Delta Corp Ltd
NSE:DELTACORP
Earnings Call Analysis
Q3-2024 Analysis
Delta Corp Ltd
In a welcoming atmosphere, Delta Corp Limited started their third quarter results call with senior executives present to field questions from investors, particularly about the recently introduced GST tariff and methodology.
Without dwelling on the preliminaries, the executives indicated that they were ready to delve into the investor queries, acknowledging the investors' familiarity with the declared results and demonstrating willingness to engage directly with their concerns.
Since October 1st, Delta Corp adjusted to the new GST scenario where it moved from absorbing a 28% GST rate on gross gaming revenue (GGR), effectively 21.875%, to a new structure where GST is applied to the sale of chips. This translated to an increased effective GST cost of approximately 6% on their GGR due to a 70% correlation between GGR and chip sales, thus impacting profitability to some extent.
Delta Corp faced operational hurdles with initial adjustments to the GST changes, as well as external factors like the World Cup and Diwali period affecting visitation and revenues. However, they reported recovering to normal operational capacity by December.
Paid customer visitations to their gaming operations in India saw a 4% decrease quarter-over-quarter and a 6% decrease year-over-year, reflecting the challenges the company faced with the changes in the regulatory environment and broader market behavior. Despite a drop in visitation, the gross gaming revenue (GGR) per visitation remained stable.
Delta Corp mentioned that fixed costs remained consistent, as expected, but there were remarks on the adjustment to variable costs, which were offset by increased legal expenses in the wake of GST-related activities.
Amid ongoing operational challenges, Delta Corp shared information about a hospitality project conversion, disclosing an investment of INR 190 crores to date and another INR 175 crores planned over the next 18 to 24 months, subject to approvals, to develop a 450-plus 5-star deluxe hotel.
The adjusted GST amount paid was around INR 7 to 8 crores extra for the offline business, and the total GST paid for the quarter was INR 58 crores, representing an increase from the previous quarter. In response to these changes, Delta Corp adjusted its F&B packages and promotional offers to maintain customer visitations while managing the extra GST cost.
The online business witnessed an incremental GST expense, jumping from INR 6 crores to INR 18 crores for the quarter. In the broader context of the online gaming industry, Delta Corp acknowledged a common trend of companies compensating players fully for their deposits, a non-sustainable model that might lead to industry shakeout and consolidation. The company is anticipating this trend and planning to adapt its online operations accordingly.
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Ladies and gentlemen, good day, and welcome to the Q3 FY '24 Conference Call of Delta Corp Limited, hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kishan Mundhra from Antique Stockbroking. Thank you, and over to you, sir.
Yes. Thank you, Michelle. Good evening, everyone. And on behalf of Antique Broking, I welcome you all to the post Q3 FY '24 earnings conference call of Delta Corp. And today, the company is represented by Mr. Anil Malani, who is the CFO; Mr. Manoj Jain, who is the COO; and Mr. Pragnesh Shah, who's the VP Finance. So today's session would first be a brief on the results by the management and would be followed by question and answer round. And with that, I would now like to hand the call over to the management. Over to you, sir.
Good day, everyone. Welcome to Delta Corp Limited Third Quarter Results Investor Call. I'd like to introduce you first to my team. I have Pragnesh Shah with me in Mumbai, Vice President, Finance; Manoj Jain, joining us from Goa. He is our Chief Operating Officer; and Anil Malani here. This actually is the first full complete quarter post the introduction of the new GST tariff and methodology introduced by the government. So I'm sure you guys have got several questions, which needs to be answered. We'll be happy to provide all the answers with full clarity and to the best of our ability. The results have been declared, and most of you would be familiar with that. So without wasting any more time, we would like to take the questions from our investor fraternity.
[Operator Instructions] We'll take the first question from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited.
So as you mentioned that this is the first complete quarter after the new GST introduction. So if you can broadly take one example of, let's say, INR 1,000 or INR 5,000 and help us understand how it was charged earlier, and how on the ground level now we are charging the GST and how much actually consumer gets to play. So if you can take one example and help us understand.
So Manoj, do you want to take this question?
Yes. So just to understand your question, you said that how we -- how the GST was charged earlier pre 1st October and how it was charged in the quarter, which -- third quarter, which basically effective 1st October, we changed our GST method because the government introduced a new GST law, right? Correct?
Yes. Yes.
Okay. So let me explain to you and everyone on the call. So pre 1st October, the GST was obviously absorbed by us only, and we used to pay 28% on our gross gaming revenue, which was our -- basically the table revenues, okay? And we were paying 28% on an inclusive basis, so it used to basically effectively cost us 21.875% of our gross gaming revenue. So if we were to basically -- if we were -- if we made hypothetically, let's say, INR 200 crores GTR, this is the table revenue, we were paying 21%, which is around, let's say, INR 42 crores or INR 43 crores.
