Breaking news: Delta Corp announces acquisition of Adda52 in multi-billion stock+cash deal

In what could be termed as the biggest news in the gaming industry this year, Delta Corp Ltd., India’s largest gaming and hospitality company announced its foray into the online gaming space in a regulatory filing to the stock exchanges. In its note to the stock exchanges and shareholders,  Delta Corp informed its intention to acquire 26% shares in Gauss Networks Pvt. Ltd., the holding company which owns and operates and is said to be the market leader in the online poker space in India.

Delta Corp is expected to pay Rs. 47.30 crores in cash for acquisition of 26% of the shares of Gaussian Networks, and offer Optionally Convertible Preference Shares (OCPS) as well Redeemable Preference Shares (RPS) to the founder shareholders of Gaussian Networks for eventual amalgamation of the company as its wholly owned subsidiary. As per Delta Corp Chief Financial Officer (CFO) Hardik Dhebar’s interview to CNBC-TV18, the total deal size is expected to be about Rs. 155 crores.

In its regulatory filing, Delta Corp noted:

Pursuant to the proposed transaction, Gaussian Network Pvt. Ltd. (“Gaussian”), a wholly owned subsidiary of the Transferor incorporated on June 10, 2011, which owns and operates the online poker website which is the market leader and India’s no. 1 online poker website, will become a subsidiary of Delta. This will witness Delta’s entry into online space and will give it an instant leadership position in the online poker space.

The consolidated turnover of Gauss and Gaussian for the last 3 financial years is as (a) Rs. 47.13 Crore for FY 2015-16; (b) Rs. 35.19 Crore for FY 2014-15; and (c) Rs. 18.15 Crore for FY 2014-2015.

With this transaction, Delta will widen its business horizon and increase its overall footprint, thereby consolidating its overall leadership position. This transaction is not only synergetic from business and growth perspective but will also provide financial strength and flexibility to Delta.

Delta Corp also noted that the proposed acquisition and amalgamation will be completed by 30th June, 2017 and is subject to regulatory and statutory approval from the shareholders, stock-exchanges and courts.

Leading law firm AZB & Partners is believed to have advised Delta Corp in the deal while Khaitan & Co. and Gaggar & Associates have acted on behalf of Gaussian Networks and its promoters.

Business Gaming

Passage of GST Bill to dramatically alter the taxation structure of gaming and lottery industries

The passage of the Constitution (122nd Amendment) Bill, 2016 by both the Houses of Parliament and the central government’s announcement of its intention to implement a uniform ‘one nation, one tax’, i.e. the Goods and Services Tax (GST) by 1st April 2017, will dramatically alter the taxation structure of gaming, betting and lottery as well as online skill gaming companies in the country, according to legal experts.

As per the 122nd Constitutional Amendment Bill, unanimously passed by both Lok Sabha and Rajya Sabha, the power of state governments to tax luxuries, amusements, entertainment, gambling and betting etc. has been taken away and subsumed into an integrated tax, i.e. GST- which can be charged at the state level or central level depending on the place of supply and location of the consumer.

As per newly enacted Article 246A of the Constitution, the state governments along with the Parliament will have concurrent powers to make laws pertaining to virtually all indirect taxes, with the GST Council, a new constitutional body comprising of state and central finance ministers having the right to recommend rates for various goods and services and settling disputes between the states or the centre.

Further, gambling and betting activities have been clubbed under the category of services under the constitutional amendment, since Article 366(26A) now defines services to mean anything apart from goods.  Further, as per the model GST law, actionable claim has also been included within the ambit of services, thereby covering lotteries and gaming tax.

Although there is no clarity on the quantum of tax for either online skill games services or casinos/lottery operations, it is widely believed that the standard rate of around 22% will be applied on online skill games, while a demerit rate of 40% or more may be applied on casinos and other gaming or betting activities.

It is also widely expected that more clarity will emerge after ratification of the 122nd Constitutional Amendment Bill by state legislatures and passage of the model GST law, based on which most states will formulate the law. However, it is increasingly becoming clear that the service tax rate of 15% paid by online skill game (poker, rummy and fantasy gaming companies) will definitely go up by 5-7% while the tax rate on betting, gaming, casinos and lotteries is also likely to go up significantly higher.

Further, availing input credit, burden of filing monthly forms  and multiple registration in various states will increase the compliance costs and burden on existing gaming companies. Additionally, there is no clarity on the definition of supply in the model GST law and whether only the gaming revenue (i.e. deposits minus winnings) will be taxed.

Experts therefore have indicated that the gaming industry should be prepared for a higher tax rate from the next financial year onwards, at least for a few years and be prepared for additional compliance challenges during the transition period from service/gaming tax to GST.

