18 September 2014
Delta Corp
spotlight
The Idea Junction
Stock Info
Bloomberg
CMP (INR)
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
DELTA IN
90
227.6
20.5/0.3
128/59
-1/-32/5
Best play on India's fledgling gaming industry
Daman casino launch to be key trigger
Financials & Valuation (INR b)
Y/E March
Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yld. (%)
2015E 2016E 2017E
3.6
1.0
0.4
1.8
35.4
5.2
8.5
16.2
49.7
2.5
22.2
0.3
5.2
1.7
1.0
4.2
38.5
11.4
15.9
25.0
21.4
2.3
12.4
1.0
6.5
2.3
1.4
6.2
48.0
43.1
15.3
22.2
26.7
14.4
2.1
8.9
1.6
Having established leadership in offshore casinos in Goa, one of the three states/UTs in
India that allow gaming, Delta Corp (DELTA) is launching India's first land-based casino in
Daman (subject to approval).
With the launch of its casino in Daman and commencement of its third offshore property
in Goa, DELTA will see a near doubling of its gaming capacity and further cement its first-
mover advantage.
Given the significant growth potential for India's gaming industry, DELTA's dominant
position, and strong earnings outlook for its gaming business, we believe the company
is well placed.
-4.8 132.8
Dominating India's gaming industry
DELTA is India's first listed pure-play gaming company. It owns three of the six
licenses for offshore casinos in Goa and enjoys a dominant share of India's
offshore casino market. In 2HFY15, it will be launching (subject to approvals) a
casino housed in Daman's only five-star hotel; this will be Daman's first land-
based casino. Daman is likely to be much larger footfall market than Goa, attracting
huge crowds from Mumbai and Gujarat. We expect DELTA to replicate its success
in Goa's offshore casino market in the land-based casino market in Daman. Also,
given that the Goa government is unlikely to issue new licenses and that land-
based casinos are allowed only in five-star hotels, DELTA's competitive advantage
should sustain.
Shareholding pattern (%)
As on
Jun-14 Mar-14
Promoter 41.3
41.6
DII
0.3
0.2
FII
13.8
14.4
Others
44.6
43.8
Jun-13
41.7
0.2
11.4
46.7
Notes: FII includes depository receipts
Launch of Daman casino to be key trigger
DELTA is by far the largest casino operator in India, with ~2,000 gaming positions.
The launch of its casino in Daman (subject to approval) and commencement of its
offshore property,
Deltin Caravela
in Goa will take its capacity to ~3,400 gaming
positions. With near doubling of its gaming capacity, DELTA will be in a better
position to exploit the potential that the nascent industry offers. Further, we
believe DELTA is at an inflection point, currently. The investment phase is behind
and the launch of the Daman casino could trigger significant cash generation as
well as RoCE / RoE improvement, beginning FY16.
Stock performance (1 year)
Spotlight
is a new offering from the Research team at Motilal Oswal. While our Coverage Universe
is a wide representation of investment opportunities in India, there are many emerging names in the
Mid Cap Universe that are not under coverage. Spotlight is an attempt to feature such mid cap stocks
by visiting such companies. We are not including these stocks under our active coverage at this point
in time. Motilal Oswal Research may or may not follow up on stocks under Spotlight.
Atul Mehra
(Atul.Mehra@MotilalOswal.com); +91 22 3982 5417
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 3982 5426
Investors are advised to refer through disclosures made at the end of the Research Report.
RED: Caution
AMBER: In transition
GREEN: Interesting
1

spotlight
| Delta Corp
Expect PAT to post strong growth
DELTA has exited its real estate business in FY14. Its core business going forward will be gaming
and gaming-related hospitality. We expect DELTA's revenue to grow at a CAGR of 5% over FY14-17,
led by 30% CAGR in its gaming and hospitality business. EBITDA would post 15% CAGR, with
margin expanding from ~27% to ~35%. PAT would grow at a CAGR of 49%. Cash flows and return
ratios should improve substantially, going forward. We expect DELTA to be a debt-free, net cash
company by FY17.
Well placed to capture strong growth
DELTA trades at 49.7x FY15E, 21.4x FY16E, and 14.4x FY17E earnings. We do not have a rating on the
stock. However, given the significant growth potential for India's gaming industry, DELTA's
dominant position, and strong earnings outlook for its gaming business, we believe it is well
placed.
Strong appetite for gaming in India
Source: Company, MOSL
DELTA's gaming business has posted a robust 37% CAGR over the last three years
Gaming revenues (INR m)
4,580
%
CAGR 37
5,638
2,579
1,637
3,123
1,003
1,440
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
Source: Company, MOSL
18 September 2014
2

spotlight
| Delta Corp
Company description
Delta Corp (DELTA) is a gaming and entertainment company, with a dominant
presence in Goa’s offshore casino market. It owns three of the six offshore gaming
licenses in the state of Goa. DELTA is the largest and only listed gaming company in
India. It has ~2,000 gaming positions in Goa and is rapidly expanding. It will be soon
starting a first of its kind integrated casino resort in Daman (subject to approvals),
with 1,200 gaming positions. The full benefits of this venture should begin to accrue
from 2HFY15. Given that Daman has a catchment area of 35m people against just
3m people for Goa, this casino resort would be a key trigger for DELTA.
In FY14, gaming contributed 45% of revenues, hospitality contributed 1%, and real
estate contributed 52%. DELTA has decided to strategically focus on its gaming
business and has exited its real estate business. In FY16, we expect gaming to
contribute 89% of revenues and hospitality to contribute 11%; there would be no
contribution from real estate.
Revenue composition for FY16E (INR m)
Hospitality
549
11%
Gaming
4,580
89%
DELTA’s Goa gaming properties
Source: Company, MOSL
18 September 2014
2

