Tuesday, August 09, 2022

Demonetization puts India’s casinos into a spin

On Nov. 8th, Indian Prime Minister Narendra Modi made an unscheduled televised appearance during which he dropped a bombshell for the country’s economy. In an effort to stamp out the black market and tax evasion he announced that the 500 rupee and 1,000 rupee notes in circulation would cease to be legal tender.

People were allowed to exchange their old, devalued notes on an immediate basis until 24th of last month. The notes can now be deposited in banks till Dec. 31 and lower denomination notes will be provided but only a certain amount of cash is available to an individual on a daily basis. The Reserve Bank of India subsequently introduced a 2000 rupee note on Nov. 8th.

According to estimates, the abandoned notes accounted for about 86 percent of the cash in circulation in a country where cash is king. About 90 percent of the volume of all transactions is done by cash, with just under half of the country without bank accounts.

The decision has had profound repercussions throughout the economy and has hit particularly hard in the gaming industry. While illegal gambling has been all but eradicated for the time being, legal casinos in Goa and Sikkim have also seen business slump.

According to Jay Sayta, founder of Glaws.com and an expert on Indian gaming, business dropped about 80 percent following the demonetization. It has since recovered with the introduction of the new bills, but is still down on the previous year.

Delta Group, the country’s only listed casino operator, which has properties in Goa, Daman and a planned project in Sikkim, saw its share price slump by about 37 percent in the week after the announcement. A Delta spokesperson confirmed that business was “suffering” but did not respond to queries about any measures undertaken to address the issue.

In a recent visit to Sikkim, an AGB correspondent spoke to gaming operators in the tiny Himalayan state, which has come to rely on gambling for revenue. The state, whose mountainous terrain makes large-scale manufacturing or agriculture all but impossible, gets about $15 million from the gambling industry.

“We are doing less than half the business we did otherwise,” the man running the operations at one of several gaming kiosks near the main boulevard of the capital Gangkok says. The kiosk offers Baccarat, Roulette and Keno, among others.

A printout pasted on one of the walls states that notes of Rs. 500 and 1000 are no longer legal tender.

At another kiosk, right in the middle of the boulevard, a young woman is in-charge of the operations. The same games are available here as well. But there are hardly any customers so she plays Roulette, along with two helpers who work at the shop.

Both the shops are under the control of Golden Gaming, a company that owns 170 such kiosks in Gangkok and 230 all over Sikkim. It also owns a three-storey betting centre and two casinos. A third casino, owned by Delta group is likely to be operational soon.

The betting centre, also on the main boulevard in the heart of the city, offers a slightly more upmarket experience, with sports betting available, as well as the other games.

On the third floor, where several TV screens show cricket and soccer matches in progress, Satya Narayan Raju, the CEO of the betting centre, says business has been hit, but he is cautiously optimistic the impact will be short term. “The footfall has gone down by almost 55 percent but I hope we should be back to doing the same volume of business as earlier in the next two-and-a-half months,” he says.

Manoj Sethi, who owns Golden Gaming, hopes that business will pick up. The company pays around $75,000 in tax to the Sikkim government every month. Operations at the betting centre started in May earlier this year.

It’s a similar story in the state of Goa, where many casinos closed shop, at least temporarily. Although gamblers are able to pay on credit, there is a problem when it comes to giving change.

"As the crux of the operations is based on exchange of currency in cash, there are not many customers now. Also, there is a short of 100 notes and even if one has a 2000 note, we are facing a problem in giving change," local media cited one casino employee as saying.

Casino Pride’s management also said the business had suffered since the news of demonetization. Casino Pride is the other major player in Goa, along with the Delta group.

"The casinos remained shut for 2-3 days as the business was low," said Mary, marketing manager of Casino Pride, adding that the business has improved slightly following the introduction of the 2000 rupee note.

Operators and observers are confident the slowdown will be temporary for the legal business. They add that while there is upside as far as illegal gambling is concerned, the effect may also only be temporary. The illegal sports betting market alone was estimated at about $150 billion by the Federation of Indian Chambers of Commerce and Industry in 2015.

“I cannot say when the situation will improve exactly because it depends on liquidity returning to the market,” said Roland Landers, who heads the All India Gaming Federation, a lobby group. However, as an unintended fall-out of the move, the online gambling sector may benefit, he added. “The transactions online on these sites are done with cards mostly so they will not be affected. In fact, they may gain some advantage,” he said.

Rajpal Singh,who heads the sports desk at FICCI, under which betting activities are also included, said that the move was a “positive start” which will curb illegal betting activities but it was not a “panacea” for curing all ills related to the industry.

“That will happen only when the industry is legalized and regulated,” he said.



Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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