Dream11's FY23 revenue soars by 66%, auditor flags impact of GST demand

On a standalone basis, Dream11 posted a total revenue of Rs 6,590 crore for FY23, up 62.4 percent from Rs 4,058 crore in FY22.

Revenues from operations grew to Rs 6,375 crore in FY23, up 66.3 percent from Rs 3,833.5 crore in FY22, as the firm benefited from increased adoption from a growing user base.

Profit after tax increased by 51.7 percent to Rs 223 crore in FY23 from Rs 147 crore in FY22.

Dream11 makes money from the platform fees it earns from players for allowing them to participate in fantasy sports contests on its platform. The company's consolidated revenues are lower than its standalone revenues due to the investments it has made in firms within its ecosystem, Moneycontrol has learned.

Dream Sports houses brands such as sports content and commerce platform FanCode, sports experiences platform DreamSetGo, mobile game development unit Dream Game Studios, and its philanthropic arm Dream Sports Foundation, apart from the flagship fantasy platform.

Incoming GST impact

It's worth noting that these revenue numbers are before the 28 percent goods and services tax (GST) regime the government recently imposed on the real-money gaming sector, which became effective on October 1, 2023. Before this, real-money gaming platforms paid 18 percent GST on the platform fees, also known as Gross Gaming Revenue (GGR).

The new tax rates are expected to hit the revenues and profitability of many companies in the sector. Dream Sports is expected to witness a revenue drop of 40-50 percent in the current financial year while the operating profit may drop by about 80 percent, sources had earlier told Moneycontrol.

Read: India's real-money gaming sector had a rough 2023. Will 2024 be any better?

Dream Sports along with a slew of other real-money gaming companies are also facing retrospective tax demands from Indian authorities, which many industry stakeholders fear could spell the death knell for the fledgling sector. Many of these companies have challenged these notices in various state high courts and the Supreme Court with mixed results.

Dream Sports had filed a writ petition in the Bombay High Court in September 2023 but later withdrew it in December 2023 with plans to challenge the show-cause notice at an appropriate forum.

In the filing, the company says that it plans to contest this tax demand and is in the process of filing the responses with the authorities, based on the legal views obtained, is confident of successfully defending its position and does not expect any adverse financial consequences arising from the show cause notice.

"The independent legal experts and jurists are of the view that the claim of the DGGI for GST to be paid at the rate of 28% on contest entry amount is not legally sustainable. The management is of the view that the current business model of the company does not involve gambling/betting/wagering and believes that the show cause notice received from the GST department lacks legal sustainability in line with the recent modifications in the CGST and IGST Act (as detailed in Note 39(b) to the financial statements)" the company said in the filing.

On January 8, Moneycontrol reported that the government plans to file a plea seeking the transfer of all cases about retrospective imposition of Goods and Services Tax (GST) from various high courts to the Supreme Court.

Where was the money spent?

Dream11 spent heavily on advertising and promotions during the financial year, as the company looked to attract audiences during marquee sporting events such as the Indian Premier League (IPL) cricket tournament.

These events are crucial for fantasy sports platforms as they witness peak usage from players and also help in significant user acquisitions to grow their respective bases.

Dream11's advertisement and promotional expenses grew by 37.3 percent to Rs 2,964 crore in FY23 from Rs 2,158 crore in FY22. The company's employee benefit cost also jumped about 2.3x to Rs 1,154 crore in FY23. The firm’s overall expenditure increased by 55.2 percent to Rs 5,839 crore in FY23 from Rs 3,762 crore in FY22.

In December 2023, rival Gameskraft posted a total profit of Rs 1,061.86 crore on revenues of Rs 2,732.11 crore for FY23, an improvement from Rs 930.5 crore profit on revenues of Rs 2,153.24 crore in FY22.

Mobile Premier League (MPL)'s overall revenue grew to $104.63 million in FY23 registering a 63 percent increase from $64.2 million in FY22. The company's revenues from the Indian market grew by 23 percent to Rs 521.8 crore ($64.7 million) in FY23 from Rs 424.4 crore ($57.2 million) in FY22.