This news today is perhaps the best possible signal one can get — Gaming has arrived in India, and big time. Mobile gaming company Nazara Technologies, which gave us titles like the Motu Patlu game series, the World Cricket Championship Series, and the Chhota Bheem game series, made a stellar debut in the Indian stock exchanges as its share price opened with a massive 80.74% premium on March 30. Additionally, its ₹ 583-crore IPO was subscribed 176 times by investors, the third biggest for an IPO with an issue size of over Rs 200 crore.
Interestingly, it is India’s first such gaming company to do so. Kudos.
All eyes are on Nazara, and that does not come as a surprise. The stock of Nazara, backed by ace investor Rakesh Jhunjhunwala, began trading at ₹1,971 per share, an increase of ₹870 (79.02%) from the IPO price of ₹1,101 per share (71% of its issue). Nazara, which happens to be the first gaming company to be listed on the stock exchanges in India, had a market capitalization of ₹6,002.25 crores on the listing. The company also received bids for 51.20 crore equity shares against the issue size of 29.20 lakh equity shares.
The company has been on a high growth trajectory for the past few years which is expected to continue going forward. The grey market premium of ₹550-650 per share is therefore justified by the high growth potential of the company, though at the current grey market levels, it is commanding a multiple of “5.5xFY23 EV/Sales which is not cheap by any means,” Jyoti Roy, DVP- Equity Strategist, Angel Broking, said.
The diversified gaming and sports media platform with a big presence in the domestic market and across emerging and developed markets, offers interactive gaming, eSports, and gamified early learning ecosystems. Not only does it provide popular games, but it also provides sports news websites Sportskeeda and Nodwin, and skill-based, fantasy, and trivia games in the form of Halaplay and Qunami.
“The company has an operating leverage advantage in gamified early learning on account of captive development of content being undertaken in India while generating revenues inter alia from North America. Further, its leadership in eSports and sports simulation and geographical reach across India, Middle East, Africa, and North America provide a strong foundation for growth,” said an ICICI Direct report. Some of the X-factors that separate Nazara from the others are its deep presence in India and abroad and its understanding of the Indian market and the gaming mindset, which enables it to develop content accordingly.
Nazara intends to continue to be present and expand its presence in emerging markets by capitalizing on its first-mover advantage in these markets and leveraging its existing network of partnerships across the local ecosystem. The firm had come back strongly from a decline in revenue of 1.4% in the fiscal year 2019 with a growth of 45.9% in revenue in FY20 to ₹ 247.5 crores.
The gaming industry in India stands currently at $1.5 billion and is expected to grow with the rising demand and use of smartphones and the penetration of the internet. Nazara, according to analysts, is expected to witness strong growth for the next 2-3 years, given its recent acquisitions and first-mover advantage.