IPO Ready! How Nazara Never Lost Focus On Profitability And Value Creation For Investors

Nazara announced IPO plans in 2017, and now three years later, the company is said to be in the process of filing its prospectus

WestBridge Capital invested $3 Mn in 2005 and after a partial exit in 2017, it is now all but exiting the cap table with a minor stake pending

WestBridge’s Sandeep Singhal believes Nazara founder Nitesh Mittersain’s vision even in the early days and focus on sustainable growth was a decisive factor in the investment

Three years after first announcing its public listing plans in 2017, and 20 years after incorporation, Nazara is finally ready.

The gaming company is fast approaching an IPO in India and media reports expect the company to file its draft red herring prospectus (DRHP) with SEBI soon. Exits are hard to come by in the Indian startup ecosystem, more so, a public listing. This means investors end up waiting for a long period of time to attain liquidity.

In Nazara’s case too, one of the early investors, WestBridge Capital, has been on the company’s cap table since 2005 when it invested $3 Mn. The private equity fund saw a partial exit in 2017, which brought down the investment firm’s 60% stake in Nazara to 21%. Now with the IPO, WestBridge Capital is estimated to dilute its stake from the current 21% to about 3%-4%.

So didn’t the delay in public listing worry WestBridge Capital? For Sandeep Singhal, the investment firm’s founder and MD, there has never been any hurry when it comes to Nazara. And this has a lot to do with the way Nazara founder Nitish Mittersain has stewarded the ship and managed the company’s finances and still achieved growth.

“From our perspective, whatever money Nitish (Mittersain) raised from us, he never really spent it. It always went into the bank, he kept generating profits and the company kept increasing the cash reserves. So this is one of those situations, where we did not have to worry about outside this,” Singhal told Inc42.

Nazara’s Frugal Philosophy
Founded two decades ago in 2000 by Mittersain, Nazara has seen the Indian economy go through waves of peaks and troughs — from the grave impact of the dotcom crash of 2003-2004 and this has integrated risk mitigation in the company’s DNA.

“Because of my own experience with the dotcom crash, I have become very averse to losses and taking any kind of risk or debt, etc. Early on, we decided that we need to become a profitable company with real cash flows and not chase any vanity metrics. Therefore even after WestBridge funds came in, we were not really shaken out of that core DNA,” Nazara’s founder and MD told us.

Even after WestBridge Capital’s investment came in, the company was not really shaken out of that core DNA and continued to conserve cash. This helped extend the runway when the gaming industry had not really taken off in India. Mittersain recalls that while many other competing companies raised more cash than Nazara and burnt it in chasing vanity metrics. The company was able to sustain $3Mn for a long time and turned profitable in 2008.

“If we were not careful, we could have easily burnt it before the market was ready to monetize and our survival would have been a challenge,” Mittersain added. However, he was also quick to point out that the times have changed today and the venture capital market in India has evolved much more than before.

Read More:-  https://inc42.com/startups/ready-for-ipo-how-nazara-never-lost-focus-on-profitability-and-value-creation-for-investors

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