Post 1st October, now we are supposed to pay 28% GST not on the GGR, which we are doing, but on the sale of chips, which we are selling. So just to take an example, if we are now selling, let's say, INR 1 lakh rupee chips, okay, then we are now liable to pay 28% GST, again, on an inclusive basis on INR 1 lakh, and that again works out to INR 21,000. So what is happening is now our GST is payable on the sale of chips, not on the gross gaming revenue. Now our gross gaming revenue to sale of chips is around 70%, okay? So basically, our cost has gone up on that 30% additional, which is basically the chips, which were encashed by the players. On that, 21% is [ VR ] cost, which has gone up. So effectively, it works out to around 6% extra on our GGR, basically the GST cost.
So you said GGR is around 70% of the chips sold?
Yes. GGR is the 70% of our chips sold right now.
Okay. And this 6% -- so basically, what you are saying that, let's say, if I come and play and if I exchange -- if I pay INR 1,000, you will give me the chips of INR 1,000 and not net of GST? So...
No. So what we are doing now is that we realize obviously that the GST cost, obviously, the player is not going to take because we did a lot of experiments in month of October and November. And what we did is that now we are basically giving full value of chips, okay, in which there are some promotional chips and there are full cash chips as well. So those promotional chips are given in lieu of GST and players who are basically coming into our casino are getting actually the full value. But they have to compulsorily lose those chips on the table. So that is basically -- that's how we are kind of recovering our GST costs.
Okay. And now so this drop in the revenue on a year-on-year basis, so is there an impact of GST? Or there was a...
So what happens is -- so good question. So there were 2, 3 things, which actually one has to look at in Q3 compared to Q2 or maybe Q3 last year that this year, there was an impact of GST in month of October, November because what happened is because of that, a lot of people were reluctant to come and we were initially deducting 20%. Actually, 21% was not possible to deduct, so we were deducting 20% and giving only 80% of the chips. So that was initially in month of October and November, we were doing. And then apart from that, there was a World Cup which was going on which also basically have always an impact on our visitation. And apart from that, there's Diwali, which always have been a lull period of almost a week, 10 days. So that's the reason why we had an impact in our revenues, okay? That's why our revenues were lower.
But interesting part, which I can sort of tell everyone on this call is that December had a very good run rate, and it has the same run rate what we used to do in our previous quarters. So we are kind of -- we were back on our normal operation in month of December.
We'll take the next question from the line of Pritesh from Lucky Investment.
Can you just share the visitation number and the net realization per visitation for this quarter and the same quarter last year? So we'll clearly understand the impact which has come through because of the newer regulatory norms.
Yes, Manoj, go ahead.
Yes. So we had -- in our India operations -- for our gaming operations in India, we had -- for this quarter, for December quarter, we had 124,000 paid customers, which was actually 6 -- 4% lower compared to the previous quarter, which was September. So in September, we had 129,000 visitations. And interestingly, it was 6% lower compared to same quarter last year. In last year, we had 132,000 visitation compared to 124,000 this year. So like I said, there was an impact. And also, I wanted to mention that there were a lot of people this year chose different destination over Goa. People have gone abroad and all of that. And we could see that in hotel occupancy here and the general arrivals at the airports. So that's why the visitation number was lower compared to previous quarter and the same quarter last year.
I think GGR per visitation would probably be more or less the same, but that number, we'll get back to you. Pragnesh would probably get your details and we'll send you those details.
No. So you're saying, as of now, the spends per head was...
It's the same. More or less the same. But our visitation were lower. It may be hardly -- maybe probably 3%, 4%, 5% lower, but it's -- and like I said in month of December, it has come back to the same sort of run rate.
Sir, we would like to understand only for the quarter. So spend is same at the net level after GST? Or after GST it has to be 6% lower, right?
It has to be 6% lower, right, because that is our cost, which has gone up. So what happens is usually the GGR is always calculated on the table, which is -- which will be less by 6% because the value of the chips has gone down by 6% anyways, right?
And at the gross level, is it down by any chance?
No. So gross level, it will be down if the visitations are lower, okay? So on an average, the GGR would be more or less same. But like I said, the visitation were lower. That's why we have a...
Spends per head at the gross level is the same, right?
Yes.
Whatever is the difference is because of the GST impact of about 6%, 7%?
Correct. Absolutely correct.
Right. So 6% lower visitations and about 6% lower net revenue, so about 12% lower.
Correct.
