We are crazily taxed and it is extremely difficult to grow in this environment but the business has been growing both organically and inorganically and we have had 20-25% compounded growth for the past 10 years, Jaydev Mody, owner, Delta Corp, tells ET Now.
What is your vision for Delta Corp?
We are on the ground floor. We just about started the business. The whole industry is about 10 years old and this is just the beginning and it has got a long way to go. But a lot has to happen to make it a global kind of business, the most important one being taxation. We are crazily taxed and to grow in this environment is extremely difficult and very challenging. If the government realises that there is a multi-billion dollar business out there in gaming — but it is all grey market or below the radar — and they tax it appropriately, it would all come into the organised sector and then the business can grow. It already exists. The market is there.
What had prompted you to acquire Advani Hotels?
We were very keen on acquiring their subsidiary called Advani Pleasure Cruise. There was a partner in that business, an Austrian company which wanted to exit and so we bought them out and then negotiated with the owners for 51% of the business. That was our main concern and we were also keen on getting hotel room inventory in Goa and this was a good way to do it. But it did not go through and we got stuck with 34-35% share which we continue to hold today.
Now you have gone on record saying that you do not like dealing with the hotel business. Why is that and how do you see the hotel business shaping up?
The hotel business does not ever make money, according to me. Lots of people claim that they make money in hotels and that may be true if you hold on to the asset for 20-30 years where ARR changed. About 30 years ago, it was Rs 500 for a 5-star hotel room, today it is Rs 15,000 to Rs 20,000 and we are not in the business of hotels. It is complementary to our casino business where we invest 90% of our capital in hotels and 10% in casino and then we get 80% of our revenue from the casino and 20% from the hotels.
We have seen gross gaming revenues grow as well as your overall visitations. Give us some projections. How has the journey been and where do you see it headed?
We started 10 years ago with one casino, then two and then three. Then we started a land-based casino in our hotel which again added to our revenues.
We started a casino in Sikkim which added to our revenue and now we are waiting for a license in Daman and an opening in Kathmandu that will drive revenues. But the business has been growing both ways — organically and inorganically — and we have had a steady 20-25% compounded growth for the past 10 years.
I do not see any reason why we cannot keep growing at that pace in the future. The business is there and we will keep growing. We just have to keep innovating and keeping our product and our quality of service, right up there.
There is a political sensitivity when it comes gambling in India and regulatory hurdles as well. Over the past many years, you have overcome a lot of these hurdles as a business to sustain.
In Goa, it has become part of the economy now. Goa does not have a lot of taxation or revenue coming in from anything else other than tourism and casinos. They have realised that ours is a business, the gambling part is for the customer. We are running a business. It is a numbers game. We have an assured 4-5% margin and that is what we operate on and we run it like a business. It is not gambling for us.
The EBITDA margins of the company have improved quite a bit. Can we assume that the margin picture will look healthy as well?
Yes, the EBITDA margins have been pretty steady and they would not get affected in the future by more than a couple of percent here or there. And our margins are pretty good. And they could improve only if taxation is rationalised. Recently, they increased the license fee by 200% in some cases even more and that really hit us. But we have worked harder to overcome that cost and we have come out okay level. Other than that, I do not think there is any other risk to challenge the EBITDA margins that we currently enjoy.
What about online gaming? There is adda52.com. Is this going to be the next wave of strong growth? Are you seeing a lot of competition here?
In the poker business, which is our adda52 brand, we are the leaders.The next competitor would be 20% of our size. So, we do not find too much going on there in terms of competition but we have two other businesses — adda52rummy and the Fantasy business — where we have started off and have start-ups and are fighting to get market share. It is a very tough business, yes.
Could the new casino policy of the Goa government be a game changer for you?
It would make sense politically because the chief minister has been asked by the people to get the ships moving out of the Mandovi. He thought the best thing would be to keep it close to the new airport, so that the rest of the state does not get affected. The travel time is less, there is no traffic in the river and all the allegations on so many other aspects of being in the river goes away. It is a win-win for everybody, for the government, for the people and for the industry. It makes a lot of sense.
You are looking to invest around $150 million over the next four to five years to construct a five-star hotel with 300 rooms. Is that plan still on the anvil and how will that help your overall casino business?
I do not know where you got those numbers from but yes we are planning to invest, subject to the new land policy coming in. We are planning to do an integrated resort which would have much more than hotels and gaming, it would have a water park and a lot of retail and a convention centre kind of a destination, an integrated resort. But all that depends on the casino policy and based on that, we structure our investment and our plan etc only after that.
Over last two years, demonetisation and increase in license fees, led to a significant correction in the stock price. How did you overcame those headwinds?
Demonetisation gave us a dip only for a couple of months because most of our business was again on credit cards. We recovered pretty fast. We just had to market harder and sell harder and improve footfalls and work at our top line and we have recovered that hit substantially. We are still hoping that the government will look at it again and rationalise because the increase has been manifold and unreasonable. They will look at it if they want the industry to survive.
What is your vision for Delta Corp? Where do you see the company over the next three to four, five years?
We will have multi location casinos in Goa, Daman, Sri Lanka and maybe in Sikkim, in Kathmandu. The game changer of course, like you said maybe the casino policy. If that is in line with what we hope it will be, then opportunities will keep coming.