Nazara Technologies Limited IPO (Nazara Technologies IPO)

Nazara Technologies Limited IPO Tentative Timetable

About the Company – Nazara Technologies Limited

Nazara Technologies Limited is a diversified gaming and sports media platform. It has a presence in India and across emerging and developed global markets like North America, Africa, etc. The company offers a wide range of interactive games, 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, and Halaplay and Qunami in skill-based, fantasy, and trivia games. Nazara tech has a market-first position in India across sports simulation and eSports. 

The company’s expansion into global markets has been strategic, both in terms of geographies as well as timing for entering new markets. It has built capacities and capabilities across its offerings in India, targeting gamers within the country, and then replicated the business model in global markets to target gamers. Here are the segments in which the company has managed to carve a niche for itself:

• Gamified Early Learning – The Company entered this segment in North America through Kiddopia, its flagship gamified early learning app. It delivers an immersive learning experience through gamification, leveraging its expertise in creating engaging game designs, and marrying it to the education needs of early learners.
• eSports – eSports is emerging as a spectator sport and is proving to be the largest disruptor to the global traditional sports market, as an outcome of sports and gaming intersecting to create fast-paced, high-thrill spectator entertainment content. Nazra Tech is currently dominating the Indian eSports market with over 80% of the total market share in the country.
• Telco Subscription – Currently, the company’s Telco subscription offerings comprise over 1021 mobile games. Through this segment, it primarily targets mass mobile internet users in emerging markets, comprising largely of first-time mobile gamers.
• Freemium mobile games – The Company’s freemium offerings in mobile gaming include free-to-play sports simulation games and children’s games, such as games designed based on cricket, carrom, table tennis, and bowling.
• Skill-based, fantasy, and trivia real money gaming – The company has also created a presence in the real money gaming segment.

1. Growth Story of Nazara Technologies Limited

Nazara Technologies Limited was originally established in 1999 as Nazara.com Private Limited and subsequently changed to Nazara Technologies Limited in 2017 as it was converted to a public limited company. In 2004, the company launched pay-per-download Java games with BPL and Hutch and signed a contract with Sachin Tendulkar for three years.

By 2005, the company had received its first round of investment from WestBridge and signed an exclusive agreement with M.S. Dhoni. The next year, it started working with telecom operators such as Tata Teleservices Limited and Vodafone.

In 2007, Nazara Tech received its second round of investments from WestBridge and started working with Bharti Airtel as a telecom partner. In 2008, the company signed an exclusive wireless content distribution agreement with Electronic Arts Asia Pacific Pte Ltd. to market, distribute, reproduce, and sublicense its contents in India through specified distribution channels.

By the next year, in 2009, Nazara Tech launched the subscription-based ‘Games Club’ model on Reliance Communications Infrastructure Limited. Over the next four years, it expanded overseas and commenced business in the Middle East, Zambia, Uganda, Nigeria, Singapore, Mauritius, and Kenya.

By 2015, the company had signed a licensing deal with Virat Kohli and Hritik Roshan and executed an exclusive licensing agreement for Chota Bheem. Over the next five years, Nazara Tech made the following acquisitions:

• 52.38% of the paid-up equity share capital of Next Wave
• 54.99% of the paid-up equity share capital of Nodwin Gaming and launch of the Esport Business of the Company
• 100.00% of the paid-up equity share capital of CrimzonCode
• 62.53% of the paid-up equity share capital of Sports Unity
• 63.90% of the paid-up equity share capital of Absolute Sports
• A significant influence in Halaplay
• 50.91% of the paid-up equity share capital of Paper Boat

2. Financials of Nazara Technologies Limited

Here is a quick look at the financial performance of Nazara Technologies Limited over the last three years:

All amounts in INR Crore

A quick glance at the financial performance of Nazara Technologies over the last three years offers the following insights:

• The company has booked heavy losses in the financial year 2019-20
• The total assets of Nazara Tech grew at a CAGR of 28.46% between 2018 and 2020.
• The total revenue grew at a CAGR of 20.04%.

SWOT Analysis

The gaming industry that was once considered to be a form of escapism has now evolved into becoming a key component in the economic transformation of the world. The gaming industry develops, designs, publishes, distributes video games across devices, leverages eSports for the marketing of video games, and deploys gamification techniques to influence consumer behaviour in various verticals like edutech, healthtech, fintech, consumer loyalty, defense, etc.

