Nazara Tech IPO: Subscribed Thrice On Day 1, $1.5Bn Worth Indian Gaming Industry Up For Roller Coaster Ride

Nazara's IPO, the first by an Indian gaming and diversified sports platform, saw its issue subscribed by over three-times on day 1, showing growing investors appetite for the gaming sector in India.

IPO Representative Image | Getty

Nazara Technologies Limited's (Nazara) ongoing initial public offering could be the game-changer for the nascent $1.5 billion Indian gaming market, projected to be $3.5 billion by 2023 as the gaming market benefitted from the COVID-19 lockdowns, upgraded 4G networks, low data costs, rising smartphone penetration and improving games.

Nazara's IPO, the first by an Indian gaming and diversified sports platform, saw its issue subscribed by over three-times on day 1, showing growing investors appetite for the gaming sector in India.

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Nazara which offers across the interactive gaming, eSports, and gamified early learning ecosystems, including World Cricket Championship (WCC) and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin and Sportskeeda in eSports and eSports media, and Halaplay and Qunami in skill-based, fantasy and trivia games, plans to raise around Rs 581 crore through public issue.

Nazara's successful listing will allow another half a dozen players like Dream 11 (backed by Tencent), Games24x7, Paytm First Games, Mobile Premier League, JioGames, and Gametion Technologies to explore the IPO route to raise funds.

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With 365 million mobile gamers, India is a $1.2 billion market and comparable to over-the-top (OTT) opportunity, both targeting to reach $3 billion by 2023. Mobile gamers account for 80% of the market now, and the share is expected to reach around 90% by 2023.

Comparatively, at $166 billion, global gaming is among the fastest-growing segments of the media sector, of which mobile gaming had grown to $74 from $41bn in 2016.

"Casual games are the most popular genre in India as most people tend to play "free to play" games. Casual games such as Ludo King, card games, and online quizzes have seen a big uptake during India's lockdown," CLSA said in its report titled "Era of mobile gaming."

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"Gamers are exploring global hits, and the number of downloads and usage is rising across many categories. Gamers are already spending more time on games and paying for game content. With more than 97% of the internet access being wireless, mobile games are expected to dominate the online gaming market in India," CLSA added in its report.

Ludo King, India's first gaming app to cross 100 million downloads, has hit yet another milestone this December 2020  as the Ludo King app crossed a total of 500 million downloads worldwide, making it the most popular Indian gaming app.

Vikash Jaiswal, the founder of Gametion Technologies Pvt Ltd and creator of Ludo King, said, "We are thrilled and excited that Ludo King is receiving global acclaim and recognition. In 2020 Ludo king helped bond and connect users with family and friends. In 2021 we will connect more families worldwide with our new app features and gameplay."

In India, gamers want to watch live events and participate in competitions that offer big prize money with improving games and online experience. India has 35% of its population in Gen-Z, and 365 million mobile gamers are multiplying.

India's digitally mature Gen Z population aged between 6 and 24 is involved in gaming more than the millennial generation and is driving mobile gaming in the country.

The number of online gamers in India has been rising with smartphones. The number of online gamers in India is projected to grow from 269 million in 2018 to 436 million in 2021. In comparison, the number of smartphones is expected to increase from 303 million in 2018 to 442 million in 2021, according to KPMG estimates.

The gaming user base surpassed 365 million in March 2020, as per KPMG's media and entertainment report. 

According to Naman Jhawar, SVP, Strategy and Operations, Mobile Premier League (MPL), since March 2020, the growth for the Indian gaming industry has been even more phenomenal, thanks to the boost it received from the Black Swan event that was the pandemic.  

"India's booming gaming sector is among the top 5 globally, and investments in the Indian gaming industry grew at a CAGR of 22% from 2014 to 2020. The first three quarters of 2020 saw India ascend to the number one spot in mobile game installs worldwide, clocking 7.3 billion installs and raking in a 17% market share of the installs volume, as per SensorTower's data," Jhawar told ABP News. 

Talking about the industry's projected growth, Jhawar said, "Indian esports and gaming industry is poised for phenomenal growth. We have an opportunity to be global leaders in game development and gaming talent- given the huge talent pool in the country. The future of gaming and esports is going to be mobile, especially in India, where smartphones are the primary device of choice for internet connectivity, and at MPL, we are trying to democratize esports and take it to the masses via the mobile medium."

One of India's prime reasons for mobile gaming growth is data price  Rs 7 per GB, the lowest globally.

Indian gamers have reported a 35% increase in average hours of mobile games played in 2020 compared to 2019, while gamers in countries like France, South Korea, Japan, Germany, Canada, and China reported a single-digit growth.

According to Elara Capital, Nazara may trade at an even higher multiple versus expectations, as it is a pure-play digital company offering the potential of 30% CAGR.

"Scarcity premium with almost no traditional company showing the capability to grow at this pace in the medium term. Global gaming and eSports companies are trading at 3.3x one-year forward EV/sales despite much lower growth rates than in India; given Nazara is India's gaming play with higher growth rates, it should command a premium valuation on EV/sales," said Elara in a note to its clients.