Delta Corp, one of India’s leading gaming and casino companies, announced a significant drop in its Q3 net profit. For the quarter ended December 2023, the net profit declined nearly 60% year-on-year to Rs. 34 crore compared to Rs. 85 crore in the same period last year.
The company saw its revenue from operations fall over 15% to Rs. 234 crore in Q3FY24 from Rs. 278 crore in Q3FY23. Both its key businesses, casino and online gaming, reported substantial revenue declines during the quarter. Casino revenue was hit due to higher GST taxes imposed on chips that had to be paid by customers upfront. Online gaming revenue fell as well due to increased competition in this space.
Only the smaller hospitality division of Delta Corp witnessed an improvement in revenue and managed modest growth during the quarter. However, it was not enough to offset the declines seen in the larger casino and gaming verticals that account for the majority of the company’s turnover.
Anil Malani, Director of Delta Corp, had an interview with CNBC-TV18 where he discussed the company’s Q3 performance and outlook. He acknowledged the adverse impact of increased GST rates on their casino business and expects some recovery in demand during Q4 once customers adjust to the higher taxes.
Malani also shared that one of Delta Corp’s ships will undergo maintenance works in January which could impact Q4 revenue to some extent. Overall, he anticipates the current quarter’s revenue to be at similar levels as Q3.
Importantly, Delta Corp continues to face legal challenges and is dealing with massive GST-related claims of over Rs. 23,000-24,000 crore issued by authorities. The company believes these notices are arbitrary and it has strong grounds to defend against the tax demands in court cases scheduled next month.
Reaction in the stock market was negative, as expected, with Delta Corp shares declining 3% in early trade on Monday post the Q3 results announcement over the weekend. The counter closed 0.2% lower on Monday as well.
Given the sharp profit drop, ongoing legal issues, and near-term revenue outlook remaining subdued, analysts feel Delta Corp stock may see further downside when trading resumes after a short break on Tuesday morning. Weak investor sentiment and profit booking pressures could drive more price correction in the coming sessions.
The stock has already underperformed considerably in the last six months, losing over 38% during this period. Any clarity about resolution of the huge GST claims as well as signs of demand recovery will be key for reversal of the current downtrend in the Delta Corp counter. Until then, volatility and downside are likely to persist.
In conclusion, Delta Corps Q3 performance reflected the challenges faced by the gaming industry today. The short-term outlook also seems mixed unless a clear solution emerges on their legal matters. Investors may want to avoid fresh purchases and wait for better visibility ahead.
