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Forget the beaches, Goa is about gambling now

"A dollar won is twice as sweet as a dollar earned," says actor Paul Newman in The Color of Money. Little wonder that the stock market is betting on Delta Corp Ltd that operatesgambling,among its other businesses -real estate and hospitality.It is the only listed company in the space, the most predominant player and can be considered a proxy for the sector.

The stock market seems excited about the prospects of the gambling business. And for good reason.Delta Corp's share price has bucked the overall sluggish trend in the stock market by gaining a staggering 166% in value over the past year while the BSE 500 index rose only 5.82% during the same period.

The Alchemy report estimates the total revenue from both onshore and offshore casinos at around Rs 160 crore.Getty Images

In a detailed report on the company, stockbroking firm Alchemy estimates that by March 2013, Delta Corp'sgaming and hospitality business in Goa will generate an operating profit of Rs 135 crore on total revenue of Rs 575 crore."As close to 80% of a casino's costs are fixed, we expect a higher number of visits to result in cash flows from operations of over Rs 300 crore over the next two years," the brokerage says about Delta Corp.

Only two Indian states, Goa and Sikkim, and the Union Territory of Daman and Diu allow gambling as it is taboo in many communities. But Delta Corp hopes families will regularly visit casinos."We want families to visit our casinos. There will be entertainment for family members not interested in using the casino," Hardik Dhebar, CFO at Delta Corp toldFirstpost. "We are looking at the growing Indian middle class to push growth."

On May 17, Delta announced a deal to acquire 51% stake in Daman Hospitality, a resort in Daman, for Rs 50 crore. The company plans to build a casino in Daman, and one in Sri Lanka. In Goa, it has four offshore casinos and 14 onshore casinos operational.

The Alchemy report estimates the total revenue from both onshore and offshore casinos at around Rs 160 crore. Delta Corp owns three of the six offshore casino licences issued in Goa so far. These were issued in 2008 and are valid for 10 years and renewed every five years.

Analysts expect the number of gaming visits to Goa and gaming revenue per visitor to go up. The revenue per visitor in Goa and other key casino locations like Singapore, Macau and Las Vegas is listed in the table.

The company reported a revenue of Rs 376 crore for the year ended March 2011. This was largely due to the sale of prime real estate assets in Mumbai. The market capitalisation of the company is just under Rs 1,300 crore.

• According to the analyst report, the four offshore casinos currently operational in Goa have 106 tables and 75 slot machines. The entry fee is Rs 3,500 per player, of which Rs 2,000 per player goes to the local government in Goa.

• Average visits per day are 285. Back of the envelope calculation indicates a Rs 23 crore revenue for the Goa government from just three casinos managed by Delta Corp.

• The Goa government also charges an annual licence fee of Rs 5 crore per offshore casino operator. The licence fee is collected on a monthly basis from onshore gaming operators.

• The gaming and entertainment tax is pegged at 10% of gaming revenue for both onshore and offshore operations. For year ended March 2010, the Goa government could have received Rs 16 crore in revenue.

• Besides Delta Corp, other players in offshore casinos include the Salgaonkar Group, Goa Coastal Resorts. In case of onshore casinos, the Marriott and the Majestic Hotel are major players. Financial details of these entities are unavailable as they are privately owned.

• Minority share holders of Delta Corp include Lashit Sanghvi , Rakesh Jhunjhunwala, Radhakishan S Damani and Ramesh S Damani who bought into the company in September 2010.


Updated Date: Dec 20, 2014 03:50 AM

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