Nazara Technologies IPO Latest Information

Company Background:

Nazara Technology Ltd is the leading India based diversified gaming and sports media platform with presence in India and across emerging and developed global markets such as Africa and North America, and offerings across the interactive gaming, eSports and gamified early learning ecosystems including World Cricket Championship (WCC) and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin and Sportskeeda in eSports and eSports media, Halaplay and Qunami in skill-based, fantasy and trivia games.

Investment Rationale:

Positives:

(a) Leadership position in a diversified and scalable business

(b) Portfolio of premium intellectual property and content across regions and businesses.

(c) Large and engaged community of users, with attractive monetization opportunities

(d) Successful inorganic growth through strategic acquisitions.

(e) Profitable platform model benefitting from the India growth story with limited regulatory risk.

Investment concerns:

(a) Company with global operations and subject to risks and uncertainties of conducting business outside India.

(b) Company’s success is tied to the continued use of the internet and smartphones, and the reliability and adequacy of online infrastructure in India and emerging markets and data pricing.

(c) Any inability to protect IP or any third-party claims in relation to infringement of existing intellectual property rights or in the future could materially adversely affect the business, reputation, financial condition, results of operations and cash flows.

Outlook & Valuation:

Nazara Technologies is present in the fast growing segment of interactive gaming, eSports and gamified early learning solutions. After registering a degrowth of 1.4% in FY2019 the company has posted strong revenue growth of 45.9% in FY2020 to Rs. 247.5 Cr. The company has already posted a revenue of Rs. 200 Cr. in H1FY2021. The company has been reporting losses as they have increased their spending significantly on advertising & promotion from FY2020 onwards which will help drive strong topline growth for the company. At current levels the stock is trading at EV/Sales of 11.6XFY20 revenues and we recommend a "SUBSCRIBE" rating to the IPO given strong growth potential for the company.

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