Jhunjhunwala’s investment is expected to give a leg up to Nazara’s upcoming public offering scheduled for the middle of next year.
December 6th, 2017
BENGALURU: Ace investor Rakesh Jhunjhunwala has picked up a stake in gaming company Nazara Technologies for Rs 180 crore in his first bet on India’s digital space. Nazara owns popular titles like Chhota Bheem and Virat Cricket. The investment in Nazara helped the Mumbai-based company raise Rs 540 crore in the past three weeks.
Jhunjhunwala’s investment is expected to give a leg up to Nazara’s upcoming public offering scheduled for the middle of next year. ET had earlier reported that ICICI Securities and Edelweiss Financial Services are bankers for the IPO and Nazara is expecting a valuation of Rs 3,000-3,500 crore.
Jhunjhunwala has earlier flagged concerns about business models and valuations of Indian ecommerce and digital companies like Flipkart saying they need to be built with their own cash flows. What attracted him to Nazara is sustained profitability and the long-term potential of the gaming space.
“I am always on the lookout for promising companies which are leaders in high-growth verticals. Nazara has a consistent track record of delivering profits, cash flows, along with efficient use of capital and high RoE. I see growth potential in the company,” said Jhunjhunwala.
Nazara logged gross customer billings of Rs 550 crore with profit after tax at Rs 66 crore in FY17 and it has been profitable since 2007.
While this is the first-known Jhunjhunwala investment in the internet space, he has taken a few bets on privately-held software companies. In 2014, he invested in Remedinet Technologies, which makes technology to hasten the process of cashless bill payments in hospitals. Jhunjhunwala has also invested in a venture capital fund called Exfinity to primarily invest in software startups.
For Nazara, the development comes after it raised Rs 330 crore from IIFL Special Opportunities Fund last month.
“The investment (from Jhunjhunwala) is from a 5-10 year long-term perspective and it is great to have strong hands like Jhunjhunwala who have staying power and don’t have need to sell based on short-term issues,” said Nazara founder Nitish Mittersain, who termed the investment as a great validation of the business.
India’s mobile gaming market is expected to expand from $200 million in 2016 to $3 billion in 2019, a FICCI-KPMG report estimated last year. With telecom operators lowering voice and data rates amid intense competition, smartphone penetration in the country is expected to deepen and is expected to push up adoption of mobile games.
Over the past decade, Nazara has expanded to 74 countries as a publisher, diversifying its revenues across Africa and the Middle East as well. The company’s plan for an IPO comes at a time when it is looking to expand from its focus on casual mobile gaming to become a broader ecosystem player. In February, ET reported that Nazara Games was committed to investing Rs 136 crore in its eSports venture over the next five years.