India's gaming sector to double topline in 4 years despite funding slowdown

India’s gaming industry, which includes formats such as real money gaming (RMG) and casual gaming, is estimated to double its revenues in the next four years from its current base of Rs 33,000 crore.

Revenues of the sector are expected to grow at a compounded annual growth rate (CAGR) of 14.5 per cent between 2023 and 2028, according to a PwC India report. The growth in revenues will occur on the back of an expanded base of gamers in the country.

At present, India has a base of 450 million gamers, which is expected to breach the 720 million mark in 2028, growing at a rate of 10 per cent CAGR. The report added that the number of gamers in India would exceed those in China by the same year.

 

However, investor interest in funding to Indian gaming companies appears to be waning.

In the first half of calendar year 2024 (H1CY24), gaming companies cornered just $14 million in funding. To put things into perspective, this number was pegged at $78 million in CY23, $495 million in CY22, and $1.677 billion in CY21.

In 2023, gaming firms amassed Rs 33,000 crore in total revenue, with the RMG format accounting for approximately half of this amount. Moving forward, the sector is expected to slow down from 25 per cent CAGR to 10 per cent CAGR due to an increased impact from goods and services tax (GST).

Companies in the social and casual gaming sector earned Rs 13,800 crore in 2023 and are expected to reach Rs 36,600 crore in topline in the next five years.

Gaming companies from the RMG sector earn their revenue in online games where a user makes a deposit. Meanwhile, casual gaming platforms earn revenue from in-app purchases, advertising, or subscriptions.

Last year, the GST Council decided to levy a 28 per cent tax on online gaming, horse racing, and casinos. Indian RMG firms are currently reeling from the blanket tax on online gaming imposed by the Centre.

The country has seen its national exchequer rise steadily after the tax was announced.

Prior to the development, companies contributed about Rs 7,200 crore in GST between financial years (FY) 2020 and 2023. That number shot up more than four times, with GST collections averaging around Rs 1,100 to Rs 1,300 crore per month.

The report added that 4 out of 5 funding deals in the sector occurred at seed-stage companies.

“Building responsible gaming practices and robust player protection policies will be crucial to maintaining trust and ensuring the industry’s sustainable growth,” said Manpreet Singh Ahuja, TMT sector leader and chief digital officer, PwC India.