MPL Layoff - Effect of New GST Policy Casualty?
Mobile Premier League (MPL), an online real-money gaming company based in Bengaluru, has announced that it is laying off 350 of its staff in response to the recent decision by the Goods and Services Tax (GST) Council to collect 28% tax on the industry at full face value. According to sources, this would represent close to 50% of the MPL team size, highlighting the effect of the decision.
MPL co-founder and CEO Sai Srinivas stated, "Last week, it was verified that a 28% GST will be imposed on the full deposit amount rather than on gross gaming revenue (GGR), in an internal email addressed to the staff on August 8. The new regulations will result in a 350–400% rise in our tax burden. While a corporation can plan for a 50% or 100% rise, dealing with a sudden increase of this magnitude requires some very difficult decisions.”
On July 11, the GST council resolved to tax online gambling at its full face value at a rate of 28%. The gaming industry, which had been fighting for tax to be imposed on the GGR, or the platform fee, charged to customers, was taken aback by this.
Following the announcement, stakeholders in the online gambling sector, including businesses and investors, appealed to the government on numerous occasions, pleading for a reexamination of the new tax regulations.
The 28% GST on online gaming is expected to significantly increase tax bills, even though the new tax system has not yet taken effect. Investors in online real-money gaming companies had also complained to the government that the decision may force them to write down the $2.5 billion they had invested in the industry.
The variable costs as a digital business are mostly related to staff, servers, and office equipment. Therefore, in order to thrive and make sure that the company remains sustainable, they had to take action to reduce these costs. Their efforts to review the costs of the office and server infrastructure had already begun. Despite this, they still needed to cut back on labor-related expenses.
In December 2022, the company posted positive earnings before interest, taxes, depreciation, and amortization (EBITDA), and in June of this year, it had its best-ever business performance month.
According to data obtained from Tracxn, MPL has so far secured $396 million in investment and commanded a $2.19 billion value. In May of last year, the business received a $155 million Series E capital round that included Base Partners, Telstra Ventures, Google Ventures, SIG Venture Capital, and Peak XV Partners (formerly Sequoia Capital India).
MPL recorded operational revenues of $65.6 million for the fiscal year that ended in March 2022, a 29% increase over the prior year. Losses increased dramatically, nearly tripling to $148.2 million. The parent company of MPL is situated in Singapore. Out of the $215 million in expenses, the corporation spent $58.7 million on labor costs in FY22.
On its Android and iOS apps, MPL, which was founded in 2018 by Srinivas and Shubam Malhotra, provides about 70 games in genres such as fantasy sports, card games, board games, esports, and casual games. It claims to have more than 90 million users in both India and other foreign regions, including Europe and the US.
In May 2022, the company announced 100 layoffs and announced its exit from the Indonesian market due to a decline in the broader technological ecosystem.