Delta Corp, the lone listed player in the casino industry, witnessed a substantial drop in its share price on Wednesday, plummeting nearly 28%. This sharp decline came in response to the recent decision by the GST Council to impose a uniform 28% Goods and Services Tax (GST) on online gaming, casinos, and horse racing.
Starting the day with a lower circuit of ₹222.15 apiece on the BSE, the stock continued its downward trend, hitting an intraday low of ₹178.20 apiece. Although trading slightly above its 52-week low of ₹172.30 apiece, which was recorded on July 12, 2022, the significant decrease raises concerns for investors and customers alike.
The implementation of a 28% GST on the full value of bets in online gaming, horse racing, and casinos is expected to have a negative impact on the industry. However, market analysts view the decline in Delta Corp’s share price as a potential buying opportunity. The company, being the sole listed player in the casino sector, is believed to have the pricing power to pass on the increased costs to its customers. It is anticipated that the company may adjust its pricing structure in the next quarter, minimizing the impact on its operational business viability.
From a technical perspective, Delta Corp’s shares have reached a critical support level at ₹175, which holds historical significance since March. Market experts warn that a close below this level could potentially result in further weakness, with the stock potentially heading towards the ₹140 level. On the upside, the immediate and critical resistance lies at the 200-day moving average (DMA) of ₹215, followed by a major hurdle at ₹240. Breaking through these levels would require considerable strength and could indicate a shift in momentum. Conversely, if Delta Corp manages to hold above the ₹175 support level, a consolidation phase within the range of ₹200 to ₹240 is likely, with the stock trading without any significant directional bias.
The recent decline in Delta Corp’s stock price is seen as a reaction to the GST Council’s decision. However, the company’s long-term business prospects remain intact. Delta Corp operates three casinos in Goa under the DELTIN brand. Despite the short-term setback caused by the GST levy, Delta Corp reported a 6% rise in net profit to ₹51 crore for the quarter ended March 2023. Additionally, revenue from operations increased by 4% to ₹227 crore in the same quarter.
In conclusion, the sharp decline in Delta Corp’s share price following the GST Council’s imposition of a uniform 28% GST on online gaming, casinos, and horse racing raises concerns. However, market analysts see this as a potential opportunity for investors. Despite the challenging environment, Delta Corp’s pricing power and long-term growth potential make it an attractive investment option. As the company adjusts its pricing strategy and navigates through this period, maintaining a focus on long-term growth objectives will be crucial.