spotlight
| Delta Corp
Dominating India’s gaming industry
Enjoys lion’s share of India’s offshore casino market
DELTA is India’s first listed pure-play gaming company. It owns three of the six licenses
for offshore casinos in Goa and enjoys a lion’s share of India’s offshore casino market.
In 2HFY15, it will be launching a casino housed in Daman’s only five-star hotel; this will
be India’s first land-based casino outside Goa. Daman is likely to be a much larger
footfall market as compared to Goa, attracting huge crowds from Mumbai and
Gujarat. We expect DELTA to replicate its success in Goa’s offshore casino market in
the land-based casino market in Daman.
Also, given that the Goa government is unlikely to issue new licenses and that land-
based casinos are allowed only in five-star hotels, DELTA’s competitive advantage
should sustain.
Has established leadership in Goa’s offshore casino market
Goa is widely touted as the
gaming capital of India
Only two states and one union territory (UTs) in India allow gaming – Goa, Sikkim
and Daman. Goa is widely touted as the gaming capital of India. It is a popular
tourist destination, famous for its beaches and long stretch of coastline (131km). It
attracts around 3m tourists annually and around 12% of all foreign tourist arrivals in
India, who spend around USD350m annually. The gaming and entertainment tax in
Goa at 15% of gross gaming revenues is favorable compared to Macau and the US.
Further, Goa is located in close to major Indian cities – an hour’s flight from
Mumbai, Bangalore, and Chennai, 1.5 hours from Hyderabad, and 2.5 hours from
Delhi. It has the potential to attract visitors from South East Asia and the Middle
East, as well.
Goa is located within 3-hour flight from all regions in India
Source: Company, MOSL
DELTA enjoys a lion’s
share of Goa’s offshore
casino market
DELTA has already established itself as the leader in Goa’s offshore casino market. It
owns three of the six offshore casino licenses in Goa and enjoys a dominant share of
India’s offshore casino market. Its two operational casinos on the River Mandovi,
Deltin Royale
and
Deltin JAQK,
have a combined capacity of ~2,000 gaming
positions. The commissioning of
Deltin Caravela,
currently under renovation, will
add 200 gaming positions. We expect 14% CAGR in visitations in DELTA’s offshore
3
18 September 2014

spotlight
| Delta Corp
properties and 5% CAGR in gross gaming revenue per person, which should drive
19% revenue CAGR for its Goa properties over FY14-17.
DELTA owns three of the six offshore casino licenses in Goa
Name of Casino
Deltin Royale
Deltin JAQK
Deltin Caravela
Casino Pride
Casino Pride 2
Casino Rio
Owner
Delta Corp
Delta Corp (Highstreet Cruises – Subsidiary of Delta Corp)
Delta Corp (Delta Pleasure Cruise – Subsidiary of Delta Corp)
Goa Coastal Resorts owned by Khetarpal
Goa Coastal Resorts owned by Khetarpal
MDLR Group
Operational
Yes
Yes
No
Yes
Yes
No
Source: Company, MOSL
Now launching Daman’s first casino
We expect DELTA to
replicate its success in Goa
in the casino market
in Daman
In 2HFY15, DELTA will be launching a casino housed in Daman’s only five-star hotel,
The Deltin;
this will be India’s first land-based casino (subject to approval) outside
Goa. The Daman property will have ~1,200 gaming positions. Daman is likely to be a
much larger footfall market, given that it is a drive-in destination for a large
catchment of over 35m people from Mumbai and Gujarat. Daman is ~2.5 hours’
drive from Mumbai and 1.5-4 hours’ drive from Gujarat. Because of the ban on
alcohol in Gujarat, Daman attracts many visitors from there. Also, while Daman is
located along Gujarat, it is governed by the same Gambling Act as Goa.
We expect DELTA to replicate its success in Goa in the land-based casino market in
Daman.
Daman is strategically located between Mumbai and Gujarat
Source: Company, MOSL
Daman has a huge catchment area of over 35m people
City
Mumbai
Surat
Vadodara
Ahmedabad
Population (mm)
18.5
4.5
1.8
6.5
Distance to Daman (km)
~180km
~120km
~250km
~350km
Source: Company, MOSL
18 September 2014
4

spotlight
| Delta Corp
Daman is favorably positioned to become a leading gaming and leisure destination
Optimal Location to Become New Gaming and Entertainment Market
Located along the coast in the state of Gujarat, but governed by the same gambling act as that of Goa
which has adopted by Daman
Alcohol consumption is not permitted in Gujarat
Proximity to Mumbai, Gujarat provides great opportunity for Daman to become India’s leading gaming,
entertainment, leisure & MICE venue
Favorable Industry and Regulatory Dynamics For Delta
Delta has the first mover advantage in Daman
Only company to get a in-principle gaming licenses in Daman
Only foreseeable Casino in Daman in near future
New land based licenses are likely to only be granted if 5-star hotel is built (same regulation as Goa)
Additional Supply to Provide Incremental Value
While tourism in Daman is poised to expand significantly, FDI restrictions and lack of resources / capital
limits significant foreseeable casino competitor in the near term
As the market matures, new supply will only drive incremental traffic to the region
Source: Company, MOSL
Strong entry barriers to ensure sustenance of competitive advantage
The Goa government is
unlikely to issue new
licenses for offshore
casinos…
Casino gaming in India has several entry barriers, with licensing being the biggest
hurdle. DELTA owns three of the six licenses for offshore gaming in Goa, and the
state government is unlikely to issue new licenses in the near future. It has a strong
first mover advantage in Goa’s offshore gaming market. It has gained significant
expertise in its last six years of operation. In the absence of new licenses, we believe
DELTA’s competitive advantage and dominant market share in Goa’s offshore
gaming market will sustain.
Similarly, with respect to Daman, land-based casinos are allowed only in five-star
hotels. DELTA’s
The Deltin
is Daman’s only five-star hotel. The casino would be the
key profitability driver for DELTA’s hospitality business in Daman. A competitor with
standalone hospitality focus may not find it remunerative to have five-star hotel
operations in Daman. Currently, there is no major casino operator in India with
plans to invest in a five-star hotel and casino in Daman.
…and land-based casinos
are allowed only in five-star
hotels, posing strong entry
barriers
18 September 2014
5