So INR 221 in 2.88. So you come to about INR 194 crores of revenue, but you still have INR 181 crores on a Y-o-Y basis. So is there any other explanation for the lower number?
Let me check that, how you are calculating. But like I said, we'll give you the breakup, if you want, how it came down, okay? There were a little bit of intra-group income also, which was slightly lower compared to this quarter and last quarter.
No, I said it's a gaming number. So I just did the casino number.
No, no, only casino. In casino, also there are some intra-group transaction which happens so that also was lower compared to -- because there is some rev share we do for our offline business and online business. Sorry?
And sir, INR 2 crore number -- there's just a INR 2 crore differential number, which I can see from your P&L, sir.
Yes. So we'll get back to you on that. Maybe I don't have those details yet.
Okay. My other question is, does the licensing fee -- when will be the license fee renegotiation happen? And is there a scope for any reduction in the fixed cost by any method even in the future?
So fixed cost, obviously doesn't go down. That's the reason why it is the fixed cost, okay? And as far as license fees is concerned, so I'm not aware if there's any conversation our head office is having with government to reduce the license fees because the GST cost has gone up. So that maybe I'm not aware of it. Having said that, the variable cost has come down little bit, okay, which was obviously kind of -- if you look at the cost has not come down overall, but our variable costs came down because of the lower visitation, but that was kind of offset against our legal costs, which went up in this quarter because of all the GST-related cases which are going on because of that.
I'll just like to add here, Pritesh, that we are having conversation, multiple actually, on the license fees. But as you know that the government has suggested that they'll review the whole thing after a period of 6 months. So that's the time we're going to be taking up all these several other parameters that we need to really look into.
We'll take the next question from the line of Anushree Gandhi from Alpha Invesco.
So I have a few questions around CapEx plans. So how much of the total CapEx of the new ship is spending?
Okay. So the total outlay is roughly between INR 280 crores to INR 290 crores. About INR 175 crores has already been invested and the balance remainder should be -- will be deployed over a few months of this year. The project is on schedule and it's being built and it's taking up a good shape.
Okay. And by when do we expect it to be done, the ship to come online?
So it should be in the river third quarter of this year. And hopefully, we should either manage to get some revenue from that ship in the third quarter or definitely in the fourth quarter.
Okay. And another question being on the land that was purchased for the integrated resort project in which we have invested close to around INR 130 crores. So what's the plan for that land now?
So you're right, about INR 125 crores, INR 130 crores has been invested for the land. Another INR 45 crores, INR 50 crores has been invested for various licensing and regulatory clearances that was required. So for now, the project has been divided into 3 phases. The first phase probably would be the theme park, which we're addressing. There is a proposal to look at that. And whilst the overall project was slightly kept on hold to wait for the outcome of the GST, which has now come, so we are in the process of deciding to go ahead with Phase 1 and subsequently Phase 2, which would be part hotel and retail and the third phase would be all of the rest. So that's the update on the integrated resort that we had planned.
Okay. So the land base, casino is still under consideration for the project or not?
Not really. Now that the clarity has been received with respect to the methodology and how we're going to be charging GST, so like my colleague, Manoj, had mentioned earlier, we have taken several steps. And we have pivoted to us ensuring that we are able to retain our customers, they come back and they spend and we go back to our GGR pre the new tariff that was introduced. So I think current quarter and maybe 1 more quarter where we'll probably go through these processes. And we are pretty much confident that quarter starting July, we should be back to our original revenues as was done previously. But the real growth would probably come in only after our new vessel comes into the river because that's going to double our existing capacity.
Okay. And lastly, sir, on our CapEx plan for the hotel in Miramar that we have. So how much have we invested yet in the property? And how much is still pending?
Yes. So if you recollect that the project was actually meant to be a residential project. Subsequently, to complement our casino business, the company took a call to convert it into a hospitality project, keeping the existing structure in mind. We have actually already spent about INR 190 crores on the project, which includes land cost. We are -- and we're starting to spend another INR 175 crores to make about 450-plus 5-star deluxe hotel.
Okay. So the additional money that we are going to invest, is that to convert or modify it into a hotel or no?
Not really modify, but yes, to convert to a hotel because the original plan, like I mentioned, and which we had also explained earlier was for a residential complex. So there is a little bit of internal modifications that we'll need to do to bring it up to the scale that we are expecting it to be.
Okay. And what is the timeline for commercializing that property?
So all going well, subject to various approvals, we are looking around a timeline of about 18 to 24 months.
[Operator Instructions] We'll take the next question from the line of Punit Shah from Shah Investments.
