What is your view on the Nazara Technologies IPO? Would you bid for them?


It is 20 years old & one of the leading interactive gaming & new age sports media company headquartered in Mumbai, which is engaged in the acquisition of, value addition to and distribution, of mobile games in 60 Countries across emerging markets such as India, the Middle East, Africa, South East Asia. It claims that its subscription services are accessed by 130.43 Mn monthly visitors from 61 countries including India and emerging markets in the Middle-East, Latin America, and Africa. It claims to have over 4.08 Mn paid users.

Nazara generates revenues from the following business models and partners -:

  • Player’s spending money within games:
    Skill Based Games where players compete against other players and win cash. The subscribers pay for playing games. This is how Nazara Tech earns revenue. Ex: sports fantasy like Hala play.
  • Advertising revenues by selling inventory within games: Under this model, the company develops popular games & upload them on play & app store, from where it can be easily downloaded for free by mobile users. Users while using these games come across ads. These ads are the revenue source for Nazara Tech. So the more popular the game, the more will be the revenue. Some of the popular games are -: Chota Bheem Speed Racing, World Cricket Championship 1/2,8 Ball pool, Real carrom, Big bash Cricket, etc.
  • Subscription of gaming services:
    Under this model, they depend upon telecom companies in India. Telecom companies offer gaming subscriptions to their subscriber base, which focussed on offering easy to play games to address the low propensity to pay, the subscription services were offered through sachet pricing, with daily, weekly and monthly subscriptions and payment were collected by the Telecom carriers and they shared on average 50% revenue to the service providers like Nazara.
  • Esports rights and events sponsorships:
    Under this model, amateur players watch the live stream of the match being played by the professional players on OTT platforms & listen to live commentary. This is a very new concept. Let understand this in detail like We all watch a live cricket match on TV or OTT platforms like Hotstar. A company like Star Sports buys live streaming rights of a cricket match from the company/board that is organizing cricket. This is how the company/board who is organizing cricket earns revenue Sports then earn from ads etc. This is how the company/board that is organizing cricket earns revenue. Star Sports then earn from ads etc. Now imagine, a game like PUBG, played by professionals in the indoor stadium, and live streaming is shown on television or the OTT platform. Imagine you are sitting at home watching live games. This is the new concept that is picking up with a lot of pace in India. A company like Nazara will organize such games and sell media rights to players like Star Sports and earn revenue. Nazara Tech is aiming to make a battery of these games which can be played by professionals.

Nazara’s goal is to cater to billion-plus mobile internet players across emerging markets who have embraced social multiplayer interactive gaming as the foremost form. With this aim, In the last two years, Made an investment in a lot of gaming companies to tap the emerging trends of gaming. Its other popular investment in gaming are -:

  1. Kiddopia – is an awarding winning edutainment app that teaches a huge variety of skills to kids of younger ages. It covers everything from shapes, colors, alphabet, spelling, math, logic, and patterns to creativity and self-expression.
  2. Bakbuck – is an engagement app for Indian home-makers where they can compete/participate in Indian contests/competitions to win coins/gifts and discover unique products. Available in Hindi, it provides ultra-casual interactive entertainment in a WhatsApp-like an interface.
  3. Moonglab technology
  4. Mastermind sports
  5. Instasportz

It has many popular and we’ll establish Subsidiaries having their own baskets of the game-

  1. Nextwave Multimedia- Cricket Mobile Game Globally having games like World cricket championship, Big bash league, etc.
  2. Nodwin Gaming – South Asia’s Largest Gaming Solutions and Esports Company, grown its revenue by 300 %.Its services include ESPORT properties, Gaming activation & agency, Media sports right, Gaming tech infrastructure. It is the fastest-growing sports entertainment format among competitive gamers and Nazara has over 80% share of the Indian market through its majority stake in Nodwin.
  3. Halaplay – Fantasy sports where players compete with each other to win real cash. A popular app in this segment is DREAM11.
  4. Sportskeeda – India’s largest destination for multisports content & news.
  5. Paperboat – India’s largest kids subscription product
  6. Crimzon code – Leading developer for Quiz Games.

FUTURE PROSPECTS –

  1. The online gaming industry in India is expected to generate a revenue of INR 11,900 Cr by 2023, growing at 22% CAGR, according to a report by consulting major KPMG and the industry’s self-regulatory body, the Indian Federation of Sports Gaming.
  2. The number of game developing companies has touched 300 in 2020 as compared to 20 companies in 2010 while the number of gamers has reached 300 Mn in 2020 from 25 Mn in 2010.
  3. According to NEWZOO, a gaming data forecast company, “There are more than 2.3 Bn active gamers in the world this year, of which 46%, or 1.1 Bn, spend money on games. The games market will reach $158 Bn in 2018, with digital revenues accounting for 91% of the market. For the first time, mobile gaming will contribute more than half of all revenues, with smartphone and tablet gaming growing +25.5% year on year to $70.3 Bn.”
  4. India has the second-largest mobile phone user in the world. The gaming industry is actually dictated by the US and China. India, with a less than $1 Bn market valuation, hardly comes into the picture. While China’s gaming market has reportedly crossed $30 Bn, the US $24 Bn is second, behind China.
  5. The second-highest game downloads globally is happening in India. There will be 300 Mn new players (users) in India over the next couple of years, and after China, India’s going to be the second biggest market. But India is a market that is open to consuming global gaming content. In either case, with a 500 Mn players’ market, India has the potential to build its own League Of Legends.
  6. It is believed the Nodwin Gaming is one of the leading enablers in the Indian Esports market with first mover advantage. In addition to hosting and managing IP-based gaming events such as the ESL India Premiership and Dew Arena by ESL, Nodwin Gaming also partners with other brands to create multiple gaming events intellectual properties in India, such as Mountain Dew Arena, Indian Gaming Show, and Asus ROG Masters.
  7. it would invest up to $20 million in 2020 in startups associated with this segment across India, Africa, and the Middle East. It already invested $50 million in the last 2 years by looking at the exponential growth of gaming.

