Why Delta Corp's Share Price Is Shooting Up Today

Shares of Delta Corp were gaining after the firm reportedly looks to expand its offline presence after a tax hike on its digital gaming operations.

What Happened: Delta Corp said it is looking at a strategic realignment of its expansion strategies following the implementation of a higher goods and services tax (GST) rate of 28% on online gaming and casinos, Moneycontrol reported.

This move comes as the company navigates challenges posed by the COVID-19 pandemic and seeks to maintain profitability amid regulatory challenges.

CFO Anil Malani told the news publication that the company plans to invest ₹1,100 crore in the company’s offline business over the next two years. This substantial investment aims to restore profit margins to at least 38%, which were adversely affected by the combination of pandemic-induced disruptions and the imposition of higher taxes.

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The company has temporarily halted its online gaming expansion plans in response to the elevated GST rate and ongoing legal battles, including a significant ₹24,000 crore GST evasion notice currently under litigation. Additionally, plans for the development of an integrated resort have been slowed down due to the revised GST structure, prompting a reevaluation of expansion timelines.

Better Topline Hopes: Delta Corp’s investment blueprint includes several key projects in Goa, including the construction of a new offshore casino ship, a hotel featuring a casino and a theme park. The company hopes to bolster its offline business to propel its turnover from the current range of ₹1,100 crore-₹1,200 crore to ₹1,600 crore-₹1,700 crore by the fiscal year 2025-26.

Despite anticipation of short-term revenue impacts, particularly due to maintenance work on one of its offshore vessels and traditionally lean quarters, Delta Corp remains optimistic about its long-term prospects. However, the company is grappling with a margin hit of 6-8% resulting from changes in GST charging practices, specifically on the sale of chips.

Price Action: Delta Corp’s share price was up 2.66% at ₹146.60 around noon on Friday.

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