Fantasy & Real money games
Nazara also has its presence in the Fantasy & Real money gaming segment. And brought Rs42.64 crore through Carrom Clash and Halaplay.
Promoter Shareholding Pattern of Nazara Technologies IPO
IIFL and Nitish Mittersain, the promoter, offloading a 14% and 2.25% stake respectively. The overall promoters holding after IPO will be 20% and Rakesh Jhunjhunwala is continuing with his 10.8% stake in the company.
The table below lists out the primary shareholders prior to the Nazara Technologies IPO.
After the IPO, the shareholding structure is expected to change.
Financial Overview of Nazara Technologies IPO
The table below summarises the main financial parameters for Nazara Technologies over the past four years. All the figures given below are in Rs. Crores.
Based on the financial figures, Nazara Technologies has been able to grow in terms of revenue at a CAGR of 9.14%.
There is a 45.85% increase in revenue from operations from Rs 169.698 crore in FY 2019 to Rs 2,47.509 crore in FY 2020. This growth is due to an increase in revenue from eSports and gamified early learning.
Between 2017 and 2020, the assets increased at a CAGR of 43.89%.
The expenses are increased at a CAGR of 30.04%. And as for the profits after tax, that has recorded a CAGR of (25.8)%.
Based on the given financial statements, one can see that the company is unable to make profits and the company has its reasons.
Nazara claims that it is because of investments in new player acquisition and branding.
The company’s spending on advertising is worth Rs 7.46 crore in FY 2020 and Rs 6.97 crore in FY 2019. Nazara acquired Paperboat with the investment of Rs 83 crores.
Industry Overview of Nazara Technologies IPO
India is now becoming the industry leader of the modern gaming and sports world due to the increase in interest and investment in the online gaming culture.
At present, the value of the gaming industry stood at Rs 9000 crore in FY 2020. It is estimated to grow to 143 bn rupees by 2022.
The overall gaming industry was $1.9 billion in 2019 and is expected to be $8.4 billion in 2024 (35% CAGR).
Mobile gamers also increased from Rs 253 million, 2019 to Rs 388.2 million in 2020.
India stood at 6th in the global mobile gaming market ranking. During the lockdown, the time spent on gaming apps has increased by 41%.
Tapping the Indian audience is not a tough task as Indians are already well aware of the pros and cons of online gaming but still interested to spend more time on gaming. This provides the opportunity to many gaming companies and eliminates the barriers to entry which creates an easy entrance into the market.
India is now having over 400 gaming companies.
During the lockdown, gaming platforms like Google Play and Apple App Store has seen a 50% rise in gaming interaction. And the time spent on gaming increased to 218 minutes against 151 minutes before lockdown
In 2020, investors like Sequoia capital & Kalaari capital invested $173 million in the Indian gaming industry.
Before lockdown, Indian eSports accounts for 4% of the total user base and had revenue over 9% of industry revenue. This segment is expected to grow 36% y-o-y in the next three years.
eSports audience in India has reached over 17 million for competitive gaming tournaments.
So, the market has several opportunities to grow and to increase its value.
Strengths of the Nazara Technologies IPO
Nazara is the first gaming and sports company that is getting listed in India.
Being a leader in the online gaming industry, Nazara provides diversified gaming products like Nodwin Gaming, Game Pack Subscription, Real money gaming, Freemium sales, Kiddopia.
These gaming products under the segments of the interactive gaming, eSports and gamified early learning ecosystem makes the company earn from different sources.
Weaknesses of the Nazara Technologies IPO
Being a 20-year-old company, Nazara is still struggling to make profits, and in FY2020, it has a huge loss of Rs.24.931 crore.
The company operates under various economic conditions and need to face distinct legal and regulatory systems and this may result in creating hurdles to lead a smooth-running business.
Valuation of Nazara Technologies IPO
Nazara Technologies is currently at losses. So we are estimating the growth rate based on its revenue.
We are using Benjamin Graham’s formula to calculate the intrinsic valuation of the company.
FY20 Profit = Rs. 262.965 crores
Expected growth rate = 9%
Intrinsic Value = 262.965 * (8.5 + [2*9%]) = Rs. 2280.19 crores
We will soon let you know whether the company is overvalued or undervalued.