Why investors are making a beeline for Indian gaming sector
Experts say that cheap data, deep smartphone penetration and young demographics will ensure that the Indian consumer becomes a force to reckon with in the world of gaming
Canada-based online and mobile gaming platform i3 Interactive had entered into an agreement to acquire a 51% stake in skill-based fantasy sports platform LivePools for $7.5 million.
Zupee, a leading skill-based mobile gaming platform in India, has managed to raise a total of $19 million to date. It raised $10 million in the latest round is led by WestCap Group (WestCap), a leading US growth equity firm, with participation from existing investor Matrix Partners India.
Digital media company Hungama along with content production company Hindustan Talkies has made a strategic investment of up to $500,000 in the Indian Gaming League (IGL), a platform for competitive gaming that allows users to win exciting rewards in e-sports competitions.
Maple Capital Advisors MD Pankaj Karna said that there are three key factors driving this growth. India has over 15% of the world traffic on gaming which has been largely driven by the mobile penetration of over 500 million smartphone users. The second key factor is meaningful monetisation across categories and growing. The sector from around $1 bn is expected to grow to 10X in the next few years. The third key factor though early in the case of Indian gaming companies is the potential globalisation of Indian gaming companies and scale spin-offs thereon. Lastly, the pandemic created good awareness and traction across age groups and genres which has improved engagement and grown the user base.
He also stated that marquee investors like Sequoia, TPG, Tiger, Kae, Beenext, Matrix, Chryscapital, Kae, Velo Partners, and BitKraft have invested in platforms like Dream 11, MPL, Moonfrog, Nazarra, Octro, Zuppe, and Baazi. "Investments are crucial for scale-up and customer acquisitions given the sector is predominantly equity funded globally. Even for tech development and content development, equity is crucial given the risk-return metrics and knowledgeable VCs are best positioned to take such risks."
Karna also said that his firm Maple Capital Advisors initiated sector coverage in mid-2020 amidst the pandemic as it saw green shoots in the sector. His belief is that the investments in the sector have crossed $500 million in the last six months and exceeding what was invested in the last five years.
"We believe gaming is now at an inflection point with greater investment and consumer traction. With growth-oriented PE’s now participating and the first meaningful IPO around the corner, gaming is poised to attract greater capital across stages, and we expect increased cross-border M&A. We expect investments to double in the sector in the next 12-18 months. Consumer traction on the back of greater awareness and engagement is likely to accelerate. Also, clearer category leaders are likely to emerge. We expect improved regulatory coverage or judicial clarity, especially in the Real Money Gaming space," Karna averred.
KPMG in India Partner and Head (Media and Entertainment) Girish Menon said mobile gaming has been witnessing a significant surge in interest from users post the pandemic. As a result, multiple mobile gaming companies – particularly the multi-gaming platforms have been attracting a lot of investor interest as their user base and engagement levels surged.
"India is a fast-growing gaming market which is significantly under-indexed in terms of consumer spends when compared to other emerging markets like Indonesia, Philippines and developed gaming markets like China, Japan, and the USA. The gaming market in India is well-poised to grow with a young population, rapidly improving digital infrastructure and India poised to move up the gaming maturity curve," he stated.
According to Menon, gaming companies require a significant amount of money upfront in creating a good product, more so for Mid-core/Hardcore titles. He further stated that customer acquisition and marketing comprise a major chunk of the capital investment required by new gaming companies, especially the RMG platforms.
"India, being a developing gaming market, has a lot of young gaming companies that require capital to build and market high-quality games. VC/PE funding is essential for these companies to build a quality product over a period of time while continuously acquiring users and scaling up," Menon noted.
Funding has been largely attracted by players in the fantasy and real money gaming space. "Going forward, companies operating in the casual gaming segment are likely to attract investments due to the attractiveness and global appeal of the segment as well as increasing adoption in India."
The Indian gaming industry has more than 380 million gamers with revenues greater than $1.2 billion and is poised to grow rapidly in the years to come while the casual gaming segment is expected to grow fastest among the sub-segments with the rapid growth in consumption translating into increased monetisation, Menon said.