spotlight
| Delta Corp
Launch of Daman casino to be key trigger
To drive high growth and profitability
DELTA is by far the largest casino operator in India, with ~2,000 gaming positions. The
launch of its casino in Daman and commencement of its offshore property, Deltin
Caravela in Goa will take its capacity to ~3,400 gaming positions.
With near doubling of its gaming capacity, DELTA will be in a better position to exploit
the potential that the nascent industry offers.
Further, we believe DELTA is at an inflection point, currently. The investment phase is
behind and the launch of the Daman casino could trigger significant cash generation as
well as RoCE / RoE improvement, beginning FY16.
India’s gaming market holds high growth potential
Though gaming has its roots
in Indian mythology, the
industry is today virtually
absent in India
Gaming is one of the oldest forms of entertainment and business. Its long history
has its roots in India’s mythology (the Mahabharata tells how Yudhishthira lost all in
a game of dice). Today, gaming forms a unique source of entertainment the world
over, with centers like Las Vegas, Macau, and Singapore having emerged as
specialized gaming destinations. These gaming destinations have evolved as
entertainment hubs, by adding key elements of tourism and hospitality, so much so
that each drives the other. For the consumer, gaming and hospitality combine to
create and deliver a holistic entertainment experience. This holistic experience has
contributed to the success of these gaming destinations.
Asia Pacific region dominates USD183b global gaming market
Price Waterhouse Coopers (PWC) estimates the total global gaming casino market in
2015 at USD183b. The market has grown at a CAGR of 7% over the last 10 years. The
Asia Pacific region has led growth, with a CAGR of 21.5%. With a share of 43%, the
Asia Pacific region is now a larger market than the US, which has 40% share. Centers
in the US and Europe traditionally dominated the gaming industry. This changed
with the emergence of Macau and Singapore as popular gaming centers. In 2006,
Macau surpassed Las Vegas as the global gaming leader. In 2010, spending in
casinos in the Asia Pacific region rose by a staggering 49.7% and put Macau and
Singapore permanently and prominently on the global gaming map. Other gaming
destinations in countries like Philippines, Malaysia, Hong Kong, South Korea, Sri
Lanka, and Australia have added to this shifting momentum. In India, gaming is just
emerging as an industry; given its paltry size of ~USD100m, the growth potential is
huge.
Global casino gaming market by region (USD b)
Region
United States
EMEA
Asia Pacific
Latin America
Canada
Total
2006
57
21
14
3
5
100
2007
60
21
18
3
6
108
2008
59
20
21
3
6
110
2009
57
18
23
4
6
107
2010
57
16
34
4
6
118
2011
60
16
47
4
6
132
2012
62
16
58
4
6
147
2013
66
17
67
5
6
2014
69
17
73
5
6
2015
73
18
79
6
6
160
171
183
Source: Industry, MOSL
18 September 2014
6

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| Delta Corp
Asia Pacific region now dominates global gaming market
Latin
America, 3
%
Canada, 3%
Asia Pacific has been the growth driver for the industry
10 Year CAGR (%)
21.5%
United
States, 40%
9.0%
Asia
Pacific, 43%
-1.4%
EMEA
EMEA, 10%
1.7%
Canada
2.7%
United
States
Latin
America
Asia Pacific
Source: Company, MOSL
Source: Company, MOSL
Share of Asia Pacific in world gaming market on a continuous uptrend
Asia Pacific share in gaming market (%)
40%
42%
43%
43%
29%
14%
16%
19%
21%
36%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: Company, MOSL
Restrictive laws have
curbed the growth of the
gaming industry in India
Though there is strong appetite for gaming in India, restrictive laws have curbed the
growth of the industry. Betting and gaming in India fall under the purview of state
legislation, with high entry barriers, strict regulations, and cap on the number of
licenses. Casinos are legally allowed only in Goa, Daman and Sikkim. The Goa,
Daman and Diu Public Gambling Act, 1976 allows casinos to be set up only at five-
star hotels or offshore vessels, with prior permission from the government. In
general, casino licenses are awarded for a term of five years, with fees payable
annually.
A large part of betting in India is in the unregulated and illegal spaces, estimated to
be in the range of USD500m by a FICCI representation. This is dominated by betting
in sports, especially cricket. The only two legally allowed betting businesses in India
are horseracing and lotteries, with an estimated turnover of USD350m and
USD12.5b, respectively. India’s casino business is miniscule in comparison at
~USD100m, 0.05% of the global gaming industry size of USD200b.
A large part of betting in
India is in the unregulated
and illegal spaces
18 September 2014
7