PROMOTERS AND MANAGEMENT

1. Mr.Vikash Mittersain is the Chairman and Managing Director of our Company. He has been associated as Director of the Company since its incorporation.He holds a diploma in industrial electronics from Walchand College of Engineering,Sangli.He has 38 years of experience in multiple business sectors. He is a member of Advisory Board on Dr. APJ Abdul Kalam Centre, Lucknow. He is also the founder and president of India Business Group. He has been part of various panel discussions and conferences including the sessions at VESIM Literati and Innovators Pitching Session at Maker Mela 2018.

2. Mr. Nitish Mittersain is the Joint Managing Director of our company. He holds a bachelor of commerce degree from the University of Mumbai. He founded our Company in 1999 and has been associated in the promotion of our Company for the last 18 years. He was selected as a member of the Young Presidents’ Organization in 2014 and he has been the recipient of many awards including the Visionary Award from the Vision Foundation in 2012, the Young Achievers Award from the Indo American Society in 2000 and the Outstanding Young Person Award from Junior Chamber International, Marine Lines in 2017. He is also a member of the MEF Asia Board.

3. Mitter Infotech LLP

SHAREHOLDING PATTERN (IN%) AS ON 31.03.2019-:

  1. Westbridge Venture II Investments – 22.69% holding (expected to get atleast 90Times more of its Investment)
  2. Rakesh Jhunjhunwala -12.21% Holding
  3. IIFL Special Opportunity Fund – 6.48%
  4. Emerging Investments Limited -2.04%
  5. Turtle Entertainment GmbH -1.769%

FINANCIAL STATEMENTS:-

INCOME GENERATION-:

  1. The company generated operating revenues of Rs 167 crore in FY19,VIS-A-VIS Rs 170.54 in FY18 (Drop of 2 %).It includes subscription income and game downloads of ₹94 crore in FY19 VIS-A-VIS ₹151.7 crore in FY18 (Drop of 38%).
  2. The revenue generated through its Esports events, which is ₹49.2crore in FY19 VIS-A-VIS ₹3.6crore in (Increase of 13.7 Times).
  3. Income through freemium content ₹24 crore in FY19 VIS-A-VIS Rs 15.2 crore in FY18 (Increase of 58%).
  4. Other income (including interest in investments and mutual fund appreciation) ₹16.3 Crore in FY19 VIS-A-VIS ₹9.8 Crore in FY18 ( Increase of 66.32%).

EXPENSES INCURRED:-

  1. Employee benefit expenses which amounted to ₹40.8 crore in FY19 VIS-A VIS ₹37.1 crore in FY18 (Increase of 10%).
  2. Rent ₹10.2 crore in FY19 VIS-A-VIS ₹4.22 Crore in FY18 ( Increase of 2.37 times).
  3. IT expenses Increased by 2.25 times amounting to ₹7.9 crore in FY19.
  4. Advertising & promotional expenses is ₹24.3 crore in FY19 VIS-A-VIS ₹41.5 crore in FY18 ( Decrease of 41.4%).
  5. It also spent ₹21.5 crore on several events it organized to gather eyeballs from esports & the online gaming ecosystem.
  6. Nazara’s net operating cash flow which improved to a positive cash flow of ₹13.7 crore during FY19 from the negative cash flow of ₹5.7 crore in FY18.

PROFIT GENERATED-:

  1. Despite lower revenues,the company managed to improve its margins & posted a Profit of ₹4.4 crore in FY19 VIS-A-VIS ₹1.2 crore in FY18 ( Growth of 2.7Times ).
  2. Improving operational efficiencies, while growing through strategic investments and creating business synergies has set the company for a well-footed in FY20.

This is a huge market of gaming which I think where next big players are going to emerge and one of them must be NAZARA TECHNOLOGY.With growing penetration of gaming in younger since childhood to elder person,this is one of the hottest company with huge growth potential & capable credible management. Investment of Investors like Rakesh Jhunjhunwala & IIFL give a comfort when it comes to Investment in private companies.

IPO IS DELAYED DUE TO THE MARKET DISRUPTION IN LAST 2 YEARS AND ONCE THE MARKET WILL STABILISE, IT WILL COME WITH IPO.

DISCLAIMER – I AM INVESTED & THIS IS NOT A RECOMMENDATION.

Author: Madhvendra
Source: Quora


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