I just had 2 questions. One, what was the GST amount that you paid for this quarter? I think you used to give that number last time. This quarter, if you can give that number. And the second question is how have our packages changed after the October -- I mean once we have had this entire GST implementation, how has -- how have our packages changed in terms of the kind of freebies or free chips that we give bonus points or whatever. So if can you just explain about these 2 things.
So Punit, I'll let Manoj answer that question, but I didn't quite catch the first part of your question.
What -- GST. What was the GST amount paid for this quarter?
Go ahead, Manoj.
Yes. So how much the GST we paid for this quarter that I'll -- Pragnesh would be able to answer that because I don't know exactly all the numbers, but for offline business, we have paid additional -- around INR 7 crores to INR 8 crores extra GST we paid. But I think Punit is looking for a total number, so that will give it to him. Now Punit, coming to the second part of the question, okay? Before basically October 1, what we were doing is we used to have 3 F&B packages, okay, where we used to just INR 3,000, INR 4,000 and INR 5,000 and the difference between these 3 packages are purely liquor, which we were offering onboard Deltin Royale, okay? And then we used to have a weekend rate, which was INR 500 more than the weekday rate. And also, apart from this, we used to have a gaming offer where the customer could pay INR 500 inside, onboarded the cage and get onetime promotional INR 1,500 chips, okay? So basically, effectively it's saying INR 3,000 to enter and experience our F&B facilities. Casino -- entry to casino was free, and he used to go pay INR 500 at the cage and get INR 1,500 chips because we want him to buy the chips. So that was onetime promotional offer was offered until 30th September. Come 1st October, what we did is we basically kept our rate at INR 3,000, INR 4,000, INR 5,000 only. And what we did is we removed this gaming offer of INR 500 to INR 1,500 because there was a GST which was paid on the entire INR 1,500 worth of chips which we were giving and charging only INR 500. So first, what we did is we stopped that.
And second, what we also did is just to increase the visitation and having this -- we saw that there was an issue when people were not coming in the numbers. So we were giving an offer of basically 10% discount on our website and call center for committed booking. So the rate remained the same, INR 3,000, INR 4,000 5,000, but you could basically get 10% discount on website and call center if you make a booking before coming to our jetty to enter. So this is as far as package change is concerned.
As far as the total GST liability, which is basically this month versus last -- this quarter versus last quarter, Pragnesh you have the numbers, right?
Yes, Manoj. It is INR 58 crores what we paid this quarter. And last quarter, we paid INR 50 crores. It's INR 8 crores, extra, we have paid.
Yes. This is only offline, right? Am I correct?
Yes.
Yes. I think Punit is asking for the entire GST paid in this quarter versus last quarter, maybe?
Okay. Online we paid INR 18 crores, what we used to pay INR 6 crores year last quarter. So there is a INR 12 crores extra, what we paid on GST front.
Okay. Okay. And sir, 1 last question. If you can just give a broad understanding of how has the entire industry changed after this impact, after -- so how is the competition behaving? And I mean if you could just give a little [indiscernible] of how things have been for the industry?
So Punit -- yes, go ahead.
Go ahead, Anil.
No, no. You go ahead.
So no. So as far as -- we were obviously focusing on ourselves for this particular quarter. And we, being a leader, started directing GST or charging GST from the customer. And then subsequent to that, we decided that let's just give the full value because we realize that a lot of our customer were, not only going to the competition, they were also choosing to go to other destinations, which is like, let's say, Nepal or Colombo. So we went back to 100% value. Competition, which is kind of -- there are small operators not as organized as Deltin, so they were probably giving full value from day 1. Anil, you were saying something you can add?
Yes. On the online space, prior to the new tariffs that got introduced, as you all know that we were planning to do an IPO. So during that particular phase, there were several plans that we had chalked out to ramp up the business. But once this came in, so besides the IPO plans, all our marketing initiatives also we put on hold. And it's -- a conscious decision was taken to make sure that we -- on the online space is at profitable. We should not be burning any money. The focus went back to poker, which has always been our mainstay. And all the other initiatives like multi-gaming platform, rummy and various other games were put on hold. So we believe all the online companies now are actually following the same format, which is in some form or fashion, they are compensating the players who are putting a deposit in their wallets in full. This, we believe, is not a sustainable model because the difference hits your bottom line straight away. We expect some shakeout and consolidation to take place. So we are waiting for that to happen. Once we get a little bit more visibility on how the competition is going to play out, that's the time we'll probably take steps and decide what further needs to be done in the online space. So the online space is a little tricky and sensitive. And most of the players, we do believe, would run out of cash as no new funding is happening.
Sir, the participant has left the queue. We'll move on to the next question, which is from the line of Bhavesh Patel from Patel Investments.
