IPO Note Rating matrix Rating : Unrated Issue Details Issue opens 21-Apr-13 Issue closes 23-Apr-13 Issue size ( cro re) 166-180 No of share s on offer (crore) 1.45 Fresh Issue 1.45 Employee Reservation NA QIB 50% Non-institutio nal 15% Retail 35% Minimum lot size NA Objects of the Issue To set up an amusement park, Wonderla Hyderabad Shareholding Pattern Pre Issue Post Issue Promoter and Promoter group 95.5 71.0 Others 4.5 3.4 Public - 25.7 Valuation Parameters crore FY FY11 FY12 FY13 9MFY14 Total Income 69.8 91.2 114.5 139.2 121.5 EBITDA 32.1 47.5 56.9 64.2 58.0 EBITDA Margin (%) 46.0 52.1 49.7 46.1 47.7 Depreciation 11.8 11.8 11.6 11.8.1 Interest 5.8 3.9 1.1 2.2 1.2 PAT 9.4 31.5 29.9 33.5 31.0 Analyst s name Rashesh Shah rashes.shah@icicisecurities.com Darpan Thakkar darpan.thakkar@icicisecurities.com April 16, 14 Wonderla Holidays Limited Price band 115 125 Wonderla Holidays Limited (Wonderla) is one of the leading amusement park operators in India. The company commissioned its first amusement park in Kochi in 00 and the second amusement park in Bengaluru in 05. Company also started resort at its Bengaluru amusement park in March 12. As part of expansion plan, company is planning to open one more park at Hyderabad which is the objective of this IPO. Investment rationale A well established player with early mover advantage Wonderla has been present in the industry since past 13 years with two amusement parks. Company s cost of establishment is lower than the establishment costs in today s market which gives the company flexibility of keeping competitive entry fees. In-house manufacturing to help in decreasing capex and maintenance cost The company has developed an in-house manufacturing facility in Kochi to construct rides used in its amusement park. According to the company, the cost in-house manufacturing a ride is almost one third to that of buying it from outside. Manufacturing capability has also helped the company to build its in-house maintenance capabilities thereby reducing the cost of maintenance and down-time for a ride. Healthy operating cashflow with strong balance sheet The company has been able to generate operating cash flow at CAGR of ~22% over the period of FY09-13 due to strong footfall growth and healthy EBITDA margin. Further, the business is a negative working capital business as most of the payments are received upfront. Company has D/E ratio of 0.15 as on FY13 which make stronger balance sheet. Concerns On going litigations on land in Hyderabad Competition from existing and new players Risk of accidents or mishaps at any of the parks Slowdown in overall economic environment Priced at FY13 PE multiple of 19x on lower band and x on higher band At the IPO price band of 115-125, the stock is available at multiple of 19x-21x FY13E PE (post dilution). Exhibit 1: Key Financials crore FY09 FY FY11 FY12 FY13 9MFY14 Total Income 63.3 69.8 91.2 114.5 139.2 121.5 Growth YoY (%) NA.2 30.8 25.5 21.5 NA EBITDA 28.7 32.1 47.5 56.9 64.2 58.0 EBITDA Margin (%) 45.3 46.0 52.1 49.7 46.1 47.7 Depreciation 11.7 11.8 11.8 11.6 11.8.1 Interest 7.6 5.8 3.9 1.1 2.2 1.2 PAT 11.0 9.4 31.5 29.9 33.5 31.0 PAT Margin (%) 17.4 13.4 34.6 26.1 24.1 25.5 EPS ( ) 4.2 2.2 7.5 7.1 8.0 7.4 Post issue diluted EPS ( ) 2.0 1.7 5.6 5.3 5.9 5.5 Source: RHP, ICICIdirect.com Research
