MPL’s losses surge 3X to touch $148 Mn in FY22

The pandemic had provided a huge push to e-sports and skill gaming platforms with the sector seeing massive growth during FY21. However, the growth numbers seem to be falling off fast during the post Covid19 period. Mobile Premier League (MPL)’s numbers indicate it has been unable to beat the trend in FY22.

MPL’s revenue from operations grew 28.9% to $65.6 million (Rs 497 crore) while the losses of the company soared 202% to $148 million (Rs 1,122 crore) in FY22, according to its annual financial statement in Singapore.

For background, the company’s operating revenue grew over 8X during FY21.

Income from online gaming formed 97% of the total collections which grew 25.7% to $63.87 million in FY22 from $50.8 million in FY21.

The sale of merchandise such as jerseys and advertisement income were other sources of income at $1.45 million and $310K respectively.

Led by Sai Srinivas Kiran, MPL offers more than 60 online games such as fantasy cricket, rummy, and speed chess with real cash prizes in paid tournaments and 1V1 games.

The Sequoia Capital-backed company has 13 subsidiaries including India, Indonesia, the USA, Germany, and Singapore. As per Fintrackr’s analysis, 89% of the total collection was from India while the USA and Europe contributed 0.8% and 10.2%.

The company also collected non-operating income from interest on deposits which stood at $1.2 million during FY22.

Moving over to the cost sheet, marketing campaigns and multiple brand ambassadors on board have taken a toll as advertisement and promotion expenses accounted for 43% of the overall cost. This cost grew 81% to $92.3 million in FY22 from $51 million in the previous fiscal year (FY21).

Employee benefits expense formed 27.3% of the total cost and ballooned 3.5X to $58.68 million. This cost also includes $14 million on employee stock options. Hosting charges and IT support services cost increased by 88% and 106% to $12.6 million and $17.3 million respectively. 

The company splurged another $13.1 million on professional and legal fees which pushed its overall cost by 115% to $215 million (Rs 1,630 crore) in FY22 from $100 million (Rs 758 crore) in FY21. 

Importantly, we have excluded the expenses which were recorded against change in the fair value of preference share while calculating the overall cost.

With an over 2X surge in the cost, the losses of the company spiked 3X to $148 million (Rs 1,122 crore) in FY22 from $49 million (Rs 371.4 crore) in FY21. MPL has discontinued its operations from Indonesia which incurred a $16 million loss separately in FY22. The losses figures will touch around $164 million (Rs 1,243 crore) if we include the same.

MPL’s cash outflow from operations surged 3X to $139 million in FY22 and its high cost worsened the ROCE and EBITDA margin which stood at -123.86% and -216.98%.

In the ongoing fiscal year (FY23), the employee expenses benefit expense for MPL may be reduced as it fired 10% of its workforce and exit from Indonesia will also have a positive impact on the company’s balance sheet. However, it also acquired Germany-based GameDuell to expand operations across European markets where it’s generating 10% of total income.

A slowing market, the overhang of heavy handed regulations and the high cost of acquisitions (of users) means the online gaming market in India is no place for capital-starved firms. Going ahead, it is obvious that the market will consolidate for the next couple of years, during which time it will be game over for at least one if not more of the top 5-6 gaming firms fighting it out. The key player here might yet be their biggest investors, or their ability to find more of them.