spotlight
| Delta Corp
Strong appetite for gaming in India
Source: Company, MOSL
India’s casino industry
should witness robust
growth, going forward
India’s nascent gaming market holds high growth potential. Over the last 10 years,
the Indian casino market has been growing at ~40% per year. DELTA’s own gaming
business has grown at a CAGR of 37% over FY11-14. With the addition of new
properties, and higher visitations and gross gaming revenues (GGR) on existing
properties, we expect 30% CAGR over FY14-17.
DELTA’s gaming business has posted a robust 37% CAGR over the last three years
Gaming revenues (INR m)
5,638
4,580
2,579
1,003
1,440
1,637
3,123
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
Source: Company, MOSL
18 September 2014
8

spotlight
| Delta Corp
Addition of Daman casino to help drive growth for DELTA
With higher capacity, DELTA
will be able to exploit the
growth opportunity better
DELTA’s two operational offshore properties in Goa have ~2,000 gaming positions
and the commencement of
Deltin Caravela
will add ~200 gaming positions. The
launch of its Daman casino will take its capacity to ~3,400 gaming positions. With
higher capacity, DELTA will be in a better position to exploit the high growth
opportunity that the Indian gaming industry offers.
DELTA’s gaming properties and capacity set to nearly double
Casino
Deltin Royale
Deltin JAQK
Deltin Caravela
The Deltin (Daman)
Gaming Tables
123
47
17
~150
Gaming Positions
1,500
500
200
1,200
Slots
60
30
10
200
Source: Company, MOSL
Profitability to improve, driven by operating leverage
Costs largely being fixed,
PAT growth would be
higher than revenue growth
We believe DELTA is at an inflection point. It has fully invested in all its three Goa
casinos and its new Daman casino. On an ongoing basis, majority of the costs
pertaining to these casinos is largely fixed which introduces huge operating leverage
in the business. Currently, DELTA has monthly fixed costs of INR160m, which post
full commencement of the Daman casino will escalate to INR200m. The cost
structure being largely fixed, a large part of the revenue growth from higher
visitations and commencement of Daman operations should flow through to
EBITDA, thus improving margins significantly. We expect improvement in cash
generation as well as RoCE and RoE from FY16.
18 September 2014
9

spotlight
| Delta Corp
Expect PAT to post strong growth
Key drivers: Daman casino, operating leverage
DELTA has exited its real estate business in FY14. Its core business going forward will
be gaming and gaming-related hospitality.
We expect DELTA’s revenue to grow at a CAGR of 5% over FY14-17, led by 30% CAGR
in its gaming and hospitality business. EBITDA would post 15% CAGR, with margin
expanding from ~27% to ~35%. PAT would grow at a CAGR of 49%.
Cash flows and return ratios should improve substantially, going forward. We expect
DELTA to be a debt-free, net cash company by FY17.
Gaming and gaming-related hospitality to be core business
DELTA’s core business going forward will be gaming and gaming-related hospitality.
Gaming and hospitality go hand-in-hand. They are mutually inclusive and
reciprocating businesses, each driving the other. A combination of gaming and
hospitality helps to provide a holistic experience that attracts not only serious
gamers, but also tourists and families. Hospitality has been an integral part of
DELTA’s growth strategy. It currently operates two hotels in Goa, and in March
2014, it launched its hotel in Daman. DELTA also has substantial stake in the holding
company of Ramada Caravela Beach Resort, with no operational interest or
management control.
In FY16, we expect gaming
to contribute 89% of
revenues, and hospitality to
contribute 13%
DELTA held 39.2% stake in a joint venture with Reliance Industries to develop real
estate in Kenya under the name of Delta Corp East Africa limited (DCEAL). Over the
last five years, DCEAL developed commercial and residential properties, from which
DELTA has made a profitable exit. In FY14, gaming contributed 45% of DELTA’s
revenues, hospitality contributed 1%, and real estate contributed 52%. In FY16, we
expect gaming to contribute 89% of revenues, with the balance 11% coming from
hospitality.
FY16E revenue break-up
FY14 revenue break-up
Others
2%
Hospitality
11%
Real Estate
52%
Gaming
45%
Gaming
89%
Hospitality
1%
Source: Company, MOSL
Source: Company, MOSL
18 September 2014
10

spotlight
| Delta Corp
Expect revenue CAGR of 5%, PAT CAGR of 49% over FY14-17
We expect DELTA’s revenue to grow at a CAGR of 5% over FY14-17, led by 30%
CAGR in its gaming business, which would contribute 89% of FY17 revenue. EBITDA
would post 15% CAGR, with margin expanding to 35%, driven by strong contribution
from Daman casino and operating leverage. We expect PAT to clock a CAGR of 49%
from INR0.4b in FY14 to INR1.4b in FY17.
Revenue to post 5% CAGR over FY14-17
Revenues (INR m)
5,586
4,254
3,565
6,467
5,220
FY13
FY14
FY15E
FY16E
FY17E
Source: Company, MOSL
EBITDA to clock 15% CAGR over FY14-17
EBITDA (INR m)
28.4%
EBITDA Margins (%)
33.3%
35.4%
2,290
1,739
26.9%
19.9%
848
FY13
1,501
FY14
1,011
FY15E
FY16E
FY17E
Source: Company, MOSL
PAT to grow at a CAGR of 49% over FY14-17
Adjusted PAT (INR m)
1,419
959
432
412
262
FY13
FY14
FY15E
FY16E
FY17E
Source: MOSL
18 September 2014
11

