Great results but GST retracement or daman +ve outcome will be required to boost near term confidence.
46368d5f-cc1a-47d5-b52e-1779c4a94209.pdf (366.9 KB)
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Again, next date.
Order:
S. O. to 03/08/2023
CFOs view on taxation. As per him irrespective of how the tax thing plays out the offline business (casinos) contributing 85-87% of the revenues will be fine.
Of couse he says that in one line âwe will be fineâ. Not sure what to make of it.
This one also mentions the GST implementation
So FM finally decided to kill the gaming industry (intention is not to kill the industryâŚlol) Looks like huge negative for online gaming as well as casinos like delta corp.
28% GST for full face value/money deposited by gamer is here to stay if some of the companies still survives after new taxation implemented after Oct 1
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Consolidation of market players. Delta will have advantage of recreational, proffesional gamers and tourism focus.
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This time they have used the word deposit instead of face value. What does this mean? If i deposit Rs. 1000 and buy chips and go play, come back after 4 hours with 600 chips. Then what is the deposit amount on which GST applies? 1000 or 400? Because why should a player pay tax on the chips that have been returned? Lets wait for the company to clarify.
What was the point of announcing a law that needs to be reviewed in 6 months. Only Nirmala ji can answer. They are playing with the livelihoods of the gaming companies, employees and investors. Very sad and retrograde step.
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Daman Case Next Date: 10/08/2023
Hardik Dhebar, CFO has stepped down, effective in 12 days - out of the blue.
He was effectively the face of the companies for the investors.
Recent news interview didnât inspire much confidence either tbh.
Definitely a big hit to the sentiment for Delta Corp stock, especially after the GST mess and the ongoing Daman issues.
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Regarding GST Impact and Twist by FM in Last Press Meet
As per new law amendement, it was confimed in press meet that it will be applicable only on first entry. (not on every bet and winning amount). As far as i know, it was better than what was explained earlier. I strongly feel Delta will find clear strategy to reduce the impact on revenue and bottom line.
Government dont want to kill the industry (at least they are tellling openly in media). One more +ve, GST Hangover is completed. I am not sure how many of you watched FM speech, it seems to be politcal angle to satisfy all states, because other states ministers are pushing for 28% on every bet and winning, since it was discussed for almost 3 years so they dont want to come up with solution that there is no change. It seems GOA and Sikkim CM was also present and pushing GST committee to follow GGR approach. Overal industry will survive.
On Hardik Resignation - May be wrong time but i feel it was planned before GST council meet. Please see all concalls which happened, you will see only Hardik attending the call, but last week you can see 2 of them joined as well which didnât happen earlier. so Managing director knows that hardik s leaving even before GST outcome. Delta is not dependent on single person so there is no long term impact here.
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Ask yourself this.
Youâre going to the casino to have a good time. You decide to play with 10K, get the money exchanged and receive 7200 to play with. Seems alright, youâre going to have a good time and might get your money back
Now, youâre going to play with 1 Lac. You get 72000 to play with. Youâll think it doesnât make sense.
Now youâre going to play with 10 Lacs. Will you be ok with playing with 720000 and giving away 2.8 L as GST?
Thatâs the difference this GST ruling on face value will do.
Rich people who are high rollers in casinos are not stupid. No one is going to give their money away like that. They would much rather fly to Macau, Singapore or Vietnam. Itâs not about thinking you can beat the casino but going for better odds in your favor.
This may not impact the tourists who are going for the experience but it will deter the regulars or high rollers.
This is an unfair, and naive decision which was taken without consulting with any industry experts⌠the fact that the Finance Minister also talked about Moral values while announcing this says a lot. In the latest meeting she mentioned the only stakeholders that were impacted - Sikkim and Goa were against this at face value. But the rest of the council was against it.
There is no other country that taxes casinos at face value. GGR are the norms because it doesnât work on the face value unless you want to kill the industry.
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Just my point. If you are a high roller, for the GST paid on Face Value, why not use much less than the taxes paid, to book a flight ticket elsewhere and have the same fun. This is not a sticky business where come what may, customers will stick with Delta. Also, the CFO going at such a crucial juncture is quite ominous.
