Delta Corp Hits 20% Lower Circuits, New 52-Week Low On Rs 16,823 Crore Tax Shortfall Notice

Indian gaming and hospitality company, Delta Corp's share price traded in deep red on Monday after the company and its subsidiaries received tax notice for a shortfall of massive Rs 16,883 crore. Investors dumped Delta Corp shares to the point it touched a new 52-week low. Its lower circuit levels also increased from 15% to a huge 20%. The stock continues to bleed severely on exchanges.

In the early trade, Delta Corp touched a new 52-week low of Rs 140.20 apiece, which is also its 20% lower circuits on BSE.

Meanwhile, at the time of writing, the stock traded at Rs 145.30 apiece, down by Rs 29.95 or 17.1% on BSE. Its market cap is around Rs 3,893.39 crore.

As per its regulatory filing, Delta Corp last week on September 22, said that it has received an intimation for payment of shortfall tax under Section 74(5) of the CGST Act, 2017 and Goa SGST Act, 2017, from the Directorate General of GST Intelligence, Hyderabad ("DG Notice").

In the first notification, the company is advised by the DG Notice to pay an alleged tax liability of over Rs 11,139.61 crore along with interest and penalty for the period from July 2017 to March 2022, failing which a show cause notice will be issued to the company under Section 74(1) of the CGST Act, 2017 and Goa SGST Act, 2017.

Delta said, "The amount claimed in the DG Notice is inter alia based on the gross bet value of all games played at the casinos during the relevant period. Demand for GST on gross bet value, rather than gross gaming revenue, has been an industry issue and various representations have already been made to the Government at an industry level in relation to this issue."

But Delta has already announced to pursue legal remedies to challenge the tax demand.

It added, "The company has been legally advised that the DG Notice and the tax demand are arbitrary and contrary to law, and the Company will pursue all legal remedies available to it to challenge such tax demand and related proceedings."

While investors wrapped their heads around the huge tax demand of Rs 11,139.61 crore, Delta released another notification to the exchanges on September 22.

In its other filing, Delta said that the company and or its subsidiaries have received intimations for payment of shortfall tax for the period from July 2017 to March 2022.

As per the announcements, Delta Corp for its Casino Deltin Denzong situated in Sikkim received a tax notice of Rs 628.20 crore, while its subsidiaries Highstreet Cruises and Entertainment and Delta Pleasure Cruise Company received tax demand notice of Rs 328.99 crore and Rs 1,765.21 crore respectively.

Delta's subsidiaries are also pursuing all legal remedies available to them to challenge such tax demands and related proceedings.

Together, Delta and its subsidiaries have received a tax demand notice of a whopping Rs 16,822.97 crore.

On Trendlyne, Delta Corp stock is defined as a 'Falling Comet' which is generally weakening stock in terms of durability or momentum, and falling below the lower thresholds. Further, Delta's RSI and MFI are in mid-range at 34.3 and 42.8, while its price-to-book value is below the industry median of 1.74. However, its 1-year Beta is at 1.42, indicating a very high volatility scenario.

In the June 2023 quarter, the company reported highest-ever consolidated gross revenue from operations of Rs 338 crore, while EBITDA margins improved over 500 bps on a QoQ basis and over 250 bps on a YoY basis, which stands at Rs 110 crore. Further, the PAT margin improved over 225 bps on a QoQ basis and over 200 bps on a YoY basis, which stands at Rs 68 crore. Also, in the quarter, the company's Casino Gaming Segment achieved an EBIDTA of Rs 101 Crores,
reflecting a margin improvement of over 1000 bps on a QoQ basis and over 100 bps on a YoY basis.

The company's business includes world-class gaming, entertainment and hospitality that is tailored to suit Indian customers and the Indian lifestyle. The company has over 2,000 live gaming positions and with state-of-the-art offshore and onshore casinos.

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