Manish Agarwal, the chief executive of India's first publicly listed gaming company Nazara Technologies, is optimistic that more clarity will emerge in the country's real-money gaming market in the forthcoming quarters.
Over the past year, several Indian states like Andhra Pradesh, Telangana, Tamil Nadu and Kerala have banned or tried to ban real-money games, with Karnataka being the latest one.
Moneycontrol was the first to report on October 6 that several gaming platforms have started blocking access to residents in Karnataka after the state government notified the online gambling law with immediate effect on October 5. This included Nazara-owned fantasy sports app Halaplay that noted on its website that individuals residing in Karnataka are not allowed to participate in the paid version of its league.
That said, similar suspensions in states like Tamil Nadu and Kerala have been struck down by the Madras High Court in August and Kerala High Court in September respectively. The Supreme Court also upheld fantasy sports as a game of skill in July this year.
"In the last two months, there have been more positives than negatives (in the sector). I'm seeing that state governments are losing battles in their respective high courts and judgements are becoming sharper and clearer where there are black and white rather than grey." Agarwal said "Given that the space is so large and new, there will be constant challenges but our view is that over the next four to eight quarters, things will start becoming more clear and firm"
Gaming associations are also mulling legal challenges against Karnataka's online gambling law that outlawed all forms of online gaming where transfer of money is involved. "The industry will challenge this in court and seek legal recourse. We must remember that the Madras HC had recently struck down a similar act that tried to stop online skill gaming in the state" said Roland Landers, CEO of All India Gaming Federation, an industry body for online skill gaming in India.
South India is an important market for games like Rummy which has a good concentration in these states, although real-money games like poker and fantasy games see equal distribution across the country, Agarwal said.
On October 6, Nazara Technologies raised Rs 315 crore war chest through a preferential allotment from marquee institutional investors like Singapore sovereign wealth fund GIC-managed investment firm Gamnat Pte Ltd and Ahmedabad-based Plutus Wealth Management.
A substantial portion of these proceeds is expected to go in pursuing strategic acquisitions across four verticals that Nazara currently operates in - gamified learning, skill based real-money gaming, freemium games, and esports, which the firm terms as the “Friends of Nazara” network.
While real-money gaming business contributed for a miniscule 1% of Nazara's revenues in Q1-FY22, Agarwal sees a big opportunity in the segment.
"The overall market is very large, around Rs 11,000-13,00 crore, and the business has very strong network effects of trusted brands, concurrent users, and liquidity pool on the platform. You cannot really compete in the market with being a really small player. If we can consolidate some of the companies in the market, we will be able to create a formidable position for us to be able to compete on unit economics with deeply entrenched players" Agarwal said.
This warchest helps them in evaluating various options, having discussions and quick closures, Aggarwal added, although they currently "don't have a pipeline as yet".The diversified gaming and sports media platform had picked up 100% stake in Hyderabad-based skill gaming company OpenPlay for about Rs 186.4 crore in August. It also owns a majority stake in real-money social quizzing app Qunami apart from Halaplay. The company also offers real-money versions of its Cricket (WCC Rivals Clash) and Carrom gaming (Carrom Clash) titles.