Three days after raising Rs 100 crore from Zerodha Co-Founders Nikhil and Nithin Kamath, gaming and sports media platform Nazara Technologies on Thursday, September 7, announced that it is raising Rs 410 crore from the country's largest mutual fund SBI MF.
SBI Mutual Fund has agreed to invest Rs 410 crore in Nazara Tech by subscribing to its preferential allotment of equity by way of private placement. The digital gaming and esports company said the shares carry a face value of Rs 4.
Nazara Tech's board has passed a resolution to issue 57 lakh equity shares at Rs 714 per share, aggregating to Rs 409.99 crore, to SBI Mutual Fund by way of preferential issue on a private placement basis.
The funds will be invested via three schemes of SBI Mutual Fund — SBI Multicap Fund, SBI Magnum Global Fund and SBI Technology Opportunities Fund.
According to the company's regulatory filing, SBI Multicap Fund will be investing about Rs 200 crore, while SBI Magnum Global Fund is investing about Rs 120 crore and SBI Technology Opportunities Fund is investing the remaining Rs 90 crore.
At present, Nazara Technologies has shareholder approval to raise up to Rs 750 crore.
The SBI MF will hold a 7.83 percent stake in the company following the investment, according to regulatory filings.
Earlier this week, the Mumbai-based company said it will raise Rs 100 crore by issuing shares on a preferential basis to Nikhil Kamath’s firms.
The company is proposing to issue 14 lakh equity shares at a price of Rs 714 per equity share aggregating to Rs 100 crore proportionately to M/s Kamath Associates & M/s NKSquared. These equity shares will be locked in for a period of six months from the date of issue.
In an exclusive interaction with CNBC-TV18, Nikhil Kamath said he will look to increase his stake in Nazara further. Currently, the combined stake has increased from 1 percent to around 3.5 percent, Kamath said.
'Nazara Tech well-positioned to benefit'
On Nazara Tech, Sudip Bandopadhyay, Group Chairman at Inditrade Capital, said: “Nazara Tech is a fantastic company. The sector is such that it is globally booming. We have probably started to see the beginning of a major boom in this particular space. If you look at the global gaming space, there are two parts — software and hardware — and both are booming globally. So Nazara is well-positioned to benefit out of the India cost structure and India-based operation."
"They can also hope to become a formidable player in the global space and for doing that they will need to raise lot of capital. So this is a great opportunity for Nazara to scale up and become a player worth recognising in the global gaming arena,” Bandopadhyay said.
"As India is becoming one of the key digital hubs and the digital infrastructure is going up, a lot of emphasis is given on these gaming stocks. So, Nazara is one of the companies which takes the advantage of development in the gaming sector. On a long-term prospective, the valuations look attractive, compared with its global peers. That is the reason Zerodha and SBI MF are buying Nazara Technologies at these valuations," said Kranthi Bathini, Director of Research at WealthMills Securities.
When it comes to raising capital, some companies elect to issue preferred stock in addition to common stock. However, the reasons for this strategy can vary among corporations.
Shareholders are mostly attracted to preferred stocks as they offer more consistent dividends than common shares and higher payments than bonds. However, these dividend payments can be deferred by a firm if it falls into a period of tight cash flow or other financial hardship.
Here's everything you need to know about equity shares and preference shares
Equity shares: An equity share is issued by a company to raise capital at the cost of diluting its ownership. Investors can purchase units of equity shares to get part ownership of the company. On buying equity shares, investors contribute to the total capital of the firm and become its shareholder.
Preference shares: Preference shares or preferred stock takes precedence over equity shares in things such as dividend distribution at a fixed rate and capital payback in the event of a company's collapse.
Like equity shares, preference shares’ investors have ownership in a firm, but they don’t get voting rights. However, investors will still have a right to vote in other matters, which directly affect their rights, which are generally caused by reduction in capital or winding up the company.
The rate of dividend is fixed for preference shareholders while it changes for equity shareholders, depending on the firm's profits.
Also, preference shares are not liquid, but you can sell them back to the company. Equity shares, however, are highly liquid.
Shares of Nazara Technologies Ltd settled 0.61 percent lower at Rs 878.60 apiece in Thursday’s (September 7) trade.
