M & A CritiqueIn order to put its business on fast track, Delta Corp Limited, India’s only listed gaming company, merged its wholly owned subsidiary Delta Leisure and Entertainment Private Limited (DLEPL) in 2013. The scheme of amalgamation alongside Delta Leisure and Entertainment Private Limited included 10 other subsidiaries and step down subsidiary companies of Delta Corp.
COMPANY PROFILE:
Delta Corp is a fast-growing Indian company operating in diversified fields. Having started as a pure textile player, Delta Corp Limited has transformed into a diversified company, with interests in real estate (in India as well as East Africa), gaming and entertainment, aviation, and hospitality. Delta Corp has de–merged its textile business into a new entity which is now called Arrow Textiles. Delta Corp is promoted by Jaydev Mody, an eminent and successful Indian entrepreneur and erstwhile managing director of Peninsula Land (PLL) (promoted by the Ashok Piramal Group).
Delta primarily operates in two business segments – Gaming and Hospitality. It is also the largest and only listed company in this space. Delta Corp entered the Gaming and Hospitality segment in 2008 with a view to providing an international gaming experience in India. In a short duration, Delta Corp has become a market leader in the Indian gaming and entertainment Industry. Going forward, the company intends to consolidate its position by adding casinos to its existing portfolio in Goa, besides expanding its gaming and entertainment presence in other destinations as and when opportunities open up in the future.
India’s listed gaming company has done an amalgamation to chart its business growth
Gaming and Entertainment –
Delta Corp through its wholly owned subsidiary Delta Leisure and Entertainment Private Limited operates two offshore casinos – Deltin Royale and Deltin JAQK – that offer about 1,200 gaming positions. Deltin Royale is India’s largest and most luxurious offshore gaming vessel. Of the current five offshore live casino gaming licenses issued by the Government of Goa, Delta owns three.
Hospitality-
Delta Corp operates two hotels in Goa – Deltin Suites and Deltin Palms, with a total of 133 rooms. Delta also owns Daman Hospitality Pvt. Ltd (DHPL), which owns The Deltin, the largest fully-integrated resort and convention complex in Daman. The hotel is in the five-star deluxe category with 189 rooms, 29,000 sq ft of indoor events and meeting space and 70,000 sq ft of outdoor pools and events space. Delta holds approximately 35.6% equity in Advani Hotels & Resorts (India) Limited (AHR), which owns and operates Ramada Caravela Beach Resort. However, Delta Corp has no operational interest or management control in AHR.
Real Estate-
Delta Corp, through its subsidiaries and JVs, intends to ride the growth wave of development in the East African countries. Delta Corp has formed a joint venture company with Reliance Industries Limited (RIL Group), namely, Delta Corp East Africa (DCEAL), through its wholly–owned subsidiary Delta Pan Africa (DPAL). DCEAL has already acquired close to 803,720 sq–ft of land with a development potential of close to two million sq–ft. It has planned a combination of commercial office space development, retail, and hotel projects.
Delta Corp also provides Real Estate consultancy services to Peninsula Land which comprise of conceptualization, designing, procuring permissions, etc. for an agreed consideration.
Aviation-
Delta Corp Limited has also forayed into the aviation sector by providing charter flight services. AAA aviation Pvt. Ltd. has NSOP license for non–scheduled airline business and its fleet currently includes a helicopter, (Robinson R44) and an aircraft (Beechcraft King Air C90 B).
CORPORATE STRUCTURE:
Delta Corp has 8 Direct Subsidiary companies and 22 Step down Subsidiary companies.
SCHEME OF AMALGAMATION:
The Scheme of Amalgamation includes the merger of the following 11 subsidiaries and step down subsidiaries with Delta Corp Limited.
- AAA Township Private Limited (ATPL)
- Aman Infrastructure Private Limited (AIPL)
- Argyll Hotel Private Limited (AHPL)
- Delta Adventures & Entertainment Private Limited (DAEPL)
- Delta Hospitality & Entertainment Private Limited (DHEPL)
- Delta Hospitality & Leisure Private Limited (DHLPL)
- Samarpan Township Private Limited (STPL)
- Samarpan Properties & Construction Private Limited (SPCPL)
- Shree Mangesh Realty Private Limited (SMRPL)
- Victor Hotels & Motels Limited (VHML)
- Delta Leisure & Entertainment Private Limited (DLEPL)
This is a case of Conglomerate Amalgamation as all the companies are engaged in different lines of business. ATPL, DAEPL, STPL, SPCPL, and SMRPL are engaged in the business of Real Estate, while AIPL is engaged in the business of Infrastructure Project Development and AHPL, DHEPL, DHLPL, VHML & DLEPL are engaged in the Hospitality Business.
