Gaming - India Story

Investment trends
Initiating Coverage

June 2020
Maple Capital Advisors®
Engaging to Create Value
Content

Preface 3

Indian Gaming Sector – Overview 4

Key Players 5

Players with Compelling Unit Economics 6

Emerging Trends 7

Investment Drivers 7

Investments 8

COVID-19 Impact 9

Expert Insights 10

Regulations 11

Conclusion 11

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Preface

Pankaj Karna
Founder and MD - Maple Capital Advisors

We are in challenging times, with extreme disruption across the consumption spectrum owing to the COVID 19
pandemic that has engulfed the world. With billions of people locked down and despite substantial impact across
sectors, internet connectivity and content has kept consumers connected, engaged and informed. This is probably
the single biggest change from the Spanish Flu epidemic in 1918. This has allowed concepts like Work From Home,
Education from Home and Entertainment from Home span out like we have never known before.

In India with over 570 MN people on the internet and over 85% of which are on mobile, gaming and streaming has
been a popular form of internet engagement. In these locked down times, we see this consumption has grown at
least 20-30% despite significant impact on live sports, a big driver of fantasy sports gaming..

We have seen growing investment traction in gaming with over $350 MN of investments. With growing internet
penetration, compelling economics, usage statistics and increasing ecosystem of entrepreneurs and developers
focusing on this space we expect good growth in investments which are likely to at least double in this space in the
next 1-2 years. Marquee VC’s have begun meaningful investments and its likely that Private Equity will enter
Gaming in a more meaningful way going forward We also expect select consolidation by larger platforms to add
categories and fill gaps.

Overall Gaming is at inflexion stage in India with rapid rise in consumption expected and investments likely to
accelerate. We have seen this play out in China and India too is likely to to show similar trends.

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Indian Gaming Sector Overview
With one of the world’s largest & youngest demographics, India is poised to become a leading market
for Gaming. Currently valued at USD 930 million, the Indian Gaming Industry is expected to grow at 41
% annually due to the growth of digital infrastructure and substantial rise in quality and engaging
gaming content.
USD Mn

3,750

32 %
GR-
CA
930
360 - 26%
CAGR

2015 2019 2024

Source: KPMG : India’s Digital Future 2019
With more than 500 Mn smartphone users in India as of December 2019, mobile gaming has taken the
lead by tapping 85% share of online gaming in India. Thus it is pretty evident that several gaming
developers are going to capitalize on increasing number of smartphones users, ease of use & strong
penetration.

The three key segments of online gaming are – Real Money Games (RMG), Mobile-centric/casual games
and platforms and Fantasy sports. There are also gaming content platforms creating gamer ecosystems.
19 Bn 300 Mn 85% Fantasy sports
App Downloads Online Gamers Mobile Gamers Strong Traction

India is the 2nd largest Expected to Growing at Fantasy sports is

market worldwide grow at a CAGR double digit yoy the most played
for app downloads of 47% by FY22 growth category

Source: KPMG : India’s Digital Future 2019 & All India Gaming Federation 4
 Key Players
Top Games in India
Downloads
S.No App Business model Rating
(Mn)
1 Teen Patti Freemium 50 + 4.7
2 Coin Master Freemium & paid 50+ 4.5
3 8 Ball Pool Freemium 500+ 4.5
4 Teen Patti Gold Freemium & paid 50+ 4.7
5 PUBG Mobile Freemium & paid 100+ 4.2
6 Candy Crush Saga Freemium 1000+ 4.7
Source: Kpmg report
Key Fantasy Sports Indian Players
Downloads
S.No App Business model Rating
(Mn)
1 Dream11 Freemium & paid 50+ (users) 4.3
2 MyTeam11 Freemium & paid 10+ (users) 4.4
3 Halaplay Paid 10+ (users) 4.7
4 11wickets Freemium & paid 3+ (users) 4.1
Approx numbers as per Google Play store and public sources
Key RMG Indian Players
Downloads
S.No App Business model Rating
(Mn)
1 Ace2Three Freemium & paid 12+ (users) 4
3 RummyCircle Freemium & paid 10+ (users) 4.2
2 Adda52 Freemium & paid 2+ (users) 4.2
4 Pokerbaazi Freemium & paid 0.5+ (users) 4.2
5 Pocket52 Freemium & paid NA
Approx numbers as per Google Play store and public sourced