Business Gaming

Golden Gaming launches new technology arm in Noida

The Shree Jalaram (Golden Gaming/Lottery) Group announced the opening of a new office of Golden Technology in Noida yesterday. The new company of the lottery conglomerate  will focus on the development of next generation mobile games and online gaming, betting and lottery software.

The Shree Jalaram Group already operates ‘Golden Lotteries‘ and through its group company Golden Gaming International Pvt. Ltd., operates licensed gaming and betting arenas in the state of Sikkim. In May this year, Golden Gaming launched the first legal sports betting arena in the country in Gangtok.

Besides lotteries and gaming, the Group has diverse interests in the real estate, beverage, healthcare and automobiles sector. As per the company press release, Golden Technology will focus on developing unique and innovative game content for the Indian and International Markets.

Golden Gaming Managing Director Manoj Sethi confirmed the news about the launch of its new technology arm and noted that the venture will focus on development of software for the group’s gaming, betting and lottery business. Besides, the new venture will also aim to provide software solutions to other Indian and International gaming companies, he added.

“Golden Technology prides itself as a straightforward company with a direct and simple approach towards complex problems.  The business is built on integrity, knowledge and professionalism, enabling partners and stakeholders alike to put their trust” noted Sethi.


Goa govt notifies onshore casino license fee hike, CM not averse to sixth offshore casino

The Goa government has notified revised license fees for onshore casinos to implement the hike in fees that were announced in the budget earlier this year. As per the notification, a casino having space upto 100 square metres will have to pay an annual license fee of Rs. 3.50 crores, while a casino having space between 500-750 square metres will have to pay annual fees to the tune of Rs. 6.50 crores.

Additionally, the government has introduced two new categories casinos, wherein casinos with gaming space of over 750 square metres will have to pay higher recurring fees. Casinos having space between 750-1,000 square metres have to pay license fees to the tune of Rs. 8 crores per annum, while those having floor space of over 1,000 square metres will have to pay fees of Rs. 8.50 crores per annum. As per earlier provisions of the budget, these casinos would have had to pay Rs. 6.50 crores annually.

The avowed purpose of this notification is to increase revenues to the exchequer and reduce the number of casinos to single digits as per government sources.

In other related developments, the Goa government has renewed the offshore casino license of Deltin Caravela, taking the number of active offshore casinos to five. Additionally, the government has indicated to the Bombay High Court (Goa bench) that it is not averse to renewing the license  M/s Golden Globe Hotels Pvt Ltd provided that it pays recurring fees and penalties totalling to almost Rs. 50 crores. The aforementioned casino linked to former Haryana Minister Gopal Kanda, was not operational due to financial crises and internal problems faced by the company.

The Goa government has faced massive resistance from civil society groups and political parties against the decision to revive the two offshore casinos. However, Chief Minister Laxmikant Parsekar has steadfastly maintained that no new offshore casinos will be permitted and that the two casino licenses would be renewed only on technical grounds.

If the Goa government agrees to renew the license of Golden Globe Hotels, the total number of offshore casinos in the state will rise to six.

Business Gaming

Silver Heritage Group set to launch new casino resort on Indo-Nepal border, files for IPO in Australia

Hong Kong based casino operator Silver Heritage Group is set to offer its shares to the public through the Australian bourses, as per the company press release and news reports.The company plans to raise Australian Australian $25 million through the listing on the Australian market and hopes to complete the process by next month, primarily to fund the Tiger Palace Resort on the India-Nepal Border.

The Group hopes to offer 62.5 million ordinary shares at 40 cents per-share and the indicative market capitalisation of the company post-listing is expected to be around Australian $80m.

The company noted,  “Funds will primarily be used for development of Tiger Palace Resort, the first integrated resort built for Indian casino players located in Nepal close to the Indian border,” said a press release issued on Wednesday on behalf of the company. It added Tiger Palace (pictured in an artist’s rendering) would be launched in ‘early 2017’.”

Since entry of foreign players in the Indian casino sector is not permitted, the Silver Heritage Group is planning a casino on the Nepalese side of the border, close to the India and is primarily intended to cater to Indians.

Silver Heritage Group also has presence in other Asian countries like Vietnam, Laos and Cambodia. In the company press release, Mike Bosver, the CEO of the Group said, “We focus on mid-size opportunities and improving operating performance to best practice standards. This strategy has allowed us to build significant expertise and local knowledge while growing profitability and generating attractive returns on capital.”