Sequoia Capital-backed mobile gaming company Octro's CMO Manav Sethi said that the gaming sector has achieved earlier than anticipated growth in the last four quarters thanks to the pandemic. He also said that this growth is sustainable and it is not a cyclical event rather it is a structural change.
"What conventional internet model has shown us is that there are certain events in the past where there is structural change it is not a cyclical shift. Lots of first-time gamers who latched on to gaming platforms during Covid-19 have become loyal audiences. They have started to play more games, spend more time. To that extent, the growth witnessed by gaming in 2020 is sustainable. Retention rates and time spent are very high. On average, a gamer spends 30 minutes on a game. Gaming like OTT is very personal in nature and it is very strongly behaviour shaping and behaviour forming," Sethi said.
He also said that any entertainment option which is at the intersection of sports and entertainment will always rise with the rising tide. Sethi also pointed out that Indian gaming companies also derive a lot of value from the fact that they have the potential to go global.
"The rising tide is cricket and now you are seeing even from the fantasy side platforms are exploring more options beyond cricket. You not only have domestic consumption acquiring scale but you also see Indian gaming platforms launching IPs globally. Dream11 is taking fantasy sports to Europe. Octro is launching Poker in markets that are a hotbed for Poker like the US, Europe, and Latin America. That is something which is driving a lot of VC/PE interest," he averred.
Citing reasons for the growth in gaming, Sethi listed a few key reasons. He noted that platforms like Jio have enabled high-fidelity consumption on mobile. Earlier gaming was restricted to PCs and Consoles because you needed high tech and fidelity. Because of data and smartphones becoming more affordable you have cross-platform play. Secondly, the emergence of micropayments has ensured that gaming platforms don't need to go through a telco. The ability to monetise either through the Play Store and App Store or directly through the payment instrument in case of real gaming money has become easier.
MPL SVP, Corporate Development, and Investor Relations Joe Wadakethalakal said that mobile gaming and eSports is a sunrise sector globally. "Mobile gaming companies in India across categories have raised funding consistently in the recent past as there’s a lot of talent in the country on both crucial sides - gamers as well as game developers. We at MPL are bridging the gap between these two sides by taking world-class, built-in-India games to gamers in India and even internationally. With over 6 crore users in India and over 3.5 million in Indonesia, Indian-made games are finding a huge audience on our platform.
Wadakethalakal said that the investments have helped businesses scale and expand rapidly, keeping with the demands of the users and the gaming community. He also said that the VC & PE firms also bring in a lot of strategic inputs on growth and scaling up, which is important for a sunrise industry like gaming.
MPL's fundraising strategy is to have a financial as well as a strategic investor on board. "However, we do prefer partners who can bring strategic value and are willing to get very involved with the business. Thus far, we have been extremely privileged to have been backed by the right investors."
PlayerzPot Media Co-founder & Director Mitesh Gangar said there are more than 100 companies in the gaming sector and the competition is too high. "VC/PE funding plays a very crucial part in the growth of the company. It helps in hiring the correct talents, providing scope for R&D to establish the brand and to market the app correctly. With the availability of funds, the growth of the company and thus the sector is fuelled to a greater speed with the tough competition."
Considering the competitive landscape, funding plays an important role in any startup. "It helps founders to focus more on the product, its user experience and to market it correctly. For the early fundraising in the company, strategic investors are always preferred, since they bring the experience, the network, and the set goal for the company’s growth along with the funds to the company," Gangar said.
Hungama Digital Media Founder & CEO Neeraj Roy said, “India is amongst the top five mobile gaming markets in the world. We will add over 250 million active gamers in India over the next 4-5 years. Low cost of data, deep smartphone penetration and a surge across all four categories of gaming will see the Indian consumer as a dominant force in the world of gaming. There is a high and sustainable interest in enabling capital to help gaming companies invest more in acquiring consumers, develop local, and made for India IPs and communities. Hungama will continue to invest in game development and platforms such as Indian Gaming League in the coming months and years ahead.”
Read more news about (internet advertising India, internet advertising, advertising India, digital advertising India, media advertising India)For more updates, be socially connected with us on
WhatsApp, Instagram, LinkedIn, Twitter, Facebook & Youtube