How Financials Of MPL, Games24x7, Zupee & WinZO Games Stack Against Each Other

India’s thriving real-money gaming industry received a big blow earlier this week when Finance Minister Nirmala Sithraman, after the meeting of the GST Council, announced that online gaming, along with horse racing and casinos, would be taxed at 28%.

Real-money gaming companies will now be charged goods and services tax (GST) on full face value, with no distinction between games of skill and games of chance. 

The announcement received sharp reactions from the industry. From calling the move “unconstitutional” to saying it would make the industry “disappear”, startups and industry bodies didn’t mince any words while criticising the imposition of 28% GST.

This prompted us to take a look at the financial performance of some of the gaming startups in FY22 to see how they fare against each other. We zeroed down on four startups for this analysis – MPL, Games24x7, Zupee and WinZO Games. 

It must be noted that only the financials of the India entities of these startups have been considered for this analysis. 

Games24x7 The Odd One Out

The most-funded and valued startup among the aforementioned startups, MPL, saw its standalone operating revenue jump 37.4% to INR 600 Cr in the financial year ending March 31, 2022 from INR 437 Cr in FY21.

MPL earns a majority of its revenue from the commission fees it charges its real-money gaming users. MPL earned INR 424.3 Cr from online gaming services in FY22, an increase of 11.7% from INR 379.7 Cr in FY21. 

Founded in 2018 by Sai Srinivas Kiran G and Shubham Malhotra, the Bengaluru-based startup has multiple offerings, including fantasy sports, sports games, puzzles, casual and board games. 

On the other hand, Mumbai-based Games24x7, the latest entrant to the unicorn club from the gaming space, reported a 24.3% drop in its operating revenue to INR 1,169.2 Cr in FY22 from INR 1,546.2 Cr in FY21. 

Like MPL, Games24x7 also earns the biggest chunk of revenue through commission fees. The startup runs two platforms – fantasy cricket platform My11 Circle and real-money card game RummyCircle. It also gets revenue from in-game virtual purchases made by users to enhance their gaming experience. 

Zupee’s operating revenue surged 445.6% to INR 194.8 Cr in FY22 from INR 35.7 Cr in the previous fiscal year.

Founded in 2018 by Dilsher Singh and Siddhant Saurabh, Zupee offers casual or board games, such as ludo, snake & ladders, among others, where the users have to pay entry fees and they get opportunities to win cash prizes. 

As per Zupee’s financial statement, its gross income from platform usage fees stood at INR 665.4 Cr in FY22. It paid a GST of INR 101.5 Cr on this. Zupee also paid INR 372.4 Cr as cashback and discounts to its users.  

The fourth startup, Delhi-based social gaming platform WinZO Games, saw a 126% increase in its revenue from operations to INR 233.8 Cr in FY22 from INR 103.4 Cr in the previous fiscal year. 

WinZO Games’ offerings include fantasy cricket and games like ludo and snake and ladders. It earns revenue through platform fees charged from users for real-money games.

Advertising Expenses Stand Out 

Marketing and promotional activities were the biggest contributor to the total expenses of most of the startups. Together, the four startups spent a whopping INR 1,781.6 Cr on marketing and advertising in FY22.

MPL, last valued at $3 Bn, saw its total expenses soar 54% to INR 1,059.6 Cr in FY22 from INR 687.3 Cr in FY21. At INR 530 Cr, advertising expenses amounted to about half of its total expenditure. In FY21, the startup had spent INR 380.4 Cr on advertising. 

The startup’s aggressive advertising strategy is highlighted by the fact that it roped in Virat Kohli, former captain of India’s men cricket team, as its brand ambassador in 2019. Kohli, who charges one of the highest endorsement fees in the country, continues to feature in MPL’s promotional campaigns even today. 

On a unit economics level, MPL earned INR 1.1 in operating revenue on every INR 1 it spent on advertising. 

Besides, MPL’s employee benefit expenditure jumped 68.8% to INR 197.7 Cr in FY22 from INR 117.1 Cr in the previous year.

In comparison, Games24x7, founded in 2006 by Bhavin Pandya and Trivikraman Thampy, kept its expenses in check during the year under review. Its total expenses rose a mere 6% to INR 1,497.2 Cr in FY22 from INR 1,411.1 Cr in FY21. Advertising and promotional expenses accounted for over 58% of its total expenses in FY22. The startup spent INR 877 Cr on marketing during the year. However, this was a decline of 10% from INR 977.7 Cr it spent on the same cause in FY21. 

