Gaming companies report big losses after India bans real-money games
What's the story
The recent ban on real-money gaming (RMG) in India has resulted in major write-downs for gaming companies. The September quarter saw a significant impact on corporate earnings, with several firms reporting huge impairments on their India-linked assets. Flutter Entertainment, a US-headquartered company, reported an impairment of $556 million after its Indian unit Junglee Games stopped money-based rummy operations.
Investment write-off
Clairvest Group writes off investment in A23 Rummy
Canadian private equity firm Clairvest Group has also written off its investment in Head Digital Works, the company behind A23 Rummy. The firm said that "in the second quarter, Head Digital Works experienced a material adverse regulatory development resulting from the Government of India enacting a law which bans real-money gaming and associated facilitations." This move has rendered it illegal for Head Digital to continue its business.
Domestic impact
Nazara Technologies and Delta Corp report impairments
Domestic companies have also been hit hard by the RMG ban. Nazara Technologies reported an impairment of ₹914.7 crore on its investment in Moonshine Technologies, the parent company of PokerBaazi. CEO Nitish Mittersain said that "during the quarter, new regulations in the real-money gaming space prompted Nazara to record an impairment on its investment in Moonshine... based on fair valuation as per accounting standards."
Financial downturn
Delta Corp and Paytm face significant financial losses
Delta Corp has written down the value of its investments in Deltatech Gaming, Head Digital Works, and OpenPlay Technologies to zero. This has led to a fair value reduction of ₹378.3 crore as these businesses have ceased revenue-generating operations. Fintech firm Paytm also witnessed a massive 98% drop in its net profit after booking an impairment of ₹190 crore on a loan given to its joint venture First Games Technology.
Sector impact
Payment firms and gaming companies feel the heat
Payment firms that used to benefit from gaming transactions are also feeling the pinch. Gurgaon-based Mobikwik reported an eight-fold jump in net loss to ₹28.6 crore for the September quarter, along with a 7% on-year decline in operating revenue to ₹270.2 crore. Several gaming companies have either exited India or scaled down operations due to these developments.