Nazara Tech IPO listing day strategy: Hefty grey market premium; should you buy more or hold after listing?

Rakesh Jhunjhunwala-backed Nazara Technologies shares will list on stock markets on March 30, 2021, following the recently concluded IPO. The public issue of the mobile gaming leader was subscribed 176 times and was sold in the price range of Rs 1,100-1,101 per share. Ahead of shares listing on bourses, Nazara Technologies shares were seen quoting a strong grey market premium of Rs 690. The shares were ruling at Rs 1,791, up 62.67 per cent in the grey market over the issue price. The strong grey market premium doesn’t always ensure listing gains. The company has finalised the share allotment this week.

Ajit Mishra, VP- Senior Technical Analyst, Religare Broking Ltd, advised not to speculate only for the listing gains. Mishra told The Outlooker Online that investors should hold the stock with a medium to long term investment horizon. Nazara Technologies is popularly known for its games on the World Cricket Championship, Chhota Bheem and Motu Patlu series. It owns IPs, including WCC and CarromClash in mobile games, Kiddopedia in gamified early learning, NODWIN and Sportskeeda in esports and esports media, and Halaplay and Qunami in skill-based, fantasy and trivia games.

Nazara Technologies first gaming firm to be listed

Nazara Technologies will be the first gaming company to be listed on the stock exchanges. It offers a wide range of diversified gaming products across interactive gaming, eSports, and gamified early learning ecosystem across emerging markets. Nazara Technologies’ business operates in different segments: (1) subscription-based business; (2) freemium business; (3) eSports; (4) gamified early learning; and (5) real-money gaming. It has a total 40.17mn and 57.54mn monthly active users across games as on FY20 and 9MFY21, respectively. The IPO is valued at 12.6x of FY20 EV to sales, which looks to be at higher compared to some of global gaming companies like Tencent Holdings and Electronic Arts,” Vikas Jain, Senior Research Analyst at Reliance Securities, told The Outlooker Online.

However, considering the huge potential to grow in the top line hereon, which is evident from 1HFY21 revenue, the issue looks to be reasonably valued. Tencent Holdings and Electronic Arts trade at 5.5-6x of CY22E on EV/sales and considering 35-40% revenue growth for NTL over FY20-FY23E, EV/sales valuations look comfortable. “Being the first mover in the online gaming space to be listed in India the stock would continue to be in demand and we remain positive on the stock,” Jain added.

Nazara Tech may list above Rs 1,650

Being the first gaming company to list, Nazara Technologies may get premium valuations owing to its operations in niche sector and robust growth outlook in forthcoming times, says Manan Doshi, Co-Founder, UnlistedArena.com dealing in Pre-IPO & Unlisted Shares. As the digital theme stocks are rocking in the listed space and Nazara can be the new joinee to the club. With few dampened listings, we have seen sentiments cooling down a bit in primary markets,” Doshi said. “However, in my personal opinion, Nazara Technologies may list at majestic premiums which may lead the listing anywhere above Rs 1,650. If it lists at such premiums, the gains would be significant for short term investors. However, I believe that the gaming is a long term story and Nazara should remain in focus after listing too,” he added.

(The recommendations in this story are by the respective research and brokerage firm. The Outlooker Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)