Ace Investor Madhusudan Kela Buys Stake in This Smallcap Stock

Making money from stocks might seem effortless during a bull market, but identifying successful investments is often a daunting challenge for most investors.

In 2025 so far, the Indian stock market has experienced significant volatility, with the Sensex and Nifty losing around 2% in just 22 days.

This downturn was fuelled by various factors, including trade tariff announcements by the US President shortly after taking office, caution ahead of the Union Budget, a weakening rupee, underwhelming Q3 results, and other concerns.

Amid such market conditions, selecting the right stocks becomes challenging. Thus, many retail investors look to seasoned experts for guidance, often mirroring their investment strategies.

With Q3 shareholding filings now available, these reports provide insights into the latest buying and selling activities of top investors.

For those who closely follow such trends, Madhusudan Kela recently bought the counter in Rakesh Jhunjhunwala & Associates' portfolio stock.

Who is Madhusudan Kela?

Known for his ability to identify quality companies with strong growth prospects, Madhusudan Kela is one of the most well-known and seasoned investors in the Indian stock market, with extensive experience of over 27 years.

He prefers a value investing style and has a long-term investment horizon.

Which IT Stock Did Madhusudan Kela Buy and Why?

The stock in the Nazara Technologies.

Nazara Technologies is an Indian gaming and sports media platform. When it comes to online gaming, Nazara has set a benchmark with its renowned IPs.

The company owns several IPs, including Kiddopia, Animal Jam, and the World Cricket Championship.

The latest shareholding pattern of Nazara Technologies reveals that ace investor Madhusudan Kela made a fresh move during the December 2024 quarter, acquiring a 1.3% stake, which amounts to around 1.1 million (m) equity shares.

Madhusudan Kela had no prior stake and if he did, it would be less than 1% as his name does not emerge on the shareholders list.

While the exact reason behind this ace investor's decision to buy the stock remains unknown, here's what we believe might have influenced the move.

#1 Aggressive Acquisition Spree

Nazara Technologies' aggressive expansion strategy, through a series of acquisitions, might be one of the reasons why Madhusudan Kela chose to invest in the stock.

The company has been strategically strengthening its position across gaming, esports, and entertainment, showcasing its ambition to dominate the sector.

On 19 December 2024, its subsidiary NODWIN Gaming acquired a 93% stake in AFK Gaming, a leading esports media company, for Rs 76 m through a combination of cash and stock swap.

This acquisition enhances Nazara's presence in esports media, with AFK Gaming offering services such as industry updates, a business newsletter, and marketing campaigns for top-tier clients like ASUS ROG, KRAFTON, and Jio Games.

Nazara's previous acquisitions further demonstrate its focus on growth. In December, the company acquired Funky Monkeys for US$ 5.16 m to bolster its entertainment segment.

Earlier, in October, it acquired UK-based growth marketing agency Space & Time for Rs 523 m.

In September, Nazara invested Rs 9,820 m to acquire a significant stake in Moonshine Technology, the parent company of PokerBaazi, and also acquired Fusebox Games for US$ 34.3 m to boost its gaming content portfolio.

These strategic acquisitions, which highlight Nazara's ability to scale up and tap into emerging opportunities, might have contributed to Madhusudan Kela's decision to invest in the company.

#2 FII buying

After consistent FII selling from the December 2023 quarter to the June 2024 quarter, the company witnessed a turnaround in the September 2024 quarter as FIIs began increasing their stake.

FII holdings rose significantly from 6.05% in June 2024 to 9.7% in September 2024. This positive momentum continued in the December 2024 quarter, with FII holdings further climbing to 11.6%.

This shift in institutional sentiment might be one of the reasons why ace investor Madhusudan Kela decided to increase his stake, as rising FII participation often indicates optimism about the company's long-term growth trajectory.

A Close Look at the Financials

The company's revenue jumped 7.3% to Rs 3,189.4 m in September 2024 quarter. Meanwhile, net profit declined to Rs 118 m during the same period.

Nazara Tech's revenue for FY24 was Rs 11,383 m, which was a 4.3% higher from the previous year's revenue of Rs 10,910 m.

