Nazara Technologies, a gaming and sports media company, Rs 583 crore initial public offering (IPO) issue will opens on Wednesday, where it is going to sell 58.9 lakh shares.
In an interview with Business Insider, the company’s chief executive officer Manish Agarwal has said that the IPO is a huge milestone in their goal of being one of the top 5 global gaming companies and for the young generation, gaming will become the go-to entertainment and that will drive growth.
“It’s different from people like us for whom movies were the source of entertainment – that’s a big shift, which makes gaming in India a very attractive market,” Agarwal said.
On the other side, analysts also agree with Agarwal as a report by Aditya Birla Capital said: “The gaming industry is set to witness over 30% CAGR (compound annual growth rate) over 2020-2023 (estimated) on the back of high mobile penetration, increasing internet penetration and increasing number of gamers. Nazara has a widespread presence both in terms of geography and product portfolio which offers strong growth visibility.”
Analysts at GEPL capital agree as they said that while the growth has come at the expense of EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins and return ratios, the pivot was an essential strategy to foray into diverse lucrative opportunities, leveraging an ecosystem of partners and creating business moats.
“All these acquisitions were funded through internal accruals. As the synergies and growth from these investments kick in, the margin profile and consequently return ratios will return back to a path of steady growth,” said the GEPL capital report.
Agarwal also said Business Insider that their growth has come from their fundamental knowledge of the Indian gaming market and knowledge of the consumer trends.
“A key factor to its success is the local knowledge, presence and focus on addressing the specific and unique opportunities and challenges in the regions it operates in. The Indian Gen-Z and millennial population form a significant portion of the gaming user-base, and companies including the company, have capitalised on the ever-growing interest of this population segment in sports and eSports through popular and relatable content,” said analysts at Kotak Securities.
Nazara’s presence across geographies also helps in its business potential, even as 41% of its revenue comes from India. It has established itself in 64 countries across Africa, Middle East, South East Asia, and the Indian subcontinent.