Should You Invest in Rakesh Jhunjhunwala Invested Nazara Tech IPO?
In this Nazara Technologies IPO Review, we have spoken about the IPO launch date, News, Price Band, Lot Size, Business model, Financials and IPO details
Nazara Technologies IPO Review
Let's talk about some games which you play on your phone like subway surfers, candy crush etc
Now would you buy the shares of the company making these games, which brings us to the upcoming IPO which is an interesting one named Nzara Technologies who develop games Another interesting fact is that one of India's biggest investors, Rakesh Jhunjhunwala has a stake in the company.
Let's talk about the company's business, industry soo that you can make an informed decision.
Nazara Tech was incorporated in 1999 and is the leading gaming companies of India and provides different mobile gaming and esports to its customers. The company is spread across the world in countries like Middle East and Latin America too Now, what is esports? 2 professionals or teams play the same sport at the same time and challenge each other.
The company has a major market share in esports streaming and on-demand esports, Some of the famous esport games in India are carrom clash, world cricket championship.
Rakesh Jhunjhunwala has 10.8% stake in the company and is not selling his stake in the IPO Monthly active users are very important for any gaming company and what are these. It is the number of users that visited the app and played different games. If we talk about Nazara Tech, their MAU base is more than 57 million and how their games are extensively used.
Let's now talk about the segment-wise revenue the company generates As you can see the different segments under which Nazara Tech has operations Like gamified early learning, esports, telco subscription, freemium and real money gaming. The total revenue was 2000 million till Sept 2020 and the largest share was from gamified early learning which contributes 39% to the total revenue of the company.
esports at 31.78%, telco subscription at 21.33% Till the last year, their major revenue contributor was esports at 34% and telco at 33% meaning recently the revenue from gamified early learning has risen quite high.
Let's now talk revenue in terms of geography. If we see, North America has given the major chunk of revenues till Sept 30, 2020, which is 41.64% contribution to the total revenue From India, 41.15%. Till the last year, major revenue came from India at 59% and was only 12.91%from North America and in today's time the company has generated more revenue from other countries.
Let's now talk about the whole industry and compare it with the world's movie and music industry. In 2017, the gaming industry was 116 billion USD, which is now at 157.5 billion USD. This industry has taken a huge leap over music and movie industry, the movie segment at 39.8 billion USD and the music segment at 57 billion USD and this was a comparison of gaming industry to the world's movie and music segment.
An interesting comparison between the Indian gaming industry to Bollywood As of 2020, the total gaming segment is 1.5 billion USD and Bollywood at 0.9 billion USD And if we see the expectation for 2023, the gaming industry would be at 3.5 billion USD and would get doubled as per the research report.
Let's now talk about the financials and compare the revenue and profits of the company If we see 2018, the total revenue was 181.94 Cr, 2019 was 186 Cr and the profit rises from 1 Cr to 6 Cr. The revenue jumps to 262 Cr in 2020 but profit falls to -26 Cr. If I speak till Sept 30, 2020 the company has booked 207 Cr in revenue and profit at -10.1 Cr.
The operating profit margin of the company is -2.94% meaning the expenses are more than the revenue The net profit is the subtraction of expenses from revenue and is at -4.88% currently. The market cap at which the company wants to list itself is 6200 Cr and since the company is loss-making we cannot talk about the PE ratio, lets see the PB ratio which is at 10 and price to sales ratio is important for online companies meaning how much price do you pay for a sale. The price to sales for the company is 30 and the company is completely debt-free.
Let's start with pros of investing
The first pro comes across as the whole gaming industry, there are 3 reasons which can be seen as positives for the industry First being smartphone penetration, their has been a huge amount of penetration due to the falling prices of smartphones from which the gaming industry saw a growth and if it continues to grow, the gaming industry would have a direct advantage
The second being the speed of the internet, which has increased with the data charges reduced the industry has benefited and in turn the company has and will and most of the games need internet due to the multiplayer facility and the speed of internet has directly impacted the industry.
The per capita growth and rise in disposable income is an advantage as people normally do online payments. The company has a leadership position in a diversified set of offerings. The company has grown inorganically too, they acquired Next Wave company in 2018 to better their cricket offerings. The company has been growing organically and inorganically to better their products and diversify their offerings.
Next is the monthly active user base being 57 million who visit the application daily and if monetised properly, the revenue can be increased a lot. but it can be seen in the coming times that how the company uses active users to build revenue.
Next, the industry is an asset-light business, meaning they don't need heavy capital expenditure The first con is that the company is loss-making and has booked a loss in the last 6 months too.
The PB is 10, Price to sales at 30 from which we can imagine PE being very high due to which we can say that the company's valuations are at a premium. The company also has civil and legal cases with a total liability of 11 Cr. The industry has seen a lot of competition in which new players have tried acquiring market share and did extensive marketing For example, Dream11 and MPL are the startups which are running their business in the segment.
IPO Date and Price
Let's talk about the important dates and numbers to keep in mind before bidding
The IPO will be from 17th March to 19th March and the tentative listing date is 30th March 2021
meaning it will be listed on NSE and BSE
The price band is from Rs 1100 to 1101 and the minimum lot size is 13 shares
We make all article for educational purposes so that we can deliver the right information. You can further do your own research, invest for the long term and make good returns.
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