Company Background Wonderla Holidays Ltd (Wonderla), founded in 02, is one of the largest amusement park operators in India. It currently operates two amusement parks situated in Kochi and Bengaluru under the brand name Wonderla and a resort in Bengaluru under the name Wonderla Resorts. The company is promoted by Mr Kochouseph Chittilappilly (promoter of V- Guard Industries) and Mr Arun Kochouseph Chittilappilly. Promoters and the promoter group hold 95.48% stake in the company while the remaining 4.52% stake is held by employees of the company and group companies. The company commissioned its first amusement park in Kochi in 00 under the name Veegaland and the second amusement park in Bengaluru in 05 under the name Wonderla. Veega Holidays and Parks Pvt. Ltd, which owned and operated Veegaland, was merged with Wonderla with effect from April 1, 08 and both the parks now operate under the name Wonderla. Wonderla Resort started operations in March 12. With continuous addition of new attractions, entry charges at affordable rates and by maintaining high standards of safety and hygiene, the company has been able to generate repeat footfalls and attract organised visits from schools, colleges and corporate. Driven by these factors, the company s revenues have grown at 22% CAGR and footfalls have grown at.4% CAGR during FY09-13. However, in 9MFY14, revenue growth slowed down to 9.9% y-o-y as footfalls declined by 3.5% over the same period; the reason being footfalls in Kochi declined by 11% in 9MFY14 due to early onset of monsoons and excess rainfall - even though footfalls in Bengaluru grew by 4.6%. Page 2
Exhibit 2: Revenue CAGR of 22% during FY09-13 Exhibit 3: Footfalls CAGR growth of 13.2% during FY-13 25 Crore 160 140 1 0 80 60 40-63.3 69.8 91.2 114.5 139.2 121.5 in Lakhs 15 16.1.3 22.6 23.4 17.5 FY09 FY FY11 FY12 FY13 9MFY14 5 Total Income 0 FY FY11 FY12 FY13 9MFY14 Footfalls Exhibit 4: Trends in margins Exhibit 5: Return ratios (%) 60 50 40 30-30 52.1 49.7 46.1 45.3 46.0 24.1 25 22.7 26.1 17.4 13.4 15 FY09 FY FY11 FY12 FY13 (%) (%) 35 30 25 15 5-21.3 42.1 25.0 28.5 28.0 19.3 31.3 39.3 FY09 FY FY11 FY12 FY13 37.6 27.6 50 40 30 0 (%) PAT Margin EBITDA Margin ROCE (RHS) ROE (LHS) Exhibit 6: Revenue break-up FY12 21% 2% 77% Entry Fees Resort and other Rentals Food and Beverages + Merchandising Source: RHP, ICICIdirect.com Research Page 3
Exhibit 7: Operational data Particulars Fiscal 11 Fiscal 12 Fiscal 13 9MFY14 Footfalls (in lakhs) Kochi 11.11 11.79 12.11 8.33 Bangalore 9.17.79 11.29 9.17 Total.28 22.58 23.40 17.50 Revenue ( in crore) Kochi 43.32 51.73 59.48 48.76 Bangalore 47.89 62.78 73.75 67.99 Wonderla Resort - 0.01 5.95 4.77 Total 91.22 114.52 139.17 121.53 Attractions Land based attractions Kochi 32 34 34 33 Bangalore 32 33 33 35 Water based attractions Kochi 22 22 22 22 Bangalore Area (in acres) Kochi 91. 91. 91. 93.17 Bangalore 81.75 81.75 81.75 81.75 Employees Kochi 270 Bangalore 4 Hyderabad 5 Restaurants Kochi 7 Bangalore 7 Objects of issue The company aims to utilise the proceeds from the issue, after deduction of the issue related expenses, to set up an amusement park at Hyderabad and remaining amount raised through IPO will be used for general corporate purposes. Exhibit 8: Object of issue Balance estimated cost as on estimated to be financed Amount which will be financed from Particulars Total estimated cost Amounts deployed as on February, 14 February, 14 through debt net proceeds of the issue 14 15 16 To set up an amusement park, Wonderla Hyderabad 255.98 37.67 218.31 45.00 173.31-173.31 173.31 General corporate purposes - - - - * * * * Total - - - - * * * * * To be finalized upon determination of the issue price Estimated Net proceeds utilization during fiscal Page 4
