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Affect Of 28% GST On Dream11: Platform Discontinues Their Major Deal

Affect Of 28% GST On Dream11: Platform Discontinues Their Major Deal: Dream Sports, the parent company of the popular fantasy sports platform Dream11 has announced discontinuing its venture capital and merger & acquisition arm, Dream Capital. This decision comes in the wake of the Indian government’s imposition of a 28% Goods and Services Tax (GST) on online real money games, which has significantly impacted the gaming industry in the country.

A Shift in Strategy

Dream Capital, headed by Dev Bajaj, was launched in August 2021 with a substantial fund worth $250 million, specifically focusing on startups in the sports, online gaming, and fitness-tech sectors. The firm employed a multi-stage investment approach, with ticket sizes ranging from $1 million to $100 million. However, recent developments have led to a change in strategy for the venture arm.

Timing of the Decision

Sources indicate that the decision to halt the services of Dream Capital was made approximately two to three months ago. This move follows the challenges faced by the gaming industry in India due to the new GST regulations and the broader impact on startups in this space.

Notable Investments and Their Outcomes

One of Dream Capital’s prominent investments was in the cricket NFT platform Rario, which garnered attention by raising $120 million in its Series A round. However, Rario faced performance issues and had to lay off several employees, with its co-founders also departing. Dream Capital also invested in over ten startups, including Fittr, IMBR, Elevar, KheloMore, and Marketwolf.

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Challenges in the Gaming Sector

The gaming industry in India has faced several challenges since introducing the 28% GST for real money games. This has led to adverse consequences for gaming startups, such as MPL, and Hike Rush Gaming Universe, which collectively laid off over 500 employees. Some companies, including Quizzy, Fantok, and One World Nation, were forced to halt their operations.

The decision to discontinue Dream Capital highlights the evolving risk environment in the Indian gaming sector. The ease of access to funding led to various ventures, meaning these entities had to find reasons to raise more money. The introduction of taxation and regulatory policies in 2023 revealed a lack of preparedness in many firms for such changes.

Dream11’s Position

Dream11 was India’s highest revenue-generating fantasy sports company for the fiscal year 2021-2022, contributing 42.2% of the overall industry revenues with Rs 3,841 crore. Despite its market dominance, the company received a show cause notice for alleged GST evasion of Rs 25,000. It filed a petition in the Bombay High Court to challenge the notice.

In conclusion, Dream Capital’s discontinuation reflects the challenges and uncertainties in the Indian gaming industry. It serves as a reminder that even major players like Dream11 can face significant risks when regulatory and taxation changes impact the sector.

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