Nazara Technologies To Raise Rs 100 Crore From Zerodha's Kamath Brothers; Shares Hit 52-Week High

Shares of Nazara Technologies Ltd. hit a 52-week high on Monday after its board approved raising Rs 100 crore via preferential allotment of equity share.

The company is proposing to issue 14,00,560 equity shares of face value of Rs 4 each at a price of Rs 714 per equity share, aggregating to Rs 999,999,840 proportionately to Kamath Associates and NKSquared, according to an exchange filing.

This infusion of fresh funds will be used for funding requirements and growth objectives of the company, including making strategic acquisitions, it said. "As per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements), Regulations, 2018, these equity shares will be locked in for a period of six months from the date of issue."

Kamath Associates and NKSquared are partnership firms represented by Zerodha co-founders Nikhil Kamath and Nithin Kamath.

"While preferential allotment will lead to an equity dilution of 2.1%, Nazara operates in a hyper-growth gaming industry where scalability is of prime importance, which may lead to dilution at frequent intervals, at least in the initial stages," Prabhudas Lilladher said in a note.

"We believe the funds might be deployed to expand presence in either the Freemium or Gamified Early Learning segments as Real Money Gaming is facing regulatory hurdles post levy of 28% GST on full bet value whereas ESports business is well funded post recent fund raise of Rs2 billion", it said.

Prabhudas Lilladher maintains a positive bias on the stock and retains a 'buy' with a target price of Rs 834.

Shares of Nazara Technologies surged 8.29% to Rs 822.5 per share, compared with a 0.11% advance in the benchmark NSE Nifty 50 as of 10:13 a.m. It rose as much as 8.86% to hit a 52-week high of Rs 825 per share.

The stock has risen 40.9% on a year-to-date basis. The total traded volume stood at 7.4 times its 30-day average. The relative strength index was at 73, indicating stocks may be overbought.

Eight out of the 12 analysts tracking Nazara Technologies maintain a 'buy' on the stock, three suggest a 'hold', and one recommends a 'sell', according to Bloomberg. The average of 12-month analyst price targets implies a potential downside of 5%.