IPO of Rakesh Jhunjhunwala-backed Nazara Tech subscribed 175 times on final day3 min read . Updated: 19 Mar 2021, 05:42 PM IST
- The price band of the Nazara Tech IPO has been fixed at ₹1,100-1,101 a share.
The initial public offer of gaming firm Nazara Technologies, which is backed by ace investor Rakesh Jhunjhunwala, has seen strong response from investors. The issue was subscribed 175 times on final day. Nazara Technologies, in which Jhunjhunwala holds more than 10% stake, had mopped up a little over ₹261 crore from anchor investors ahead of the IPO.
The price band of the offer has been fixed at ₹1,100-1,101 a share. At the upper end of the price band, the IPO is expected to fetch ₹583 crore. According to grey-market trackers, shares of Nazara Technologies are quoting at a premium in the range of ₹840 to ₹850. According to brokerages, share allotment is likely to be finalised on March 24 while listing may happen on March 30. In this issue, 75% is reserved for qualified institutional buyers (QIB), 15% for HNIs and 10% for retail investors.
Many brokerage have recommended subscribe to the issue both for long term potential and possibility of listing gains. Here is what brokerages say:
"We like Nazara given its leadership in highly under-penetrated mobile gaming, wide product portfolio and strong relationship and network. Nazara is expected to witness strong growth for next 2-3 years given its recent acquisitions and first mover advantage. The issue is valued at 5.5x FY21 P/BV and 7.6x FY21 EV/Sales on an annualized and post issue basis. The issue is first of its kind listing and has no peer comparison in India. We believe that the market would like to give premium valuation to emerging growth stories like mobile gaming. We recommend Subscribe."
"Over FY18-20, the company sales has grown at a CAGR of 19.8%, both organic and inorganic way, growth in revenue is despite decline in Telco business revenue which was the major business. Going ahead, being into the online gaming space, which over FY20-FY23, is expected to grow at a CAGR of 31.7% in India, and 11.8% in USA we feel the company can sustain higher growth. Being a loss making company in FY20 ROE stands negative. At the given upper price band of issue of ₹1101, Nazara technologies is offered at EV/Sales of 7.8x H1FY21 annualized sales which is attractive. We recommend subscribing to the issue."
"Nazara is present in the fast-growing segment of interactive gaming, eSports and gamified early learning solutions. After posting strong revenue growth of 45.9% in FY20 to ₹2.48 bn, the company has already posted revenue of ₹2 bn in 1HFY21. Nazara has been reporting losses as it has increased spending significantly on advertising & promotion from FY20 onwards, which will help drive strong topline growth. At the proposed IPO price band, the stock will trade at an EV/sales multiple of 13.1x FY20 revenue and 8.1x annualised HFY21 revenue. We recommend a SUBSCRIBE to the issue, with the potential for healthy listing gains as well as long term stock price appreciation in light of strong long term growth potential in online gaming, both in India and globally."
"If we annualize the H1 sales, the demanded valuation comes out to be 8.4x, which is attractive considering the prevailing valuation of internet technological companies in India. Thus, considering the nascent stage of domestic gaming market and the dominant position of the Nazara in key growth segments, we assign a “SUBSCRIBE" rating for the issue."
"This is the first company in online gaming space to be listed and hence there is no domestic peers for the company for comparison. The IPO is valued at 12.6x of FY20 EV to sales, which looks to be at higher compared to some of global gaming companies like Tencent Holdings and Electronic Arts. However, considering huge potential to grow in topline hereon, which is evident from 1HFY21 revenue, the issue looks to be reasonably valued. Tencent Holdings and Electronic Arts trade at 5.5-6x of CY22E on EV/sales and considering 35-40% revenue growth for NTL over FY20-FY23E, EV/sales valuations look comfortable. Hence, we recommend SUBSCRIBE to the issue."
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