spotlight
| Delta Corp
Cash flows and return ratios to improve significantly
We expect operating and free cash flows to improve significantly over FY14-17.
Capex during the period would only be maintenance and modernization related and
is unlikely to exceed depreciation.
Operating cash flow to remain strong
Operating Cash Flow (INR m)
2,847
2,295
1,414
1,408
1,707
1,541
1,164
1,158
1,457
Limited capex to aid robust free cash generation
Free Cash Flow (INR m)
FY13
FY14
FY15E
FY16E
FY17E
FY13
FY14
FY15E
FY16E
FY17E
-845
Source: Company, MOSL
Source: Company, MOSL
The play of operating leverage would reflect in significant increase in return ratios.
We expect RoCE to improve from 13.8% to 22.2%, and RoE to improve from 5.6% to
15.3% over FY14-17.
RoCE (%)
RoCE (%)
22.2
13.8
7.7
8.5
3.4
15.9
5.6
5.2
11.4
RoE (%)
RoE (%)
15.3
FY13
FY14
FY15E
FY16E
FY17E
FY13
FY14
FY15E
FY16E
FY17E
Source: Company, MOSL
Source: Company, MOSL
To be a debt-free, net cash company by FY17
DELTA has debt of ~INR3b on its books. Given the robust free cash generation, we
expect debt to be fully retired by FY17. We have not factored in any cash flows from
sale of non-core assets.
Sale of non-core assets could yield ~INR3b
DELTA has non-core assets valued at ~INR3b, which it intends to divest over the next
two years. Stake sale in Advani Hotel and Resorts could yield nearly INR1.25b-1.5b
after tax. DELTA could derive ~INR0.4b-0.5b post tax from sale of land in Sri Lanka,
and INR1b from sale of real estate in Goa (Kolvale and Panjim). The management
intends to use this cash to retire debt.
Post debt retirement, we believe DELTA will be a net cash company by FY17.
18 September 2014
12

spotlight
| Delta Corp
To be a debt-free…
Gross debt (INR m)
0.6
0.5
0.3
0.2
4,850
FY13
3,524
FY14
2,524
FY15E
1,524
FY16E
(0.0)
FY17E
0
Debt-Equity (x)
Source: Company, MOSL
…and net cash company by FY17
Cash on books (INR m)
1,132
FY13
FY14
-1,924
FY15E
-973
-77
FY16E
FY17E
-3,242
Source: Company, MOSL
Dividend payout to improve from 19% in FY14 to 27% in FY17
With little capex, robust free cash generation, and declining debt, we expect DELTA
to increase its dividend payout from 19% to 27% over FY14-17.
Dividend payout to improve
Dividend (INR m)
23
19
16
Payout (%)
25
27
378
67
FY13
67
FY14
67
FY15E
240
FY16E
FY17E
Source: Company, MOSL
18 September 2014
13

