IPO Note - Nazara Technologies Ltd By Geojit Financial
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BACKGROUND
Incorporated in December 8, 1999, Nazara Technologies, is the leading India based diversified gaming and sports media platform with presence in India and across emerging and developed global markets such as Africa and North America. The company offers across the interactive gaming, 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.
Objects and Details of the Issue
The public issue consists of Offer for Sale of Rs 582 cr by the promoter &selling shareholder
Investment Rationale:
* Growth in the industry will lead to growth to the company
* Diversified business Across segment
* Enhance existing offerings and Launch new IP and titles across content and games
Valuation and Recommendation
Over FY18-20, the company sales has grown at a CAGR of 19.8%, both organic and inorganic way, growth in revenue is despite decline in Telco business revenue which was the major business. Going ahead, being into the online gaming space, which over FY20-FY23, is expected to grow at a CAGR of 31.7% in India, and 11.8% in USA we feel the company can sustain higher growth. Having a diversified Business, Acquisition or creation of new games and with cross sell opportunities available to different geographies, will help the company to grow ahead.
Company is looking for growth through acquisition as well. EBITDA margin has declined over FY18 to FY 19 from 28.3% to 9.6% majorly due to change in mix in revenue and decline in the telco business which is a high margin Business. H1FY21 EBitda margin stood at 3%. Management indicates of taking the EBitda Margin back to 8% going ahead. FCFF for FY20 stands at Rs -9.2 cr which is expected to improve with higher margins. Being a loss making company in FY20 ROE stands negative. At the given upper price band of issue of Rs 1101, Nazara technologies is offered at EV/Sales of 7.8x H1FY21 annualized sales which is attractive. We recommend subscribing to the issue.
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