Delta Corp puts online gaming IPO on hold amidst GST uncertainties

Delta Corp CFO highlights the impact of uncertainty on investor sentiment

Delta Corp, a prominent casino and online gaming operator, has decided to put its initial public offering (IPO) plans for its online gaming unit on hold due to the prevailing uncertainties regarding the Goods and Services Tax (GST) rate increase on the sector.

During the company’s recent earnings call, Delta Corp’s Chief Financial Officer, Hardik Dhebar, stressed the importance of absolute clarity for the investing community when it comes to online gaming. He emphasised that without a clear picture of the way forward, potential investors would be hesitant to commit their capital, particularly in a sector burdened with this level of uncertainty.

Given the circumstances, Dhebar announced that the IPO is currently postponed, and the company will reassess the plan once complete clarity emerges.

The online gaming unit contributed 15 percent to Delta Corp’s net revenue, excluding the GST component, in the June quarter. However, on July 11, the GST council decided to impose a 28 percent tax on the turnover of online gaming companies, horse racing, and casinos.

As the GST council prepares to convene on Wednesday, August 2, the definition of online gaming is set to be a key point of discussion. Among the doubts surrounding the proposed tax, one crucial aspect to be addressed is whether the tax will be applied to the entry-level or on each wager. Despite officials affirming no changes to the proposed rate, the meeting aims to find a resolution on this matter.

IT Minister Palanivel Thiaga Rajan disagreed with claims that the 28 percent GST would lead to the demise of the online gaming industry, describing such statements as exaggerated. Instead, he emphasized the need for a balanced approach that regulates the industry, generates revenue, and supports continued growth to boost the economy.

Dhebar highlighted that the company has now started to make course corrections due to the uncertainties surrounding the sector. As of now, the online gaming sector remains negative in terms of revenue.

For the June quarter, Delta Corp’s online gaming revenue reached Rs 43.12 crore, slightly below last June’s figure of Rs 43.83 crore and lower than the March quarter’s number of Rs 47.41 crore. However, the revenue from gaming operations, which represents the company’s core business, increased both year-on-year and sequentially.

Dhebar expressed optimism about turning the online gaming revenue positive in the third quarter.During the April-June period, Delta Corp reported its highest-ever quarterly revenue.

After experiencing its biggest single-day drop on record on July 12, shares of Delta Corp returned to the Rs 200 mark last week for the first time. However, the stock is still down 7.1 percent year-to-date.

Numerous online gaming companies have raised concerns about the potential repercussions of the tax, asserting that it could have a significant impact on gaming volumes and the overall viability of their businesses. The outcome of the council’s deliberation holds crucial implications for the future of the online gaming industry.

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