Mumbai-based mobile games developer Nazara Technologies Ltd has filed its draft red herring prospectus with the Securities and Exchange Board of India to float an IPO that will see its backer WestBridge Capital offload most of its stake.
VCCircle had first reported in November 2016 about the company’s public market listing plans.
VCCircle also reported that Nazara is seeking a valuation of around $500 million. The company is backed by public markets-focussed private equity firm WestBridge Capital.
The public issue is entirely a secondary market sale of 5.54 million shares. The IPO will result in a 20.55% stake dilution.
WestBridge will sell four-fifths of its holding in the IPO. The PE firm's stake will decline to 3.48% post the IPO compared with 22.69% stake it holds in the company at present, VCCircle estimates show.
Promoter entity Mitter Infotech will sell a small portion of its holding that will see its holding drop to 20.74% from 22.07% stake held at present.
In December 2017, VCCircle reported thatIIFL Special Opportunities Fund has bought a minority stake in the mobile game developer for $51 million (Rs 330 crore), clearly indicating signs of an IPO.
With the IPO and stock exchange listing, Nazara would become the first Indian gaming firm to tap the public market.
The Economic Times had earlier reported that Nazara plans to complete the listing process by end of March 2018 and is expecting a valuation of 30-35 times the projected profit after tax of Rs 100 crore for FY19. It has been profitable since 2007.
The IPO is expected to give WestBridge impressive returns on its 12-year-old investment in the gaming firm.
Here is a snapshot of the proposed IPO by Nazara.
Issue
The public issue is entirely a secondary market sale of 5.54 million shares and will result in a 20.55% stake dilution.
WestBridge will sell four-fifths of its holding in the IPO. The PE firm's stake will decline to 3.48% post the IPO compared with 22.69% stake it holds in the company at present, VCCircle estimates show.
Promoter entity Mitter Infotech will sell a small portion of its holding that will see its holding drop to 20.74% from 22.07% stake held at present.
Use of proceeds
The entire proceeds after deducting IPO related expenses will go to the selling shareholders. The company will not receive any proceeds from the IPO.
Bankers
ICICI Securities and Edelweiss Financial Services are merchant bankers managing the IPO
Lawyers
Cyril Amarchand Mangaldas is the legal counsel representing the company and WestBridge Capital.
AZB & Partners is the legal advisor to the merchant bankers on the IPO.
Company
Established in 1999 by Nitish Mittersain, Nazara grew after the dot-com bust in 2003 and raised $3 million from WestBridge Capital. WestBridge owns a majority stake in the firm after factoring in the convertible preference shares it holds, as per VCCEdge, the data research platform of News Corp VCCircle.
The company is engaged in acquisition of mobile games across emerging markets such as India, Middle East, Africa, Southeast Asia and Latin America. Its projects range from value addition to distribution, while its operations comprise of subscription business, freemium business and esports business.
Nazara caters to 130.43 million monthly visitors from 61 countries across emerging markets, besides having more than 4.08 million paid users subscribed to its services as on September 2017. The company claims its users have downloaded games over 37.62 million times.
The company has seen Freemium business see 44.49 million downloads till September 2017.
Last month, the company acquired a majority stake in Chennai-based gaming company Nextwave Multimedia. It did not disclose the deal value.
The acquisition will help Nazara strengthen its portfolio of offerings in virtual interactive sports.
This is not the first time that Nazara has made acquisitions or investments in other gaming firms. In November 2017, it invested an undisclosed sum into Mumbai-based fantasy sports platform HalaPlay along with Kae Capital. In August 2017, it invested an undisclosed amount in Noida-based Moong Labs Technologies Pvt. Ltd, a developer of 3D cricket simulation games.
In April 2016, it picked up 26% stake in London-based mobile gaming studio Mastermind Sports Ltd and invested an undisclosed sum in London-based mobile games studio TrulySocial.
Financials
Nazara reported consolidated net profit of Rs 19.84 crore for six months ended September 2017 on revenue (from operations) of Rs 83.89 crore in the same duration.
It reported profit of Rs 59.72 crore for financial year 2016-17 on revenues of Rs 190.15 crore.
The company has seen its revenue grow at a compounded annual rate of 28.53% in five years till March 2017. Its net profit has risen at a compounded rate of 35.25% during the time period.
Recent deals
PE firm WestBridge Capital had invested $3 million in Nazara and was the majority shareholder in the firm.
Among other investors who back Nazara is India’s top stock market investor Rakesh Jhunjhunwala, who put in Rs 180 crore ($27 million) into the firm in December 2017.