Best Casino Stocks

Casino is a heavily restricted sector in India with only three states—Goa, Sikkim and Meghalaya—and the union territories of Dadra and Nagar Haveli and Daman and Diu legalising casino games.

However, online gaming like fantasy sports and real money games are unregulated and operate within the exception for games of skill as opposed to games of chance.

Casinos and gaming companies suffered a setback recently when the Goods and Services Tax Council decided to levy a uniform GST of 28% on the entire stake for casinos, horse racing and online gaming rather than imposing a rake fee and removed the distinction between a game of chance and a game of skill.

What are casino stocks?

Casino stocks are shares of companies that run casinos where gambling or game of chance is allowed. However, in India there is only one listed company which runs physical casinos—Delta Corp Ltd.

However, there are a number of online gaming companies, which are largely unregulated and operate within the exception for games of skill. These online gaming companies also offer real money games, which are similar to gambling.

Why invest in casino stocks?

According to German database company Statista, total revenues of casino games in India is projected to reach $52.50 billion by 2027, growing at compounded annual growth rate of 15% between 2022 and 2027.

In the absence of many pure-play casino stocks, investors can also look at online gaming companies. According to the National Investment Promotion and Facilitation Agency, India is the world’s largest mobile gaming market in terms of app downloads. There are 400 million gamers and over 500 gaming studios with India producing three gaming unicorns, or privately held companies with a valuation of over $1 billion. These are Games 24X7, Dream11 and Mobile Premier League.

The National Investment Promotion & Facilitation Agency has projected the online gaming industry to grow at a compounded annual growth rate of 33% to reach Rs 25,300 crore by 2026-27.

The online gaming industry is dominated by game development companies. According to TeamLease, game development companies account for 70% of the gaming industry.

Overview of casino and gaming stocks

Delta Corp: Delta Corp is the only listed casino operator in India. The company operates three offshore gaming vessels on Mandovi River in Goa, an all-suite hotel and onshore casino in north Goa, an integrated resort in Daman and land-based casino in Sikkim and Nepal. Besides casinos, the company operates adda52.com, an online platform for gaming.

Delta Corp has a market cap of about Rs 3,800 crore and revenues of Rs 594 crore in 2022-23. The company has a strong annual growth in earnings per share and its return on capital employed has been improving in the last couple of years. The company has a 12-month trailing EPS of Rs 8.92 and return on equity of Rs 10.45.

However, mutual funds have pared their holding in Delta Corp in recent months and its net cash flow has been declining.

Nazara Technologies: Nazara is a mobile gaming company and sports media platform. The company, which offers interactive gaming and eSports, owns World CC and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin and Sportskeeda in eSports and eSports media, and owns World Cricket Championship and CarromClash. It also owns real money game Classic Rummy. The company earned a revenue of Rs 406.3 crore from gaming in 2022-23.

Nazara Technologies has a market cap of about Rs 6,000 crore. The company stock has strong momentum with the current share price above the short, medium and long-term moving averages. The company’s 12-month trailing earnings per share has grown

OnMobile Global: OnMobile offers mobile gaming products such as ONMO and Challenges Arena through B2B and D2C channels. The company’s mobile gaming revenues increased 81.8% on year to Rs 42.3 crore in April-September 2023. The company has 28.7 million mobile gaming subscribers as on September 30, 2023.

OnMobile has the lowest market cap among the four companies at Rs 12,500 crore. The company has low debt and growth in its 12-month trailing earnings per share has been high.

Zensar Technologies: The software services company provides application services for gaming equipment manufacturers and online gaming software companies. The company has a specialised game testing centre offering a complete end to end testing platform for gaming companies. Zensar has a market cap of Rs 11,400 crore.

The company’s 12-month trailing earnings per share growth has been high with return on equity increasing. The company’s net cash flow has been declining. However, return on capital has been declining.

Performance of casino stocks

Things to consider before investing in best casino stocks

The sector has been witnessing impressive growth with internet and mobile penetration increasing in the country. However, the decision of the GST Council earlier this year to charge a uniform 28% on entire stake is a negative for the sector. Therefore, investors looking to invest in this sector must carefully evaluate their options.

Barring a few exceptions, most states in the country don’t allow casinos in their territory. Though the government has been talking about self-regulation, the gaming companies are basically operating within the exception for game of skill. Regulation by any state or the central government could be detrimental to the industry.

Conclusion

Although COVID-19 pandemic disrupted the casino industry, it gave a big boost to online games in India. Over the last few years, India has emerged as the world’s largest mobile gaming market in terms gamers and app downloads. On the flip side, there have been growing calls to regulate the casino and gaming industry. This could be a detriment to the growth of the sector.