India’s gaming sector is at an inflection point. Estimated at ₹3.1 billion, it’s set to almost triple in size, aiming for ₹8.92 billion within the next five years. These figures highlight a market that continues to expand despite recent obstacles, such as the newly imposed 28% GST on online gaming.
With approximately 442 million players, India now ranks as the world’s second-largest gaming space, second only to China. Curious about what this means for potential investments in 2024? Let’s explore some of the best gaming stocks in India.
Understanding the gaming industry in India
Mobile games. It’s the pulse of the Indian industry, shaping how millions engage with digital entertainment. Unlike the US or China, where mobile gaming accounts for 37% and 62% of the sector, respectively, in India, it’s a dominant 90%. In 2023 alone, the country recorded more than 9.5 billion app downloads related to gaming.
The reach is also diversifying. Many games now feature regional languages and local themes, connecting with users in rural areas where the internet adoption is increasing. Rural internet use is growing at a rate of 13% and 4% in urban centres.
The main driver of earnings in India’s gaming scene is the RMG i.e real money gaming. This segment pulls in 83-84% of the industry’s income, with an active daily user base of around 100 million. Out of these, nearly 90 million are paying participants. Such numbers have made RMG an attractive target for investment, drawing in approximately $2.8 billion over the past five years.
However, there are challenges. The recent 28% GST has caused waves in the industry. Previously, a lower 18% tax was applied to the Gross Gaming Revenue (GGR). Now, the unified rate, which makes no distinction between skill-based and chance-based games, has raised concerns.
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Why invest in gaming shares in India?
Multiple income streams
Game developers generate earnings from various sources advertisements, in-game purchases, subscriptions, esports, and more. Some even venture into live streaming and merchandise. This diverse range of income models provides stability and makes companies in this field more resilient to market fluctuations.
Growing confidence among investors
Private equity and venture capital firms are increasingly backing gaming enterprises. Funds like Lumikai and Centre Court Capital specialise in gaming, sports tech, and interactive media. The entry of larger private equity investors signals a maturing sector, likely to witness more deal activity. For individual investors, this growing interest suggests confidence in the future prospects of the field.
Shifting user demographics
India’s player base has become more diverse. Women now make up nearly 40% of gamers, a considerable shift from previous years. This evolving demographic drives demand for a variety of experiences casual, hyper-casual, core, and even educational games. As companies cater to these varied preferences, they open up new revenue channels, enhancing their appeal to investors.
Global footprint and market diversification
Several Indian gaming companies are not limiting themselves to domestic operations. They are venturing into international markets, adopting varied business models across regions. This global footprint provides investors with a hedge against local market volatility and adds diversity to their investment portfolios.
Key things to know before exploring gaming stocks
- Regulatory grey areas: There isn’t a uniform legal framework across all states, which creates ambiguity for companies and investors alike. For instance, some states restrict certain types of gaming, while others have more relaxed regulations. Industry leaders advocate for a detailed code of conduct focused on transparency and ethical practices This lack of consistency makes it difficult for businesses to implement long-term strategies.
- Intense industry rivalry: Competition is fierce in this domain, with both established giants and newcomers striving to capture user interest. Constant innovation and fresh content are necessary to retain a competitive edge.
- Reliance on technological evolution: The gaming world is in a state of constant technological transformation. Innovations in artificial intelligence, augmented reality, and virtual reality are reshaping user experiences. Businesses that can’t keep up risk becoming obsolete.
- Intellectual property concerns: In this space, intellectual property (IP) is a significant asset. From game mechanics and storylines to characters, IP plays a crucial role in a company’s value. However, protecting these assets is an ongoing challenge. Legal disputes and IP infringement can result in financial losses, impacting overall business health and, in turn, stock performance.
- Cyclical nature of the sector: The gaming industry is inherently cyclical. Consumer spending patterns fluctuate based on economic conditions, market trends, and the arrival of new platforms. Companies overly reliant on a single title or platform risk encountering severe setbacks when demand shifts.
Gaming stocks in India 2024 to keep on your radar
Here are five firms that may ride the wave of the gaming industry’s boom in 2024, ranked by their market cap as of 7 October-2024. While market cap provides a glimpse into a company’s scale, it doesn’t dictate its next phase.
