Delta Corp - A huge but risky opportunity

Stock Opportunities
585

Delta Corp is a pretty interesting company at this juncture. What makes it interesting?

  1. Investor’s apathy - Based on the circumstances today, I think no sensible investor will look at this company. Why?
  2. GST Demand - 25,000 Cr demand is enough to understand that company is in wrong side of political power. But is this demand justified? Current stock price says it does not matter and that company is done and dusted.
  3. It looks Promoters also does not have any confidence left in casino business - Why? They have started diverting their focus to non casino ventures (real estate, theme parks etc). They have also stopped concalls. Which brings us to interesting juncture . Promoters wants DEMERGER?
  4. Demerger - What do you think is real driver of this demerger? It looks that promoters want to safe guard company’s assets from possible takeover by govt.

Why? Leaving aside if GST demand makes sense or not, if court verdict does not goes in favor of the company, entire company will be washed away.

How can promoter protect part of its belonging? Do demerger. Demerged entity will not have obligation of GST demand, it is akin giving dividend to shareholders and the value of demerged assets is more than 1500 Cr

But will the demerger go through? Will government entities allow to do it? I don’t know.

But leaving GST demand aside, is it really a worthless company? Lets see:

  1. Like Tobacco and Liquor, it looks like Delta Crop is entity which is the biggest revenue earner for government. If Govt is ready to tolerate Liquor and tobacco, why not casino’s?

Delta Corp runs a business that generates ~200 Cr yearly profits (standalone), pays 240 Cr yearly GST, pays 150 Cr yearly casino tax and pays 100 Cr income tax. It is huge revenue earner for Goa government.

  1. After GST ruling 2023, operating business has not suffered, financial results of last few quarters are the proof.

  2. Operating profitability is going to multiply by 2, as new new ship comes onboard in 2 years.

So, its a company with 400 Cr free cash flows, 1500 Cr assets, 500 Cr Cash, valued at 2600 Cr.

Why? Is it due to extreme uncertain environment that the company face?

Is the Market correct? Will the company be washed away or will Govt will some day accept casino’s as they have accepted Tobacco/ liquor?

One thing that is sure, is that company will remain at the center stage at the time of elections, a political attraction all the time.

Another thing that is sure, when certainty will come, this price will not come.

These thoughts are to clear my head what I am thinking about the company now. My thoughts may change in the future.

I am not invested and this post is not to influence anyone to invest

10 Likes