spotlight
| Delta Corp
Well placed to capture strong growth
Do not have a rating currently
DELTA trades at 49.7x FY15E, 21.4x FY16E, and 14.4x FY17E earnings. We do not have a
rating on the stock.
However, given the significant growth potential for India’s gaming industry, DELTA’s
dominant position, and strong earnings outlook for its gaming business, we believe it
is well placed.
Price to book (x)
Price to earnings (x)
Source: Company, MOSL
Source: Company, MOSL
EV/EBITDA (x)
SSource: Company, MOSL
18 September 2014
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Risks and concerns
Regulatory risk:
Gaming in India is a highly regulated business. There is a possibility
of adverse changes in government policy, especially given the conservative nature of
India. This could have a detrimental effect on DELTA’s business. The new Chief
Minister of Goa has indicated shifting of six offshore casinos from the Mandovi
River, possibly into the Arabian Sea or any other land-based dedicated location over
time. Any such change might bring about uncertainty in the business.
Change in taxation policy:
Substantial increase in entry fee (INR700/visitor
currently) or substantial increase in gaming tax (15% currently) could negatively
impact DELTA’s business prospects.
Issue of new licenses:
Currently, offshore casino licenses in Goa are capped at six.
Of these, DELTA owns three licenses. Issue of licenses to new players could dilute
the edge DELTA has developed in Goa.
Demand highly discretionary in nature:
The gaming and hospitality businesses are
highly dependent on discretionary spends. As such, during economic slowdowns,
there is a marked tendency to curtail expenditure on entertainment, travel, and
leisure. During such times, DELTA’s business could suffer.
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Management team
Mr Jaydev M Mody (Non-Executive Chairman)
Mr Jaydev Mody, Promoter of DELTA, is a first generation entrepreneur and a
leading Indian real estate visionary based out Mumbai, India. He played a leading
role in building and developing India’s first truly global mall ‘Crossroads’ in South
Mumbai. A Humanities graduate from the Mumbai University, Mr Mody has been
instrumental in the development of several large residential and commercial
complexes, and retail destinations in and around Mumbai. Among them are
Peninsula Corporate Park, Ashok Towers, Ashok Gardens, and Peninsula IT Park.
Mr Ashish Kapadia (Managing Director)
Mr Ashish Kapadia is an Entrepreneur, having established and managed several
businesses across sectors such as paints, textiles, financial services, and civil
aviation. Mr Kapadia was appointed Non-Executive Director on DELTA’s Board in
October 2008. In April 2009, he was appointed Managing Director. He holds a
Bachelor’s Degree in Commerce.
Mr Neelish A Shah (Executive Vice-Chairman, Delta Corp East Africa)
Mr Neelish A Shah is a Chartered Accountant. He has over 30 years of experience in
the conduct of various successful businesses in East Africa.
Mr Narinder Punj (Managing Director, Highstreet Cruises)
Mr Narinder Punj is a Bachelor of Commerce from St Xavier's College, Kolkata and
has more than 35 of experience in the hospitality, entertainment, and gaming
industries. During his career of 35 years, he has held several positions from Casino
Dealer to the Managing Director of Casino Caravela and Casino Royale in Goa. He
has held several supervisory and management positions in his overseas assignments.
Mr Anil Malani (President – Operations)
Mr Anil Malani is a Bachelor of Commerce from Mumbai University and has over
25 years of experience. He has been involved in versatile businesses ranging from
hospitality, entertainment, information technology, electronics, and office
automation. He has been associated with the Esquire group of companies, Aims
International, and Amazon Food Beverages (Garcia’s Famous Pizza). His last
assignment before he joined DELTA was with Clover Solar. He has traveled around
the globe extensively and has the distinction of being the fifth resident Indian to
stay in Prague for 18 months (1991-1992) just after the velvet revolution.
Mr Hardik Dhebar (Group Chief Financial Officer)
Mr Hardik Dhebar holds a Post Graduate Diploma in Finance from the Welingkar
Institute of Management. He has over 13 years’ experience in finance and treasury
operations. He has worked with the Piramal Group, where he held positions of
responsibility in Nicholas Piramal, Morarjee Textiles, and Peninsula Land.
18 September 2014
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About Delta
Delta Corp (DELTA) is the largest and only listed gaming company in India. It owns
three of the six offshore gaming licenses in the state of Goa. The company currently
offers ~2,000 gaming positions in Goa and is rapidly expanding. It recently started a
first of its kind integrated casino resort in Daman, the full benefits of which should
begin to accrue from 2HFY15.
Corporate history
Source: Company, MOSL
DELTA has secured the most attractive locations for gaming in India
Source: Company, MOSL
18 September 2014
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DELTA’s core business centers on gaming
DELTA’s core business going forward will be gaming and gaming-related hospitality.
In FY14, gaming contributed 45% of revenues, hospitality contributed 1%, and real
estate contributed 52%. Going forward, DELTA has decided to strategically focus on
its gaming business and will not pursue the real estate business. In FY16, we expect
gaming to contribute 89% of revenues with balance 11% coming from hospitality.
Revenue split – FY14
Others
2%
Revenue split – FY16E
Hospitality
11%
Real Estate
52%
Gaming
45%
Gaming
89%
Hospitality
1%
Source: Company, MOSL
Source: Company, MOSL
DELTA’s corporate structure (As on 30 June, FY14)
th
Source: Company, MOSL
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Gaming & Entertainment
Gaming & Entertainment is DELTA’s core business. It owns three of the six offshore
gaming licenses in the state of Goa, and is setting up a first of its kind integrated
casino resort in Daman.
Deltin Royale, Goa:
Deltin Royale,
with five operational decks, is currently India’s
largest offshore gaming vessel, offering ~1,500 gaming positions, comprising 123 live
gaming tables and 65 slot machines.
Deltin Royale is India’s largest offshore gaming destination
Source: Company, MOSL
Deltin Royale has 1,500 gaming positions, comprising 123 live gaming tables and 65 slot machines
Source: Company, MOSL
18 September 2014
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Deltin JAQK, Goa:
Operational since 2008, Deltin JAQK, with four operational decks
covering an area of approximately 31,900sf, offers approximately 500 gaming
positions, comprising 47 live gaming tables and 30 slot machines.
Deltin JAQK is India’s second largest offshore gaming destination
Source: Company, MOSL
Delta JAQK has 500 gaming positions, comprising 47 live gaming tables and 30 slot machines
Source: Company, MOSL
18 September 2014
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Deltin Caravela, Goa:
Deltin Caravela, currently under renovation is India’s first
offshore gaming casino. Once operational, it will offer approximately 200 gaming
positions, comprising 17 live gaming tables and 10 slot machines.
Deltin Caravela started operations in 2000, and is India’s first offshore live casino
Source: Company, MOSL
Deltin Caravela has 200 gaming positions, comprising 17 live gaming tables and 10 slot machines
Source: Company, MOSL
18 September 2014
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The Deltin, Daman:
During 2HFY15, DELTA is likely to launch a land-based casino in
Daman through its hospitality project named
The Deltin,
adding 1,000-1,200 gaming
positions.
The Deltin is the first casino to be launched in Daman
Source: Company, MOSL
The Deltin has 1,000-1,200 gaming positions, spread across 60,000sf of gaming space
Source: Company, MOSL
18 September 2014
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Hospitality
In line with global industry practices, DELTA’s hospitality business is synergistic to its
gaming business. It has ventured into the hospitality business to provide an
enhanced overall gaming experience.
The Deltin, Daman:
DELTA owns a majority stake in Daman Hospitality Private
Limited, which in turn owns a 176-room five-star deluxe property,
The Deltin
in
Daman.
The Deltin
is the largest integrated resort in Daman, spread over 10 acres,
with 300,000sf of developed area. This hotel will offer the largest banquet facility in
the area, with three bars, four specialty restaurants, 29,000sf of indoor event (MICE
space) and 8,000sf high-end retail space.
The Deltin
in Daman is only a 2.5 hours’
drive from Mumbai, Maharashtra, and a similar driving distance from major cities in
Gujarat, making it an attractive destination for tourists in both states.
The Deltin is the first five-star hotel to be launched in Daman
Source: Company, MOSL
The Deltin, Daman has a 176-room capacity, spread across 10 acres, with approximately 300,000sf of developed area
Source: Company, MOSL
18 September 2014
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Deltin Suites, Goa:
DELTA recently launched an all-suite hotel,
Deltin Suites
in Nerul,
North Goa.
Deltin Suites
is equipped with all modern amenities and recreational
facilities, including two restaurants, a lounge bar, spa, gym, and swimming pool. The
property is 5-10 minutes’ drive from the popular Candolim and Calangute beaches,
and is close to boarding points for DELTA’s casinos.
Deltin Suites is located at Nerul, Goa close to Candolim / Calangute beaches, and boarding points for DELTA’s casinos
Source: Company, MOSL