Its net profit for the year jumped 41.1% to Rs 895 m, up from Rs 634 m.

Nazara Technologies Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	2,475	4,542	6,217	10,910	11,383
Revenue Growth (%)	45.7	83.5	36.9	75.5	4.3
Net Profit	(-268)	136	507	634	895
Net Profit Margin (%)	(-10.8)	3.0	8.2	5.8	7.9
Return on Equity (%)	(-5.6)	2.1	4.9	5.7	4.5
Return on Capital Employed	(-3.9)	2.7	6.9	8.6	5.6

Source: Equitymaster

Between 2020 to 2024, the company's net sales have grown 46.3%, while the net profit has grown at a CAGR of 82.8%.

The average RoCE and RoE for the past five-year period have stood at 3.4% and 4%, respectively.

Recent Developments

# Funding Boost

Nazara Technologies has secured Rs 4.9 bn in funding from Axana Estates LLP, an entity led by existing investors Arpit Khandelwal, founder of Plutus Wealth Management, and Mithun Sacheti, co-founder of CaratLane.

This strategic investment involves Axana Estates acquiring about a 5.4% stake in Nazara through a preferential issue of equity shares at Rs 990 per share.

The infusion of capital is intended to support Nazara's ongoing acquisition strategy and facilitate its expansion into international markets.

This move aligns with the company's objective to strengthen its position in the global gaming and digital entertainment industry.

This transaction has triggered an open offer, as per Securities and Exchange Board of India (SEBI) regulations, obligating Axana Estates to propose the acquisition of an additional 26% stake in Nazara Technologies.

This step ensures compliance with regulatory requirements following significant share acquisitions.

This development follows Nazara's earlier funding round in November 2024, where the company raised Rs 8.6 bn from a combination of new and existing investors, including SBI Mutual Fund.

The consistent capital inflow underscores investor confidence in Nazara's growth trajectory and strategic initiatives.

What Next?

Nitish Mittersain, Joint MD & CEO of Nazara Technologies, has expressed confidence in achieving 10% revenue growth for FY25. The gaming and sports media company recently announced five new investments amounting to Rs 1,960 m.

These include a strategic investment of Rs 437 m in Funky Monkeys Play, an indoor kids' play centre, and Rs 42 m for a 4.7% stake in Learntube.ai, an AI-powered educational platform.

Additionally, Rs 1,480 m has been allocated to increase the company's shareholding in existing ventures.

To further strengthen its portfolio, Nazara Technologies plans to infuse up to Rs 640 m into Nodwin Gaming through optionally convertible preference shares, invest Rs 690 m to purchase ESOP shares from Sportskeeda's management, and provide up to Rs 150 m in primary funding to Datawrkz Business Solutions.

Nazara's management highlighted that all the acquired businesses are profitable and self-sufficient, ensuring no burden on existing cash reserves while contributing positively to growth.

With a focus on long-term success, the company is prioritising high-quality revenue, sustainable EBITDA, and strong cash flows.

These strategic moves are designed to build a robust foundation for the next three years, thus inspiring confidence in Nazara's future performance.

How Shares of Nazara Technologies have Performed Recently

The share price of Nazara Technologies has gained 15% in the past six months.

Over the past one year, shares of the company have gained 13%.

The company touched its 52-week high of Rs 1,124 on 19 September 2024 and its 52-week low of Rs 590.8 on 27 May 2024.

About Nazara Technologies

Nazara Technologies is an Indian gaming and sports media platform. It has a presence in India, North America, Africa, and the Middle East.

Its product portfolio includes offerings across interactive gaming, eSports, and gamified early learning ecosystems.

This includes the world cricket championship & carrom clash in mobile games, Kiddopia in gamified early learning, Nodwin & SportsKeeda in eSports, fantasy, and more.

The company is widely known for its games, Chhota Bheem and Motu Patlu series. It derives revenues mainly from subscription fees paid by users for accessing gamified early learning content and from the eSports business.

Investors should evaluate these companies' fundamentals, corporate governance, and valuations of the stocks as key factors when conducting due diligence before making investment decisions.

To know more about the company, check out Nazara Technologies' factsheet and quarterly results.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...