India’s biggest fantasy gaming platform Dream11 continued its growth momentum in FY22 as its gross revenue grew over 50% and crossed the Rs 4,000 crore mark. But, at the same time, the firm’s profit shrank over 56% in the fiscal year ending March 2022.
Fantasy sports was the only source of revenue for the 14-year-old firm which rose 50.4% to Rs 3,841 crore in FY22 from Rs 2,554 crore in FY21, according to its financial statements with the RoC. Dream11 generates its revenues primarily by charging platform fees to its users who participate in fantasy sports contests — it recognises this income as gross gaming revenue (GGR).
Dream11 also made Rs 224 crore from interest on current investments. It’s worth noting that it raised $840 million (almost Rs 6,500 crore at the time) from Alpha Wave (formerly Falcon Edge), DST Global, D1 Capital, Redbird Capital, and Tiger Global during FY22 (November 2021).
Dream11 has been sponsoring the Indian Premier League for the past three editions and onboarding a host of star cricketers as brand ambassadors. As a result, advertisement and promotional expenses claim the largest share of the firm’s costs: 57.4%. This expenditure surged 72.8% to Rs 2,158 crore in FY22 from Rs 1,249 crore in FY21.
To keep up with growth in FY22, the company hired aggressively, spiking its employee benefit expenses by 80.1% to Rs 497 crore during the 12-month period.
Dream11 did not disclose much about their cost breakup and booked Rs 1,050 crore under a miscellaneous head which might include transaction charges, information technology, and other expenses. In the end, the firm’s overall costs rose 70.2% to Rs 3,762 crore in FY22 from Rs 2,210 crore in FY21.
While the company’s scale grew over 50% in the last fiscal year, its profit dipped 56.6% and stood at Rs 142 crore in FY22.
When it comes to ratios, its ROCE and EBITDA margin remained positive at 6.08% and 4.60%. On a unit level, Dream11 spent Re 0.98 to earn a single unit of operating revenue in FY22.
FY22 turned out to be a tough phase for startups in fantasy, e-sports, and skill-based gaming space as they couldn’t hack growth as swiftly as they did in FY21. The pandemic had given wings to their scale in FY21 as people’s outdoor movement was limited. For instance, Mobile Premier League’s (MPL) revenue from operations grew only 28.9% to Rs 497 crore while its losses soared 202% to Rs 1,122 crore. Similarly, Gameberry saw fall in revenue as well as profits during FY22 whereas Games24X7 slipped into losses during the last fiscal.
With a claimed 150 million users, and an official partner status with the ICC (International Cricket Council) to boot, Dream11 had been riding the T20 cricket bandwagon very well till now. However, the firm will probably seek bigger contributions from other sports too, especially since they offer potentially lower acquisition costs of entry and expansion.
Other challenges are ongoing, despite the SC order accepting the legality of the firm’s offerings. It will do very well to maintain margins in FY23 if it can, to set the platform for a stronger push in the future. In the meantime, the company has sent the right signals like its policy that threatens a Rs 1 lakh fine on employees who disturb a co-worker during leave.