Deltin Suites, Goa has a capacity of 106 rooms
Source: Company, MOSL
18 September 2014
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Deltin Palms, Goa:
DELTA operates a boutique hotel,
Deltin Palms,
which is used
primarily for DELTA’s casino guests. It is located on the banks of the Mandovi River,
and is a 5-minute feeder boat ride to the company’s offshore casinos.
Deltin Palms is located at the banks of Mandovi River, and is a 5-minute feeder boat ride to DELTA’s casinos
Source: Company, MOSL
Deltin Palms, Goa has a capacity of 27 rooms
Source: Company, MOSL
18 September 2014
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Popular games at Delta’s casinos
DELTA offers the following games in its casinos.
Roulette
American Roulette is a very popular game. The layout consists of 37 numbers
including "0" in the same wheel but in a random order. The players can choose to
bet on a number or combination of numbers. The dealer then spins the ball, and
whichever number the ball drops on, is the winning number. All the chips on that
number and the chips covering that number win and are paid accordingly.
Blackjack
Blackjack is a game played with 6/8 decks of cards. Cards of rank 2-10 are scored
according to face value. All face cards are 10 points. The highest hand in Blackjack is
an Ace and any 10-point card during the initial deal is called a Blackjack. It pays one
and half times the original bet. Aside from a Blackjack, a winning hand pays even
money. The player wins if his hand has more points than the dealer without going
over 21, loses if they are less, and ties if they are same as the dealer's points.
A round of blackjack begins with each player placing a bet directly in front of him.
The dealer deals two cards for each bet and one card for the house. Then the dealer
acts upon each of the hands. If the player wishes to take more cards, he has to
indicate to the dealer by tapping behind the box, if not then just wave across. Then
the dealer draws cards on the dealer's hand until the points reach a total of 17 or
more. If the dealer’s total goes over 21, all the bets are paid. If not, each hand is
compared with the dealer's hand and paid or taken accordingly.
A player can also split his first two cards if they are of equal point value into two
hands. A player may split up to three times, if splitting opportunity arises. A player
may also double on two cards by placing an extra wager equal to his original bet and
will be given only one card. A player can also bet on insurance bet when the dealer
is showing an Ace. It basically means that the player is betting that the dealer is
getting a Blackjack and it is paid two times.
Craps or Dice
Craps is a very fast game. Players wager money against the outcome of one roll, or
of a series of rolls of two dice. They take turns to roll the dice. To begin, the shooter
(player who is rolling the dice) must bet the table minimum on either the "Pass" line
or the "Don't Pass" line, which are also referred as "Line Bets". Other players at the
table make bets on the shooter's dice rolls. In this roll, a dice result of 7 or 11 is
called a "natural," resulting in a win for players who made pass line bets.
If the shooter's come-out roll is a 2, 3 or 12, it is called "Craps" and the players lose
their pass line bet. If the remaining numbers of 4, 5, 6, 8, 9, or 10 are rolled on the
come-out roll, this number becomes the "point." The shooter will then try and re-
roll the dice until the point is rolled again. If the shooter is successful in rolling the
point again, the result is a win for those who bet the pass line. But if the shooter
rolls a 7 instead of the point (called a "seven-out"), the round ends immediately,
18 September 2014
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with the dice being passed to the next player, who becomes the new shooter. The
"Don't Pass Line” is opposite to the "Pass Line". Craps is available at
Casino Royale.
Baccarat
Baccarat is an easy card game played with 8 decks of cards. Players can choose to
bet either on “Player” or “Banker” hand. The object of the game is to get as close to
9 (nine) points as possible. Two cards are drawn to each of Banker hand and Player
hand and a third card is drawn to either/both hands according to the drawing rules.
The hand with the sum of cards closest to 9 wins (10, J, Q, K count as 0-zero). The
dealer draws the cards according the below tableau.
Pontoon
Pontoon is similar to Blackjack, with few variations. The object of the game is the
same as Blackjack, where the player is trying to achieve a total of 21 or close to 21
and beat the dealer’s total. However, there is no push or standoff. The dealer wins
on all ties. The dealer initially deals two face-up cards to each player and one card
for the dealer. According to their card total, players have an option to either draw
more cards or stand. When additional cards are drawn, if the hand total goes over
21 points, they lose the bet and the cards are removed. After all players have played
out their hands, the dealer continues to draw cards until a total of 17 points or
more, except the dealer shall hit a soft 17. The dealer will also stop with any five-
card hand regardless of total points. The dealer shall compare their hand to each
player’s hand and winning players shall be paid according to the following ranking:
5-Card Poker
5-Card Poker is a game played with one deck of cards. A player makes an ante wager
plus an additional bet called the bonus bet. Each player and the dealer get five
cards. All cards are dealt face down; only one dealer card is exposed. The player may
examine his own cards but sharing of information is not allowed. A player must fold,
or if he wants to bet, he has to put exactly double his ante money. If the player
folds, he forfeits his cards, ante bet, and side bet (if made).
Once the decisions are made on the table, the dealer turns over his other four cards.
The dealer must have an ace and a king or higher to qualify. If the dealer does not
qualify, the player will win even money on the ante wager only. If the dealer
qualifies and beats the player, he will lose both the ante and raise. If the dealer
qualifies and loses to the player, the ante will pay even money and the bet is paid
according to the odds for different hands. The different hands can be a pair, two
pairs, three of one kind, flush, full house, straight, four of a kind, straight flush, and
royal flush.
A bonus bet is a side bet and is paid anytime there is a bonus qualifying hand. The
bonus is paid for flush, full house, four of a kind, straight flush, and royal flush. A
player is also allowed to buy one or two cards at the cost of the ante bet, but he
loses the bonus bet.
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3-Card Poker
3-Card Poker is a game played with one deck of cards. A player makes an ante
and/or pair plus bet. The dealer gives each player three cards and himself three
cards. The player may examine his own cards. The dealer's cards are dealt face
down. If the player makes the ante bet, he has must either fold or bet. If the player
folds, he loses his ante wager. If the player bets, he must make an additional bet,
equal exactly to his ante bet.
Once all the decisions are made on the table, the dealer turns over his cards. The
dealer needs a queen high or better to qualify. If the dealer does not qualify then
the player will win even money on the ante bet and the bet will push. If the dealer
qualifies, the player's hand will be compared to the dealer's hand – the higher hand
wins. If the player has the higher hand, the ante and bet will both pay even money.
If the dealer has the higher hand, the ante and bet will both be lost. If the player and
dealer tie, the ante and bet will push. If the player made the ante bet and has a
straight or higher, the player will receive an ante bonus, regardless of the value of
the dealer's hand.
The pair plus bet will pay entirely based on the value of the player's hand. If the
hand does not qualify for the pair plus bonus, that bet is lost. The different hands
qualifying for the pair plus are: a pair, which pays even money, a flush, which pays
4x, a straight, which pays 5x, three of a kind, which pays 30x, and a straight flush,
which pays 40x.
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Financials and valuations
Income statement
Y/E March
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Min. Int. & Assoc. Share
Adj Cons PAT
2012
3,649
-2.9
1,006
27.6
65
941
107
127
0
961
292
30.3
670
501
-69.8
-169
501
2013
4,254
16.6
848
19.9
81
767
155
185
-52
849
340
40.0
509
262
-47.6
-216
262
2014
5,586
31.3
1,501
26.9
166
1,335
334
312
143
1,170
520
44.4
650
432
64.7
-297
432
2015E
3,565
-36.2
1,011
28.4
241
770
302
156
0
624
212
34.0
412
412
-4.8
0
412
(INR Million)
2016E
5,220
46.4
1,739
33.3
264
1,475
202
179
0
1,453
494
34.0
959
959
132.8
0
959
2017E
6,467
23.9
2,290
35.4
271
2,019
76
206
0
2,149
731
34.0
1,419
1,419
48.0
0
1,419
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2012
226
7,291
7,517
4,554
14
13,164
1,203
232
970
4,115
1,343
7,407
3,173
647
1,323
2,263
1,046
664
382
6,360
13,164
2013
227
7,505
7,732
4,850
4
14,202
2,950
332
2,619
5,217
1,141
5,495
2,366
145
466
2,517
1,138
774
364
4,358
14,202
2014
228
7,473
7,701
3,524
0
11,749
7,418
645
6,773
992
1,048
3,295
717
674
551
1,353
1,146
730
416
2,149
11,749
2015E
228
7,819
8,046
2,524
0
11,095
8,660
886
7,774
0
1,048
1,971
0
49
502
1,420
486
0
486
1,485
11,094
(INR Million)
2016E
2017E
228
228
8,538
9,578
8,765
9,806
1,524
0
0
0
10,814
10,330
8,910
9,160
1,150
1,421
7,761
7,740
0
0
1,048
1,048
1,961
1,737
0
0
72
89
398
83
1,491
1,566
743
982
0
0
743
982
1,218
756
10,813
10,330
E: MOSL Estimates
18 September 2014
29

