Delta Corp to Sell Adda52 Parent Firm to Head Digital Works for ₹491 Crore in Landmark Deal
Delta Corp : In a significant move for the online gaming industry, Delta Corp has announced the sale of its skill gaming subsidiary, Deltatech Gaming, to Head Digital Works, the parent company of A23. The deal, valued at ₹491 crore, marks a major consolidation in India’s real-money gaming space, which is currently navigating regulatory challenges, including the impact of the 28% GST regime.
Deal Structure and Financial Considerations
The transaction will take place in two phases:
- Initial Stake Sale: By April 6, 2025, Head Digital Works will acquire a 51% stake in Deltatech Gaming by paying ₹34.8 crore in cash and issuing equity shares to Delta Corp, giving Delta a 2.8% stake in Head Digital Works.
- Merger and Final Stakeholding: Deltatech Gaming will then be merged into Head Digital Works by June 2026, following which Delta Corp will hold a 5.7% stake in the combined entity.
A Strategic Move for Online Poker Expansion
Delta Corp’s Managing Director, Ashish Kapadia, expressed optimism about the deal, stating,
“We’re excited for this journey with Deepak (Gullapalli) and the team, whose leadership has been instrumental in shaping the online Rummy market in India. This transaction will strengthen Adda52’s leading position in the online poker space.”
Deltatech Gaming, formerly Gaussian Networks, was acquired by Delta Corp in 2016 for ₹182 crore. The company operates Adda52, one of India’s most recognized online poker platforms, alongside Addagames, a multi-gaming real-money platform offering card games and Ludo.
Failed IPO and Regulatory Hurdles
Delta Corp had initially planned an IPO for Deltatech Gaming worth ₹550 crore in 2022 but put those plans on hold in August 2023 due to uncertainties surrounding the revised GST rates on gaming revenues. Additionally, Deltatech Gaming received a retrospective GST notice of ₹6,384 crore in October 2023. The Supreme Court, however, stayed similar notices worth over ₹1.5 lakh crore from over 50 gaming firms in January 2024.
In FY24, Deltatech Gaming recorded a total income of ₹92.9 crore, contributing approximately 9.46% of Delta Corp’s total revenues.
Head Digital Works: Strengthening Market Position
For Head Digital Works, which operates online rummy and poker platforms under the A23 brand, this acquisition will solidify its presence in the online poker market. The company has been aggressively expanding, having entered the online poker space in September 2023.
“Adda52 has been a trailblazer in the online poker arena with an excellent platform and a strong, loyal user base. By combining our strengths, we aim to accelerate growth and create India’s most comprehensive skill-gaming platform,” said Deepak Gullapalli, Founder of Head Digital Works.
The firm, backed by Canadian private equity firm Clairvest, has 75 million users across its gaming platforms.
Financial Performance of Head Digital Works
- Profit After Tax (PAT): ₹72 crore in FY24 (24% growth from ₹58 crore in FY23)
- EBITDA: ₹98 crore in FY24 (up from ₹89 crore in FY23)
- Gross Revenue: ₹1,378 crore in FY24 (31% YoY growth)
- Net Revenue: ₹841.4 crore in FY24, nearly flat compared to ₹839.1 crore in FY23
However, the firm noted that its EBITDA margins have declined due to the 28% GST tax slab.
Rising Competition in the Online Poker Industry
The Indian online poker market is becoming increasingly competitive, with several established players vying for dominance. Key competitors include:
- Nazara Technologies, which acquired a 47.7% stake in PokerBaazi
- Games24x7’s PokerCircle
- Gameskraft’s Pocket52
- Mobile Premier League (MPL)
- Spartan Poker, which was acquired by OneVerse in February 2024
Delta Corp’s Financial Overview
| Financial Metric | Value |
|---|---|
| Market Cap | ₹2,674 Cr. |
| Current Price | ₹99.9 |
| 52-Week High/Low | ₹155 / ₹86.7 |
| Stock P/E | 22.9 |
| Book Value | ₹95.1 |
| Dividend Yield | 1.25% |
| Return on Capital Employed (ROCE) | 12.4% |
| Return on Equity (ROE) | 8.76% |
| Debt to Equity Ratio | 0.02 |
| EPS (Earnings Per Share) | ₹5.86 |
| Intrinsic Value | ₹73.3 |
| Promoter Holding | 33.3% |
| PEG Ratio | 7.62 |
| Debt | ₹45.4 Cr. |
| Free Cash Flow (3 Years) | ₹93.2 Cr. |
| Recent QoQ Profit Growth | 32.4% |
| Industry P/E | 22.9 |
| Relative Strength Index (RSI) | 49.4 |
Conclusion
This acquisition signifies a major shift in India’s online poker and real-money gaming industry, consolidating key players amid regulatory uncertainties. For Delta Corp, the sale of Deltatech Gaming allows the company to streamline its operations, while Head Digital Works strengthens its market position in online poker.
With India’s gaming industry projected to witness exponential growth, this deal positions Head Digital Works as a dominant player in the skill-gaming segment, making it a move that could reshape the future of online gaming in the country.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.