This Rakesh Jhunjhunwala-owned stock hits record high; up 30% in 3-weeks

Nazara Technologies hit a record high of Rs 2,076, surpassing its previous high of Rs 2,026.90 touched on debut day i.e. March 30, 2021.

Shares of Nazara Technologies hit a record high of Rs 2,076 as they rallied 8 per cent on the BSE in intra-day trade on Tuesday, up 16 per cent in the past two trading days. In the process, the stock of information technology (IT) software products company surpassed its previous high of Rs 2,026.90 touched on debut day i.e. March 30, 2021.

Nazara Technologies is primarily engaged in providing subscription/ download of games/ other content through consumer base in India and worldwide and digital support services to group companies.

In the past three weeks, the stock has outperformed the market by gaining 30 per cent, as compared to a 4.4 per cent rise in the S&P BSE Sensex. The stock has witnessed good amount of buying post listing, and now commands 89 per cent premium to its issue price of Rs 1,101 per share.

Ace investor Rakesh Radheshyam Jhunjhunwala held 10.82 per cent stake in Nazara Technologies as on June 30, 2021. The gaming market is witnessing an accelerated growth worldwide and the industry too has evolved immensely. With the increase in the number of players in India, a convenient gaming culture is to set in.

Availability of smartphones and affordable technology, rising disposable income, the industry is in its growth launchpad and gradual penetration to untapped market will fuel the growth and the Industry can make valuable contribution to the economy, Nazara Technologies said in the financial year 2020-21 annual report.

The company is looking forward to build on Nazara’s leading market position and growth opportunity in India. To enhance existing offerings and increase monetisation opportunities, pursue strategic investment and acquisition opportunities and further build the existing technology stack to enhance existing platform, the company said.

Meanwhile, Prabhudas Lilladher initiated coverage on Nazara Technologies with a ‘Buy’ rating and a target price of Rs 2,342 as the brokerage firm believes it is a unique play on rising gaming culture; given Gen Z & millennials constitute around 65 per cent of India’s population demographics. The company has an early mover advantage in evolving Esports category (organized 82 per cent unique Esports events with 73 per cent share in total prize pool as of 2019), that is likely to disrupt traditional sports landscape in next 4-5 years and offers a direct play on emerging Ed-Tech market via Kiddopia, the brokerage firm said in September 2, 2021 report.

"Nazara is a hyper growth business model with a repository of IPs across segments. The entire gaming network has been created by acquisitions, a model which is difficult to successfully replicate, in our view. Management’s focus to pursue further inorganic opportunities creates additional growth optionality," it added.

The brokerage firm further said Nazara is India’s only listed gaming company (no peer comparison possible) having a scalable business model. Further, given that focus is on maximizing growth rather than profits, earnings based multiples hold little relevance. While a cursory look at global gaming companies reveals Nazara trades at higher valuations , we believe the premium is justified given better growth prospects in India (India’s mobile gaming industry is expected to grow at 38 per cent CAGR over the next 3 years in comparison with 9 per cent/10 per cent CAGR for China/US), it added.