Nazara Techno IPO review (May apply)

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Review By Dilip Davda on March 13, 2021

•  NTL is a diversified gaming and sports media platform developer.
•  It last paid a dividend of 1510% for FY18.
•  The company is in the red since FY20 and thus issue is priced at a negative P/E.
•  Investment by RKJ has created hype for this IPO.
•  Risk savvy, cash surplus investors may consider parking funds at their own risks.
  
  ABOUT COMPANY:
  Nazara Technologies Ltd. (NTL) is a 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. It offers across the interactive gaming, eSports and gamified earl 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 Quanami in skill-based fantasy and trivia games.
  
  NTL's goal is to cater to billion-plus mobile internet players across emerging markets who have embraced social multiplayer interactive gamming as the foremost form of entertainment. It has focused on growing profitable business, with an emphasis on self-sustainability rather than relying on external investments. It claims to be historically been EBITDA positive and has generated sufficient cash flows from its operations. Due to this its cash and bank balances as of September 30, 2020, were in the region of Rs. 184.28 cr.
  
  ISSUE DETAILS/CAPITAL HISTORY:
  To avail listing benefits and provide an exit to a few current stakeholders, NTL is coming out with its maiden IPO with a vanilla secondary offer. The company is issuing 5294392 equity shares of Rs. 4 each with a price band of Rs. 1100.00 - Rs. 1101.00 and mulls mobilizing Rs. 582.91 cr., (at the upper price band).  The Minimum application is to be made for 13 shares and in multiples thereon, thereafter.  
  
  The issue opens for subscription on March 17, 2021, and will close on March 19, 2021. The issue constitutes 17.39% of the post issue paid-up capital of the company. The company has kept shares worth Rs. 2 cr. For eligible employees and offering them a discount of Rs. 110 per share. From the residual portion, lit has made an allocation of IPO quota - 75% for QIBs, 15% for HNIs and 10% for Retail investors.
  
  Having issued initial equity at par, NTL issued further equity in the price range of Rs. 30.33 to Rs. 2733.50 per share (based on FV of Rs. 4 per share) between April 2000 and March 2021.
  
  It has also issued bonus shares in the ratio of 4 for 1 in January 2018. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. Nil, Rs.0.80, Rs. 413.59, Rs. 554.54, Rs. 554.62, Rs. 554.65, Rs. 554.81, Rs.556.90, Rs. 728.00 and Rs. 730.95 per share.
  
  NTL's current paid-up equity capital of Rs. 12.18 cr. will remain the same following this being complete OFS. Based on the upper price band of the issue, the company is looking for a market cap of Rs. 3352.86 cr.
  
  Book Running Lead Managers for this issue are ICICI Securities Ltd., IIFL Securities Ltd., Jefferies India Pvt. Ltd., and Nomura Financial Advisory and Securities India Pvt. Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.
  
  FINANCIAL PERFORMANCE:
  On the financial performance front, for the last three fiscals, NTL has (on a standalone basis) posted total turnover/net profits - (loss) of Rs. 181.94 cr. / Rs. 1.02 cr. (FY18), Rs. 186.10 cr. / Rs. 6.71 cr. (FY19) and Rs. 262.15 cr. / Rs. - (26.62) cr. (FY20). For the first six months of FY21 ended on September 30, 2020, it has posted a loss of Rs. - (10.11) cr. on a turnover of Rs. 207.01 cr.
  
  For the last three fiscals, NTL has posted an average EPS of Rs. 1.88 and an average RoNW of 1.30%. The issue is priced at a P/BV of 6.54 based on its NAV of Rs. 168.47 per share as of September 30, 2020.
  
  Based on FY20 and 6M-FY21 negative earnings, the issue is at a negative P/E.
  
  COMPARISION WITH LISTED PEERS:
  As per offer documents, NTL has no listed peers to compare with.
  
  DIVIDEND POLICY:
  The company has last paid a dividend of 1510% for FY18 and thereafter it has skipped it till going for IPO. It will consider a prudent dividend policy based on its performance and future prospects going forward.
  
  BRLM'S TRACK RECORDS:
  The four Book Running Lead Managers associated with the offer have handled 29 public offers in the past three years, out of which 10 issues closed below the offer price on the listing date.

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