Investment Rationale A well established player with early mover advantage Wonderla has been present in the industry since past 13 years with two amusement parks, one each in Kochi and Bengaluru, as of now. The Kochi Park was set up in 00 and Bengaluru was set up in 05. Both parks get visitors from their respective states as well as neighbouring states. Other than this, company s cost of establishment is lower than the establishment costs in today s market which gives the company flexibility of keeping competitive entry fees. Company s vast experience in managing amusement parks will help it in setting up new amusement park at Hyderabad. In-house manufacturing to help in decreasing capex and maintenance cost The company has developed an in-house manufacturing facility in Kochi to construct rides used in its amusement park. According to the company, the cost in-house manufacturing a ride is almost one third to that of buying it from outside. Manufacturing capability has also helped the company to build its in-house maintenance capabilities thereby reducing the cost of maintenance and down-time for a ride. The company has been able to generate healthy CFO with strong balance sheet The company has been able to generate operating cash flow at CAGR of ~22% over the period of FY09-13 due to strong footfall growth and healthy EBITDA margin. Further, the business is a negative working capital business as most of the payments are received upfront. Company has D/E ratio of 0.15 as on FY13 which make stronger balance sheet. Demographic advantages India is one of the youngest countries in the world with median age of 26.5 years compared to 37.1 years in US, 45.4 years in Japan and 35.9 years in China. The GDP growth of the country has also helped in increasing GDP per capita for the nation. With increasing per capita income, there has been a steady growth in domestic spending on tourism and leisure activities as well as increase in urbanization. More urbanisation means more population in the catchment area of an amusement park. This advantageous demography is expected to fuel further demand for more leisure activities like amusement parks. Page 5
Key concerns On going litigations on acquiring land in Hyderabad may constraint ability for future expansion The company is currently involved in two litigations pertaining to 14.70 acres of land acquired in Hyderabad to set up the park. Following these litigations, the date of commissioning of the park has been postponed to September 15 from April 15 as execution of the project has been delayed. The management has indicated that initially the park will be set up across 27 acres which excludes the land under litigations. Hence, no further delay is expected in setting up the park but any adverse result of litigation might result in limited expansion of the park in future resulting in lower than expected revenue. Competition from the existing and new players India s amusement park industry is estimated to be worth 7000 crore and it has grown at ~17% CAGR over the past few years. With such a huge potential in sight, there are several players which are expected to enter the industry in different parts of India which will create competition for the company. Some of the major projects in pipeline are Theme park in Surat with size of 30 acres, Adlabs Imagica in Khopoli, Maharashtra (completed), Theme park in Nagpur, Maharashtra etc. Other than this, existing entertainment parks in Hyderabad namely Ramoji Film City and Ocean Park may also pose a challenge even though they are different in terms of their attractions. Risk of accidents or mishaps at any amusement parks exposes the company to possible financial liabilities and legal proceedings Ensuring the safety of visitors on the rides is critical for the smooth operation of an amusement park. Even though Wonderla has stringent checks in place for safety and hygiene standards, since majority