Sea Limited (SE 0.05%) investors may be worried these days about the risk of the company being banned in India. In this Fool Live segment from "The Gaming Show," recorded on Feb. 14, Motley Fool contributors Jon Quast, Jose Najarro, and Clay Bruning discuss some of the factors at play in this scenario.
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Jon Quast: How much of Sea Limited's growth potential here is in the India market? What is to prevent, as you said, a banning of perhaps Shopee in India as well and those operations, so maybe it could snowball into a bigger thing over time. I'm pretty sure that's what investors are fearful about today. We'll note that one of the things I was reading is mobile gaming company, PUBG.
I don't believe that's a publicly traded company, but they were also banned at one point from India and they had a connection with Tencent later, they cut their affiliation with Tencent and they were able to reenter the Indian market. Just because there is a ban today does not mean that this is a permanent situation. There are ways that Sea Limited perhaps can get back into the game there [OVERLAPPING] go ahead, Jose.
Jose Najarro: I was going to say one thing that's Sea Limited does is they have a gaming platform. You download this gaming platform, and within this gaming platform, you can play numerous games. Tencent has some other games inside that platform which is called Garena. I'm guessing one of the solutions that can happen for Sea Limited, is any games that were made from Tencent or some other partnerships, they can just pull them out of those platforms in India. Then India could be like, "Okay, we're no longer seeing the ties from China, we can now reapply this platform to be available for download."
Jon Quast: How about you, Clay? Any thoughts?
Clay Bruning: Yeah, I was just doing a little browsing in terms of where I could see what the top-grossing games in India were. I'm not sure. It looks like it was updated on Friday or Saturday from Similarweb, but it looks like Free Fire Illuminate and then Free Fire Max are the number 1 and 4 top-grossing games in India respectively. I think the article that we were summing up earlier was saying it's likely less than 10 percent of Sea's gaming revenues. But I think as John mentioned earlier, it's not really about what it's worth today, but the potential in 2, 5, 10 years that it presents.
We've talked about the scope of the gaming industry as a whole and some of the trends in India are they have a massive aging population. They are growing up with mobile phones, whereas a lot of Americans 10, 15 years ago were growing up with desktop first. It's a very much mobile native country, especially in the aging demographic in India. It'll be interesting to see how this progresses considering it's clearly one of the most sought-after games from consumers in India and one just wonders if Tencent rings the register on their investment, does this change the landscape for Sea Limited in India? Again, not a shareholder, but if I was, I would certainly be looking to see if Tencent provides any commentary here in the coming weeks, because this is probably a huge growth lever for Free Fire in particular, for Sea.