It serves as a starting point but should not stand alone in decision-making. A well-rounded analysis requires looking beyond mere numbers, diving into financial health, competitive positioning, and sector trends. Evaluating these aspects within the broader industry is crucial to understand a firm’s potential for growth.
#1 Tata Consultancy Services/ TCS
The company is a leader in IT services, and plays a strategic role in the video game sector. While not directly developing games, it helps clients with gaming operations like cloud computing, AI, and analytics optimising multiplayer hosting, player engagement, and data management.
The company’s venture into digital twin simulations, like creating a model of athlete Des Linden’s heart, demonstrates its advanced technical skills. This expertise could be adapted for immersive gaming experiences, particularly in virtual sports and augmented reality, positioning TCS as an essential partner in the industry’s digital transformation.
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#2 Infosys
As a major force in IT services, Infosys has a unique role in the virtual entertainment landscape. Though not a gaming company per se, its influence extends to supporting interactive media through AI, data analytics, cloud infrastructure, and security.
To unlock fresh revenue avenues, this tech services provider employs an array of sophisticated tools like Ooyala – a cloud-based solution for smart video distribution, enabling targeted content and advertising strategies.
#3 Zensar Technologies
It is a mid-tier IT firm, offers a diverse range of tech solutions across industries like manufacturing, retail, and finance. Spread across 16 countries, it provides end-to-end IT support, from consulting to application design, backed by over 10,000 skilled professionals. In interactive entertainment, Zensar’s offerings extend beyond basic IT. Its capabilities include game creation, testing, compliance, security, and advanced analytics.
#4 Nazara Technologies
The company is a key player in India’s digital entertainment landscape, encompassing mobile gaming, interactive learning, and competitive e-sporting platforms. Operating across Indian and North American territories, its income is derived from subscriptions, advertising, and sponsorship deals.
The company has a strong foothold in e-sports through its ventures like Nodwin Gaming and Sportskeeda, helping shape the rapidly growing digital competition space. Not confining itself to local growth, Nazara recently acquired the UK-based IP studio Fusebox Games for ₹228 crore, broadening its international presence.
#5 Delta Corp
The company commands a prominent place in India’s casino and hospitality sectors. It dominates Goa’s market, holding three of the six offshore licences and managing iconic properties like Deltin Royale and Deltin JAQK, with a combined capacity of 2,000 gaming spots.
In the digital space, Delta operates Adda52.com, a popular platform for poker enthusiasts. While contributing around 15% of revenue in FY24 this area faces headwinds due to stricter GST regulations.
Outlined below is the financial performance of these entities for the first quarter of FY25.
| Fundamental metrics (In ₹ Cr) | TCS | Infosys | Zensar Technologies | Nazara Technologies | Delta Corp |
| Sales | 62,613 | 39,315 | 1,288 | 250 | 181 |
| Expenses | 45,951 | 29,878 | 1,092 | 226 | 150 |
| Profit before tax | 16,231 | 9,021 | 210 | 34 | 32 |
| Net profit | 12,105 | 6,374 | 158 | 24 | 22 |
| Market capitalisation | 15,47,101 | 8,03,066 | 15,137 | 6,924 | 3,219 |
Should you consider investing in gaming stocks?
India’s video game industry is on a rapid ascent, but investing here requires a nuanced approach. Tech enthusiasts might be drawn to its ties with digital innovation, offering possibilities for growth. Yet, it’s a volatile space, influenced by shifting regulations, consumer trends, and technological advances.
High risk can bring high reward, but it suits those comfortable with unpredictability. Future-focused investors may find value in the sector, as forecasts suggest it could reach ₹8.92 billion within five years. Technologies like virtual reality and artificial intelligence are reshaping the landscape, creating new frontiers.
Adding gaming companies to a portfolio can provide balance since their movements often differ from traditional sectors. However, diving into this space demands a clear understanding of its complexities and challenges.
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Bottomline
Gaming stocks present an avenue into a fast-changing sector. Yet, your financial goals, risk tolerance, and investment timeline are crucial in this choice. This space demands a sharp analysis of trends, regulatory environments, and competitive strategies. Balancing growth prospects with the inherent volatility is key. Weigh all factors before proceeding.