Over the last two decades, the gaming industry has progressed from a primitive arcade style of entertainment to a graphically immersive and social form of entertainment. With an estimated market size of approximately USD 160 billion in 2020, the gaming industry is one of the largest and fastest-growing segments within the media and entertainment sector.

While the pandemic pulled the brakes on many businesses, the online gaming industry benefited as people stuck at home turned to gaming platforms for entertainment. The Indian Bollywood film industry was valued at USD 2 billion in 2016 and is projected to reach a size of USD 2.7 billion by 2023. The gaming industry in India was nearly 25% of the Indian film industry in 2016, but by 2023, it is expected to exceed the Bollywood revenues by USD 0.8 billion and reach a value of USD 3.5 billion. This tremendous increase will be predominantly driven by the proclivity of the Indian population to adopt gaming as their primary source of entertainment.

The CAGR for India’s mobile gaming market stands close to 40% YoY. Being a relatively nascent market, the growth rate for mobile gaming in India closely reflects the growth that China had between 2013 and 2020 (CAGR ~ 41%). Compared with the early rise of mobile games in the USA which had a CAGR of 21% between 2013 and 2020, the Indian mobile gaming market is projected to have healthy growth in the future.

A comparison with the Chinese mobile gaming market of the last decade shows that the Indian mobile gaming market is currently where the market in China was 8 to 10 years ago. Between 2012 and 2013, China had around 300 million mobile gamers which is approximately the number of mobile gamers in India in 2020. Similarly, in 2012, the Chinese mobile gaming market had revenues of USD 1.3 billion which is approximately close to the revenue for the Indian mobile gaming market in 2020.

Based on how the mobile gaming market in China has taken off in the last few years, and with the Indian mobile gaming market reflecting the Chinese mobile gaming market of the early 2010s, it is fair to assume that the Indian mobile gaming market will have a growth similar to that of China and will see equivalent traction.

1. Strengths of Nazara Technologies Limited

• Nazara Technologies Limited has a leadership position in a diversified and scalable business. Its successful business model and established presence in India, a market with economic, technical, and cultural complexities, has given it a competitive advantage. The company has successfully leveraged its capabilities for in-house content creation, game engine development and propriety technology stack development, ability to deliver positive LTV/CAC ratios across offerings and its relationships with telecom operators, app stores, and other participants in gaming ecosystems.
• The company owns and has sustained access to premium IP and popular, local brands across eSports and mobile games in India. It applies local market knowledge and technical expertise to provide highly relevant and localized content that appeals to its diverse user base.
• Nazara’s insight into and deep understanding of the behaviour and journey of its key demographics and users across businesses enable it to attract and retain users in an optimized manner.
• The company has expanded its portfolio of business offerings through multiple acquisitions, and successfully integrated those businesses into its operations. It has been successful in selectively identifying strategic acquisition and investment targets in the past, and in integrating, developing, synergizing, and leveraging the existing businesses and brand equity of its past acquisitions and investments to enter into new business segments and geographies.
• As the 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, with offerings across the interactive gaming, eSports, and gamified early learning ecosystems, Nazara Tech is well-placed to leverage the large addressable populations in these markets, and the expected rise in consumption of and investments in mobile gaming and eSports, as well as gamification in early learning.

2. Weaknesses of Nazara Technologies Limited

• Nazara Technologies suffered a huge loss of Rs.26.61 crore in 2020. 
• A substantial option of the company’s revenue depends upon its subscription business.
• Nazara Tech relies on third-parties for distributing its mobile games

3. Peer Comparison

According to the Red Herring Prospectus, there are no listed companies in India that engage in a business similar to that of our Nazara Technologies Limited. Hence, it is not possible to provide an industry comparison in relation to it.

4. Opportunity to investors – valuation of the IPO

As there are no listed peers, we cannot compare the P/E ratio of Nazara Tech with the industry average. However, the company has a negative P/E ratio and hence, investors must conduct a thorough fundamental analysis of the company before applying.

