After PhonePe and Zepto, Dream11 parent shifts domicile to India
What's the story
Dream Sports, the parent company of fantasy sports platform Dream11, has officially changed its domicile from Delaware, US, to India.
The move comes as part of a growing trend of Indian start-ups like PhonePe and Zepto, returning to their home country.
Confirming the transition, a company spokesperson said, "Dream Sports is leveraging tech to unlock the massive potential of India's sports ecosystem. We have completed a 'ghar waapsi' and are now an Indian domiciled business."
Reverse flipping
Dream Sports joins trend of start-ups returning to India
The move by Dream Sports is in line with a growing trend among Indian start-ups, dubbed 'reverse flipping.'
PhonePe, Zepto, and Groww have already made the move. Other companies like Razorpay, Meesho, Pine Labs, Udaan, and Flipkart are also mulling the same.
The shift is driven by favorable economic policies and compliance requirements in India.
Regulatory changes
New rules to expedite cross-border transactions
The shift comes after the Indian government introduced new regulations under the Companies Amendment Rules, 2024, in September last year.
The rules aim to expedite cross-border transactions and simplify compliance procedures for mergers of foreign holding firms and their wholly-owned Indian subsidiaries.
Such mergers can bypass approval from the National Company Law Tribunal (NCLT) under the regulations but need prior consent from the Reserve Bank of India (RBI).
Merger details
Dream Sports Inc merges with Sporta Technologies
As part of its move to India, Dream Sports has approved the merger of Dream Sports Inc with Mumbai-based Sporta Technologies Private Limited.
The merger is intended to help the company "achieve cost savings from more focused operational efforts, lead to consolidation of the group and elimination of intercompany transactions."
It is expected to streamline overhead costs, enhance efficiency, and facilitate optimal resource allocation between India and Delaware.
Tax issues
Dream11 and other platforms face tax challenges
The real-money gaming (RMG) sector in India is already struggling with regulatory uncertainty and a 28% GST regime.
Dream Sports, along with other gaming platforms, is absorbing the additional tax burden to avoid user churn.
Separately, Indian authorities have also served retrospective tax notices to several skill-based gaming companies, including Dream Sports, for alleged tax evasion of over ₹1.5 lakh crore.
Financial forecast
Financial performance and future outlook
For FY23, Dream Sports recorded a 66% jump in revenue from operations to ₹6,384.49 crore against ₹3,841 crore in FY22.
However, as per Moneycontrol, the company is likely to witness a revenue drop of 40-50% in the ongoing financial year. Operating profit could also fall by around 80%.
The firm was last valued at $8 billion in November 2021.