Online gaming and fantasy sports unicorn Mobile Premier League is laying off 350 employees in a bid to survive 28 percent GST on online real-money games, Sai Srinivas, founder and CEO told employees in an internal note. The move will impact the Peak XV Partner-backed startup’s 50 percent of India workforce.
In the email accessed by CNBC-TV18, Srinivas told the employees, “The new rules will increase our tax burden by as much as 350 percent-400 percent. As a business, one can prepare for a 50 percent or even a 100 percent increase, but adjusting to a sudden increase of magnitude means we need to make some very tough decisions.”
“As a digital company, our variable costs predominantly involve people, server and office infrastructure. Therefore, we must take steps to bring these expenses down in order to survive and to ensure that the business remains viable,” the CEO added.
“However, despite this, we will still have to reduce our people related costs. Regrettably, we will have to let go of around 350 of you.”
This is the second round of layoffs at startup in about a year. MPL had handed pink slips to more than 100 people and exited the Indonesian market in May 2022.
The GST Council has decided to continue with the 28 percent GST on online games, casinos and horse racing but this would be on the initial amount paid on the game and not on the total value of each bet placed. GST would not be applicable on the winnings which could be used to place further bets. Last week, Finance Minister Nirmala Sitharaman said the decision will be reviewed after 6 months of its implementation or April 2024 by the GST Council to see if any change in rule is required.
Calling the 28 percent GST on full value of online gaming a "killer blow", gaming industry experts have said that the GST council's decision was a retrograde step that will hurt the thriving sector and lead to job losses.
E Gaming Federation (EGF) and Federation of Indian Fantasy Sports (FIFS) have stated that the 350 percent increase in GST would drag back the gaming industry.
Last month has been extremely challenging and uncertain for all of us. We want to thank each and every one of you for the strength and courage you have shown. Last week, it was confirmed that a 28% GST will be levied on the full deposit value rather than on Gross Gaming Revenue. The new rules will increase our tax burden by as much as 350- 400%. As a business, one can prepare for a 50% or even a 100% increase, but adjusting to a sudden increase of this magnitude means we need to make some very tough decisions.
As a digital company, our variable costs predominantly involve people, server and office infrastructure. Therefore, we must take steps to bring these expenses down in order to survive and to ensure that the business remains viable. We have already initiated work on revisiting our server and office infrastructure costs.
However, despite this, we will still have to reduce our people related costs. Regrettably, we will have to let go of around 350 of you. This has been a heart wrenching process because it impacts a lot of our friends and colleagues. In a short span of four years, we have achieved a lot. MPL India was on track to continue the amazing business performance we have seen since December when we turned EBITDA positive. In fact, we recorded our best ever month in terms of business performance in June and we beat that in July. If anything, this makes this decision all the more difficult to come to terms with.
What we have collectively done shows how phenomenal this team truly is, and we can't thank you enough for that. Your resilience, resolve and unwavering dedication is what has brought us where we are today. We know how demotivating this may be to all of you after all the hard work you have put in over the years. Personally, this is the toughest decision we have ever had to make. It's as if we aced our class and now find ourselves needing to repeat a school year. But I guess that's how life is, sometimes you get good fortune and sometimes you don't.
You have our promise that we will proceed with the utmost respect, compassion, and empathy. To everyone who is leaving us, while nothing can truly be enough, we are committed to providing you the best possible support during this transition. We recognize that these changes will also affect your personal life, and the company is here to offer any assistance you may need during this period. We will also do everything in our capacity to help you find new opportunities.
We have spent a lot of time evaluating and re-evaluating this decision; asking ourselves if we should wait or not. Eventually, we came to this conclusion because we believe that in uncertain times the sooner we are able to deliver certainty to everyone, the better. As we get through this, we want all of you to know that you can count on both of us to answer any questions you have and to support you through any difficult situations you may face now or in the future.
As for the future of MPL, we are very confident we are going to get through this, together as a team, and we will rebuild our business stronger than ever.
With the Utmost sincerity,
Sai and Shubh
