A23 Games revenue touches Rs 820 Cr in FY21, profit drops 59%

Real money online rummy is  hot  in the Indian ecosystem, with the top four companies including Rummy Circle, Junglee Rummy, Adda 52 and A23 games making a combined revenue of Rs 4,000 crore, according to The Online Rummy Federation (TORF).

While there is no further data point to corroborate the TORF’s claim, the figure seems to be feasible when we factor in the revenue of one of the four entities mentioned above: A23 Games. The Delhi-based startup saw its revenue from operations grow by 36.6% to Rs 819.3 crore in FY21 from Rs 599.8 crore earned in FY20, as per its annual financial statements filed with the Registrar of Companies (RoC).

During the same period, its non operating income nearly doubled to Rs 15.2 crore as compared to Rs 7.12 crore in FY20.

A23 controls four subsidiaries including Wittygames India, WCFN Solutions, Ace Interactive Solutions and Crictec Media. It claims to have over 40 million players which participate in 1,000 daily tournaments, and disburse over Rs 10 lakh daily winnings.

Moving over to the expense sheet, we observe that the company has booked 87.5% of expenditure under “Miscellaneous expenses”.

These costs likely include the bonus rewards handed out to users and payment gateway charges mostly. Such costs surged by 53.8% to Rs 628.7 crore in FY21 from Rs 408.7 crore spent on the same during FY20.

Employe benefits payment is the second-largest expenditure for the gaming company, accounting for 8.8% of the firm’s annual costs. These costs grew by only 5.2% to Rs 63.4 crore in FY21 from Rs 60.3 crore in FY20. Further, the company spent Rs 10.8 crore on legal and professional payments during the fiscal ending March 2021.

A23 Games spent another Rs 3.6 crore on rent and repair, pushing the annual expenditure to Rs 718.2 crore in FY21, growing by 42.2% as compared to Rs 505.23 crore during FY20. On a unit level, A23 Games has spent Rs 0.88 to earn a single rupee of revenue during FY21.

As the company increased the volume of in-game rewards to the users during the previous year, its operating margin suffered. A23’s EBITDA margin for FY21 stood at 15.22% as compared to 19.92% achieved during FY20. As a result, despite nearly 37% growth in revenues, A23’s annual profit after tax dropped by 58.8% to Rs 21.01 crore from Rs 51.05 crore in FY20.

Even as both topline and bottomline are reassuring for the firm, the fact remains that this is a category where success, especially too much visible success is a mixed blessing. It risks drawing attention in terms of stronger policy interventions, be it taxation or even restrictions on operations. By choosing to incorporate in India, ironically, A23 Games has done something many startups encouraged by the government haven’t. It remains to be seen if that loyalty will be welcomed with the freedom to operate their business that the firm/s have enjoyed so far.