India Gaming Update: 2022
End of the year update on the Indian gaming sector
Once or twice a year, we publish an update on Indian gaming which tries to capture all (or at least the key) fundraising, deal making, regulatory and other happenings in the sector. Our last update was published in DataDrivenInvestor (DDI) and can be found here.
This year has been interesting to say the least. The soaring valuations finally seem to have peaked and we have suddenly gone from plentiful capital and cheap liquidity to what looks like a protracted “funding winter.” Inflation and interest rates have been rising. Add to that Russian misadventures in Ukraine and increasing global supply chain woes and you have the perfect recipe for a painful road ahead. Private Equity and Venture Capital investments in India for the first 9 months of 2022 are significantly lower than 2021 even if the number of deals may be higher. This could also be an indicator of shrinking cheque sizes as funds hunker down on capital.
After a stellar two-year run, how has the gaming sector performed amidst all this gloom and doom? Well, if Lumikai is to be believed, Indian gaming’s best times lie ahead and not in the past.
India is home to 507 million gamers of which 24% are paying users. In FY 21–22 we added about 2 million new paying users every month. In India, new paying users or NPUs are growing at the fastest rate in the world, a stat we have continued to maintain over the last three years and are carrying forward as we enter the post-pandemic era.
Lumikai’s report talks about a fast-growing market, improved engagement and monetisation (rise in paying users), and a booming interest in investments and M&A. All of this points to an exciting future for India’s gaming industry. As we head into 2023, below is a quick recap of the year. What will the new year hold? We are as excited as you to find out!
Top Games in India (Grossing)
The below table shows the official Google Play mobile games chart for India. Once again, only a disappointing 7% of the top grossing games in India are actually by Indian game publishers. While Free Fire continues to dominate, COD Mobile appears to have fallen out of favour with gamers, dropping out of the Top 3 slot. BGMI, unsurprisingly, is absent as it got banned again in July this year despite Krafton’s best efforts to restart services.
Key Deals
Funding in Indian gaming companies is up 380% from 2019 and up 23% from 2020 as per the Lumikai report. But who got funded or acquired in 2022? Below, we have attempted to capture most of the deals in the sector; all open-sourced using publicly available media/news sources.
Some observations on the ~45 deals in 2022 which we think are worth noting below:
- Streaming, content and Web 3.0 appear to have been the flavour of the season
- Korean giant Krafton continues to invest in India (Lila, Nautilus, Kuku.FM) despite the uncertainty on the BGMI front
- Nazara Tech is adding in ad-tech and analytics capabilities
- Tencent’s acquisition of a minor stake in Flipkart is interesting
- Control / exit deals in this space continue as evidenced by GameDuell, WildWorks, Square Off, UpSkillz etc. This is a net positive for the sector
Other Movers & Shakers
After Nazara Games, 2023 may see the listing of another gaming company. Deltatech Gaming (of poker platform Adda52 fame), filed its listing document with the Securities and Exchange Board of India to raise INR 550 crore via a primary share issuance worth INR 300 crore and an offer-for-sale (OFS) of INR 250 crore. Given the company operates both online and offline casino games, it would be interesting to watch how the regulator and the markets react to this IPO. Games involving money have always been a contentious issue in India, with the “real money gaming” (RMG) industry sometimes seeking intervention from the Indian Judiciary to define them as games of skill rather than chance.
Apart from defining what constitutes games of chance versus games of skill, the gaming industry also faces challenges on the taxation front. A long overdue report on the mechanism of taxation for the online gaming sector appears to have been delayed further. The appointed panel of state finance ministers is unlikely to reach a consensus in December as per media reports. While India is also separately working on federal regulations for the gaming sector, a centralised and transparent regulatory and tax structure is the need of the hour and would go a long way in removing uncertainties and improving the growth of this sector.
Venture Monk View
So what lies ahead? The bad news is that we may be some way off before recovery sets in. The good news is, there are enough levers for growth left in Indian gaming and as they unlock slowly, this sector can only grow.
To gamers, builders, operators and investors in this space, Venture Monk would like to wish you the very best for the new year. May your ping be low and your enthusiasm high. Indian gaming to the moon 🚀🚀
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