Nazara Tech, Suryoday IPOs oversubscribed as listing boom continues

Six issues closed this week; Barbeque Nation could hit the market next

Nazara Technologies' initial public offering (IPO) saw 175 times more demand than the shares on offer, making it the second-most subscribed issue of 2021.

The issue attracted bids worth more than Rs 55,000 crore with high networth individual (HNI) category seeing nearly 390 times oversubscription. A HNI placing bids worth Rs 390 crore will be allotted shares worth Rs 1 crore.

Retail and institutional investor portions of the issue were subscribed 75 times and 104 times.

Nazara’s IPO consisted of a secondary share sale worth Rs 583 crore. The price band was set at Rs 1,100 to Rs 1,101 per share. At the top end, the company is valued at Rs 1,769 crore.

Market experts said the IPO was a rare investment opportunity in a mobile gaming and e-sports firm.

Most brokerages gave "subscribe" rating to the issue. “The IPO is valued at 12.6 times of FY20 enterprise value(EV)-to-sales, which looks to be at higher compared to some of global gaming companies like Tencent Holdings and Electronic Arts. However, considering huge potential to grow its top line from here on the issue looks to be reasonably valued. Tencent Holdings and Electronic Arts trade at 5.5-6 times CY22E on EV/sales. Considering 35-40 per cent revenue growth for Nazara over FY20-FY23E, EV/sales valuations look comfortable,” said a note by Reliance Securities.

Suryoday Small Finance Bank’s (SFB) IPO was relatively modest subscription. The Rs 580-crore issue garnered 2.7 times subscription. The issue consisted of a fresh fund raise of Rs 247 crore and secondary share sale worth Rs 333 crore. The price band for the issue was Rs 303 to Rs 305 per share. The company on post-issue basis is valued at Rs 3,237 crore.

The IPO was priced at 2.7 times book value for nine months of FY20. Analysts said pricing was at a premium to listed peers such as Ujjivan SFB and Equitas SFB, which resulted in modest subscription.

Six issues closed this week. The listing boom may continue with several companies waiting in the wings to launch their issue. According to reports, Barbeque Nation Hospitality’s IPO could hit the market next week.