Key Gaming Platforms

Downloads
S.No App Business model Rating
(Mn)
1 Games2win Freemium & paid 300+ 4.2
2 MPL Freemium & paid 40+ (users) 4.8
3 Moonfrog Labs Freemium & paid 50+ 4.6
4 Junglee Games Freemium & paid 25+ (users) 4.1
5 99games Freemium & paid 5+ 4.5
6 Nazara Technologies Ltd Freemium & paid 1+ 3.9
Approx numbers as per Google Play store and public sourced
Source: Analyst Research *Real money games are not available on google play store, number of downloads are from public sources 5
 Players with Compelling Unit Economics
USD Mn

S. No Company Category Latest FY Revenue EBITDA

1 Play games 24x7 RMG 2019 129.35 38.52

2 Head Infotech India Platform 2017 41.31 23.59

3 Delta Corp RMG 2019 40.23 3.59

4 Nazara Technologies Ltd Platform 2019 24.08 3.55

5 Moonfrog Labs Platform 2019 18.9 7.99

6 Junglee Games Platform 2018 13.67 0.61

7 Jetsynthesys Platform 2019 6.5 1.39

8 Games2win Platform 2020 E 6.0 3.1

9 Baazi Networks Pvt Ltd RMG 2019 4.0 0.3

10 Zapak Digital Entertainment Platform 2018 2.71 1.53

Ø There are over 400 gaming start ups in India

Ø The fantasy sports landscape in India has witnessed a significant transformation; number of fantasy
sports operators have increased by seven times (~7x) over 2016-2018, whereas the number of users
has grown by over twenty five times (~25x) from June 2016 to Feb 2019.
Ø While Fantasy sports has shown strong user growth but lags on profitability
Ø Increasing traction towards multiplayer games has been observed post the onset of PUBG in India.
Ø Real Money games have shown substantial growth and profitability and are now ready for
diversification
Ø Platforms have demonstrated good unit economics and between 10-30% EBITDA margins
Ø It seems gaming is getting traction and scale, we believe time is right for some of the leaders to start
actioning development of potential world leaders which has been successfully demonstrated by
Chinese companies given key ingredients of talent, creativity, consumers and increasing capital are
available in India

Source: Analyst Research 6

Emerging Trends in Indian Gaming Landscape
Multi Player Formats
This format engages more than 1/3rd of India’s gamers by providing them with an
opportunity for social interaction and a sense of achievement over other gamers. They
are more likely to pay for games and make in-app purchases.

Gaming as a career
The sector is attracting talent across value chains. With chat options available in games, real
money involved and tournaments being held more people are considering gaming as their
career.

Investor Traction
The sector has caught investor’s eyes and global giants like Alibaba, Tencent have
invested and see great potential in coming future. Investors feel India has an untapped
market in gaming which is yet to evolve, hence start ups have seen good VC traction.

Upcoming Indian Content

While fantasy sports is the most loved gaming segment, local companies have come
up with Indian games like rummy and teen patti. Gamers are engaging in casual as well
as heavy games, giving local developers an opportunity to develop in multiple languages
and pre-load these games on handsets.

Investment Drivers in Indian Gaming Landscape

Traffic Revenue Mix
Month on Month growth in number of Right mix of advertisement and
Impressions, downloads, active users and subscription, platform fees and
repeat users deposit revenue

Overall Unit Economics Product Quality &

Customer acquisition cost, operating cost, Pipeline
marketing cost and team cost and overall High rating, additions to existing
profitability portfolio of games and
performance are key

Source: KPMG : India’s Digital Future 2019 & All India Gaming Federation 7
Investments
Key Deals over last 5 years
Total
Year Game Investors investment
($Mn)
2016 Dream11 Tencent, Steadview Capital 100
2018 Ace2Three Matrix, Clairvest 75
2019 Mobile Premier League Sequoia & Times Internet 41
2020 PayTM Games One97 & AG Tech holdings 20
2015 Moonfrog Tiger Global & Sequoia 16
2014 Octro Sequoia 15
2015 Games2win Clearstone, SVB , Eventures & ICICI Eco-net 11
2018 Mecha Mocha Blume, Shunwei, Accel India , Neoplux & Akatsuki Fund 10
2020 Zupee Matrix, Orios, Smile, Falcon Edge, WestCap 9
2019 Halaplay Nazara Technologies and Kae 8
2019 WinZO Kalaari , Kstart 6
2020 Rooter.io PayTm, Founder Bank Capital, Anthil, lead Sports 3
2020 Rheotv Lighspeed, sequoia 2
2018 Square Off India Quotient, Kstart, RB 2
2018 Pocket 52 Special Invest fund 2
2019 SuperGaming Dream Incubator Inc., Akatsuki Entertainment, Better 1
2015 Real Teen Patti Matrix 1
*Table specifies total investment received as of last date of investment