And again, I mean, well done in the difficult situation. I have 2 questions, and 1 is around the cases which are ongoing, number one, on the GST demand for the prior years. And I'm aware that maybe a Supreme Court hearing is upcoming and associated with Deltin is also the Daman case, which is almost there in terms of the decision, but haven't heard anything recently. And the second is on the overall strategy of the organization and cash on hand because we have already signed up in terms of our real estate partnership and plan. So if you can throw some light on this will be helpful.
Yes. So on the retrospective tax issue, as you would be aware, all our cases are in the high court for which we have received the stay. It's being fought by our legal team who believes that the claims are arbitrary and not justified in law. So over there, we'll have to wait and as rightly mentioned by you, it should be coming up for a collective hearing sometime next month. We are hoping that both the verticals are fought on different grounds, the casino separately and the online separately, because they are different games.
On the prospective tax collection, I think that clarity has come in. So we are abiding and following the guidelines laid down by the department. Our current projects, 2 of them which is on stream, the new boat and the new hotel, these are being -- these have been taken care and will continue to be taken care with our current cash flows. We may have had a small blip in the quarter that went by. But otherwise, the company quarter-on-quarter is swaying out cash and that's -- it will continue. And that would take care of our current 2 investments, which are ongoing. We have close to -- post our investment of INR 100 crores in Peninsula Land, about INR 500 crores still sitting on our balance sheet for which we have treasury income coming in. So there's substantial comfort in the cash flows and our reserves.
Okay. Just a clarification on the Daman Casino case?
Yes. So actually, yesterday or day before yesterday, it was scheduled to come up. It was listed on the board. Unfortunately, it didn't come up. Now we are seeking for a date. And informally, we've been advised that some date next month, we probably would be given.
We'll take the next question from the line of [ Agastya Shah ] from Shah Research Services.
You gave the numbers for footfall for the quarter. Can you also give it for the month of December and December of last year as well?
Manoj?
Yes. Just 1 second, yes. So for December last year, we had 50,278 visitation versus this year, we had 46,329 visitation, which is almost around 8% lower compared to the December last year.
Okay. And can you also provide me the average gross streaming revenue of December, like both this month and last year as well?
So [ Agastya ], that we will have to share with you, okay, because I don't have that number often right now, the GP -- gross gaming revenue. Because what happens is now we have changed our methodology and remove the GST from our GGR. So that we'll have to work out. Pragnesh will send it to you, yes?
Okay. Okay. And also I believe we had some offers running in December, but still we see 8% lower footfall in December. So -- and like over the whole quarter only, we are seeing this like October was good, but then October, November, December, December is the lowest amount of footfall?
Yes. So I'm sorry, [ Agastya ]. So what happens is -- I'll give you the numbers also. Like I said, we have an 8% lower visitation. That is mainly because last year, December was still -- maybe because of the COVID and even tourism people are still traveling and coming to Goa. But this year, we had seen quite a bit of drop in people coming into Goa. I mean the reflection is that for 26, 27, 28 December, flights from Bombay was as cheap as INR 4,000, INR 5,000, which usually go to basically INR 15,000, INR 18,000. So the visitation overall in Goa was lower compared to last year.
In fact, if you could ask the taxi driver, they were all saying the reason that because of the GST implemented to the casinos, people are coming lesser in number in Goa. I mean I don't know that was 1 of the reason or not, but yes. I mean the overall visitation in Goa was lesser. But like I said, the interesting thing is that in month of December, we went back to our original run rate, okay? So maybe our visitations were lower, but our gross gaming revenues were more or less similar to what we otherwise do in a month, yes?
Manoj, is it possible for you to give us a trend over the last January?
So January also, compared to last year, we are lower in terms of visitation for first 7 days, Anil, okay? And in -- I mean I don't know the numbers, but they are definitely lower, more than 8%, 9%, okay? But our run rates are good.
The next question is from the line of Rishikesh from RoboCapital.
Sir, you said to a previous participant that from July, we will be back to our original revenues. So can you explain how exactly that would be achieved? And what would be the sustainable EBITDA margins then?
So with respect to the numbers, like Manoj mentioned, on a GGR basis, as far as the customers coming in, we are actually more or less online with that and the contribution per customer is in line with what they were spending in the past. Now this tourism issue with respect to less footfall, so whilst I believe that Goa will continue to occupy preferred destination for all Indians, this drop in footfall we are addressing. And hopefully, over the next few months, it should be sorted out.
