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Salient features of the IPO:

* Nazara Technologies Ltd. (Nazara), a gaming and sports media platform is planning to raise up to Rs. 5,830mn through an IPO, which opens on 17th Mar. and closes on 19th Mar. 2021. The price band is Rs. 1,100 – 1,101 per share.

* The issue is fully OFS. The company will not receive any proceeds from the issue.

Key competitive strengths:

* Leadership position in a diversified and scalable business

* Portfolio of premium intellectual property and content across regions and businesses

* Large and engaged community of users with attractive monetization opportunities

* Successful inorganic growth through strategic acquisitions

* Profitable platform model benefitting from India growth story with limited regulatory risk

* Strong leadership team backed by marquee investors

Risk and concerns:

* Subdued macro economic environment

* Difficulty in monetizing media rights

* Unfavorable regulation in fantasy sports

* Lower demand post Covid-19 pandemic

* Unfavorable forex movements

Peer comparison and valuation:

There are no listed peers, having similar operating model. In FY20, the company was loss making at EBITDA and PAT levels. At higher price band of Rs. 1,101, Nazara is demanding an EV/Sales multiple of 12.8x (to its FY20 sales of Rs. 2,475mn).

Below are a few key observations of the issue:

* Nazara is a leading India based diversified gaming and sports media platform with a presence in India and across emerging & developed global markets such as Africa and North America, with offerings across the interactive gaming, eSports and gamified early learning ecosystems. It has a market share of over 80% in the domestic eSports market. The company owns some of the most recognizable IP, including World Cricket Championship (WCC) and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin and Sportskeeda in eSports & eSports media and Halaplay & Qunami in skill-based, fantasy and trivia games.

* Over the last few years, Nazara has grown inorganically to expand its offerings by acquiring multiple assets and successfully integrating in its operations. In 2017, it acquired Next Wave Multimedia Pvt. Ltd. (Nextwave) to further augment its cricket mobile game offerings and through IP-led cricket games such as WCC, WCC 2, Beach Cricket and Bat Attack Cricket. The company also entered eSports, through the acquisition of Nodwin Gaming Pvt. Ltd. (Nodwin) in 2018, and eSports media through Sportskeeda by acquiring Absolute Sports Pvt. Ltd. (Absolute Sports) in 2019. In Jan. 2020, it made a strategic investment in Paper Boat Apps Pvt. Ltd. (Paper Boat), which provided it an entry into gamified early learning. Nazara also acquired Halaplay Technologies Pvt. Ltd. (Halaplay) in 2019, marking its entry into skillbased, fantasy gaming. All these acquisitions are being funded through internal accruals.

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