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Rakesh Jhunjhunwala-backed Nazara Technologies IPO opens next week; grey market premium strong

Ace investors Rakesh Jhunjhunwala, who owns a 10.82% stake in the company, doesn’t look to sell his stake.

Nazara Technologies IPO
Rakesh Jhunjhunwala-backed Nazara Technologies’ much-awaited IPO is set to open next week.

Rakesh Jhunjhunwala-backed Nazara Technologies’ much-awaited IPO is set to open next week. Nazara Technologies, a gaming and sports media platform, looks to raise Rs 582.91 crore in the upcoming public issue. The initial public offering will entirely be an offer for sale (OFS) by existing shareholders, and will have no fresh issue of equity shares. Promoters of the company Mitter Infotech LLP will also trim their stake through the IPO. Ace investors Rakesh Jhunjhunwala, who owns a 10.82% stake in the company, doesn’t look to sell his stake.

About the offer

Investors can bid for Nazara Technologies IPO, beginning March 17, in the price band of Rs 1,100 to Rs 1,101 per equity share of face value Rs 4. Bids can be placed for a minimum of 13 equity shares and multiples thereafter, translating to a minimum investment of Rs 14,313 per investor. A portion of the issue will also be reserved for employees of the firm, who will be eligible for a discount of Rs 110 per equity share. 75% of the issue will be reserved for Qualified Institutional Buyers (QIB) while 15% is reserved for Non-Institutional Investors and only 10% for retail investors. The issue will close on March 19 next week. 

Selling shareholders of the company, including the promoters, currently hold a 41.51% stake in the company or 1.26 crore equity shares. Of this, 52.94 lakh shares will be sold through the IPO next week.

Grey market performance strong

In the unlisted space, Nazara Technologies shares have been commanding a strong premium for weeks now. Earlier in February, Nazara Technologies shares were trading at Rs 1,060 apiece in the unlisted space even before the price details were announced. Now, in the grey market, shares of the gaming firm are running with a premium of Rs 620 per share, Manan Doshi, Cofounder of UnlistedArena, a firm dealing in unlisted & pre-IPO shares told Financial Express Online.

“Nazara Tech is the next-gen digital play in India, which caters to its youth,” said analysts at Elara Capital in a recent note on the firm. Nazara Technologies The company has key offerings in the education technology space, eSports, Gaming, Fantasy Sports, and Sports content creation. Nazara runs Kiddopedia where Elara Capital sees a big untapped potential to scale up the paid subscriber base in the US. The pandemic has further augmented the growth of this space. In the Gaming range, the brokerage firm said that ad revenue is expected to grow by 30%, in line with the digital ad industry. However, the APRU in the segment is low.

In the financial years 2018 and 2019, Nazara Technologies made a profit of Rs 1 crore and Rs 6.7 crore, respectively. However, in the previous fiscal year, the company reported a loss of Rs 26 crore. “Global gaming and eSports companies are trading at 3.3x one-year forward EV/sales despite much lower growth rates than in India; given Nazara is India’s gaming play with higher growth rates, it should command a premium valuation on EV/sales,” said Elara Capital.

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