Just to give you an idea, the number of flights coming in from different locations have now increased to 29, they are expected to go up to 36 by the end of this month and so on and so forth. I don't have February, March figures. The average arrivals, which generally is in the vicinity of 15,000, 16,000 a month, dropped to about 14,000 for the last weeks of December, and everyone is doing whatever they need to do to contribute to ensure that the footfall goes up. So our thinking is stemming from the fact that once the footfall comes back to its original numbers, which was the pre-GST, then we have enough ammunition with us and the marketing team on ground along with the operations team have got plans to make sure that the revenues probably will go up to the level that we were seeing before.
There is a GST impact as well as the promotional chips impact. So it's going to be our endeavor to ensure that the revenue increases. And whilst we are running nearly at full capacity, there is also a plan to slightly change the demographics of the player that come in to ensure that their contribution towards GGR is maintained at a higher level.
Okay. And also, if you could comment on your EBITDA margin sustainability, what would be the sustainable EBITDA margin that is then?
Manoj, do you want to get to that?
Yes. So I think we'll be able to maintain 35%, 36% EBITDA margin. See, we were at 41% EBITDA margin, okay, and we see that additional 6%, 7% hit because of the GST, okay? And like we said that with most of our costs are fixed costs, so at a steady level with this current capacity, I think we'll be able to go back to the original EBITDA margins less by around 5% to 6%. We will try to compensate by generating more revenues because if we get more revenues, we'll be able to obviously add to straightaway EBITDA because, like I said, it's a fixed cost business.
Having said that, I think, like Anil mentioned, the next level of growth will come from the new ship, okay, which will come soon in the operations. So the margins will have an impact only GST, there is nothing else, because our costs are predominantly fixed.
Okay. Also 1 more question. With regard to the GST demand, can you comment on the possibility of government ordering any fees on accounts or any adverse actions that they can take?
Really, unable to comment on that, Rishikesh, to the matters such as this. So whatever the outcome, we'll have to wait and watch.
The next question is from the line of Rehaan Phophalia from Sicomoro.
First of all, thank you for the transparency on the changes in the business and the numbers provided. That really helps in understanding the way forward. What I wanted to understand was the plan with Peninsula Land. What kind of geographies are you targeting? And what projects would you be looking at? And if you could also provide some kind of timeline.
Yes. So real estate sector currently seems to be in an upstream cycle. Peninsula have actually been the pioneers and among the first companies to introduce luxury living and commercial spaces. We do believe that they went through some issues but have now managed to come out strong and have cleaned up and have a robust balance sheet. We've -- as Delta is concerned, we've been in the real estate play much earlier, and we've executed projects and exited profitably. . So we felt that there is definitely synergies, which lie between the 2 companies, 1 which has got execution skills. The other 1 being us where we've got some reserve funds laying with us, and we would like to deploy it into quick projects. When I say quick projects, probably would be redevelopment projects and small projects, which can add value, not long gestation projects. We are -- and this can be considered as a slight diversification program from our side. We are not completely sure how this is going to play out, but we are confident that we will be able to -- and the whole objective is to build a strong real estate brand.
As you are aware that our current promoters have real estate in their DNA. So we've seen an opportunity, and we're just going to go by that and hopefully turn it around. At this point in time, what revenue is going to add to our top line, we really can't say, but we are hoping that it does become significant because after our expansion plans in the casino and hospitality space, there isn't really any scope for further expansion because the casino businesses are primarily limited to the state of Goa and it has a small presence in the state of Sikkim. So beyond that, we don't see really any opportunity. The integrated resort, yes, like I said, Phase 1, which is a theme park, which again also happens to be a real estate play. So we're going to be executing that. And then subsequently, we'll take it from there.
Okay. That helps. Could you help me with what you mean by quick projects? If you can just give me an example of something that has been done in the past or by any other [ probable load ]?
So we're looking at small redevelopment projects. There are a few offers and proposals, which I can't disclose right now with Peninsula Land. So we've been strategically evaluating them. So we expect provisions to come in between 6, 9 months and a quick construction and delivery by anywhere between 18 months to 2 years. So hopefully, the end-to-end exercise should be within a period of 3 years. We are looking at an IRR of anywhere between 25% to 30% since there will be no cost of land involved in this.
Okay. And what kind of geographies are you looking at?
So primarily, it's going to be -- the Island City of Bombay. I think we're looking at South and Central Bombay. There are a few proposals in Goa also, which -- where we have our strengths. So to start, it will be between the 2 cities.
The next question is from the line of Bhavesh Patel from Patel Investments.
The next question is, have you seen any uptick in our Nepal casino considering that India GST has gone up? And any other plans now that if you are finding that challenging in India, then maybe even Sri Lanka we had put it on hold?
Manoj, will you take that?