of company s current revenue is coming from operations of two amusement parks, any accident/incident at any one of them may result in the temporary closure of the park for some time thereby affecting revenues of the company and gathering adverse publicity. A slowdown in economic growth in India could cause business to suffer Performance and the growth of the business are dependent on the health of the overall Indian economy. As a result, any slowdown in the Indian economy could adversely affect the business, results of operations, financial conditions and prospects. Page 6
Valuations At the IPO price band of 115-125, the stock is available at multiple of 19x-21x FY13E PE (post dilution). Exhibit 9: Profit & Loss Crore FY09 FY FY11 FY12 FY13 9MFY14 Income Income from services 57.2 63.0 82.4 4.7 124.8 5.5 Sale of products 5.2 5.9 7.2 8.5 13.0 14.2 Other Income 0.9 0.9 1.6 1.4 1.3 1.8 Total Income 63.3 69.8 91.2 114.5 139.2 121.5 Expenditure Direct operating expenses.4 11.5 12.4 17.0.7 18.1 Purchase of stock in trade 3.2 3.7 4.1 4.8 7.3 7.5 Change in inventory of stock in tra (0.0) (0.1) 0.1 (0.1) (0.1) (0.3) Employee benefits 9.9 11.2 13.8.7 27.4 19.3 Other expenses 11.2 11.3 13.3 15.2 19.6 18.8 Total Expenditure 34.6 37.6 43.7 57.6 75.0 63.5 EBITDA 28.7 32.1 47.5 56.9 64.2 58.0 Financial charges 7.6 5.8 3.9 1.1 2.2 1.2 Depreciation/amortisation 11.7 11.8 11.8 11.6 11.8.1 PBT 9.3 14.5 31.8 44.2 50.1 46.7 Extraordinary items.8 Taxation (1.7) 5.1 11.1 14.3 16.6 15.7 PAT 11.0 9.4 31.5 29.9 33.5 31.0 Adjusted PAT 11.0 9.4.7 29.9 33.5 31.0 Exhibit : Balance Sheet Crore FY09 FY FY11 FY12 FY13 9MFY14 Equity Share Capital 26.0 42.0 42.0 42.0 42.0 42.0 Share capital suspense account 16.0 - - - - - Reserves & Surplus 2.1 6.6 30.8 53.3 79.4 1.4 Total Shareholders Funds 44.1 48.6 72.8 95.3 121.4 152.4 Long term borrowings 34.8.4 8.1 16.1 12.4 17.0 Deferred tax liability (net) 0.3 3.1 3.6 3.3 3.7 3.4 Long term provisions 0.2 0.3 0.4 0.5 1.5 1.3 Total Non-current liabilities 35.3 23.9 12.0 19.9 17.6 21.8 Short term borrowings 21.4 16.5 1.0 0.5 6.2 1.4 Trade Payables 0.7 1.5 2.1 3.7 4.0 5.9 Other current liabilities 13.6 13.3 11.1 11.8 7.0 7.4 Short term provisions 5.7.1 8.4 9.3.6 2.8 Total current liabilities 41.4 41.5 22.5 25.3 27.8 17.6 Total Liabilities 1.8 114.0 7.3 140.6 166.9 191.8 Fixed Assets Tangible assets 113.4 4.6 92.3 1.4 143.5 145.6 Intangible assets 1.0 0.8 0.7 0.7 0.5 0.5 Capital work-in-progress 0.1 1.3 7.7 4.4 5.7.3 Long term loans & advances 3.2 2.3 3.6 9.1 8.3 2.6 Other non-current assets 0.2 0.1 0.1 0.1 0.1 0.2 Total non-current assets 117.8 9.3 4.4 134.6 158.1 169.2 Current investment - - - - - 13.9 Inventories 1.1 1.3 1.4 1.8 2.8 3.6 Trade receivables 0.1 0.2 0.3 0.2 0.5 0.6 Cash and bank balances 0.3 1.1 0.3 2.5 2.9 1.0 Short-term loans and advances 1.4 2.0 0.8 1.4 1.7 1.3 Other current assets 0.1 0.1 0.1 0.1 0.9 2.3 Total Current assets 3.0 4.7 2.9 6.0 8.7 22.6 Total Assets 1.8 114.0 7.3 140.6 166.9 191.8 Page 7
Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC Andheri (East) Mumbai 400 093 research@icicidirect.com Disclaimer The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Ltd (I-Sec). The author may be holding a small number of shares/position in the above-referred companies as on date of release of this report. I-Sec may be holding a small number of shares/position in the above-referred companies as on date of release of this report. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This report may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. I- Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. I-Sec may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Page 8