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Delta Corp as a stock was always lucrative from valuation perspective but taxes and regulatory decisions were holding it back and the uptick in last 6 months was due to some hints being given by MEITY that certain frameworks would be adopted and sort of gave a hint that the earlier indications of GST being applied on face value would not really happen. GST council disregarded or overlooked that and the impression that they gave was to not encourage or for that matter discourage gambling as an activity.
Business/Volumes are bound to go down with the new GST regime. Speculation is how big or small that drop is going to be. I guess only time will tell including whether it will destroy or make the business unviable. CFO resigning could have some inference but still guess work. But near term your stock price wont move up for sure as people will try to seek that clarity which I donât think might be obvious and will start coming into play only in Feb 2024 when 3rd Quarters results are declared. Probability of stock gravitating towards downside is more. Now this is a short to medium term view. Over time once we have full yearly cycle of new GST play out and then once you start seeing QoQ and YoY results is when there could be more analysis on valuation etc.
It would be interesting if we can get more details from the management if they can give break up in terms of percentages of amount that people place their total bets on like 10% volume coming from people trying to gamble for 5K only, 50% between 5k to 50K and so on. That might give some hints on possible volume going forward. In one of the concalls a similar question was asked but details were not disclosed.
Final thoughts are that best gamble would be to move away from this stock till more clarity comes but again gamblers dont play safe 
Disc: Invested presently (looking to reduce/exit)
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Also not sure if details have been given around how much is the total gaming revenue for a quarter. That would help indicate the actual increase in revenue that govt might be able to get if the volume remain same.
Also i am not sure if i am analyzing this correctly so people can correct me on how it would work out in terms of taxes.
E.g. if people buy chips of 100 and place all bets and the winnings or leftover are 15 at the end of few games then the tax as per current regime would be on 85 vs 100. So a a tax of 23.8 vs 28 i.e. 4.2 more. (there is also a debate on what would happen when someone returns the chips i.e. whether gst will be returned. I yes then no change in taxes)
Now in a separate scenario if 100 are placed as bets but the winning is 115. In that case i guess there is no GST paid but in current regione you still pay 28 so a huge difference. Obviously overall such a scenario would rarely happen
Assuming the 1st scenario is what is likely one in majority of cases then the difference is not huge except for the big phycological difference that the Gambler will feel when buying chips.
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Government is gambling with GST methodology as Trail and Error approach thinking that they will get more money. At the end it yields nothing. This is just like LTCG tax which came up during Arun Jaiteley time.
There are lot of uncertainty, how things will happen if you are going to return chips. Whole gaming pricing mechanism/gaming methodology will undergo a change due to this impact. I have sent an email to them to clarify these points.
GST on Face value - As per GST committee, they mentioned only on First Entry. Does it mean it willl not be charged on Second time when customer wants to play again.
Though I am invested at lower level since very long time, i never gambled myself in casino.
Another thought (may be stupid one) - Customer pays 10,000 gets 10,000 worth of chips, Company considers GST as offer coupone or donât charge customer (atlease direactly). At the end, house always win. Probability of win will be reduced compared to current daysâŚ
If what you assume is true there is a probability that gamer will use the remaining chips rather than returning it if he doesnât get GST 28% backâŚHuman psychology will force to spend full chips instead of returningâŚ
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I am surprised at the kind of hypothesis being put forward on why player will play more or not. Nobody can validate it until we see the results.
From the concall one could gather that they can change the methodology of chip exchange based on the fine prints of the new rule. Doing away with giving chips can also be an option. The company can navigate around the new rules if it survives these changes.
Instead of focusing on how the business will be impacted based on the new methodology, investors should be worried about retrospective implementation. If this was always how tax department interpreted the rule, casinos will be slapped with a massive GST bill. This will obviously be followed by more litigations.
More tareek pe tareek like the Daman case.
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For retrospective taxation - it was confirmed that if rule passes through then it will be implemented from 1st October. I guess this is ruled out now.
Hit can be reduced in multiple waysâŚroom and beverage bundle. Free chips to top up on purchase valueâŚDelta has lots of games to play
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After a ton of confusion between everyone I would like to remind all of us of a quote.
âNever invest in a business you cannot understand.â
â Warren Buffett
Disc. - Moved out entirely as I can catch a few other fish if my line remains intact.
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