MPL Takes Tough Step: Letting Go of 350 Employees Amid GST Woes in Real-Money Games Sector

MPL Takes Tough Step: Letting Go of 350 Employees Amid GST Woes in Real-Money Games Sector

Mobile Premier League (MPL) has reportedly carried out a workforce reduction, affecting approximately 350 employees. This decision comes in the aftermath of the GST Council’s recent resolution to maintain a 28% tax rate on online real-money gaming platforms. The tax policy has created challenges for the online gaming industry, prompting to reevaluate its operational structure.

In an email sent to the company’s employees, MPL’s founder and CEO, Sai Srinivas, explained that the decision to lay off employees was driven by the recent GST Council decision to impose a 28% tax on the full deposit value, rather than on the Gross Gaming Revenue. This change in taxation rules is expected to result in a significant increase in the company’s tax burden, estimated to be around 350-400%. Srinivas acknowledged that while the company could have prepared for a more moderate tax increase, such a sudden and substantial rise required them to make difficult choices.

Srinivas expressed regret for the impact this decision would have on the affected employees and emphasized that the company would provide all necessary support, including severance packages and outplacement services, to help them during this transition. He also assured the remaining employees that the company remained committed to its mission and would continue its operations. The layoffs come as a response to the challenges posed by the revised taxation policy, which has prompted to reevaluate its financial and operational strategies.

Srinivas highlighted that the main variable costs for MPL are related to human resources, server infrastructure, and office facilities. In light of the significant increase in tax burden due to the new GST rules, the company is compelled to reduce these variable costs in order to ensure the survival and financial viability of the business. The decision to lay off employees is part of the company’s efforts to streamline its operations and reduce expenditures, given the unexpected and substantial increase in taxation.

Srinivas’ statement reflects the company’s determination to adapt to the changing regulatory landscape and financial challenges in order to continue operating and serving its users. The decision to cut costs through layoffs underscores the impact that regulatory decisions can have on the business environment, particularly in industries that are sensitive to tax policies and regulatory changes.

The decision to carry out the layoffs at Mobile Premier League (MPL) appears to have been in response to the announcement of the 28% GST (Goods and Services Tax) on online real money games by the government. This new tax structure is anticipated to come into effect from October 1, 2023. The imposition of this higher tax rate has likely prompted MPL to take measures to adjust to the increased financial burden, which includes reducing its workforce.

This layoff marks the second instance of job cuts at MPL in the span of 15 months. It underscores the challenges that businesses operating in the online gaming sector can face due to changing regulations and taxation policies. The company’s decision to implement layoffs as a response to the impending tax changes reflects its effort to navigate these challenges and adapt to the new financial landscape in order to ensure its continued operation and sustainability.

In addition to the recent layoffs, Mobile Premier League (MPL) had previously undergone another round of job cuts in May 2022, where approximately 100 employees were laid off. Alongside these job reductions, the company also made the decision to exit the Indonesian market. This series of actions highlights the challenges MPL has faced in terms of its operational strategy and market presence.

Despite these challenges, MPL achieved the significant milestone of becoming a unicorn in September 2021, when its valuation reached $2.3 billion. This valuation indicated the company’s rapid growth and investor confidence in its business model. However, the subsequent layoffs and market exit suggest that the company has been navigating a complex landscape marked by regulatory changes and shifting market dynamics. The recent decision to lay off 350 employees is likely a strategic move aimed at maintaining financial sustainability and adapting to the new tax structure affecting the online gaming industry.

Sai Srinivas, the founder and CEO of MPL, emphasized that the company had achieved a significant milestone by turning EBITDA positive since December of the previous year. Despite this achievement, financial performance has been marked by substantial losses. Although the audited financial statement for FY23 is still pending, the company’s losses surged by 202% to reach Rs 1,122 crore in FY22. In the same fiscal year ending in March 2022, the company experienced a 28.9% increase in revenue, which amounted to Rs 497 crore.

The juxtaposition of EBITDA positivity and escalating losses highlights the complexity of MPL’s financial journey. While achieving EBITDA positivity can be seen as a positive sign, it is evident that the company has faced significant operational and financial challenges that have impacted its bottom line. The layoffs and cost-cutting measures undertaken might be strategic steps to address these challenges and achieve long-term sustainability amidst a changing regulatory environment and competitive landscape.

The online real money gaming industry in India has been actively opposing the new GST structure since its introduction. This sentiment has been echoed by a range of gaming companies, including Nazara Technologies, Baazi Games, and Winzo Games, as well as industry body All India Gaming Federation, and approximately 30 investors. Collectively, they have been urging the government to reconsider its decision to impose a 28% GST on these platforms.

Despite these appeals, the GST Council has not provided immediate relief to the gaming companies. Instead, it indicated that a review of the taxation structure for online games might take place after a period of six to eight months. This response indicates a potential willingness to assess the impact of the new GST structure on the industry and make adjustments if necessary. The gaming industry, investors, and related stakeholders are keenly observing how this situation evolves and whether any changes will be made to the tax framework in the future.