The K K Modi Group, along with a clutch of international partners, is splurging Rs 500 crore to launch a national online lottery - the business of selling a dream for just Rs 20 per online ticket.
Globally, the online lottery business is worth $128 billion, growing at between 1-4 per cent annually. In India, the legal paper lottery is estimated to be at Rs 28,000 crore, with fake ticket sales taking the market size to a whopping Rs 50,000 crore.
The online lottery business is just beginning to attract corporate interest. With the Essel Group announcing plans in this area only a week ago and others like the Mittals, Ventures Infotech and M S Subba, and a player in the paper lottery business also believed to be potential players in the future.The Subhash Chandra led Essel promoters have floated a new company called playfind Infravest Pvt. Ltd. to be headed by R K Singh. Playfin will have two subsidiaries,one for each of the states in which online lotteries are legally permitted. While one subsidiary , Tashi Delek has been awarded the contract to manage Sikkim State Lottery , another subsidiary Ultra Entertainment Solutions has won the mandate for Karnataka state lottery.
Modi Enterprises, has now brought in Victor Chandler International of UK, and a South Korea-based company called Tiger Pools as equity partners in the online lottery venture which has been named MwC Market Services.
GTECH, the world’s largest online lottery supplier, a $1.01 billion company, is the technology partner in the venture. The exact equity holding in the venture is as yet unknown, though the Modi Group is believed to hold at least 35 per cent, funded through internal accruals.
On May day, the service will be launched through a network of over 8,600 online lottery retail terminals at various FMCG outlets in 166 cities across India. And on that day, Rs 500 crore would already have been spent, with an additional marketing budget of Rs 135 crore allocated for just the first three months from the launch.
According to the company sources, the return on investment would be only after two years, by which time the company expects a revenue flow of $700-800 million.
The online lottery uses a retail computer, which allows the customer to choose the required quantity of numbers from a given range. The terminal then transmits that number selection to the central computer, which confirms that it is entered into the draw and prints the ticket. This is followed by a live weekly telecast of the draw on prime time on television to ensure transparency.
The company is in negotiations with three satellite networks for the telecast of the draw.
While online lotteries are hugely successful in some markets like the US, where it is a $1 trillion business and has entirely replaced paper lotteries, it has not done well in the Philippines, Mexico and Malaysia, where paper lotteries still hold sway.