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Games24x7 Reports Robust Growth in FY23 Despite Rising Expenses and Tax Challenges

SUMMARY

Games24x7 reported a 70% increase in operating revenue to Rs 1,988 crore for FY23, while successfully narrowing its net loss by nearly 30% to Rs 199 crore.

Despite the positive financial performance, the company and the broader RMG sector are facing challenges due to a new 28% GST on player deposits, which is expected to significantly impact earnings in the next fiscal year.

Real money gaming (RMG) firm Games24x7 has reported impressive financial growth for the fiscal year ending March 2023. The company's operating revenue surged by over 70% to reach Rs 1,988 crore, compared to Rs 1,169 crore in the previous fiscal year. Simultaneously, Games24x7 managed to narrow its net loss by nearly 30%, reducing it to Rs 199 crore from Rs 282 crore in FY22.

Revenue Growth: Operating revenue increased by 70% to Rs 1,988 crore.

Reduced Losses: Net loss narrowed to Rs 199 crore, down from Rs 282 crore.

Increased Expenses: Total expenses rose by 43% to Rs 2,147 crore, driven largely by a 61% increase in advertising and promotional costs, which amounted to Rs 1,421 crore.

Market Position:

Games24x7 is a leading player in the RMG sector, operating popular platforms such as RummyCircle and My11Circle. The company generates revenue primarily through commissions on wagers placed by players on its platforms.

Industry Challenges:

The RMG sector, which includes other prominent firms like Dream11, MPL, and Gameskraft, has been significantly impacted by the introduction of a 28% goods and services tax (GST) on player deposits from October last year. This regulatory change is expected to adversely affect earnings in the current fiscal year.

Impact on Competitors:

Dream11, one of the most popular cricket fantasy platforms, is projected to experience a 30-40% decline in revenue and an 80% reduction in earnings before interest, taxes, depreciation, and amortisation (Ebitda) due to the higher GST, as noted by cofounder and CEO Harsh Jain in November.

Strategic Adjustments:

In response to the increased tax burden, RMG firms have been exploring new models to reduce the frequency of user withdrawals. This strategy aims to mitigate the impact of higher indirect taxes and enhance overall earnings.

While the new GST regime poses challenges, Games24x7's strong revenue growth and strategic adjustments indicate resilience in the face of industry-wide pressures. The company's ability to manage costs and innovate in response to regulatory changes will be critical in sustaining its growth trajectory.