5. Risk Factors

• Nazara Technologies Limited conducts its business across emerging and developed markets such as India, Middle East, Africa, South Asia, and North America, and derives a substantial amount of its revenues and profits from international sales, particularly from North America, Africa, and South Asia. These markets are diverse and fragmented, with varying levels of economic and infrastructure development and distinct legal and regulatory systems, and do not operate seamlessly across borders as a single or common market. Therefore, the company may be subject to risks inherent in doing business in countries other than India.
• The success of Nazara Tech 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.
• It faces competition in each of its businesses from both new as well as existing players, and the failure to compete effectively with any of them could materially and adversely affect its business, financial condition, cash flows, and results of operations.
• Any failure to protect its Intellectual Property or any third-party claims in relation to infringement of its existing intellectual property rights could materially adversely affect its business, reputation, financial condition, results of operations, and cash flows.
• Consumer preferences for mobile games are usually cyclical and difficult to predict, and even successful titles remain popular for only limited periods unless refreshed with new content or otherwise enhanced. To remain competitive, Nazara Tech must continuously aggregate new mobile games for its telco subscription business or introduce enhancements to its existing freemium mobile games. If its future mobile games do not achieve expected consumer acceptance or generate sufficient revenues upon their introduction, the company may not be able to recover the licensing and marketing costs associated with such games.
• As part of its business strategy, Nazara Tech intends to continue to selectively acquire and invest in businesses, assets, and technologies that complement its existing business, including game developers, game publishers, advertisement networks, offline gaming companies, eSports companies, and real money gaming companies present anywhere in the world. There are several uncertainties and risks associated with this approach and any failure to address them successfully may have a material adverse effect on its financial condition, results of operations, and cash flows.
• The company may not be able to maintain or grow the size of its user base or level of engagement of its users, which could materially and adversely affect its business, financial condition, cash flows, and results of operations.
• Nazara Tech has a limited operating history in gamified early learning and caters to the online gamified learning market for young children in North America. Any adverse changes in extant policies or its inability to continue to attract and retain subscribers may materially and adversely affect its business and prospects.
• The company derives a significant portion of the revenue of its eSports business from a few customers, with most of whom it does not have long-term contractual arrangements.
• Nazara’s revenues from freemium mobile games are largely dependent on its leading mindshare in cricket simulation mobile games. Therefore, its inability to retain its current popularity and levels of engagement with players for these games may materially and adversely affect its revenues, cash flows, and results of operations.

6. Objects of the Offer

Since the IPO only includes an Offer for Sale by the existing shareholders, the objects of the offer are:

1. To carry out the Offer for Sale; and
2. Achieve the benefits of listing the Equity Shares on the Stock Exchanges.

The company will not receive any proceeds from the IPO.

7. Promoter/s of Nazara Technologies Limited IPO

1. Vikash Mittersain;
2. Nitish Mittersain; and
3. Mitter Infotech LLP

How can you apply for the Nazara Technologies Limited IPO?

You can apply for the Nazara Technologies Limited IPO by using one of these two methods of payment:

1. ASBA – available via the net banking interface of your bank account. Almost all banks offer this facility
2. UPI – available with brokers who do not offer banking services. 

Things to keep in mind before investing in the Nazara Technologies IPO

Here are some things that you need to keep in mind before investing in the Nazara Technologies IPO:

1. Nazara Technologies Limited has a negative P/E ratio in 2020. Also, there are no listed peers. Hence, assessing the valuation of the company is important.
2. It is the leading mobile game service provider in India and has in-house game designing capabilities.
3. The business model is light and scalable.

FAQs

Q1. What is the Nazara Technologies Limited IPO?

The Nazara Technologies Limited IPO is a Main Board IPO of 5,294,392 equity shares having the face value of Rs.4 totaling up to Rs.582.91 crores. The registrar for the IPO is Link Intime India Private Limited and the shares are proposed to be listed on the BSE and NSE.

Q2. What are the open and close dates of the Nazara Technologies Limited IPO?

The Nazara Technologies Limited IPO opens on March 17, 2021, and closes on March 19, 2021.

Q3. What are the lot size and minimum order quantity of the Nazara Technologies Limited IPO?

The lot size of the Nazara Technologies IPO is 13 shares. Also, the minimum order quantity is 13 shares.

Q4. What are the allotment and listing dates of the Nazara Technologies Limited IPO?

According to the DRHP, the basis of allotment will be finalized by March 24, 2021. Further, investors can expect to receive the credits in their demat accounts by March 26, 2021. The shares may get listed on March 30.