Delta Corp crashes 20%, After Receiving ₹16,822 Crore Tax Notice

Delta Corp Ltd, a prominent gaming company, saw its stock plummet by 20% during the intraday session on the Bombay Stock Exchange (BSE), touching its 52-week low of ₹140.20. This significant decline followed the company's announcement that it had received a staggering tax shortfall notice of ₹16,822 crore on Friday, September 22, 2023.

Tax Notices Received

In addition to the substantial ₹16,822 crore notice, Delta Corp also revealed that it had received interest and penalty charges from the Directorate General of GST for the period spanning July 2017 to March 2022. Specifically, one notice of ₹11,140 crore was directly issued against Delta Corp. In a separate instance, Delta Corp encountered a tax shortfall of ₹5,682 crore concerning three of its subsidiaries: Casino Deltin Denzong, Highstreet Cruises, and Delta Pleasure Cruises.

The company further clarified that it had received intimation for the payment of the tax shortfall under Section 74(5) of the CGST Act, 2017, and Goa SGST Act, 2017, from the Directorate General of GST Intelligence, Hyderabad, referred to as the "DG Notice." These notices instructed Delta Corp and its subsidiaries to settle the alleged tax shortfall along with associated interest and penalties. Non-compliance could lead to the issuance of a show-cause notice under Section 74(1) of the CGST Act, 2017, and Goa SGST Act, 2017.

Industry-Wide Concern

Delta Corp pointed out that the amount claimed in the DG notice was based on the gross bet value of all games played at the casinos during the relevant period. This approach, demanding GST on the gross bet value rather than the gross gaming revenue, has been an industry-wide issue. Various representations had been made to the government concerning this matter. 
The company and its subsidiaries received legal advice stating that the tax notices and demands are not fair and go against the law. They plan to use all legal options to challenge these tax demands and the related legal processes

This development follows a series of challenges for Delta Corp, including the resignation of its chief financial officer just a month ago. Two months earlier, the company had announced the postponement of the initial public offering (IPO) of its online gaming business. These decisions were prompted by the government's announcement to impose a 28% GST on the gross bet value for casinos three months ago.

Over the past six months, Delta Corp Limited has delivered a negative return of -20%. Looking at a one-year timeframe, the company's returns have been negative, with a decline of -29%. In the long-term perspective, specifically over the last five years, Delta Corp has also experienced negative returns, with a decrease of -32%. It's important to note that the stock of Delta Corp is currently under the F&O (Futures and Options) ban, meaning that no new positions can be created in the stock.

Q1 Performace

Delta Corp Limited announced a net profit growth of 18.9% year-on-year, reaching ₹67.9 crore in FY23, compared to ₹57 crore in FY22. Additionally, their revenue showed a 9% increase, reaching ₹272.8 crore in FY23 compared to ₹250.3 crore in FY22. The EBIDTA also demonstrated growth, rising by 9.5% to ₹95.8 crore. Furthermore, the company noted that the PAT margin exhibited improvement by over 225 basis points on a quarter-on-quarter basis and over 200 basis points on a year-on-year basis.

In conclusion, Delta Corp Ltd faces significant challenges with a massive tax notice, legal battles, and a turbulent stock performance. The company remains resolute in defending its position while navigating a complex regulatory landscape.