Delta Corp's FY25 Results: Sufficient to Conquer Its Obstacles?
Delta Corp Faces GST Show-Cause Notice and Legal Battle, Affecting Investor Sentiment
Delta Corp, a prominent player in India's gaming and casino industry, is grappling with a significant challenge in the form of a retrospective GST show-cause notice demanding ₹23,207.30 Crores for the period between July 2017 and November 2022. This demand, which continues to impact investor sentiment, could have far-reaching implications for the company's future.
The resolution of the GST issue and the successful execution of Delta Corp's revamped casino strategy are crucial for the company's future performance. However, the ongoing legal battle with the government over GST has negatively impacted investor sentiment.
In February 2025, Delta Corp announced plans to launch a new floating casino in Goa, replacing the existing Deltin Royale. The company is also focusing on boosting its casino capacity and improving its hospitality segment.
In an effort to reduce its exposure to the online gaming sector, Delta Corp sold a 51% stake in Deltatech Gaming to Head Digital Works, generating a gain of ₹57.14 Crores. The merger with HDW, expected to be completed by June 2026, will leave Delta Corp with a minority stake in the combined entity.
Delta Corp's FY25 results were a mixed bag, with exceptional gains masking the underlying pressures in its core gaming and casino businesses. The company reported a dramatic year-on-year surge in net profit, but the core operational profitability weakened due to a 12% decline in EBITDA in Q4 FY25.
The heart of the dispute lies in the valuation of the taxable amount. The central government is taxing the gross bet value (GBV) rather than the internationally accepted gross gaming revenue (GGR), a decision that affects the basis of tax calculation and is at the core of Delta Corp's legal challenge before the Supreme Court.
The retrospective tax demand, amounting to ₹33,500 crore, has created substantial financial and operational uncertainty for Delta Corp. The company has vigorously contested this demand, arguing constitutional and procedural issues, including the legislative competence of the Centre to levy such taxes on gambling activities.
Delta asserts that Article 246A of the Constitution does not empower the central government to tax gambling activities and that local state laws governing casinos (such as those in Goa and Sikkim) should take precedence. The dispute raises questions about the nature of supply in casino gaming and GST's interpretation under the Constitution.
Despite paying substantial taxes under valid state licenses in Goa and Sikkim, Delta's operations are being targeted by retrospective central GST demands. This conflict between state regulatory frameworks and central taxation policies exacerbates compliance complexities.
The uncertainty around the tax regime and ongoing legal battles may affect Delta Corp’s plans to expand, such as deploying new state-of-the-art gaming vessels, given the high tax burden and regulatory unpredictability in the sector.
Parallel to the casino tax dispute, the gaming industry faces additional regulatory challenges, such as overlapping jurisdictions between states and central bodies over online gaming and games of skill, potentially influencing Delta’s broader gaming interests.
In summary, Delta Corp’s chief challenge under the 28% GST regime is the retrospective tax demand based on GBV, which is contested at the highest judicial level due to constitutional, procedural, and valuation disputes, combined with the complexity of balancing local casino licensing compliance with central taxation and evolving regulatory frameworks.
The coming months will be crucial in determining whether Delta Corp's initiatives will help it regain momentum and rebuild investor confidence. The merger with HDW and the demerger of its hospitality and real estate businesses into a separate entity, Delta Penland Private Limited (DPPL), are steps towards insulating valuable assets from the risks associated with the gaming division's GST litigation.
The legal challenge facing Delta Corp over GST demands could impact its future business strategies, including planned expansions like the launch of a new floating casino in Goa.
The ongoing dispute with the central government over the valuation of taxable amount under GST, specifically the use of Gross Bet Value (GBV) instead of the internationally accepted Gross Gaming Revenue (GGR), presents a significant hurdle in the company's finance and investing endeavors.
