New Delhi: Reflecting the growing popularity of fantasy sports in India, the industry’s revenues are expected to grow at a compound annual growth rate (CAGR) of 33 per cent to reach Rs 25,300 crore in the 2026-27 financial year (FY27), with a projected user base of 50 crore, according to a new report by the financial advisory firm Deloitte and Federation of Indian Fantasy Sports (FIFS) released Tuesday.
The report, ‘Fantasy Sports: A catalyst for the sports economy’, however, added that regulatory and tax-related certainty are key ingredients that will determine sustained growth for the sector.
The revenues earned by the Indian fantasy sports (FS) platforms are estimated at Rs 6,800 crore in FY22, almost three times the revenues in FY20, and projected to grow to Rs 8,900 crore in FY 23, Rs 11,700 crore in FY 24, Rs 15,200 crore in FY 25 and Rs 19,700 crore in FY26
“This can be attributed to improving digital infrastructure, investments, the introduction of new sports and leagues on existing FSPs, and the rise of new platforms. Rapid improvement in platform revenues can also be attributed to the growing popularity of FS, with a swelling user base of about 18 crore to date, a 38 per cent increase over FY21, and projected to reach 50 crore by FY27,” the report said.
It pointed out that India is the fastest-growing FS market in the world with a user base that is almost three times that of North America, which is a significantly more mature market and the market leader in terms of revenue.
Fantasy Sports are team-selection contests where users make a virtual team of real-life players across various sports. This team competes against online teams of other users and winners are decided based on real-life performance of the sportspersons in officially sanctioned live and complete matches.
Formed in 2017, the FIFS is self-regulatory industry body that aims to protect consumer interest and create standardised best practices for the fantasy sports industry in India.
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Revenue to the exchequer
According to the report, between FY18 and FY22, an aggregate of Rs 4,500 crore was generated by the FS industry as revenues to the exchequer. Of these, an approximate Rs 2,800 crore was contributed as GST. This is expected to surge to a cumulative Rs 17,500 crore accrued between FY18 and FY27, according to the current tax regime.
Additionally, fantasy sports platforms (FSPs) also cut tax deducted at source (TDS) on winnings on their platforms and contribute to the economy by way of corporate taxes.
“[AS] Per industry estimates, a cumulative of Rs 1,700 crore has been contributed in this manner between FY18 and FY22. The revenue to the exchequer is expected to reach an accumulated Rs 30,500 crore between FY18 and FY27, [as] per FIFS estimates,” the report said.
The sector attracted cumulative investments of Rs 15,000 crore until FY22, both from foreign and domestic sources.
Demographic profile
According to the report, millennials and Gen Zs make up 75 per cent of the FS user base in India, with the 25-34 age group making up 40 per cent of the user base, the 18-24 age group comprising 35 per cent of the user base and the remaining 20 per cent coming from the 35-and-above age group.
The users are evenly split across metros and non-metros and are predominantly male. “With increasing participation and viewership of women in sports, participation of women in FS is growing, comprising an estimated 30 per cent of the user base at present,” the report added.
Interestingly, non-cricket FS is also catching user attention. Sports such as handball, volleyball, futsal have started getting traction, while there has been significant user growth for kabaddi — from nine percent in FY21 to 26 per cent in FY22 — owing to leagues such as Pro Kabaddi and the Senior National Kabaddi Championship. Basketball and baseball have also seen a jump in their userbase from four per cent to seven per cent, and from two per cent to five per cent, respectively, it said.
On an average, 65 per cent users participate in just one sport on FS apps, 20 per cent users in two, and the remaining 15 per cent in more than two sports.
Further, the report found that 80 per cent users on FSPs participate for free, while paid users stand at around 20 per cent. However, this is expected to increase with the growing popularity of FSPs and interest amongst the younger demographic with relatively high disposable incomes.
Need for tax clarity
“As FSPs look to chart a course for future growth, regulatory and tax-related certainty will be key ingredients that will determine sustained growth for the sector,” the report said.
Terming the government’s recent notification of the “Amendments to the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 in relation to online gaming” on 6th April 2023, “as a much-awaited move that will bring order and systematic growth to the industry”, it said that the coming few months are also likely to see the resolution of the debates regarding the goods and services tax (GST) regime.
The current tax regime imposes an 18 per cent GST on the gross gaming revenue (GGR), which is the revenue made by platforms after distributing winnings to players.
“In June 2022, the Group of Ministers (GoM) formed to examine GST on online gaming proposed a 28 per cent taxation on the total consideration, i.e., the total money that forms part of a prize pool for a particular contest. Reports suggest that the GoM has agreed to a rate hike from 18 to 28 percent, however, a consensus on the value of supply i.e., amount on which GST is to be levied, has not been reached yet,” the report said.
It added that if the value of supply of GST is changed to the total consideration it will harshly impact FSP margins, and the viability of the sector is likely to decline as a key consequence of this decision.
(Edited by Poulomi Banerjee)
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