Mumbai-based mobile gaming developer Nazara Technologies Ltd has received an approval from markets regulator Securities and Exchange Board of India to float its initial public offering.
On 20 April, SEBI had issued its final observations to Nazara’s IPO proposal, making it the fourteenth firm to receive regulatory clearances for an IPO in 2018. In comparison, 2017 saw 46 firms getting approvals for IPOs, according to the SEBI website.
Nazara, which counts public markets-focussed private equity firm WestBridge Capital LLC as its backer, had filed its draft proposal on 1 February.
The public issue will entirely be a secondary sale of 5.54 million shares. It will result in a 20.55% stake dilution. The IPO is expected to give WestBridge impressive returns on its 12-year-old investment, VCCircle estimates show.
During the IPO, WestBridge is expected to sell about four-fifths of its holdings, which will bring down its stake in the company to 3.48% from the existing 22.69%, VCCircle estimates show.
The promoter entity, Mitter Infotech, will sell a small portion of its holding to bring down its stake from 22.07% to 20.74%.
In December 2017, IIFL Special Opportunities Fund had bought a minority stake in the mobile gaming developer for $51 million (Rs 330 crore), a move that clearly indicated that the firm was planning an IPO.
Nazara will become the first Indian gaming firm to tap the public market.
ICICI Securities and Edelweiss Financial Services are merchant bankers managing the IPO.
Earlier, The Economic Times had reported that the company plans to complete the listing process by end of March 2018 and was expecting a valuation of 30-35 times the projected profit after tax of Rs 100 crore for 2018-19. It has been profitable since 2007.
Established in 1999 by Nitish Mittersain, Nazara started doing well after the dot-com bust in 2003 and subsequently raised $3 million from WestBridge Capital. WestBridge owns a majority stake in the firm after factoring in the convertible preference shares it holds, according to VCCEdge, the data research platform of News Corp VCCircle.
The company is engaged in acquiring mobile games across emerging markets such as India, West Asia, Africa, Southeast Asia and Latin America. Its projects range from value addition to distribution, while its operations comprise a subscription business, freemium business and esports business.
Nazara caters to 130.43 million monthly visitors from across 61 countries, besides having more than 4.08 million paid subscribers as of September 2017. The company claims over 37.62 million downloads. Its Freemium business saw 44.49 million downloads till September 2017.
The company had acquired a majority stake in Chennai-based gaming company Nextwave Multimedia in January 2018. It had, however, not disclosed the deal value. The acquisition is expected to help Nazara strengthen its portfolio of offerings in virtual interactive sports.
This is not the first time that Nazara has acquired or invested in other gaming firms. In November 2017, it had invested an undisclosed sum in Mumbai-based fantasy sports platform HalaPlay along with Kae Capital. In August 2017, it had backed Noida-based Moong Labs Technologies Pvt. Ltd, a developer of 3D cricket simulation games.
Nazara reported consolidated net profit of Rs 19.84 crore for the six months ended September 2017 on revenue (from operations) of Rs 83.89 crore. It reported profit of Rs 59.72 crore for the financial year 2016-17 on revenues of Rs 190.15 crore.
PE firm WestBridge Capital had invested $3 million in Nazara and was the majority shareholder in the firm. Among others, stock market investor Rakesh Jhunjhunwala had put in Rs 180 crore ($27 million) into the firm in December 2017.