Can Delta Corp's financial results for the fiscal year 2025 effectively tackle the obstacles it faces?
Delta Corp, India's only listed casino gaming company, is currently embroiled in a significant legal dispute with the Indian government over a substantial Goods and Services Tax (GST) demand exceeding Rs 23,200 crore. The company has strongly contested these demands, claiming them to be arbitrary and not in accordance with the law.
The legal battle has had a profound impact on Delta Corp's financial performance. In Q3 FY24, the company reported a 59% year-on-year decrease in net profit to Rs 34.48 crore and a 15% drop in revenue from operations to Rs 181.54 crore. This decline in profitability and revenue is likely linked to the ongoing tax controversies and legal uncertainties.
Delta Corp and its subsidiaries have received show-cause notices alleging short payment of GST. However, they have challenged these demands in courts and secured stay orders from multiple High Courts, including interim relief from the Calcutta High Court concerning a Rs 6,384 crore GST demand. This relief prevents tax authorities from taking action without the High Court's permission.
The Supreme Court has also been involved in broader GST issues relevant to companies like Delta Corp. Notably, around Input Tax Credit (ITC) claims, with rulings emphasizing strict adherence to statutory time limits for ITC claims while constitutional validity challenges remain pending. Additionally, recent Supreme Court decisions have upheld taxpayer protections regarding GST refunds, which could be relevant to Delta Corp’s position if refund or credit claims are involved in their disputes.
In summary, Delta Corp's legal battle over GST demands remains unresolved with interim court protections in place, and the dispute continues to weigh heavily on its financial results, contributing to lower profits and revenues. The final outcome will depend on ongoing judicial processes and interpretations of GST law compliance.
Amidst these challenges, Delta Corp has announced a strategic exit from a significant portion of its online gaming business by selling a 51% stake in Deltatech Gaming to Head Digital Works, resulting in a gain of ₹57.14 Crores. The company is also planning to launch a new floating casino in Goa, replacing the existing Deltin Royale, to enhance capacity and attract high-end clientele.
The demerger of hospitality and real estate businesses into a separate entity, Delta Penland Private Limited (DPPL), is expected to unlock value for shareholders by providing better access to financing for DPPL's expansion plans. However, the ongoing legal battle with the government over GST continues to be a major roadblock, with the uncertainty surrounding the GST issue impacting investor sentiment.
The coming months will be crucial in determining whether Delta Corp's initiatives will help the company regain its momentum and rebuild investor confidence. The growth in Q4 net profit, primarily due to the exceptional gain from the Adda52 divestment, offers a glimmer of hope, but the underlying pressures in its core gaming and casino businesses remain a concern. The final outcome of the GST dispute will play a significant role in shaping Delta Corp's future.
- The ongoing legal dispute over GST demands has significantly affected Delta Corp's financial performance, causing a decrease in net profit and revenue, which is a concern for investors.
- Despite the challenges in its business operations due to the GST dispute, Delta Corp has made strategic moves such as selling a stake in Deltatech Gaming, launching a new floating casino, and demerging hospitality and real estate businesses to improve financial outcomes and attract investors.
