Now scheduled to open in August, Silver Heritage Group’s Tiger Palace Bhairahawa will be the first casino resort built especially for the Indian market. (Credit: Silver Heritage Group Ltd)Silver Heritage Group Ltd

Frontier market specialist Silver Heritage Group’s casino project in Nepal targeting Indian visitors is over budget and will miss its scheduled opening this month. That’s led to a suspension of trading in the company’s shares in Australia, a revamp of project management and a new fund raising exercise. None of that means Tiger Palace Resort at Bhairahawa, the first purpose built integrated resort in South Asia, is a bad idea.

Silver Heritage raised A$25 million (US$19 million) in an ASX public offering last August to complete funding of the US$40 million Bhairahawa project, the first Nepal border casino targeting the Indian market. India only has legal casinos for its 1.3 billion people, many keen punters, in just two states, both remote from Tiger Resort’s target markets of Delhi, Uttar Pradesh, Bihar and West Bengal, with 430 million people within a six hour drive of the casino.

In early February Silver Heritage announced delays to Tiger Palace, hardly the first casino in Asia to fall behind schedule, a person close to the project notes. Silver Heritage asked ASX to suspend trading in its shares on February 27, just as it was due to report earnings for 2016. The company, which currently runs casinos in Kathmandu and Vietnam, said it would provide further information on the situation in Bhairahawa, and last week it did in an ASX filing and supplemental documents.

Independent reviews of the development blame delays on changes to the initial design of the resort, plus difficulties with fund transfers and construction management. As result, Silver Heritages needs another US$14.8 million to open Tiger Palace. The company says it is finalizing its capital raising structure for those funds. The casino hotel, with 100 five-star rooms, two villas, a gym, spa, swimming pool, restaurants, plus meeting and banquet facilities suitable for weddings in its first phase, will now aim to open in stages from August, with a grand opening expected in November. A new project management team has been put in place to complete construction and fit out.

Among details revealed in the review, the hotel and other hospitality areas are being completed faster than the casino. (That sequencing confirms Tiger Palace Bhairahawa is Silver Heritage’s first greenfield casino project.) So the August opening will include the hotel blocks, villas, gym, spa, pool and four food and beverage outlets. Once the hotel is operational and the casino license is issued, gaming tables and machines will be installed in public areas ahead of main casino floor completion in November.

Delays aside, there’s still a strong case for Tiger Palace Bhairahawa. A Global Market Advisors White Paper by Kit Szybala pegs the potential Indian gaming market at US$10 billion. India’s middle class is projected to top of China’s  as the largest in the world in terms of spending by 2030. With limited casino choices in India, much of that gaming spend will find its way to casinos in neighboring countries, and Tiger Palace aims to become the preferred proximate choice. Even the new projected cost of US$54.8 million is a reasonable investment to test a market that size.

Bolstering the case, roads and airports on both sides of the border are being improved, with the Bhairahawa airport getting upgraded to international status. (One Delhi travel agent cautioned that if people are getting on a plane, they might as well go to Macau.) Bhairahawa is near a pair of UNESCO World Heritage sites, including Buddha’s birthplace in Lumbini and wildlife area Chitwan National Park.

Silver Heritage is a long term play in the midst of a short term delay. The experience developing a resort from the ground up should serve the company well when it goes ahead with Tiger Palace Jhapa to the east, closer to Kolkata.