Online gaming industry faces growth bumps as ban kicks in

Bengaluru: The growing online gaming industry is facing risks to sustain its northward graph as ban imposed by Karnataka government on all forms of betting and wagering in online gaming space comes into effect. The State government has legislated to ban online games involving betting and wagering, and "an act of risking money, or otherwise on the unknown result of an event including on a game of skill".

This law came into effect from late Tuesday. Following the ban, some of the leading players have started blocking access to users. Sequoia Capital-funded Mobile Premier League (MPL) was among the first few gaming startups to block users today following the ban. Karnataka became the third State to impose such ban on online gaming after Telangana and Andhra Pradesh.

Though Tamil Nadu had also imposed such ban, it was overturned by the Madras High Court. These laws have provisions for imposing hefty fines and prison terms on violators. According to official sources, such regulations have come into effect to allay growing concerns that online gaming platforms, like gambling, are addictive and can cause financial harm.

Increasing restriction on online gaming platforms are threatening to derail the growth prospects of this industry. India is one of the world's largest markets for gaming platforms with more than 840 million downloads. With China cracking down on its e-gaming companies, Indian contenders were earlier expected to see better growth prospects in India and abroad. Currently, large PE firms are aggressively betting on Indian e-sports industry with marquee firms such as Sequoia Capital and Tiger Global Management investing in this growing segment. This segment also has two unicorns - MPL and Dream11 with market cap of $1 billion or more. Industry sources said that the south Indian states accounts for more than 25 per cent of the Indian gaming industry.

With higher internet penetration rate and disposable income, southern region is one of the fastest growing markets for Indian gaming industry. With ban coming into effect in key states, the revenue growth is expected to be badly impacted. Moreover, investment by many marquee PE investors in this segment is at risk with a possibility of dip in valuation.

According to a study by multinational professional services network KPMG, the online gaming segment in India is projected to grow at a compound annual growth rate (CAGR) of 21 per cent over FY21-FY25 to reach a size of Rs 29,000 crore. By the end of last fiscal, it was estimated to be around Rs 13,600 crore.