Top-tier global private equity firms TPG, Advent, James Murdoch’s Lupa Systems and homegrown Chrys Capital are in final negotiations to start a new innings with Dream11, valuing the fantasy sports platform at $2.25 billion, said several people with knowledge of the matter. The deal, once concluded, will effectively double the 11-year-old company’s valuation from a little over $1 billion just a year back. This is as per a report in the Economic Times.
While TPG will be using its Tech Adjacencies Fund (TTAD), which was raised in 2019, Advent International’s arm Sunley House Capital Management is also expected to join the consortium, said the people cited above. Tencent plans to double down on its investment in the company, they said. The WeChat operator invested $100 million in Dream11 in 2018.
The latest round of $150-200 million fund raising will be the largest for the company and will predominantly be a secondary sale of shares, providing an exit to Vani Kola-led Kalaari Capital, Renuka Ramnath-founded Multiples Alternate Asset Management and San Francisco-based Think Investments, said the people cited above. There will also be a small primary infusion into the company, they said.
This will be the second time in the last 12 months that the three early backers of Dream11 sell shares in the company. In April last year, Hong Kong and London-based investment firm Steadview Capital picked up a stake in Dream11 for an estimated $60 million, catapulting it into the unicorn club, or companies with valuations of more than $1 billion. Avendus Capital is the financial advisor on the deal.
In fiscal 2019, Dream11 India reported revenue more than trebled to Rs 800 crore from Rs 230 crore in the previous year. Losses, however, widened to Rs 130 crore from Rs 65 crore, according to data collated by industry tracker Tracxn. ET reported February 19 that Chrys Capital and B Capital were among potential investors in talks to undertake a sizeable secondary transaction in Dream11.
Investor interest largely stems from the legal question over whether Dream11 promotes gambling or a game of skill having been resolved. A division bench of the Supreme Court recently dismissed goods and services tax (GST) evasion and gambling appeals filed against Dream11, upholding a previous ruling by the Bombay High Court. “The latest ruling from the Supreme Court should be the last word as far as the legality of fantasy sports in India. Its time such sports-based franchises take off in the country,” said a potential investor. The Supreme Court said fantasy sports is a game of skill.
Dream11, which says it has more than 70 million users on its platform, is also the official fantasy gaming partner for the Indian Premier League (IPL) and the Board of Control for Cricket in India (BCCI). Founded in 2008 by Harsh Jain and Bhavit Sheth, it has emerged as an investor favourite over the past two years. Several marquee investors, including the investment arms of Goldman Sachs and B Capital, have shown interest in the company.