Going The IPO Route: Mobile Gaming Company Nazara Technologies To Offer $156.5 Mn Public Offering Early Next Year

Mobile gaming studio Nazara Technologies has announced plans to offer an IPO towards the end of FY18, making it the first public listing in the Indian gaming space. As per reports, the Mumbai-based company has mandated ICICI Securities and financial services firm Edelweiss for the proposed initial public offering.

According to sources, the public offering is expected to raise a total of $156.5 Mn (INR 1,000 Cr) at a valuation of somewhere between $469.7 Mn-$548 Mn (INR 3,000 Cr-INR 3,500 Cr).

Commenting on the development, a source in the know stated, “The company is planning to finish the listing process by end of March 2018, and is expecting a valuation of 30-35 times projected profit after tax (PAT) of $ 15.6 Mn (INR 100 Cr) in FY19.”

As part of the public offering, WestBridge Capital will partially exit the venture, clocking in a 75-80x return on its 12-year-old investment in the process. Having invested a total of $3 Mn in Nazara between 2005 and 2007, the UK-headquartered PE firm currently holds majority stake of 55% in the mobile games developer and distributor. The remaining shares are held by Nazara Games founder Nitish Mittersain and his family.

Speaking about Nazara’s decision to take the IPO route, Sandeep Singhal, co-founder and Managing Director at WestBridge Capital, said, “Nazara is a great example of all that can be achieved when a company takes a long-term view. It has a great future given its dominance and the huge market potential of mobile gaming in India. Going public will allow the company to maximise its potential.”

The investment firm has previously backed companies like Dr. Lal Pathlabs, Vini Cosmetics, and Havells.

Nazara Technologies: From Hitting Profitability In 2007 To Generating $86 Mn Revenue In FY17

Established in 2000 while Mittersain was still a college student, Nazara Technologies is a mobile games developer and publisher that provides unique services such as “Games Club.” It also serves as an exclusive distributor for key game developers such as Electronic Arts. Apart from Mumbai, the company has offices in Dubai, London, Africa and Singapore.

The company is known for the Chhota Bheem and Virat Kohli mobile games series. It currently offers gaming subscription services to users across 74 countries in Africa, Middle East, Southeast Asia and the rest of Asia Pacific. Nazara also recently entered the e-sports market and is in the process of setting up cricket leagues in India.

At present, Nazara is working to capture the mobile gaming market in India, Africa, and a few Middle Eastern nations. Talking about the company’s plans for the future, Mittersain told Inc42, “Nazara has invested over 15 years in building a very strong foundation to be a leader in digital entertainment / gaming space in India and we look forward to continuing down this path and emerging as a leader in this category across emerging markets reaching out to the next 2 billion consumers.”

In a segment that witnesses intense competition from a fast-expanding crop of startups, Nazara Technologies has been profitability for nearly a decade. In FY17, the company raked in over $86 Mn (INR 550 Cr) in revenue and more than $10.3 Mn (INR 66 Cr) in profits. To bolster its stronghold in the country’s online mobile gaming market, Nazara has been on an acquisition spree over the last few years. It has also been actively investing in up-and-coming 3D and 4D game developers.

In the second week of August, Nazara Games poured an undisclosed amount in Moong Labs, a developer of 3D simulation games. The two companies had previously entered into a partnership to launch 4D simulation mobile cricket games Virat Super Cricket and Epic Cricket.

Earlier in April 2016, Nazara Games picked up 26% stake in London-based gaming studio Mastermind Sports. During the same month, Nazara’s Game Fund invested an undisclosed amount in London-based mobile games studio TrulySocial. The round also saw participation from London Venture Partners and Game Lead at Supercell Drussila Hollanda-Gronberg.

Back in 2014, Nazara infused $654.5K (INR 4.2 Cr) Series A funding in Bengaluru-based gaming startup HashCube. Perry LaForge, Ah Ventures and existing investors Indian Angel Network and Blume Ventures also participated in the round.

What’s Been Happening In The Mobile Gaming Market

According to Inc42 Datalabs, India currently ranks among the top five countries in the world for online mobile gaming. As per a Google KPMG report published in May 2017, the online gaming industry in India is estimated to be worth over $360 Mn. Poised to grow to $1 Tn by 2021, the industry will likely reach more than 310 Mn gamers around the country by then.

In July 2017, Bengaluru-based online gaming startup Hypernova Interactive secured an undisclosed amount in Seed funding from Kae Capital. The funding will reportedly go into building an e-sports ecosystem for mobile. The online gaming startup also plans to scale their current games in markets like China and the US.

Owned by Mumbai-based OceanKing Software Solutions, online gaming startup Baadshah Gaming raised an undisclosed amount from Casino Pride in June 2017. The funding was raised against a 30% stake in the startup. As part of the deal, the Indian startup will soon be launching its ‘Baadshah Gaming Live’ property at Casino Pride.

Earlier in April, Bengaluru-based mobile gaming startup Mech Mocha raised $5 Mn in Series A round of funding led by Accel Partners, Shunwei Capital, and Blume Ventures. In the beginning of the year, Udupi-based gaming startup 99Games secured investment from Japanese investment firm Dream Incubator, along with participation from existing investors Kalaari Capital and Ascent Capital.

200% Growth In Number Of Tech Companies Opting For IPO

According to a report by US-based research firm CB Insights, the number of IPOs filed by Indian technology companies has increased by over 400% between 2015 and 2016. As per the report, a total of 10 tech startups in the country have opted for initial public offerings in 2017, of which six took place in June and July.

Among these are IT services provider Infobeans, Ortel Communications, Mumbai-based local search service Just Dial, and Avenue Supermarts. Other companies that have issued an initial public offering are Eris Lifesciences, Info Edge, and Cochin Shipyard.

In July 2017, online automobile marketplace Droom announced plans to make a public offering right after raising $20 Mn (INR 130 Cr) Series C round led by Integrated Asset Management and Japan’s Digital Garage. Internet-based search company Just Dial launched its IPO back in 2013. Recently, shares of the local search engine jumped 6% after HDFC Mutual Fund purchased bulk shares via a bulk deal mechanism on the National Stock Exchange (NSE).

The initial public offering of online matchmaking portal, Matrimony is also set to open today. As per reports, Matrimony is looking to issue up to 3,767,254 equity shares in exchange for a total of $20.3 Mn (INR 130 Cr), which will , in turn, e used to fund advertising activities in the future. Just days ahead of its IPO, Matrimony reportedly raised  $35.3 Mn (225.9 Cr) from anchor investors including Smallcap World Fund, HDFC Trustee Company, Baring Private Equity Asia, BNP Paribas Arbitrage, Goldman Sachs India and DB International (Asia).

Presently, India accounts for around 13% of the world’s online mobile gaming population. Despite the impressive growth the sector has seen in the last few years, most companies are struggling to break even in this highly-competitive domain. Being the country’s first gaming company to offer an IPO, Nazara Technologies will likely herald a brighter dawn for mobile gaming startups in India.

(The development was reported by TOI)