So as far as Nepal casino is concerned, it's doing well, it's okay. But we can't look at any other jurisdiction now because the FDI rules and ODI rules doesn't permit us to invest any casino outside the country. So I mean those opportunities are not there anymore for us.
Okay. So but existing can continue is what I'm hearing.
Yes.
Okay. And then there were some plans to monetize land, I don't remember correctly, but whether it's Sri Lanka or even South Africa, whether we have made any progress on that and are another Advani hotel stake?
Bhavesh, as far as Sri Lanka land is concerned, we already sold that land. So we already encashed that value.
And as far as Advani pleasure investment is concerned, at the right -- there is no real requirement right now. So it's there in our books. We can monetize it any time. I'm sure when the right opportune time arises, we'll take that call. That investment is still about INR 125 crores.
[Operator Instructions] We'll take the next question from the line of [ Karan Meta ], an individual Investor.
I just have a few questions related to our real estate business. So firstly, why have we adapted the dual investment strategy in this business by investing in Peninsula Land Limited as well as investing in the JV?
That's a very simple transaction, actually. We bought in a small stake in Peninsula Land Limited. And subsequently, we will form a JV for which we will have majority stake. Peninsula will put in their contribution, we'll put it in our contribution. We felt that the structure works best for both companies. So that's the decision and thinking behind this whole investment.
Okay. Okay. And do -- is this the only vehicle through which we are entering this business? Or are we planning to collaborate with other experienced industry players as well?
So as far as our foray into real estate is concerned, this JV will be the vehicle. See, the other established and reputed brands are very large, and they don't really need funds from us, and they've got their own projects online. Peninsula has, in the past, executed projects and they have a small pipeline of projects, which would be there. And we were thinking of capitalize and monetizing together with them on that. That's the whole purpose. And we do definitely distinctly see value on this.
Okay. And sir, regarding our capital allocation strategy in this business, so how will it be for the next 3 years? And what will be the peak investment in this business?
So The peak investment will depend upon the opportunity that arises. Right now, we don't really need any debt. We've got enough cash in our balance sheet. Current business is [ throwing ] up cash. It's taking care of all our investments. So if there is a safe opportunity that does arise and the IRR is lucrative and mouthwatering, we'll definitely plunge into it.
Okay. Any rough guidance, like how much can that amount be for the next 3 years?
So we are starting off with the investment of about INR 250 crores in the JV, then we'll see how it plays out. And if and when needed, we'll take a call then. But for now, that's the amount that we've earmarked.
Okay. And sir, lastly, on the Goa land project Phase 1. So will the amusement park also have casino?
No. That's going to be a water theme park. That's not going to have a casino.
The next question is from the line of [ Dhaval Dama ], an individual investor.
My first question is regarding the ship. Sir, over the last 5 quarters, 6 quarters, we have consistently seen both the timeline of the ship being stretched out more than what it was initially communicated to investors and even the absolute amount increasing significantly. If you were to look at just the con call of our company 6 quarters back, the amount is more than INR 100 crores higher what you're saying today. Can you please clarify how has this amount increased by so much?
Okay. So when we embarked on this project, we were -- the ship currently has got 5 floors, and it's got 1 underdeck. So when we embarked on this project, we had not envisaged for it to become so large. We were focusing on it to just replace our smallest vessel. Subsequently, when this clarity on GST came out and the proposal was to tax on sale of chips, we decided to slightly tweak the ship in terms of facilities available on it. We've added some more retail space. We've added some more space for retail players. We're going to have shops in that. We're going to have a salon in that. There's a food court, which has been planned. So a lot of features have been added to that. This resulted in a slight delay. And as far as cost goes, yes, it's -- I don't think it's gone up too much. I don't recollect on the last call, what was the amount mentioned. But based on the new budget that has been prepared and accepted by the Board, we seem to be on track for that.
The ship will also have the largest space available for any outdoor event that can take place in Goa. So -- which actually has been -- I'm not talking about events like Sunburn, but if you're going to have an upside party where you get about 800, 1,000 people, this vessel will be able to take care of that.
So it will be -- besides an entertainment destination, it will also be an F&B destination. It will have areas for children. There is going to be games arcade, there's going to be retail shopping and, of course, enough area for gamers to come in. There's a lot of new introduction in terms of features, which we have learned over the last 15 years running our current 3 ships, which we have introduced in the ship. So keeping all that in mind, we have just run into a little bit of a delay, and then the vessel being built in a remote location, like Karnataka and Udupi also has added bit to the execution process.
