Mumbai-based gaming and sports media company, Nazara Technologies, made a bumper debut on Indian public markets, National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) on Tuesday.
The shares of the country’s leading gaming company, which made the initial public offer of INR 583 crore (USD 80 million) between March 17 and 19 and was subscribed 175.6 times, were listed at around 80% premium over the issue price on the two stock exchanges.
Nazara’s shares were listed at INR 1,990 (USD 27.1) on NSE, an 80.74% premium over the issue price of INR 1,101 (USD 15), while on BSE, it got listed at INR 1,971 (USD 26.9), a 79.02% premium. Rakesh Jhunjhunwala, Nazara Technologies’ marquee investor, who had put in INR 1.8 billion in 2008 and holds a 10.82% stake in the gaming firm, saw the worth of his shareholding soar to INR 656 crore (USD 90 million) with the listing.
“As we take our first step as a listed company today, we are fully aware of the increased scrutiny and the expectation burden which comes along on account of being the first gaming company to be listed in the Indian stock exchange,” Manish Agarwal, CEO and co-founder, Nazara Technologies, wrote in a LinkedIn post. “We have always tried to keep things simple instead of getting overwhelmed with external feedback and scrutiny, and we wish to follow the same by keeping our head down and focus on delivering profitable business growth.”
Industry experts believe the trading premium for the share of Nazara Technologies is due to the firm’s leading position in the country’s fast-growing gaming industry, its oversubscribed IPO, and the big-name backers like Jhunjhunwala.
Nazara’s shares touched a high of INR 2,024.90 apiece, gaining almost 84 percent over the issue price. But by the end of the day, some of those gains were erased. Its stock closed at INR 1,592 on NSE, and at INR 1,576.8 on BSE, up 44.6% and 43.2%, respectively, compared to the issue price.
The 20-year-old firm has seen a lot of interest from investors in the grey markets, with shares supposedly trading at Rs 1,060 per piece owing to its strong balance sheet, as per a report by local media YourStory.
Nazara has operations across diverse segments including interactive gaming, gamified early learning, e-sports, and telco-based subscriptions, with footprints in 62 countries. Some of its popular games include Chhota Bheem, Motu Patlu, Oggy and the Cockroaches, World Cricket Championship 3, World Table Tennis Champions, and CarromClash. It is also the only company to have rights over IP and assets across grassroots, regional, national, and international e-sports, which it considers as the key driver of future growth.
For the six months ended September, the company’s revenue from operations stood at INR 200.4 crores (USD 27.6 million). Of the total, gamified early learning segment contributed 39.25%, followed by e-sports at 31.78%. Telco subscription accounted for 21.33% of this income, while freemium and real money game contributed a mere 4.5% and 3.1%, respectively.
While traditionally, majority of its revenue comes from India market, in H1 2020, after acquiring a popular North American gaming company Kiddopia, its operational revenues from North America bumped up dramatically, accounting for 41.6% of the total earnings. India, meanwhile, contributed 41.1% of its total income from operations.
The company’s consolidated revenue stood at INR 207 crore (USD 28.5 million) for the first half of 2020, while the losses hovered around INR 10.1 crore (USD 1.4 million) due to the expenses the company incurred on advertisement and promotions.
“Our cash reserves are pretty strong. I would say the company holds ballpark INR 300 crore of cash,” said Nitish Mittersain, Joint MD, Nazara Technologies in an interview with local media Economic Times (ET) on Tuesday. “We are a debt-free company and most of our businesses are pretty strongly cash flow positive.”
“So we are not burning cash and are not sucking in the cash that we have,” he said. “We will continue to explore inorganic opportunities in the areas that we find interesting especially the ones we are already operating in. These could be backward integration, these could be geographical expansions.”
Nazara competes with mobile gaming companies like Dream11, Mobile Premiere League, and Gaming Monk in real-money games and e-sports segments. According to Maple Capital, the Indian gaming industry, with over 400 million players, is expected to grow at a CAGR of 32% to become a USD 3.7 billion market by 2024, from USD 930 million in 2020.