Dream11’s Profit Declines 57% YoY To INR 141.97 Cr In FY22, Operating Revenue Up 1.5X

SUMMARY

The startup’s bottom line took a hit despite a 1.5X year-on-year jump in its operating revenue to INR 3,840.7 Cr in FY22

Led by a surge in advertising and promotional expenses, Dream11’s total expenses rose 1.7X to INR 3,762.4 Cr from INR 2,210.3 Cr in FY21

Among the gaming unicorns, Dream11 is the only profitable entity currently as its profit-making peer Games24X7 slipped into the red in FY22

Fantasy gaming unicorn Dream11’s net profit fell 56.59% to INR 141.97 Cr in the financial year 2021-22 (FY22) from INR 327.1 Cr in FY21 on the back of a sharp jump in its expenses.

The startup’s bottom line took a hit despite a 1.5X year-on-year (YoY) jump in its operating revenue to INR 3,840.7 Cr in FY22. Dream11, which earns a majority of its revenue from sale of services, reported operating revenue of INR 2,554.3 Cr in FY21.

The startup recognises the platform fee received from users as revenue, which is also

known as Gross Gaming Revenue (GGR). The revenue from fantasy sports is recognised upon the users participating in the contest by using the Dream11 platform.

“In case of a contest for which service obligation is pending at the financial year end, the revenue in relation to such contest is treated as income received in advance,” the company stated in its regulatory filing with the Ministry of Corporate Affairs.

Dream11’s total revenue, including other operating revenue and interest income, stood at INR 4,065.03 Cr in FY22, a 50% YoY increase.

However, the jump in its expenses outweighed the rise in revenue. Led by a surge in its advertising and promotional expenses, Dream11’s total expenses rose 1.7X to INR 3,762.4 Cr in FY22 from INR 2,210.3 Cr in the previous fiscal year.

Dream11, which keeps on roping in top sports celebrities as brand ambassadors and also partners major sports events like IPL and ICC tournaments, saw its advertising expenses jump to INR 2,158.3 Cr from INR 1,249.2 Cr in FY21.

It is pertinent to note that the fantasy gaming platform had launched one of its major ad campaigns ‘Dream Big’ towards the end of 2021, which featured several Indian cricketers and Dream11 brand ambassadors like Rohit Sharma, Rishabh Pant, Hardik Pandya, Jasprit Bumrah, and Shikhar Dhawan. By the end of FY22, the startup announced an extension of the campaign and the launch of a new brand campaign for the IPL, which would have 17 ad films featuring various Indian celebrities.

Consequently, advertisement expenses constituted over 57% of Dream11’s total expenses in FY22.

Besides, the startup reported a 1.8X jump in its employee benefit expenses to INR 496.5 Cr from INR 276.5 Cr in FY21. A majority of the startup’s expenses in this bucket went towards wages and salaries, where it spent INR 407.34 Cr in FY22 as against INR 241.61 Cr in the previous fiscal year.

Dream11’s depreciation, depletion, and amortisation expenses rose almost 34% YoY to INR 40.33 Cr. It also spent INR 1,050.4 Cr as miscellaneous expenses as against INR 648.01 Cr in FY21.

In FY22, Dream11’s venture capital and acquisition arm Dream Capital also announced its plans to invest $1 Mn-$100 Mn in sports, gaming, and fitness-tech startups.

Founded by Bhavit Sheth and Harsh Jain in 2008, Dream Sports, which operates Dream11 under Sporta Technologies, has enhanced its platform over the years with various fantasy sports, experiences, events, and more. Its most popular fantasy sports leagues include fantasy cricket, fantasy football, fantasy kabaddi, and fantasy basketball.

Currently, the startup claims to have an active user base of 150 Mn.

In October 2021, Dream11 had to suspend its operations in Karnataka for a while after an FIR was lodged against its founders following a ban on online gaming involving betting and wagering in the state.

After a month, Dream11 raised $840 Mn in a funding round led by Tiger Global, Falcon Edge, D1 Capital, DST Global, and Redbird Capital at a valuation of $8 Bn.

Comparison With Peers

Dream11 competes with gaming unicorns like Mobile Premier League (MPL), and Games24X7, along with Halaplay, MyCircle11, among others.

Among the gaming unicorns, Dream11 is the only profitable entity currently as its profit-making peer Games24X7 slipped into the red in FY22, reporting a loss of INR 230 Cr. In FY21, Games24X7 had generated a profit of INR 110 Cr.

Meanwhile, MPL reported a 3X surge in its loss to $149.3 Mn in FY22.

The online gaming space in the country is seeing multiple regulatory changes, with the Centre recently appointing the Ministry of Electronics and Information Technology (MeitY) as the nodal ministry for online gaming. Earlier this month, MeitY also came out with draft rules for the industry.

The government has proposed a self-regulatory mechanism for the online gaming companies in India.

Meanwhile, the final decision on the GST levy rate for online gaming, horse racing, and casinos is still pending.