Nazara slides 7%, Delta recoups losses; should you sell on RMG crackdown?

Dream11, MPL, Rummy and Poker operators would be the other unlisted companies that will face direct impact from the draft legislation

Shares of Nazara Technologies and Casino operator Delta Corp took a hit on Wednesday after India finalised a draft legislation to ban all forms of online real-money gaming (RMG). 

 

Nazara Technologies shares slumped 6.69 per cent to ₹1,306, marking their sharpest intraday fall since January 13, while Delta Corp dropped 6.75 per cent to ₹86.6, also its steepest decline since that date.

 

As of 10:00 AM, Nazara Tech was trading 6.2 per cent lower, while Delta Corp recouped losses to trade 0.4 per cent higher, compared to the 0.02 per cent decline in the benchmark Nifty50 index.   Track LIVE Stock Market Updates Here

 

Real-money gaming faces regulatory crackdown

The draft Bill, cleared by the Union Cabinet on Tuesday, is likely to bar "offering, aiding, abetting, inducing, or otherwise in the offering of any online money gaming service and declares it as an offence," according to a Business Standard report.

 

The draft Bill has also proposed that banks, financial institutions, or any other person should not facilitate any transactions related to online real-money games, the sources said.

 

The gaming sector currently pays a 28 per cent GST rate imposed in October 2023, and has contested the levy of the tax as well as its retrospective applicability in the Supreme Court.  

 

Dream11, MPL, Rummy and Poker operators would be the other unlisted companies that will face direct impact from the draft bill.  

Nazara Tech to face indirect impact 

Commenting on the crackdown, Nazara Tech clarified that the company has no direct exposure to RMG businesses. However, it has an indirect exposure through its 46.07 per cent stake in Moonshine Technologies Pvt. Ltd. (PokerBaazi). 

 

As Nazara Tech does not hold a majority stake or exercise control, Moonshine’s revenue is not consolidated in its financial statements and has no impact on the reported revenue, Nazara clarified. Nazara Tech invested ₹805 crore in Moonshine through a mix of cash and stock and also holds compulsory convertible shares worth ₹255 crore.

What should investors do? 

Nazara Tech has clarified that the government's crackdown on real-money online gaming will not significantly affect its business, noted independent market analyst Ambareesh Baliga. Its exposure is indirect, through clients, and most of those clients are overseas, he said. "Despite this, Nazara’s shares saw a correction in trade."

 

For Delta Corp, the situation remains less clear since most of its business is derived from physical casinos, which are not covered under the ban. In fact, some online players could even shift to offline casinos.  The draft ban comes as RMG firms are already reeling under a 28 per cent GST imposed in October 2023. The government is now considering hiking the levy further to 40 per cent, placing these games in the same "sin goods" category as tobacco. 

 

Baliga added that ongoing discussions on GST could provide greater clarity for the sector. For now, he suggested that investors wait for more regulatory certainty. 

 

Nazara Tech is riskier than Delta Corp, as the latter has physical casinos, which are not covered so far under the bill, G Chokkalingam, founder of Equinomics Research, said. "Delta Corp may have started some online operations, but its main business is still physical casinos."