The Indian online gaming industry has drawn strong attention from venture capital and private equity investors in the last three years with its market size estimated at Rs 10.1 billion and slated to grow to Rs 15.3 billion. With a significant population of mobile users in the 15-30 age bracket across the country, India stands out as a lucrative market for companies to put out gaming content for consumption.
One such startup which benefited from the surge in fundraising was WinZO, which cornered a $65 million round led by Griffin Gaming Partners around the end of FY21.
The company which positions itself as an “Online skill gaming platform” saw 3.8X growth in scale while its losses surged nearly 2X during the financial year ending March 2021, as per its annual financial statement filed with the Registrar of Companies (RoC),
WinZO serves as a platform for third-party game developers to host multiplayer games and claims to have over 75 million registered users. It collects an entry fee on the prized multiplayer events and charges a commission on the overall collections. The company has onboarded Mahendra Singh Dhoni as a brand ambassador (earlier shilling Dream 11) in March this year to capitalise on the surge of fantasy sports gamers in India and also launched a game development fund worth $20 million.
Initially limited to skill-based multiplayer games, WinZO now also organises daily sports fantasy competitions on its platforms with prize amounts as high as Rs 2 crore for predicting the winning team and tickets going upto Rs 4,400 per entry.
Its revenue from operations surged by 287% to Rs 103.46 crore in FY21 as compared to Rs 26.72 crore it earned during the preceding fiscal year (FY20). WinZO also earned Rs 1.66 crore as non-operating income during the year from its financial assets in the form of interest income and gain on the sale of investments.
On the expense front, the cost of hosting games (including developer fees and server costs) is the largest cost centre for the company, accounting for 66.1% of its annual costs. These expenses ballooned nearly 3X to Rs 103.5 crore in FY21 from Rs 34.6 crore during FY20.
WinZO also increased its employee base in order to cater to the growing user base and employee benefit payments grew by 147.2% from Rs 5.42 crore paid in FY20 to Rs 13.4 crore during FY21.
WinZO relies on expansive advertisement campaigns during the IPL and strategic influencer marketing partnerships to drive engagement on its platform. As a result, expenditure on advertising and promotions emerged as the second-largest cost for the firm, accounting for nearly 20% of the annual expenses. These costs surged 2.7X to Rs 30.46 crore during FY21 from Rs 11.15 crore in the last fiscal year (FY20).
Legal, professional fees and commission (paid to sell agents) increased 4.7X and 2.4X to Rs 5.67 crore and Rs 2.05 crore during the financial year 2021 from Rs 1.2 crore and Rs 87 lakh respectively in FY20. It booked a 2.8X jump in total expenditure to Rs 156.5 crore in FY21 from Rs 54.06 crore spent in FY20.
With a sharp increase in revenues, the losses of the startup also surged 1.9X to Rs 51.36 crore in FY21 from Rs 26.7 crore reported in FY20. On a unit level, the firm spent Rs 1.51 to earn a single rupee of operating revenue, improving the unit economics from Rs 2.02 spent on the same in FY20.
Even though WinZO spent more during the fiscal year ending March 2021, the sharp rise in scale helped it to improve the EBITDA margin from -96.6% in FY20 to -48.64%. The cash outflows of the firm rose 2X to Rs 47.06 crore during FY21 from Rs 22.86 crore in FY20.
With the gaming market wearing a crowded look, competition has been high enough to make even brand ambassadors hop around, as seen in the case of MS Dhoni. That indicates a continued pressure on the bottom line as ad spends will stay high, and a slowdown on the funding side could seriously impact any industry player living on the edge from one fundraise to the next. Much like many of their players hoping to win big money through their games.
