I was a long term investor (holding for over 5 years) in the company as I was a believer in the long-term prospects of the gaming industry. However, I exited all my positions as soon as the GST levy on deposits was introduced, as this raised significant questions about my rationale for investing in the business.
The key event for the company is, if the levy is removed or substantially diluted from current levels. As a person who understands this industry, if the govt. does not announce any relief in March 2024, the industry will slowly and surely die as the cost structure for the participants is unsustainable. In the online business despite Adda bearing the entire 22% cost (effective GST levy), which means that the company has been losing money (transaction cost being more than margins), the footfalls have been falling and they are forced to give more incentives for people to come on their platform.
The venture into real estate to me makes sense and I think they have understood that the sector will always be vulnerable to draconian regulations. They had planned to develop an offshore casino in Goa, but with these recent developments, any fresh expansion in gaming seems imprudent. Exploring avenues in hospitality like hotels etc. makes sense and the recent partnership with Peninsula is a step in that direction, which I think makes sense.
Best Regards
SJ
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