Rakesh Jhunjhunwala-backed mobile gaming firm Nazara Technologies share price shot up 84 percent intraday on listing on March 30 but erased around 22 percent gains by afternoon despite strong market conditions.
The huge trading premium is justified given the leading position the company enjoys in the mobile gaming market, a healthy IPO subscription and the backing of ace investor Jhunjhunwala, who holds a 10.82 percent stake, experts said.
They advised holding the stock with a long-term perspective but if someone wants, they can book profits as the stock has had a solid start.
The cost of investment for one lot was Rs 14,313 and that value shot up to Rs 26,349.7, translating into a profit of Rs 12,036.7. Even at the day's low of Rs 1,590, the profit comes to Rs 6,357 per lot.
At 1218 hours, Nazara Technologies share was trading at Rs 1,611.35, up 46.35 percent after hitting the day's high of Rs 2,026.90 and low of Rs 1,590 on the BSE. It opened at Rs 1,971.
"There is a possibility of the company surprising positively in terms of revenue growth going forward as online gaming has really taken off in India finally. We remain positive on the growth prospects of the company in the long run and investors who have been allotted shares can hold on to their investments from a long-term perspective," Jyoti Roy-DVP- Equity Strategist at Angel Broking told Moneycontrol.
Investors with a medium to long-term horizon can look at buying the stock post listing at Rs 1,651-1,751 level, he said. "While we believe that the company has very strong long-term growth prospects, there is a possibility of some profit0booking post-listing, given relatively expensive valuations," he said.
Nazara Technologies is in the fast-growing segment of interactive gaming and is one of the best play in the internet sector. It owns properties like World Cricket Championship and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin and Sportskeeda in eSports, Halaplay and Qunami in skill-based, fantasy and trivia games.
The company has been on a high growth trajectory for the past few years, which is expected to continue, Roy said.
After a decline of 1.4 percent in FY19 revenue, Nazara posted strong revenue growth of 45.9 percent in FY20. It clocked revenue of Rs 200 crore in the six-month period ended September 2020. "It is expected to maintain a very high growth rate going forward," said Roy.
Nazara Technologies' Rs 583-crore IPO was subscribed 175.46 times. It was a complete offer for sale by selling shareholders.
"It (being) backed by Rakesh Jhunjhunwala seems to have provided it some creditability. The company has maintained steady profitability figures and has virtually no debt. Mobile gaming is expected to become one of the primary mediums for entertainment in the future, thus enhancing its prospects," said Gaurav Garg, Head of Research at CapitalVia Global Research.
Astha Jain, Senior Research Analyst at Hem Securities, advised booking partial profits on the listing day and hold the remaining shares for the long term.
"The company, being the leader in India across diversified gaming and sports media platform, has a successful business model. Presence in India, a market with economic, technical and cultural complexities, has given it a competitive advantage. Also, the company being the pioneer in the field will get first-mover advantage," she said.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.