The Appointed Date of the Amalgamation is 1st April 2013 except for the purpose of amalgamation of Victor Hotels and Motels Limited with Delta Corp Limited – the Appointed Date is 1st October 2013. No Consideration will be paid by Delta Corp Limited as entire Share Capital of the Transferor Companies is held by Delta Corp Limited and its subsidiaries directly or through subsidiaries.
GROUP SHAREHOLDING:
ATPL, AIPL, AHPL, SPCPL, and SMRPL are wholly owned subsidiaries of Delta Adventures & Entertainment Private Limited as their entire share capital is held by DAEPL. DAEPL, DHLPL, VHML, and DLEPL are wholly owned subsidiaries of Delta Corp Limited as their entire share capital is held by Delta Corp. DHEPL is a wholly owned subsidiary of Delta Hospitality & Leisure Private Limited as its entire share capital is held by DHLPL. The entire share capital of STPL is jointly held by DAEPL, SPCPL, and ATPL.
DELTA SHAREHOLDING:
The Company’s Equity Capital consists of 22,75,76,504 shares of face value Re.1 each, owned by shareholder groups below
The total revenue of the Company substantially increased from Rs 15.67 crore in 2012 to Rs 65.40 crore in 2013 and Rs 201.44 crore in 2015. The company registered a net profit of Rs 21.62 crore in 2013 against a loss of Rs 0.70 crore in 2012 and the net profit of Rs 31.90 crore in 2015. With new ventures coming up and increased focus on core business divisions seems to have paid off for Delta Corp.
The Company plans to make itself Debt Free in the next 1.5 years by selling their non-core assets which include their Real Estate Division. The company is looking to exit their, 40:60 Real Estate Joint Venture in Kenya with RIL.
The Financial Trend of the past 4 years indicates that the Company’s Debt has been increasing. Currently, they have a Debt of Rs 326 crore. The company is being tied down due to their debt. They have expressed their plan to expand their Gaming Business in Daman and Sri Lanka but they first wish to become debt free.
They have acquired a land in Sri Lanka to expand its Gaming Business and are also expecting their Property in Daman to be operational early next year. Their Daman Casino is considered to be the largest Casino in India over 100 acres and 60000 sq ft of gaming space. They also recently launched their Casino Deltin Royale in Goa.
Among the Transferor Companies involved in the Scheme, only 3 Companies i.e., Delta Adventures & Entertainment Private Limited, Delta Hospitality & Entertainment Private Limited and Delta Hospitality & Leisure Private Limited are generating revenue and making the profit. All the other transferor companies involved are not generating any revenue and are losses making entities.
Also as per the Accounting Treatment of the Scheme, all the assets and liabilities of the Transferor Companies shall be recorded by the Transferee Company (Delta Corp.) at their respective fair values. The fair value will be as may be determined by the Board of Directors. The investment in share capital the Transferor Companies held by the Transferee Company shall stand canceled. Also, any inter-corporate balances shall be canceled.
BENEFITS OF THE MERGER:
- The main benefit of the merger is a simplified Group Structure by an elimination of multiple entities.
- Companies carrying on a similar line of business have been merged so as to achieve greater administrative efficiency.
- As multiple entities cease to exist, it would eliminate multiple administrative functions and multiple records keeping.
- Further, there is a significant reduction in the multiplicity of the regulatory compliances.
- Delta Corp has merged its wholly owned subsidiary Delta Leisure and Entertainment Private Limited which runs Casinos Deltin and Royale along with other hospitality and gaming businesses. With this merger, Delta is looking to strengthen its gaming and entertainment division. With new Casino launch in Daman, the tide definitely seems to be in Delta’s favor.
CONCLUSION:
The decision to merge its subsidiaries seems to be a good move on the part of the gaming company. The merger would result in a leaner and streamlined group structure which would help in reducing expenditure cost an increasing efficiency. The merger will help Delta top focus on its core divisions. With new plans for strengthening its core division of Gaming and Hospitality underway and increasing revenue, Delta Corp Seems to have made the right gamble with the merger.
