Shares of Delta Corp Ltd crashed 20% on Tuesday, July 12, 2023, to hit an intraday low of Rs 197.40 on NSE. The plunge comes after the GST Council decided to levy a 28% GST on online gaming, horse racing, and casinos. The decision to raise GST by 10% online gaming is negative for the investors of the online gaming firm
"GST Council has decided that online gaming, casinos and horse racing will be taxed at 28% at entry point on full face value of bets. However, the effective date for the 28% GST levy on online gaming will roll out after amendments to GST law," said Finance Minister Nirmala Sitharaman on Tuesday. This hit Delta Corp whose 80% of the gross income from operations came from gaming operations in FY23, and about 15% from online skill gaming operations
Meanwhile, shares of other online gaming companies like Nazara Technologies, Zensar Technologies and OnMobile Global also tumbled today. Gaming stocks took a hit as the increased GST comes at a time when online gaming businesses were on the road to recovery with the formation of Self Regulatory Body (SRB) and lifting of ban on Battlegrounds Mobile India (BGMI)
“India is probably the only Country to levy GST on full face value on all categories of online games. The blanket proposal to levy GST on full face value on online gaming will possibly put an end to the sub-judice debate of ‘game of skill’ vs ‘game of chance. This change will bring game of skill at par with wagering contracts which are in the nature of gambling and betting," said Kishore Kumar, Lead, Indirect Tax, Taxmann.
Currently, online gaming platforms pay 18% GST on the platform fees. Shares of Delta Corp opened at Rs 222.05 on NSE today and fell around 20% in early deals. Market cap of the gaming and entertainment firm declined to Rs 5,615 crore in the current session. Total 13.07 lakh shares of the firm changed hands amounting to a turnover of Rs 2,856.88 lakh
Delta Corp shares have gained around 16% in the last one year. Delta Corp shares hit a 52-week high of Rs 259.95 on June 28, 2023 and a 52-week low of Rs 172.30 on July 12, 2022. In terms of technicals, the relative strength index (RSI) of Delta Corp stands at 53.1, signaling it's trading neither in oversold nor in the overbought zone. The stock has a one-year beta of 1, indicating average volatility during the period
According to Trendlyne data, Delta Corp's Debt to Equity Ratio is zero as the company is debt-free. Its Return on Equity (ROE) for the last financial year was 11.8%, in the normal range of 10% to 20%. Meanwhile, its Price to Earnings Ratio is 22.7, lower than its sector PE ratio of 85.6. After Wednesday's fall, the stock is now trading below their 5-day, 10-day, 20-day, 50-day, 100-day and 200-day moving average
Delta Corp stock has declined in three out of the last four trading sessions. It is now trading at the lowest level in two months. Delta Corp is also in the F&O ban, which means traders cannot create any new positions in the stock. What is currently taking place is selling in the cash market and unwinding of existing positions
Vaibhav Kaushik, Research Analyst, GCL Broking said, "As we know already 30% TDS is applicable on gambling as well 28% GST directly impacts the users to play such games as after taking high risk, users have to pay more than 50% as taxes to government. So, from our point of view, at least next two quarter results must be tracked. The stock can range between Rs 150 to Rs 210. So avoid is the recommendation."
Abhijeet from Tips2trades said, "Expectedly after proposing 28% GST on online gaming & casinos, Delta Corp stock price has crashed with a strong support at Rs 173. Till daily resistance of Rs 222 is not broken on a closing basis, investors should avoid buying."
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