Shares of gaming company Nazara Technologies were under selling pressure after the Tamil Nadu government passed an ordinance banning online gaming in the state, dealing a blow to the nascent but fast-growing sector.
The Tamil Nadu cabinet, led by Chief Minister MK Stalin, approved an ordinance on September 26 to ban online games with stakes in the state. According to a government statement, the ordinance will take effect following the governor's approval.
Shares of Nazara Tech were down over 2 percent to Rs 665.
Nazara is a diversified gaming and sports media platform with a presence in India and across emerging and developed global markets such as Africa and North America, with offerings across the interactive gaming, e-sports and gamified early learning ecosystems.
The company owns some of the most recognisable products such as World Cricket Championship, Kiddopia in gamified early learning, NODWIN and Sportskeeda in esports and esports media, and Halaplay, Qunami and OpenPlay in skill-based, fantasy and trivia games.
The move comes as the Supreme Court begins hearing a petition by the Tamil Nadu government challenging a Madras High Court decision that overturned the previous AIADMK-led government's November 2020 ban on online games involving the transfer of money. In an order issued on August 3, 2021, the state high court declared it unconstitutional.
The company had recently acquired a 100 percent stake in a US-based interactive entertainment company, WildWorks, for $10.4 million in an all-cash transaction.
Analysts raised their earnings estimate following the acquisition.
“We increase our sales estimates by 5 percent/10 percent for FY23E/FY24E respectively as we incorporate acquisition of WildWorks (consolidation impact will be for 7 months in FY23E), an interactive edutainment company based out of the US,” said Prabhudas Lilladher.
It has set a target price of Rs 1,031 on the stock.
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