Delta Corp: Is the scarcity premium for India’s sole publicly traded casino stock justified?

Delta Corp: Is the scarcity premium for India’s sole publicly traded casino stock justified?

After the lockdowns, the first part of trade reopening looked suitable for Delta Corp., which makes games. Many people came back to the table because of revenge money. Will this newfound desire for domestic travel and spending last, or will the rise in prices and the reopening of international travel be a setback for the group?

Gambling can be a problem for some people, but the people who make the most money from it are the people who organize it, like the casinos. The casino business, which is hard to get into because there are a lot of barriers, is thought to be very profitable. With a lot of money comes a lot of risks. In India, there have been a lot of legal restrictions and a lot of work to do, and a lot of uncertainty.

Delta Corp. Expects To Reach Pre-Pandemic Revenue Level Soon

Mumbai-based Delta Corp owns and runs three of the six floating casinos in the Indian state of Goa, and it also has agreements to run three land-based casinos in Sikkim, Goa, and Nepal. It is a casino that has been in business for more than a decade, and it has a significant market share. But does betting against gamblers sound like a good idea, or is it just another risk?

Casinos in India have always had a lot of barriers to entry, like a limited number of licenses. Getting a permit can take a long time and cost a lot of money. However, the casino industry in Goa is proliferating. Public Gambling Act of 1976: Only casinos in five-star hotel rooms or on boats can be built in Goa and Daman.

The pricey licenses are usually good for five years, but they can be renewed. Goa is still the center of the casino industry in India. This is because Goa is a popular place for domestic and international tourists. Also, all major Indian financial centers can quickly get to Goa, which is essential to make sure some people want to spend money there.

In 1990, Delta Corp was a real estate consulting firm and a textile company that made clothes. There was a lot of gambling and casinos in 2006-2007. In 2014 and 2015, Delta Corp stopped working with real estate and instead focused on the casino business. When Delta Corp bought Adda 52 in 2016 or 2017, it marked the company’s first foray into the world of online gaming platforms. Delta Corp is a new industry in India because of the massive growth in smartphones and internet access across the country. The company’s move into online skill-based games has been a success, bringing in extra money.

To figure out if Delta Corp is a good bet or a risk, let’s look at many different things in more detail.

People make money and make money with their own money.

Below is a chart that shows how sales have changed over the last 10 years and how much profit Delta Corp has been able to keep.

Delta Corp had to take a massive hit on its top line in the year that ended in FY2015 because the real estate business it had previously shut down made up about 50% of its revenue. The management was able to focus on and grow the casino business after the person left, which was suitable for the company. The hospitality business, linked to the casino business, was given less attention. Revenues from online skill-based games like Adda52 started to add to the top line in March 2018.

Company EBITDA and net profit margins were very low before it left the real estate business, so they were deficient. As the casino business grew, the margins got better.

The chances of winning at casinos are meager, and the amount of money you need for working capital is insufficient. Thus, it can make a lot of money from EBITDA. In the same way, in an online gaming platform, the costs are limited to the website and app management, and the margins grow as the traffic increases. The hospitality business is a low-margin business that doesn’t make much money, which means that it doesn’t significantly impact the margins.

As a group, they did well.

Below is a chart that shows how much each segment of the business contributed to the top line.

It’s clear from this chart that the gaming business’ revenue contribution will rise from 10% to 35% by 2021. But even though online gaming made more money, its share of total revenue went down as the casino business started to earn money again, making it less critical. The gaming business made more money because of sales growth in the division and a drop in sales in the casino division because of the pandemic. The gaming business is expected to be strong because more people in India have smartphones and more people access the internet. Nonetheless, the hospitality business has stayed at about 10% of GDP for a long time.

It has a significant impact on the whole world.

It has been one of the worst-hit industries in the last two years, and everyone in this field has felt it. It was hard for people to go out during the first and second pandemic waves because they didn’t want to get sick. Also, the lockdowns limited the number of people in public places and, in some cases, did not allow some businesses to start back up even after fewer Covid cases. For business, casinos and hospitality companies had to rely on the rules of the place where they did business. But online gaming thrived because people were forced to stay inside because of the lockdowns, which led to more people going to these portals.


Delta Corp’s stock has gained 15% over the last five years, but the chart below shows how volatile the stock is.

The company has a premium because it is the only one that lists casinos. The company has also been growing its top line at a rate of 21% per year from 2014 to 2020, which made the stock worth a lot in the years before Covid. High valuation multiples like P/E at 110+ and EV to EBITDA at 50+ are now, and this is based on the number itself.

Another way to think about this is to look at the annualized EPS or the EV/EBITDA. There are four times as many times. You should think about what the company would have made if it had not been limited. A typical situation can be seen through the assumptions, which helps us understand the company’s performance better.

When we look at the valuation multiples again, we can see that the P/E is about 43 [309 / (4*1.8)]. In this case, the EV/EBITDA ratio is 25: 8,174 / (4*81) = 25

Note: The math was done on April 18, 2022.

Such annualized numbers have been considered in light of the rising QoQ trend of EPS in the pre-pandemic era. A growing company with a scarcity premium but a significant business risk that trades at such high multiples could be a good deal, but chances are also.


Significant risks for the casino business are:

  • Changes in the law.
  • Uncertainty about whether the license will be renewed after five years.
  • Some local governments unwillingness to allow land casinos.

To get in, you have to be a tourist.

There is a lot of competition in the online skill-based gaming business, and big companies spend a lot of money to get a more significant market share. This can lead to lower profits or even losses. Another reason this business is likely to have a lot of competition and low yields is that there aren’t many barriers to getting in.

Companies that rely on travel and tourism face significant risks because of the pandemic. After looking at these factors, investors need to consider their risk tolerance and see if the company fits their expectations and portfolio. The risk-reward ratio can be subjective, which means that when you invest, you need to make a personal decision.

edited and proofread by nikita sharma

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