Digital Gaming sector in India: Poised for a strong growth

Published by Sharekhan Education | February 20, 2023

Amit Pathak | Sharekhan Education

Digital gaming refers to playing electronic games conducted through multiple means, such as laptops, computers, mobile phones, and consoles. Smartphones have prompted rapid development in India’s gaming industry. The availability of faster smartphones with enhanced gaming capabilities and affordable high-speed internet has fueled growth in the sector. Experts estimate that the digital gaming market in India will grow at a CAGR of 28-30%, reaching $5 billion by 2025 from $2.8 billion in 2022.

About the Industry

The number of gamers in India is estimated to increase from 420 million in 2022 to 500 million by 2025. The number of paying gamers is around 120 million, growing at 25% CAGR. The average revenue per paying user has increased by 11% to reach US$ 20 annually in FY22. An Indian gamer on average spent 8.5 hours per week on mobile games in FY 22. The average age of the Indian population is around 28 years which is a sweet spot for the gaming sector in terms of interest in gaming and paying capacity. 

Most states in India only allow skill-based games but not games of chance, which are considered immoral as gambling. The business model has evolved from outright purchase where users pay for a new game to a subscription model where they are required to pay a recurring fee. In a Freemium model, users can access the basic features for free but will have to purchase in-game functions and features. In-game advertisements could be in the form of banner ads that appear on some part of the screen.

Key Growth Drivers

The key growth drivers are higher disposable income and an increasing number of smartphone and tablet users. The sector is witnessing the emergence of E-sports, the introduction of new gaming genres, and a significant improvement in the quality & engagement of gaming content. Cloud gaming is an emerging technology that allows the user to stream high-end games with fast network connectivity, thereby eliminating the requirement for a periodic hardware upgrade. Digital gaming is becoming a prominent part of the Indian entertainment industry. Gamification is also increasing in industries such as education and financial services to engage consumers. Conveying ideas via gaming has proven to be more effective.

About Nazara Technologies:

Let us discuss Nazara Technologies in this space. The company is a leading gaming & sports media platform with a presence in India, Africa, and North America. It has offerings across eSports, interactive gaming, and gamified early learning ecosystems. Nazara Technologies has created an ecosystem across multiple markets that helps them scale up through proprietary tech, in-house content, and relationships with ecosystem partners. It has established strong relationships with global gaming publishers like ESL and Valve Corporation, allowing it to bring gaming leagues and tournaments to India with participation from international teams. The company’s estimated Revenue & PAT CAGR over FY22-25E is 41% and 52%, respectively. 

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