India’s online gaming sector has seen a spate of acquisitions in recent months as operators position themselves for strong projected growth, despite the ongoing regulatory uncertainties.
In September last year Delta Corp, India’s largest hospitality and gaming company, acquired Adda52, also a top-ranking company when it comes to the Indian online gaming market.
PokerStars, the biggest online poker company, owned by Canada-based Stars Group, has partnered with Sachar Gaming, a unit of the Sugal and Damani Group, for a site exclusively for Indian players, which became operational earlier this year. While, UK-based Stride Gaming acquired a 51-percent stake in Rummy Passion, an Indian company based out of Chandigarh in January.
“The growth seen in the business has surpassed the growth seen prior to the merger significantly,” Mohit Agarwal, co-founder of Adda52 told AGB.
For the 2016/2017 financial year, the company posted revenue of 87.08 crore. In 2018, year-to-date, revenue stands at 123 crore ($17.9 million), and could be almost double the prior year.
“All the ingredients of explosive growth in gaming are present in the country – be it the demographics, the internet penetration or the smartphone penetration. The digital payment infrastructure in the country is superb. Once the advertising framework for real money gaming matures, the business should see significant growth,” he said.
According to Delta Corp, the current size of the online gambling industry is about $100-$125 million a year. However, it’s the fastest growing sector of the Indian market, which is estimated at $60 billion overall, if you include illegal operations.
QTech Games CEO Jonas Alm also sees strong potential in the Indian market. The country has a population of 1.3 billion and according to the World Bank will have one of the world’s top performing economies this year, while 87 percent have access to 4G.
“You don’t need to be a statistician to decipher those numbers, even in India where most forms of gambling are illegal,” said Alm. “It’s a potential treasure trove, albeit one shrouded with a patchwork quilt of diverse legal and consumer sensitivities.”
Casino gambling is banned apart from Goa, Sikkim and the union territory of Daman, although skill-based gaming is not. That said, the legality of games such as fantasy sports, rummy and poker, has been challenged in various states across the country and the regulatory sands shift frequently.
Ranjana Adhikari, a lawyer with Nishith Desai Associates, which advised parties in all three of the deals mentioned in this article, said under India’s foreign direct investment policy, technological collaboration, or investment in the gambling industry is not allowed.
But individual state laws distinguish between gaming and gambling, and allow certain skill-based games. “For a game of skill, even accepting wagers, amounting to gambling in the traditional sense, is allowed in the state-wise laws,” she said.
As far as sports betting is concerned, Adhikari maintained that it does “pass muster” when it comes to being a game of skill. “It (sports betting) is very, very similar to horse racing. Since the Supreme Court believes horse-racing is legal, sports betting should also be legal. But in India, the problem is moral sanctions, the taboo of being immoral and being perceived as illegal.”
In poker, the two variations recognised as games of skill are Texas Hold’em and Omaha Hold’em, Adhikari noted. “However, we all know that foreign direct investment policies are a matter of interpretation and government policy decisions. Tomorrow, if they want to change them, it is up to them… like it happened with the retail and e-commerce boom.”
Agarwal added that a recent report from the Law Commission of India about regulating gambling instead of banning it outright has opened up the situation legally.
“The recent law commission report talks about regulating games of skill as well. This should be a welcome move. I feel that the actual implementation of the LCI recommendation will take a few years. Till that happens the larger operators are continuing to deploy best practices and self-regulate to improve trust in the ecosystem.”
“Since all transactions happen online and the games are available for review, the system is fairly transparent.”
The Law Commission report generated excitement in India’s gaming circles, especially with regards to sports betting. However, the law body subsequently put out a clarification stating it had not recommended legalizing gaming at present, but said it may ultimately be the only way to stamp out rampant illegal gambling.
“At QTech Games we remain mindful of the complexity, but not daunted by it,” Alm said, regarding the regulatory environment.
Meanwhile, Adda52 continues to expand. “Over the past year or so, we have made tremendous strides towards live streaming, presenting poker on TV as well as evolving a 360-degree complete offering of poker together with an offline poker offering.”
“With the merger with Delta, Adda52 has exclusive access to the largest physical poker room in India and we conduct the largest offline poker tournaments all year round. These tournaments are live streamed and watched by millions on viewers making our players into mini celebrities.”