The shares of Rakesh Jhunjunwala-owned Nazara Technologies were up more than 18.5% in the early hours of trading on Friday. The stock climbed to touch its high of ₹ 618.84 per share as of 9:39 IST, up ₹ 98 from its previous day’s adjusted closing price of ₹ 520.90 per share.

It must be noted that Rakesh Jhunjhunwala owned gaming company had informed that its board of directors had fixed Monday, June 27th, 2022 as the record date for the issuance of bonus shares in the ratio of 1:1. 

A bonus share is an additional free share that the present shareholder of a company gets without paying any extra amount. A bonus share can be issued in different proportions to the present shareholding of the investor. They can also be perceived as accumulated earnings of the company that were not distributed in the form of dividends but have been passed on as additional shares.

The billionaire investor Rakesh Jhunjunwala owns 10.1% or 65,88,620 shares of the company worth ₹ 407.73 crores.

Analysts at JM Financial commented that Nazara’s partnerships with various eSports platforms globally, game publishers and brans give it an edge to lead eSports growth in India. eSports is the largest and fastest-growing segment of the company with a 49% revenue share in FY22. Nodwin, its eSports subsidiary has an 80% market share in India’s budding but rapidly growing eSports market.

The brokerage firm said that the fund-raises by other gaming platforms will result in the increased competition going forward which may lead to a decline in the market share of the Mumbai-based Nazara Tech. 

The firm pointed out that Nazara doesn’t hold a dominant position in any other segment. The analysts noted, “Its absence/sub-scale presence in Fantasy Sports – the fastest growing, and real-money gaming – the highest revenue pool, segments is conspicuous.”

But the firm considers the valuations rich despite corrections. Though the downside is limited post the correction, the brokerage sees rising competition and margin focus of the company to be red flags which can limit growth in the near future.

JM Financial said, “We will, therefore, wait for a better entry point and fresh triggers to emerge to play Nazara’s strengths.” 

However, brokerage firm Prabhudas Lilladher anticipates the company’s revenues and profit after tax to grow at a CAGR of 28% and 52% respectively over the FY22-24E period despite short-term hiccups. Its target price stands at ₹ 873 per share, adjusted for ex-bonus share quotations, signalling an upside of 41%.

Written By – Vikalp Mishra

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