Break up of number of deals Break up of amount of deals

Total no. of deals: 21 Total amount. of deals: $350 Mn

19%
33% 28% 33%

48% 38%

Fantasy Sports Platforms Real Money Gaming Fantasy Sports Platforms Real Money Gaming
ü Between 2014-20, the total Venture Capital funding in Indian gaming start ups was $350 Mn which is growing
at a CAGR of 22% .Recent trends indicate that the growth is accelerating. The segment has also witnessed
increased overseas investments and partnerships given its growth trajectory.
ü Marquee VC’s like Sequoia, Accel, Kallari, Blume, Steadview, Matrix have made meaningful investments in
gaming.
ü While number of transactions in platforms led the investments, valuewise real money and E-sports led
investments
Source: KPMG : India’s Digital Future 2019 & VCCEdge 8
ü The unit economics are getting compelling for serious players in Series B-D to get active in the space.
ü While the sector in India has not seen any meaningful M&A, select leaders are actively looking at consolidating to
address gaps in portfolio and ensure continued traction
ü Platform trends include the “Netflix” of games model to enhancing content and creation of world quality games.

Strategic Partnerships: Alibaba backed, PayTM and Hong Kong’s AGTech Holdings launched a gaming platform
Gamepind. Youzu launched local casual strategy games last year. Vietnam based StomStudio also partnered with
mobile game publisher Gamesbond to create mobile games in India. Google & Apple have been very active too.

COVID -19 Impact

Online gaming companies are seeing a spurt in traffic as firms go into shutdown mode triggered by Covid-19
scare. Working professionals and students have turned to online games for entertainment and social connect.

Between the weeks of Feb. 10-16, 2020 and March 16-22; 2020, visits to online gaming websites or apps
increased by 24%. Engagement, as measured by time spent on gaming sites or apps, increased by 21% during
the same time period.

Ø Games2Win : The platform saw increase in daily users from 1.1-1.2 Mn people earlier to 1.5 Mn people now
Ø WinZO Games: The platform saw a surge of three times in online traffic on its games
Ø Hitwicket : The platform saw increase in user numbers by 10-15% over the past few weeks
Ø Gamerji : The platform used to have 12,000-15,000 play on an average on their platform every day; now,
the numbers range between 40,000 and 55,000
Ø Rummy: Traditionally south based user base has seen diversification to NCR, Kolkata and Gujarat in the
COVID period.

Despite impact from IPL, players like MPL have grown substantially through added categories and platformation
strategy.

Ø MPL: Offers over 40 games across categories. Fantasy Sports users have been active on other games on their
platform. Games like World Cricket Championship, Archery, Quiz, are seeing increased traction.
Ø Baazi Games: As no live matches are happening, fantasy games have come to a standstill. But the other two
verticals, namely poker baazi and rummy baazi have seen 8 to 10% surge in traffic recently.

Overall, all platforms have seen a surge in number of impressions and downloads but their revenue from
advertisements has substantially reduced as many advertisers have withheld advertisements in this period.

Source: Analyst Research, https://www.livemint.com/technology/gadgets/mobile-games-prime-pastime-as-coronavirus-keeps-people-locked-in-11584645643820.html,

https://yourstory.com/2020/03/online-gaming-startups-coronavirus-covid-19 9
Expert Insights
“
Shailesh Lakhani
MD, Sequoia Capital
Mobile gaming, aided by 1) more powerful smartphones, 2) increased
bandwidth, 3) relevant local content and 4) micropayments and new
business models will be the dominant entertainment form for Indians this
decade. Gaming companies in India are already the highest profit
generating domestically controlled Internet companies, and gaming, like
it is for Tencent in China, will be the cornerstone business model for the
next generation platform companies in India. Gaming will be the
amongst the most powerful cultural influences and where many of us
spend much of our online time.