Tiger Palace resort is slated to be operational from early 2017 as per the Silver Heritage website. The funding for the project is likely to ensure that Tiger Palace resort competes with casinos in Goa, Sikkim and Sri Lanka to attract Indian gamers.

Business Legal & Regulatory

Newly created trade body demands opening up of FDI in gambling and betting

The All India Gaming Federation (AIGF), a not-for-profit organisation registered under the Societies Registration Act, 1860 and working towards promotion of sporting and gaming activities, has written to Nirmala Sitharaman, Union Minister of State (Independent Charge) for Commerce & Industry to allow foreign direct investment in the gambling, betting and lottery sector as per a report in the Economic Times.

AIGF has claimed that even as these industries are increasingly been recognised as legitimate industries globally, offering entertainment and recreation avenues to millions across the world, they remain illegal in most parts of India.

Under Para 5.1 of the FDI policy, foreign technological collaboration in any form, including for franchise, trademark, brand name, management contract is also prohibited in the gambling and betting sector.

AIGF has sent a letter to the ministry, asking it to allow at least 26% foreign equity participation along with rights of Indian companies or governments to use the superior technical know-how of foreign companies. Such a move would garner foreign investment of more than Rs 10,000 crore into India and provide employment to thousands, claims AIGF.

Roland Landers, CEO of AIGF said, “It is in everyone’s interest to remove gambling, betting and lottery sector from the prohibited list  in the FDI policy. Since India is moving towards welcoming foreign investment in all sectors, the gaming industry should not be an exception. The victorian attitude of prohibition gambling is no longer in sync with modern day thinking.”

The Commerce Ministry has written back to AIGF stating that they are considering the request and that they would revert with their stand on the issue shortly.  Prohibition on FDI in the gaming sector has been a huge impediment for International operators who view India as a vast untapped market. If AIGF’s demands are accepted, it would be a huge boost for the gaming industry and it would also go a long way in convincing state governments to change their prohibitive attitude towards gambling.

Business Gaming

Delta Corp set to start new casino in Sikkim

Exclusive Delta Corp, India’s largest and only publicly traded gaming and hospitality company is all set to operate a new casino in Sikkim in the next two or three months, according to sources.

Multiple sources familiar with the matter indicate that Hotel WelcomHeritage Denzong Regency in Gangtok has procured a license under the Sikkim Casinos (Control & Tax) Act, 2002 to operate a live casino and that the gaming space will be leased to Delta Corp, which shall be responsible for the day-to-day operations and management of the new casino.  The company, however, has not made any official announcement yet and may share further details about the operations and commencement date in the coming days.

Sikkim already has two existing casinos- Casino Mahjong in the Mayfair resort and Casino Sikkim in Hotel Royal Plaza. However, Hotel Denzong Regency is said to have a more convenient and strategic location and is the closest from Gangtok city.

As per the Denzong Regency website, it “is the only 5 Star Luxury Mountain Retreat at Gangtok, the capital of Sikkim, at a height of 6000 feet, situated within a 10 acre sprawling, century-old, wooded, family-owned property, which offers the finest views of the city and the pristine splendor of the undulating hills, valleys and a myriad streams that course through it, with the towering Mt. Kanchenjunga peak in the background.” The hotel is next to the residences of the Governor (Raj Bhavan) and the Chief Justice of Sikkim.

Delta Corp already operates two offshore and one onshore casino in Goa, while its resort in Daman is awaiting an onshore casino license. However, Sikkim is the only state in the country where live gaming is permitted on land. Casino licenses are granted only to five-star hotels in the Himalayan state.

With its entry in Sikkim, the only other state apart from Goa where casinos are permitted, Delta Corp is likely to consolidate its position as the market leader in the gaming industry.

In light of this new development, Sikkim may become the preferred location for the gaming industry, overtaking Goa, where the casino industry has been reeling under the  with full-fledged online gaming and betting operations also likely to start in the coming months.

Business Gaming

Kerala government mops up almost $1 billion in lottery sales, Karnataka mulls the lottery route to generate funds

Lotteries organised by the Kerala government has grown exponentially in the past decade, as per data released by the state government. It is believed that the total annual sales of lottery in Kerala has grown from Rs. 557 crores five years ago to Rs. 5,696 crores (until February 2016). The expected turnover for the year 2015-16 is said to be Rs. 6,250 crores or US $911 million as per a statement by Chief Minister Oommen Chandy.

Chandy added that he intended to eventually increase the total turnover from lottery sales to Rs. 10,000 crores. He also noted that over Rs. 1,200 crores profit from lottery sales has been utilised for providing medical treatment to poorer sections of the society. Over 1,40,000 people are currently employed in the lottery trade in Kerala, mainly as agents and sellers, while over 3.90 crore lottery tickets are printed every week.

