Toronto investment firm hit by closure of Indian online rummy company

Toronto private equity group Clairvest and Clairvest Equity Partners V invested $99.2 million in Indian online rummy firm Ace2Three in April through compulsory convertible debentures and common shares, and it has proved a costly business for them both.

Clairvest has posted a net loss for fiscal Q1 of Cdn $11.6 million, or $0.76 a share, after accounting for potential losses in its investment in the Indian venture.

The group said it had included a $1.00 per share unrealised loss in Ace2Three, which was shut down for nine days in June after the state of Telengana declared online gaming, including skill-based games, illegal (see previous report).

Since June 28, 2017, Ace2Three has reopened its gaming platform outside the state of Telangana, and the Indian courts have provided Ace2Three with interim relief to give the company time to move its registered business address outside of Telangana, Clairvest revealed.

Revenue from customers outside of Telangana represented approximately 60 percent of Ace2Three’s overall revenue prior to the shutdown in that state.

Online rummy companies are challenging the validity of Telangana’s decision, arguing it runs counter to a Supreme Court decision dating from 1996 that declared rummy a skill-based game and therefore legal.

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