Games24x7 roped in former cricketer Sourav Ganguly as its brand ambassador in 2020. Besides, several top Bollywood actors such as Ranveer Singh and Hrithik Roshan have also appeared in its promotional videos. Most recently, it signed up emerging Indian cricketers Subhman Gill and Arshdeep Singh to promote its app.

Overall, Games24x7 earned INR 1.3 in operating revenue from every INR 1 it spent on marketing in FY22.

In the year under review, Zupee reported a total expenditure of INR 348.7 Cr, a whopping 495% jump from INR 58.6 Cr in FY21. The startup’s advertising and marketing expenses ballooned 1,028% to INR 176 Cr in FY22 from INR 15.6 Cr in the previous fiscal. Promotional expenses accounted for about 50% of its total expenditure. 

Zupee, which has signed up comedian Kapil Sharma as its brand ambassador, earned INR 1.1 in operating revenue from every INR 1 it spent on promotions. 

Meanwhile, WinZO Games’ total expenditure stood at INR 363.2 Cr in FY22, a 132% jump from INR 156.4 Cr in the previous fiscal year. Promotional and advertising expenses accounted for over 50% of total expenditure, increasing 553% to INR 198.6 Cr from INR 30.4 Cr in FY21.

It must be noted that the startup named former Indian cricketer Mahendra Singh Dhoni and YouTubers Carry Minati and Bhuvan Bam as its brand ambassadors in 2022. Overall, WinZO Games earned INR 1.1 in operating revenue from every INR 1 it spent on advertising. 

Besides, WinZO Games’ employee benefit expenses also jumped 121.8% to INR 29.5 Cr from INR 13.3 Cr in FY21, indicating that the startup increased its headcounts. 

Profitability A Distant Dream?

All four gaming startups were in losses in FY22. MPL reported the highest loss among the four startups. The startup, which has raised over $375 Mn till date and is backed by PeakXV Partners (formerly known as Sequoia Capital India), RTP Global, Moore Strategic Ventures, among others, saw its net loss grow 247.2% to INR 449.4 Cr from INR 129.4 Cr in FY21.

Amid the funding winter, MPL also wound up its operations in Indonesia last year and laid off over 100 employees. However, it is also doubling down on Mayhem Studios, its gaming studio, and claims to have over 90 Mn registered users across Asia, Europe, and North America. 

Zupee, which partnered with Reliance Jio to roll out its game on Jio’s 5G smartphones last year, incurred a net loss of INR 147.1 Cr in FY22, a 610% jump from INR 20.7 Cr in FY21. The startup claims that its app has seen over 70 Mn downloads till date and has raised over $121 Mn. It is currently valued at $600 Mn. 

Meanwhile, Tiger Global-backed Games24x7 slipped into red in FY22 after reporting a profit in FY21. It reported a net loss of INR 282.4 Cr in FY22, as against a net profit of INR 110 Cr in the previous fiscal year, as its revenue declined. 

Games24x7 turned unicorn in FY22 after raising a funding of $75 Mn at a valuation of $2.5 Bn. 

WinZO Games, founded by Paavan Nanda and Saumya Singh in 2018, saw its net loss soar 135% to INR 120.5 Cr in FY22 from INR 51.3 Cr in FY21. The startup has raised total funding of $90 Mn till date and counts the likes of Makers Fund, and Courtside Ventures among its backers.

All these startups compete in a highly-crowded gaming space, in which Dream11 is a clear leader. Dream11, which recently became the lead sponsor of the Indian cricket team, reported a profit of INR 142 Cr in FY22 on an operating revenue of INR 3,840.7 Cr. However, it must be noted that the Harsh Jain-led startup’s net profit dropped 56% from INR 327 Cr it reported in FY21 due to a rise in its promotional expenses, which rose 72.7% to INR 2,158 Cr from INR 1,249 Cr in FY21. 

As the above data shows, the startups in the sector are largely loss-making. Amid this, the GST Council’s decision to levy 28% GST on full value may prove to be a knockout punch for many of the startups.

Earlier today, a group of over 100 gaming startups and industry bodies wrote to the government asking it to reconsider the GST Council’s decision to levy 28% GST on face value. However, it remains to be seen if the government listens to this demand at a time when it has been justifying the decision of the GST Council. For now, the future of the country’s gaming industry, whose size was estimated to soar to $8.6 Bn by FY27 from $2.6 Bn in FY22, seems bleak.