This Rakesh Jhunjhunwala portfolio stock surges 22% in 3 sessions; here’s why

Rakesh Jhunjhunwala portfolio stock Nazara Technologies has seen strong rebound in the last three sessions after staying under the grip of bears for quite some time. The share price of mobile gaming and sports media platform has rallied as much as 22% in three trading days, from ₹646.15 on Wednesday to ₹788.95 intraday today, after Google allowed a one-year “limited time” pilot for daily fantasy sports (DFS) apps and online rummy games to users in India by developers incorporated in India. Ace investor Rakesh Jhunjhunwala, who passed away on August 14 last month, owned 10.03% or 65.88 lakh shares in the country’s first listed gaming company.

“From September 28, 2022, through September 28, 2023, Google Play will run a limited-time application-only pilot to allow DFS and rummy apps by developers incorporated in India to be distributed to users on Google Play in India,” Google reportedly says in a statement on September 8.

As per the release, the decision to run a pilot test for the local developers would help Google Play collate learnings and retain an enjoyable and safe experience for its users.

This is a major boost for companies like Nazara Technologies as Google recently banned fantasy gaming apps such as Dream 11, Mobile Premier League, and many others from the play store for violating the platform's policy on gambling.

Formed in 1999, Nazara is the first gaming company to be listed on the stock exchanges with a presence in India, Africa, and North America. The company has diversified offerings across the interactive gaming, eSports, ad-tech and gamified early learning ecosystems, including World Cricket Championship (WCC) and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin, PublishMe and Sportskeeda in eSports and eSports media, OpenPlay, Halaplay and Qunami in skill-based, fantasy and trivia games, and Datawrkz in digital ad tech. It is known for its games on the World Cricket Championship, Chhota Bheem, Motu Patlu series, and fantasy game Halaplay.

In the June quarter of 2022 (Q1 FY23), the company generated around 6% of its earnings from the real-money gaming portfolio including fantasy sports platform Halaplay and skill gaming platform OpenPlay.

Last month, the gaming company announced the acquisition of U.S.-based children’s interactive entertainment firm WildWorks for $10.40 million in an all-cash transaction. Founded in 2003, WildWorks is an established game studio focused on the children’s market for ages 8-12. In the past decade, Wildworks’ mobile apps have attracted over 150 million players, and as a result of today’s deal, WildWorks is expected to expand into new products and territories in 2023 and beyond.

On Monday, the Nazara Technologies stock opened higher for the third straight session at ₹742, against the previous closing price of ₹736 on the BSE. During the session, the share rose 7.2% to hit an intraday high of ₹789 amid strong volume. At the time of reporting, 4.1 lakh shares changed hands over the counter as compared to the two-week average volume of 0.98 lakh stocks.

Despite the recent rally, the gaming stock trades 53% lower than its 52-week high of ₹1,677.20 touched on October 11, 2021. The stock has given a negative return of 28% to its IPO investors, who keep the stock-still date, against the issue price of ₹1,101. The stock made its stock market debut on March 30, 2021, after raising ₹583 crore via its public offering and ₹261 crore from anchor investors.

The stock hit its 52-week low of ₹484 in intraday trade on June 22, 2022. The market capitalisation of the smallcap currently stands at ₹4,727.52 crore. Nazara shares have gained 17% in a week and 20% in the past one month. However, the share of gaming and sports media firm has fallen nearly 36% since the beginning of the calendar year 2022, and 20% in the past year.

On July 29, Nazara Technologies reported 22% year-on-year (y-o-y) growth in its consolidated net profit at ₹16.5 crore for the April-June quarter of 2022 (Q1FY23), compared with ₹13.5 crore in the same period last year. On a sequential basis, the profit grew 237% from ₹4.9 crore in the March quarter of 2022 (Q4 FY22). Its revenue from operations jumped 70% y-o-y and 27% on a sequential basis to ₹223.1 crore during the quarter under review.

On the operating front, earnings before interest, taxes, depreciation and amortisation (EBITDA) was flat at ₹30.1 crore in Q1 FY23, as compared to the same period last year. On the q-o-q basis, EBITDA grew 102% from ₹14.9 crore in Q4 FY22. The EBITDA margins stood at 13.5% versus 22.9% for Q1 FY22 and 8.5% for Q4 FY22.