Additionally, thousands of other persons are indirectly employed in ancillary businesses like printing and stationery etc. Lotteries are extremely popular in Kerala and many people purchase the tickets as a major portion of the profits from lottery are utilised for alleviation of social problems. Kerala government sources indicate that the popularity of lottery schemes has also significantly reduced illegal gambling and matka activities.

Meanwhile, the Karnataka State Sellers (Agents) Lottery Union has urged the state Government to lift the ban on lotteries imposed in 2007. The Lottery Union added that the Karnataka government is loosing Rs. 10,000 crores of revenue because of its decision to ban lotteries, while increasing the flow of black money and other illegal activities. The Union added that like Kerala, Karnataka can also provide free medical aid to poorer sections of the society through lottery funds. Ramakrishna, the Association President added that opening up the lottery trade would also provide employment to lakhs of people as sellers and agents.

Commenting on the developments, Kamlesh Vijay, Group CEO of Sugal & Damani, one of the largest lottery distributors in the country said, “The idea of the Karnataka government and indeed all other state governments opening up the lottery trade has merit. Globally, funds from lotteries are used for socio-economic development and charitable causes. The three main benefits of legalising lotteries are increase in revenues to the state government, increase in employment opportunities and additionally it may also result  in  reduction of illegal gambling.”

Read more about Kerala state lottery.

Business Legal & Regulatory

In blow to casino industry, Goa CM once again hikes entry tax, license fees

Goa Chief Minister Laxmikant Parsekar hiked the entertainment tax and license fees for onshore and offshore casinos in the state in his budget speech presented in the legislative assembly yesterday. The entry tax for visitors to casinos has been hiked from the existing Rs. 700/- per visitor to Rs. 1,000/- while the existing recurring annual casino license fees has also been hiked for both onshore and offshore casinos by at least Rs. 1 crore or more.

Thus, onshore casinos upto 100 square metres in area had to pay Rs. 2.5 crores as license fee last year, will now have to pay Rs. 3.5 crores. An offshore casino having passenger capacity of 100 persons had to pay Rs. 7 crores as license fee, but will now have to pay Rs. 8 crores (complete table given below).

The Goa government has progressively increased the license fee and entry taxes for casinos making it difficult for the casino industry to continue operations.

Relevant extracts of CM Parsekar’s budget speech

Entertainment Tax

Speaker Sir, I propose to enhance the existing entry fee in Casinos of Rs. 700/- charged per person under the Goa Entertainment Tax Act, 1964 to Rs. 1,000/- per person. I also propose to implement ticketing through use of electronic fiscal devices, which will ensure a check on the entry tickets issued and utilized on real time basis.

Casino Fees

Speaker Sir, I propose to revise the fees for Renewal of Licence and Annual Recurring Fees, for land based and off-shore casinos. The details are provided in Annexure – D.

Fee structure for casinos

Fees of Renewal of Licence:

a) On shore / land based casinos: Rs. 20 lakhs
b) Off-shore Casinos : Rs. 20 lakhs

Table on recurring annual license fees


Business Legal & Regulatory

No 'achhe din' for gaming industry as FM fails to hike TDS threshold in Budget 2016

Contrary to expectations and the first set of recommendations given by the Easwar committee, Union Finance Minister Arun Jaitley maintained status quo on the taxes from gaming and lottery winnings. The Finance Bill, 2016 has not raised the threshold under Section 194B of the Income Tax Act and has retained the existing taxation provisions.

Under Section 194B, 30% Tax Deducted at Source (TDS) has to be deducted while releasing winnings above Rs. 10,000/- Further, the income tax rate on winnings for assesses also remains unchanged under Section 115BB.

However, Jaitley has hiked the TDS threshold for winnings from horse-racing from Rs. 5,000/- to Rs. 10,000/- and an amendment to that effect has been introduced to Section 194BB of the Income Tax Act in the budget presented today.

The government while retaining the TDS threshold on gaming winnings has ignored the recommendations of the Easwar committee report which proposed hiking the threshold from Rs. 10,000/- to Rs. 15,000/- A section of the gaming industry had also urged Jaitley to go beyond the draft Easwar committee recommendations  by significantly hiking the TDS threshold and reducing the tax rate especially for games of skill like poker and rummy. However, it seems that there has been no positive response by the government on that front yet.

Perhaps, the government may wait for the final set of recommendations from the Easwar committee (expected by the end of this year) before tinkering with the TDS threshold for gaming winnings. In any case, it seems that the fabled ‘achhe din’ or good days have not yet arrived for the gaming industry.