“ Roland Landers
CEO, All India. Gaming Federation
The transactional online skill gaming Industry has been growing in
the excess of 30% YoY over the last few years. The number of
investment deals that have materialised in the last three years is
testimony to the humungous potential the Indian market offers to
this sector, which is estimated to reach a billion dollar in 2021. As
the Industry expands and consolidates, the AIGF will continue its
efforts towards recognition
“
Alok Kejriwal
Co-Founder & CEO , Games2win

We are focused on building a global games company from India

vs for India. The company has achieved double digit EBITDA
Margins and has touched up to 310 Mn downloads Our view is
that the global (export) market of mobile games is very lucrative
and profitable. We want to be the first listed company in India on
the stock exchanges by 2023.

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Regulations
Gambling laws in India prohibit betting or wagering and any act which is intended to aid or facilitate the same.
Gaming/Gambling being a State subject, gaming/gambling laws in India may differ from state to state.

The Indian Legislative paradigm is at a very nascent stage when dealing with ‘Online’ gaming and has thus, not yet
developed a consistent legislation qua ‘online gaming’. It is pertinent to note that online gaming involving a
monetary stake is neither per-se prohibited in India, and neither de facto regarded as a ‘gambling activity’.

However, judicial precedents suggest that online game involving skill even if played with stakes would not
amount to gambling. For eg. Dream 11’s format of fantasy sport to be a game of skill and does not amount to
gambling.

Conclusion
Mobile games are likely to dominate the gaming arena. With growth in engagement and willingness to spend, in-
app purchases on gaming platforms are also set to rise in times to come. Tier 2 and Tier 3 cities hold a promising
story and may accelerate the future growth.

While multiplayer gaming formats are the new trend, localised games are likely to start picking up pace with more
and more penetration, ease of use, increasing awareness and most importantly – a sense of familiarity.

We believe that investments in the space will double in next couple of years and will see strong traction from VC’s,
Private Equity and select strategic players.

Emerging technologies like AI, Virtual Reality, Augmented Reality and Simulation while at a nascent stage of
adoption in India could benefit in coming years. Lastly growing sports and gaming federations will play a key role.

In Collaboration with All India Gaming Federation

The All India Gaming Federation (AIGF) a registered not for profit
society, set up in May 2016 with the objective of bringing recognition to the
transactional online skill gaming Industry. AIGF is a self-regulated Industry
body and has been at the forefront of ensuring global best practices for its
stakeholders through its self-regulation skill games charter, which are based
on the four principles of Legality, Integrity, User Rights and Good
Governance and focuses on advertising guidelines, responsible gaming and
player protection.

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Disclaimer
Disclaimer: This publication has been prepared by Maple Capital Advisors (“Maple”). All rights reserved. All copyright in this
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This publication is for information purposes only. While due care has been taken during the compilation of this publication to
ensure that the information is accurate to the best of Maple’s knowledge and belief, the content is not to be construed in any
manner whatsoever as a substitute for professional advice. Maple neither recommends nor endorses any specified products
or services that may have been mentioned in this publication and nor do we assume any liability or responsibility for the
outcome of decisions taken as a result of any reliance placed on this publication. Maple shall in no way be liable for any direct
or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance
taken from any portion of this publication.

Maple Capital Advisors may have a client relationship and / or investment in in one or more players in the gaming and
streaming space.

Maple Capital Advisors Private Limited

Engaging to Create Value

Maple Capital Advisors is a boutique investment bank established in 2010 by professionals from Rabobank and Grant
Thornton, specializing in the Indian Mid-Market companies and India oriented cross border investment space. Key focus areas
include;

Mergers & Acquisitions - Focusing on both sell and buy side, Joint Ventures, Alliances, Partnerships, we cover
domestic and cross border markets with sectoral focus on Consumer, Consumer Tech, Hospitality, Manufacturing,
Health and Wellness and Financial Services.
Accelerator – Investing in promising early stage scalable tech driven ideas
Private Equity - Working closely with PE funds and Advising on induction of equity or like instruments
LEverage Capital - Advising on structured debt spectrum covering, acquisition financing, convertibles, special
situations

Authors Legal
Shriya Khanna Venkatesh Meka Navin Syiem
Senior Analyst Management Associate Partner - Luthra & Luthra
[email protected] [email protected] [email protected]

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Maple Capital Advisors
Engaging to Create Value