Delta Corp to sell Adda52 parent firm to A23 owner Head Digital Works for Rs 491 crore

The deal will strengthen Head Digital Works' footprint in India's online poker market

Casino and hospitality giant Delta Corp on February 20 announced that it is selling the company's skill gaming unit Deltatech Gaming to Head Digital Works, which operates online rummy and poker platforms under the A23 brand, for a total consideration of around Rs 491 crore in a cash-and-stock deal.

The deal marks the latest consolidation in India's real-money gaming industry that is grappling with lack of regulatory clarity and the impact of the 28 percent Goods and Services Tax (GST) regime.

The transaction will occur in two phases: Hyderabad-based Head Digital Works will initially acquire a 51 percent stake in Deltatech Gaming by paying Rs 34.8 crore in cash and swapping its equity shares with the company by April 6, 2025. This will give Delta Corp 2.8 percent stake in Head Digital Works, as per a stock market filing.

This will be followed by a merger of Deltatech Gaming into Head Digital Works. After the merger is completed, Delta Corp will hold a 5.7 percent stake in Head Digital Works. The proposed merger is expected to be completed before June 2026.

“We’re excited for this journey with Deepak (Gullapalli, founder of Head Digital Works) and team, whose leadership has been instrumental in shaping the online Rummy market in India. We believe that this transaction will help Adda52’s leading position in the online poker market” said Ashish Kapadia, Managing Director, Delta Corp.

Deltatech Gaming (previously called Gaussian Networks) acquired Adda52, one of India's oldest online poker platforms, for Rs 182 crore in 2016. The company also operates Addagames, a real-money multi-gaming platform that offers multiple card games and ludo among others.

Delta Corp initially planned to take Deltatech Gaming public and filed for a Rs 550 crore IPO in June 2022. However, the firm put these plans on hold in August 2023, citing uncertainties related to the revised GST rates.

Further, Deltatech Gaming also received a retrospective GST notice for alleged tax shortfall of Rs 6,384 crore in October 2023. In January, the Supreme Court stayed GST show cause notices, worth more than Rs 1.5 lakh crore, from over 50 real-money gaming companies and industry associations.

Deltatech Gaming reported total income of Rs 92.9 crore  for the the financial year March 31, 2024 (FY24), contributing for about 9.46 percent of Delta Corp's FY24 revenues.

Strengthening presence in online poker

For Head Digital Works, the acquisition is expected to strengthen its presence in the rapidly-growing online poker space and help it take on Nazara Technologies, which recently acquired 47.7 percent stake in online poker platform PokerBaazi, one of the country's biggest online poker platforms.

The skill gaming company, which is majority-owned by Canadian private equity firm Clairvest, forayed into online poker in September 2023, as part of its efforts to diversify its offerings. Head Digital Works has over 75 million users across its online rummy and poker platforms.

Head Digital Works founder Deepak Gullapalli said this acquisition will enable the firm to offer an "enriched gaming experience, drive technological advancements, and cater to the evolving preferences of our users."

"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 expand our poker business, accelerate growth through new avenues and create India's most comprehensive and diversified skill-gaming platform for our customers" he said.

Started in 2006, Head Digital Works reported a profit after tax (PAT) of Rs 72 crore in FY24, a 24 percent increase from Rs 58 crore in FY23.

EBITDA (earnings before interest, taxes, depreciation, and amortization) increased to Rs 98 crore in FY24 from Rs 89 crore in FY23. The firm however stated that EBITDA margins have narrowed since the implementation of the 28 percent GST tax slab.

The firm's consolidated gross revenue from operations grew 31 percent to Rs 1,378 crore in FY24, from Rs 1,051 crore in FY23.  The net revenue was however nearly flat at Rs 841.4 crore in FY24, from Rs 839.1 crore in FY23.

Other prominent players who offer online poker in the country include Games24x7's PokerCircle, Gameskraft's Pocket52, Mobile Premier League (MPL), and Spartan Poker, which was acquired by metaverse and gaming tech company OneVerse in February 2024.