Despite regulatory and other challenges, the online gaming industry in India is projected to grow 20% by FY25 to ₹23,100 crore as the number of online gamers soars to 442 million, the second-largest gaming user base globally after China, according to a whitepaper ‘Guardians of Safe Play: Ethical Gaming for Vibrant Bharat’ by consulting firm Grant Thornton Bharat and not-for-profit e-gaming body E-Gaming Federation (EGF).

Indian gaming companies raised $2.8 billion (3% of total startup funding in India) in the last five years. Within the e-gaming industry, the real money gaming (RMG) segment is emerging as one of the chief revenue drivers. “With users spending an average of 8.5 hours per week in FY22, this segment is gaining significant traction,” the whitepaper says.

India’s real money gaming sector faced several challenges in 2023 after the government implemented a 28% Goods and Services Tax (GST), leading to widespread layoffs and the closure of some start-ups due to the tax burden.

"Boosted by the pandemic and an expanding user base, the global gaming industry is expected to reach $665.77 billion in the next five years, with India accounting for $8.92 billion," says Vishal Agarwal, partner, private equity group and deal tax advisory leader, Grant Thornton Bharat.

He says the industry has shown strong growth potential, leading to a rise in early-stage startups. Since 2021, the industry has seen over six strategic exits worth $775 million, three unicorns, and a public listing oversubscribed 175x with an 80% listing gain.

Some of the notable private equity and venture capital investors in e-gaming in FY23-24 include $22 million in Greenhorn Wellness by Courtside Ventures and 7 others, including Lumikai Fund and Kalaari Capital; $20 million in Mayhem Studios by more than five investors including Sequoia Capital; and $19.51 million in Kratos Studios Ltd by Accel, Prosus Ventures, among others.

In FY23, SBI Mutual Fund invested ₹410 crore in digital gaming and The Kamath brothers invested ₹100 crore in Nazara Technologies. Japanese entertainment firm MIXI Inc. launched a $50-million corporate venture fund (CVC) for gaming.

Despite challenges, the mobile gaming sector continues to account for “83-84% of the revenue, with approximately 100 million online gamers daily, including 90 million paying to play”, the report reveals, adding that the gamer participation ensures the industry’s expansion continues, “with the tax implications having a limited impact on overall long term growth”.

The whitepaper calls for prioritising adherence to a strong code of conduct and embracing of self-regulation to ensure sustainable growth. It underscores the importance of third-party certification for fostering self-regulation and maintaining high industry standards. The whitepaper says the code of conduct will address key risks such as cyber threats, regulatory uncertainties, and financial risks, offering best practices to mitigate these challenges and ensure the industry's sustainability and growth.

Shalabh Saxena, Partner at Grant Thornton Bharat, highlights the importance of responsible play and consumer protection, and advocates for fair play, transparency, and the safeguarding of mental well-being. “Central to this is a robust code of conduct that ensures all aspects of the gaming ecosystem adhere to high ethical standards.”

The report makes a clear distinction between games of skill and games of chance and underscores the need to modernise laws. “As India's gaming industry experiences exponential growth, we must prioritise player safety and responsible gaming practices. This whitepaper provides a roadmap for the industry to foster trust, transparency, and sustainability,” says Anuraag Saxena, CEO of EGF, adding that its self-regulatory standard (Code of Conduct) will help strike a balance between innovation, consumer protection, and the nation’s interests.

For consumers, various risks associated with e-gaming are identity theft, financial and legal implications, and hazards of minors assessing real money gaming, among others. The report underscores efforts being made by companies to adhere to the right practices.

The way forward involves embracing modern regulatory frameworks, enhancing player protection measures, and promoting ethical standards, the report adds.

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