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The intriguing Buzz around Nazara Technologies

Nazara Technologies announced yesterday that its board of directors had given approval of raising ₹315.30 crores by the allotment of fresh equity from marquee institutional investors. However, it is still subject to receiving a go-ahead from the company’s shareholders and the compliance to all regulatory and statutory authorities that are applicable.

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The amount, as mentioned earlier, is raised by issuing 1,429,266 equity shares, each at a face value of Rs. 4. The shares are valued at a price of Rs 2,206 per share, which includes a premium of Rs 2,202 per equity share “aggregating to Rs 315,29,60,796 to Gamnat Pte Ltd and Plutus Wealth Management LLP…on a preferential basis,” the company stated. Following SEBI ICDR Guidelines, the locking period for these shares would be for a period of one year from the date of issue.

Game at Pte Ltd is expected to take up a 3.62% stake in the company, acquiring shares of a maximum of 1.1 million, amounting to a totality of about Rs 259.8 crore for shares. Plutus Wealth Management will pump in the remaining Rs 55.5 crore to increase its stake in the company to a 6.92% stake. In January 2021, the company had also acquired shares worth over Rs 500 crore from early investor WestBridge.

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These funds raised would be primarily used for expansionary business plans and would be utilized for the investment in the growth of the company. It would also be utilized to indulge in strategic acquisitions in its sector.

Being a company operating in the gaming and media sector, these strategic acquisitions are mainly to acquire business operating in various verticals such as gamified learning, freemium, skill-based real money gaming and esports. Moreover, this company has been heavily investing in growth and has already acquired many companies in the recent past to inflate its “Friends of Nazara” ecosystem.

About the CEO of Nazara Technologies

Manish Agarwal, the CEO of Nazara Technologies, said that the company is extremely grateful to their investors, citing their strength in the endorsement of Nazara’s strategic vision and ability to operate, implement and flourish towards their stated goals. He stated that the investments made by institutional investors would act as a “catalyst.” It would stimulate a higher operational efficiency across various business segments, which would ultimately increase shareholder value and wealth creation for the shareholders by the compounding effect across verticals from the parent company to companies at the subsidiary level and acquisitions.

Nazara Technologies is a leading diversified sports media and games platform in India with a presence in India and in emerging and developed global markets such as Africa and North America with offerings in interactive games, e-sports, and playful ecosystems for early learning. Nazara was one of the first to enter the Indian market for esports (via Godwin) and cricket simulation (via Nextwave).

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Friends of Nazara Technologies:

The ‘Friends of Nazara’ ecosystem, as mentioned above, refers to those gaming companies in which Nazara holds a majority stake. Nazara Technologies has active involvement in these companies and works in line and with the top management and founders of the particular companies to rapidly expand.

There are various companies that consist of this network, most of them coming under Nazara Technologies owing to the company’s acquisition spree. These companies include Godwin Gaming and SportsKeeda in the esports segment, Qunami, Next Wave Multimedia, developer of World Cricket Championship (WCC), which is the largest mobile-based cricket simulation game, developers of the popular gamified learning app Kiddopia, and Halaplay, and OpenPlay in the skill-based real money gaming vertical.

With the company having a widespread presence across the globe in developed or emerging markets like Africa and North America, Nazara has also been investing and expanding into foreign companies, and as of June, it acquired a 69.82% stake for an amount totaling up to Rs. 20 crore in a company named Publishme, which is based in the Middle Eastern region and mostly operates in the sector of game publishing. This acquisition did this through primary and secondary transactions.

Nazara Technologies Financials:

For the quarter ended June 2021, Nazara Technologies reported revenues standing at Rs 131.2 crore and a net profit of Rs 13.6 crore, thereby earning a reasonable net profit margin of 10.366%. The revenues were mainly attributed to Esports and gamified early learning account, which account for nearly 81% of its overall revenues.

Its consolidated net profits have increased substantially from RS. 12.13 in the financial year 2017-2018 to 136.36 in the year 2020-2021, with an increase in revenue from operations from 1,705.47 in 2017-2018 to 4,542.07 in 2020-2020. Accordingly, the net profit margin had exponentially increased from 0.7% in 2017-2018 to 3% in 2020-2021. It has also created wealth generation for the shareholders, evidence showing a steady increasing trend in the earnings per share.

Involvement of Rakesh Jhunjhunwala:

The Big Bull Billionaire of the stock market, Rakesh Jhunjhunwala, has heavily backed in this gaming and sports media start-up. He has a stake of 10.8 per cent, amounting to 32,94,310 shares in Nazara Technology. The share prices of Nazara Technologies had skyrocketed to an increase of ₹800.45 in the previous month, consequently causing a surge in Rakesh Jhunjhunwala’s net worth in this particular stock by nearly Rs. 265 crores.

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Moreover, in the past year, the share prices of Nazara Technologies have risen by nearly 65% from ₹1592 to ₹2625.10 in the year 2021. This, obviously, has also boosted the wealth of the legendary investor, Rakesh Jhunjhunwala.

Nazara Technologies is viewed to be highly bullish as per the stock market analysts and believe a high growth in this stock. The rising investment in growth accompanied by Rakesh Jhunjhunwala’s stakeholding makes it a growth stock. Moreover, historically, it has shown exceptional performance by active acquisitions expansions and steady growth, and a similar trend can be expected to occur in the future.

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Moreover, on October 6, Nazara Technologies said it took up 1,601 shares of Rs 10 each from a digital media firm, Rusk Media. This represented 5.54% of the paid-up share capital that was Rs 2.02 crore.

Rusk Media is an IP creation application catering to the Gen-Z and millennial audiences in India. The main rationale behind Nazara picking a stake in this company was to utilize its capability of creating a “scripted reality esports or gaming universe.”

Nazara Technologies commented, “Rusk will be able to create an entertainment-driven content universe for gaming fans in India and globally and Nazara, and its subsidiaries will have exclusive monetization rights on the IP that will be created, along with the ability to monetize the characters, creators via mobile games as well.”

The New Delhi-based start-up posted revenues of Rs 7.1 crore in FY21, up from Rs 3.4 crore in FY20.

On Tuesday, the share price of Naraza Technologies stood at ₹ 2341.10, which skyrocketed to ₹ 2,625.10 on 7th October post the announcement. On Thursday, it ultimately closed at ₹2691, not before touching its 52 weeks high of ₹2700.

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