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| Delta Corp
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2012
2.2
2.5
33.9
0.4
20.1
2013
1.2
1.5
34.1
0.2
22.8
2014
1.9
2.6
33.8
0.2
18.8
47.4
34.3
2.7
4.2
15.6
0.3
7.2
10.6
0.3
64.7
317.4
91.7
0.6
3.4
7.7
0.3
12.5
203.0
82.9
0.6
5.6
13.8
0.5
44.0
46.9
65.2
0.5
2015E
1.8
2.9
35.4
0.3
16.2
49.7
31.4
2.5
6.3
22.2
0.3
5.2
8.5
0.3
5.0
0.0
0.0
0.3
2016E
4.2
5.4
38.5
0.9
25.0
21.4
16.8
2.3
4.1
12.4
1.0
11.4
15.9
0.5
5.0
0.0
0.0
0.2
2017E
6.2
7.4
43.1
1.4
26.7
14.4
12.1
2.1
3.2
8.9
1.6
15.3
22.2
0.6
5.0
0.0
0.0
0.0
Cash flow statement
Y/E March
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2012
962
65
0
75
-77
-648
473
-3,483
4,206
-4,072
-3,350
26
2,690
-107
-89
3,560
684
640
1,323
2013
849
81
0
10
-365
2,235
2,847
-3,692
205
-643
-4,129
49
301
-155
-109
425
-857
1,323
466
2014
1,175
166
0
199
-332
1,130
2,295
-753
631
779
657
22
-1,177
-334
-57
-2,867
84
466
551
2015E
624
241
0
146
-212
615
1,414
-250
0
156
-94
0
-1,000
-302
-67
-1,369
-49
551
502
(INR Million)
2016E
2017E
1,453
2,149
264
271
0
0
23
-130
-494
-731
163
147
1,408
1,707
-250
-250
0
0
179
206
-71
-44
0
0
-1,000
-1,524
-202
-76
-240
-378
-1,442
-1,978
-104
-315
502
398
398
83
E: MOSL Estimates
18 September 2014
30

Disclosures
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spotlight
| Delta Corp
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