Nazara hits lower limit after surging 84% on debut, stock ends 45% up

Market players said the spate of recent weak listings forced high networth individuals (HNIs) to take gains at the table

Shares of online gaming company Nazara Technologies surged 84 per cent over their issue price on trading debut on Tuesday. However, the shares failed to hold on to the gains as wealthy investors rushed to book profits, and heavy selling saw the stock hit its 20 per cent lower limit over the discovered price of Rs 1,990.

The discovered price is arrived at after an hour-long pre-open session to curb volatility. A stock is allowed to gain or fall a maximum of 20 per cent over the discovered price.

The stock ended the day at Rs 1,576.8, with a gain of 43.21 per cent over its initial public offering (IPO) price of Rs 1,101.

“Shares of Nazara were expected to do well on listing. The discovered price pointed to a strong opening. Having lost money in recent listings, HNIs got jittery and rushed to book profits. This weighed on the stock price. After a point, there were only sellers and no buyers,” explained an investment banker.

Nazara’s IPO had seen 175 times more demand than the shares on offer, the second highest in 2021 after Mtar Tech. Investors had lapped up the shares in the IPO, enthused by the prospects of the mobile gaming and electronic sports industry.

Analysts are expecting the company to post annualised revenue growth of 35-40 per cent over FY20-FY23.

Nazara’s IPO consisted of a secondary share sale worth Rs 583 crore. At the IPO price of Rs 1,101, the company was valued at Rs 1,769 crore. After the first day’s trade, the company’s market cap has increased to Rs 4,848 crore.

"Nazara is well placed to leverage the opportunity that interactive mobile games, eSports content and gamified early learning apps offer," Motilal Oswal analysts had said earlier this month, according to Reuters.

Nazara’s backers include billionaire investor Rakesh Jhunjhunwala, whose stock picks are closely watched by local retail and institutional investors.

The company gets a bulk of its revenue from India and North America, but is also present in African and West Asian markets. Its revenue jumped 46 per cent year-over-year to Rs 248 crore ($34 million) in FY20.

However, Nazara reported an annual loss of Rs 26 crore compared with a profit of Rs 6.7 crore a year earlier, hurt by costs related to a string of acquisitions, higher licensing expenses at its e-sports business and more spending on advertising.