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Nazara Techno IPO review (May apply)

Review By Dilip Davda on March 13, 2021

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  •  NTL is a diversified gaming and sports media platform developer.
  •  It last paid a dividend of 1510% for FY18.
  •  The company is in the red since FY20 and thus issue is priced at a negative P/E.
  •  Investment by RKJ has created hype for this IPO.
  •  Risk savvy, cash surplus investors may consider parking funds at their own risks.

    ABOUT COMPANY:
    Nazara Technologies Ltd. (NTL) is a leading India based diversified gaming and sports media platform with a presence in India and across emerging and developed global markets such as Africa and North America. It offers across the interactive gaming, eSports and gamified earl 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, and Halaplay and Quanami in skill-based fantasy and trivia games.

    NTL's goal is to cater to billion-plus mobile internet players across emerging markets who have embraced social multiplayer interactive gamming as the foremost form of entertainment. It has focused on growing profitable business, with an emphasis on self-sustainability rather than relying on external investments. It claims to be historically been EBITDA positive and has generated sufficient cash flows from its operations. Due to this its cash and bank balances as of September 30, 2020, were in the region of Rs. 184.28 cr.

    ISSUE DETAILS/CAPITAL HISTORY:
    To avail listing benefits and provide an exit to a few current stakeholders, NTL is coming out with its maiden IPO with a vanilla secondary offer. The company is issuing 5294392 equity shares of Rs. 4 each with a price band of Rs. 1100.00 - Rs. 1101.00 and mulls mobilizing Rs. 582.91 cr., (at the upper price band).  The Minimum application is to be made for 13 shares and in multiples thereon, thereafter.  

    The issue opens for subscription on March 17, 2021, and will close on March 19, 2021. The issue constitutes 17.39% of the post issue paid-up capital of the company. The company has kept shares worth Rs. 2 cr. For eligible employees and offering them a discount of Rs. 110 per share. From the residual portion, lit has made an allocation of IPO quota - 75% for QIBs, 15% for HNIs and 10% for Retail investors.

    Having issued initial equity at par, NTL issued further equity in the price range of Rs. 30.33 to Rs. 2733.50 per share (based on FV of Rs. 4 per share) between April 2000 and March 2021.

    It has also issued bonus shares in the ratio of 4 for 1 in January 2018. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. Nil, Rs.0.80, Rs. 413.59, Rs. 554.54, Rs. 554.62, Rs. 554.65, Rs. 554.81, Rs.556.90, Rs. 728.00 and Rs. 730.95 per share.

    NTL's current paid-up equity capital of Rs. 12.18 cr. will remain the same following this being complete OFS. Based on the upper price band of the issue, the company is looking for a market cap of Rs. 3352.86 cr.

    Book Running Lead Managers for this issue are ICICI Securities Ltd., IIFL Securities Ltd., Jefferies India Pvt. Ltd., and Nomura Financial Advisory and Securities India Pvt. Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.

    FINANCIAL PERFORMANCE:
    On the financial performance front, for the last three fiscals, NTL has (on a standalone basis) posted total turnover/net profits - (loss) of Rs. 181.94 cr. / Rs. 1.02 cr. (FY18), Rs. 186.10 cr. / Rs. 6.71 cr. (FY19) and Rs. 262.15 cr. / Rs. - (26.62) cr. (FY20). For the first six months of FY21 ended on September 30, 2020, it has posted a loss of Rs. - (10.11) cr. on a turnover of Rs. 207.01 cr.

    For the last three fiscals, NTL has posted an average EPS of Rs. 1.88 and an average RoNW of 1.30%. The issue is priced at a P/BV of 6.54 based on its NAV of Rs. 168.47 per share as of September 30, 2020.

    Based on FY20 and 6M-FY21 negative earnings, the issue is at a negative P/E.

    COMPARISION WITH LISTED PEERS:
    As per offer documents, NTL has no listed peers to compare with.

    DIVIDEND POLICY:
    The company has last paid a dividend of 1510% for FY18 and thereafter it has skipped it till going for IPO. It will consider a prudent dividend policy based on its performance and future prospects going forward.

    BRLM'S TRACK RECORDS:
    The four Book Running Lead Managers associated with the offer have handled 29 public offers in the past three years, out of which 10 issues closed below the offer price on the listing date.


Conclusion / Investment Strategy

With negative earnings for the past 18 months, the issue is being offered at a negative P/E. Simply due to investment by big tycoon RKJ, this IPO is creating hype. Being the first mover, it might catch fancy post listing, but the offer price is very aggressive based on its financial data. Hence cash surplus, risk savvy investors may consider investment at their own risks.

Review By Dilip Davda on March 13, 2021

About Dilip Davda

Dilip Davda, SEBI Registered Research Analyst

Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.

He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.

Dilip Davda

SEBI Registered Research Analyst – Mumbai

Registration No.: INH000003127 (Perpetual)

Email: dilip_davda@rediffmail.com

Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.

Nazara Technologies IPO FAQs

The initial public offer (IPO) of Nazara Technologies Ltd. offers an early investment opportunity in Nazara Technologies Ltd.. A stock market investor can buy Nazara Technologies IPO shares by applying in IPO before Nazara Technologies Ltd. shares get listed at the stock exchanges. An investor could invest in Nazara Technologies IPO for short term listing gain or a long term.

Nazara Technologies IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Nazara Technologies IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Nazara Technologies IPO?"

Our recommendation for Nazara Technologies IPO is to subscribe for long term.

As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Nazara Technologies IPO.

The Nazara Technologies IPO allotment status will be available on or around March 24, 2021. The allotted shares will be credited in demat account by March 26, 2021. Visit Nazara Technologies IPO allotment status to check.

The Nazara Technologies IPO will list on Tuesday, March 30, 2021.

Read more about Nazara Technologies IPO