Right, sir. And sir, second, I'm not able to understand the strategic view of the company, and I'll put the question in a way. See on one side, all you're saying is that the hit from new GST regime is only some 6%, 7%. And obviously, with the revenues going up, you'll be able to make up a large portion of that margin hit with revenue increase. But on the other side, company now is doing everything under the sun. We are building a hotel, which we were not earlier. We're not putting up a new casino. We are making it a water park. We are putting now like a lot of game things in our ship. So from a game income plan, we have also invested in a real estate company now. So we seem to be looking at more opportunities outside, thinking that this business might not do well. But this business, the hit is only 6%, 7%. Why is the view of the company like that?
No. So let me -- in case you've got the wrong inference. As far as our casino business goes, it's extremely robust and extremely resilient. We are actually going to decommission 1 of our smallest vessel. And the new vessel that's going to come into the river is going to be equal to twice the current capacity that we have. So we are doubling capacity. So that only goes to show the faith in the business. We can't do anything more to increase capacity because we have 3 vessels, and there are 3 licenses which have been issued to us, and no more licenses will be issued. So in terms of increasing capacity with the existing vessels, I think we peaked out.
The new ship that comes in and the capacity, that will hold us into good stead for the next 3 to 5 years in terms of churning out revenue because what we are doing right now, the new ship is going to add double capacity. So you can imagine what the revenues will grow up to.
As far as the hospitality sector is concerned, the more capacity we create for our vessels, the more capacity we will need to have in the hospitality space. Currently, we have a 106-room hotel, which over the weekend is completely sold out to all our players. Now with the new ship coming and new capacity being doubled, we would, at the bare minimum, require about 200, 250 rooms. Whilst we are happy to pay for the rooms outside, there are some weekends where you, in spite of what you want to pay, you won't even get rooms.
So if that happens, then we are able to invite our guests, which means it has a direct impact to our revenue. So if you see all that we are doing is basically to grow our casino business. You are right on the fact that the impact is only small percentages, and that is here to stay. But we're doubling the capacity. That would be completely overlooked. And I don't think we'll have an issue with respect to increasing our margins the way Manoj explained.
Right. Right. And sir, last question is, did I hear you right when you said that our GGR to gross buying of new chips is only like as high as 70%? So essentially, people lose almost 70% of what they buy?
So before the tariff was announced, you would be free to come and buy any amount from our cash cage, let's say, about INR 10,000. And you could play in any zone, on any level and depending on the outcome, you could freely go and exchange those chips from the cash cage. So to give you an example, if you bought INR 10,000 worth of chips and you came back with INR 5,000, you would get net INR 5,000 back in your hand. The system has now changed. If you buy INR 10,000 right now, we will deduct the [ TDS ] and give it to you. And if you come back with any chips, you're not going to get a refund. That's not something that I am dictating. That is something which is the law. So what has happened where people would buy amounts and probably at the end of the day, go back and change, have decided now to control their purchase. So they buy in a smaller lot. And as and when they spend that and if they need to buy more, they buy more. So therefore, the hold percentage to our drop has gone as high as 70%, and it's just simple logical that you won't do that. And the same fundamental applies to our online business, where people are now controlling their deposits that they make because you have to straightaway pay 28% on the deposit. So that's where the irony lies.
Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to the management for their closing comments. Over to you, sir.
Yes. So to sum up and provide some more clarity on our businesses. As far as our casino business is concerned, I think we have demonstrated -- we are demonstrating and we are pretty much confident that we -- after maybe next quarter or maybe 2 quarters, we would be back to where we were performing. The growth in the business will come in after the new ship comes in. And we are pretty confident that we will be able to excel and deliver revenues in expectation with what we've been doing in the past.
The online business currently is a wait and watch. We are definitely expecting some shakeout to take place, and we are hoping to reap some benefits out of that. The current ongoing projects are well taken care of and they're only going to add to our revenue, the new ship and the new hotel, which is going to complement our gaming business, that's going to further have substantial cost savings, and that is going to directly translate into profits into our P&L account. The integrated resort project, which was currently and temporarily put on hold, we are looking at breaking it up into phases. And we are looking at starting the water theme park, which is a portion of our entire outlay. So the total project that we had envisaged in terms of hotels, retail, convention center, multiplex and the theme park remains intact, but we start with the theme park. And with respect to our overall financial health, I think we are in a comfortable position and we have healthy reserves in our balance sheet, and we don't foresee any hurdle coming our way. The investment that we made into real estate is a well thought of investment and we are pretty confident, given the fact that we've had experience in this, that we will be able to add great value of our investment in Peninsula Land. So with that, I'd like to conclude our summary of our business and for the next couple of years, the way we see it.
Thank you very much, sir. Ladies and gentlemen, on behalf of Antique Stockbroking, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.