Daman-Gujarat 'merger' talk spooks Delta Corp investors

MUMBAI: Fears of a possible merger of Daman and Diu -a coastal Union Territory (UT) -with the state of Gujarat have triggered selling in the stock of Delta Corp, India's only listed casino company. In just three trading sessions, the company's share price is down 17% from a 52-week high of Rs 218 on April 5.

The market dreads that Prime Minister Narendra Modi, during his upcoming visit to the UT on April 17, may set the ball rolling for the merger, hurting the company's casino business in the region because gambling is banned in Gujarat. Delta Corp operates an integrated hotel and casino resort in Daman.

A hint to the existence of such a proposal was first dropped in 2015 by former Gujarat home minister Haribhai Chaudhary on his visit to Daman.

Daman is a huge market for Delta Corp, as its casino is just a few hours away from Mumbai and Gujarat.While Daman is located along the Gujarat coast, it is governed by the same gambling act prevailing in Goa, making it easy for Delta Corp to operate there. Daman also attracts tourists, as alcohol is banned in neighbouring Gujarat. “Merger of Diu and Daman with Gujarat could weigh on casino operations in the UTs," said a Mumbaibased broker and high networth investor. “Even the ban on liquor in most states is sentiment negative for gambling and hotel companies, as it could hit foreign tourism."

Another analyst tracking the company said there was no substance to the rumours of merger as the government had not given any hint to such a proposal.

According to a March 21 research report by Mumbai-based broker Motilal Oswal, Daman was supposed to be a key growth driver for Delta Corp. The report said that the company could have nearly doubled its capacity from 1,700 gaming positions in Goa to around 3,000 due to Daman operations with an added advantage of a first mover advantage in the UT.