Delta Corp Ltd. reported December quarter earnings which turned out to be weak in what is an otherwise strong quarter. This was also the first quarter post the GST rate revision, where the company now collects 28% GST on coins sold to customers, instead of Gross Gaming Revenue.
The company's CFO Anil Malani spoke exclusively to CNBC-TV18 and shed more light on the GST uncertainties surrounding the company, the IPO plans of its online gaming business among other issues.
Here are the key takeaways from this interaction:
December Revenues
55% of Delta Corp's revenue during the October-December period came only in the month of December, CFO Malani said.
The new GST regime got the company to re-think its strategy as charging 28% GST on coins sold did not go down well with customers in the initial days.
Additionally, a delay in the Diwali festivities in 2023 led to lack of activity during the months of October and November.
Q4 Will Be Similar To Q3
Delta Corp's March quarter performance will be similar to that of the December quarter, Malani said. Adding that once things playout, it should be business as usual for the company by the December quarter of financial year 2025.
In order to lure back customers, Delta Corp introduced promotional offers, which impacted the bottomline and margins. Delta Corp's EBITDA margin fell 1,300 basis points from last year to 24.1%.
Malani said that these promotional offers are a need of the hour and are here to stay for the time being. Additionally, one of the company's ships will also head to the dry-dock, as a result of which, the revenue earned from this ship in January will not be recognized.
No Provisions For ₹23,000 Crore GST Notices
Delta Corp's subsidiaries currently have multiple GST claims worth ₹23,000 crore to ₹24,000 crore pending. The company highlighted in its notes to accounts that it has made equity investments worth ₹677 crore in three of its subsidiaries on which the GST claims are pending. It has also lent them short-term loans worth nearly ₹100 crore.
However, the company has made no provisions with regards to the same.
CFO Malani said that no provisions are being made in-line with legal opinion, as lawyers do not feel the need to make such provisions. He also mentioned that all of these claims will be clubbed together and the hearing for the same will take place next month.
The overall GST claims are nearly six times Delta Corp's current market cap of around ₹4,000 crore.
Diversification Into Real Estate
Delta Corp forayed into the real estate space after it announced a ₹99 crore investment in Peninsula Land Ltd. in November last year. The companies plan to establish a JV with a capital outlay of ₹250 crore. Delta Corp will be the majority shareholder in the JV.
The foray into real estate is to make the best use of funds and the promoters' acumen, Malani said. He further added that currently there is no opportunity of growing the casino business in India and that they may pivot into a real estate business.
"We have got a good amount of cash on our balance sheet. So, to get some more value into our business, we thought this would be an ideal fit for us and therefore the investment," the CFO said.
Daman Deltin Hearing
With not specifying a clear timeline, Malani said that the hearing on Deltin Daman will take place in the next few months under a new jury.
Delta Corp had opened a five-star resort in Daman called The Deltin, via its subsidiary Daman Hospitality Pvt. Ltd. However, it does not have regulatory approval to launch casino operations there.
It had then filed a writ petition in the Bombay High Court with regards to this issue.
Value Unlocking Plans
Amidst the regulatory uncertainty on GST, Delta Corp has put the IPO plans of its online gaming business on hold for now. Malani said that in case of a favourable outcome, the IPO plans may return to the table.
"If it's going to be favourable yes, we will be back. If not, then we will have to see how it plays out," Malani said.
Delta Corp also holds 28.2% stake in Advani Hotels & Resorts and while Malani did not share a specific timeline, he said that the stake sale will happen at the right time. At current market price, Delta Corp's stake in Advani Resorts is valued at ₹142 crore.
Shares of Delta Corp are off the day's low, currently trading 1.4% lower at ₹148.45.
(Edited by : Hormaz Fatakia)
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