Wonderla Holidays Limited has informed the Exchange regarding 'Q2FY20 Earnings call transcript'.
“Wonderla Holidays Limited
Q2 FY2020 Earnings Conference Call”
October 31, 2019
ANALYST:
MR. JIGAR SHAH - ICICI SECURITIES LIMITED
MANAGEMENT:
MR. GEORGE JOSEPH – JOINT MANAGING DIRECTOR – WONDERLA HOLIDAYS LIMITED MR. SATHEESH SESHADRI –CHIEF FINANCIAL OFFICER - WONDERLA HOLIDAYS LIMITED
Page 1 of 34
Wonderla Holidays Limited October 31, 2019
Moderator:
Ladies and gentlemen, good day and welcome to the
Wonderla Holidays Limited Q2 FY2020 Results
Conference Call hosted by ICICI Securities Limited. As a
reminder, all participant lines will be in the listen-only
mode and there will be an opportunity for you to ask
questions after the presentation concludes. Should you
need assistance during the conference call, please signal an
operator by pressing “*” then “0” on your touchtone
phone. Please note that this conference is being recorded. I
will now hand the conference over to Mr. Jigar Shah of
ICICI Securities. Thank you and over to you Sir!
Jigar Shah:
Thank you. Good morning everyone. It is a pleasure to
welcome you all on behalf of ICICI Securities to Wonderla
Holidays Limited Q2 FY2020 earnings conference call.
We have with us today on the call Mr. George Joseph,
Joint Managing Director and Mr. Satheesh Seshadri, CFO
of the company. Thank you and over to you Sir!
George Joseph: Thank you very much. Good morning everyone. On behalf
of the management of the company, we extend a warm
welcome to all of you. We are here on this conference call
to discuss the earnings of Wonderla Holidays Limited for
the Q2 of the FY2019-2020. At the outset, I am extremely
happy to announce that the much-awaited exemption from
Page 2 of 34
Wonderla Holidays Limited October 31, 2019
entrainment tax has been received from the Government of
Tamil Nadu. We are now in the final stages of receiving
the necessary project approvals to begin the construction
of our much-awaited fourth park in Chennai. Our strength
and expertise in running the complex amusement park
business in the most optimal way has been greatly
appreciated across the country.
As a further testimony to our operational efficiency, we
have recently received an offer from the Government of
Odisha to setup a new amusement park in that State. The
Government of Odisha will provide the land on a long-
term lease basis thus enabling us to develop an asset-light
model and balance sheet friendly amusement park. The
board of the company has given an in-principle approval to
evaluate the proposal and we will keep you updated about
the progress. These developments are giving a further
impetus to our overall expansion plans. Let us now look at
the Q2 and the H1 performance of the company.
As you are aware, the Q2 is typically unfavorable to
outdoor parks due to the onset of monsoon. The footfalls
get impacted and naturally so does the revenue and the
profitability. Looking at our financial scorecard, the
revenue for Q2 of 2020 were almost flat running at just
1.2% lower on a Y-o-Y basis from Rs.41.3 Crores to
Page 3 of 34
Wonderla Holidays Limited October 31, 2019
Rs.40.8 Crores. Our ticket revenue per visitor declined by
5%, while our non-ticket revenue remained flat during the
period. Our Q2 2020 revenue growth was affected due to
lower footfalls, largely due to the demand slow down,
excessive rainfall, and the floods prevailing in both Kerala
and Karnataka. Our Bengaluru Park in particular witnessed
a decline of 22% in footfall mainly due to unfavorable
weather conditions for outdoor activities.
In contrast, our Kochi Park saw a 60% increase in footfall,
albeit on a lower base of Q2 FY2019, while our Hyderabad
park footfall grew by 5% despite witnessing some
unseasonal rain. Our Q2 FY2020, EBITDA declined by
39.4% Y-o-Y from Rs.9 Crores to Rs. 5.48 Crores. Our
profit after tax for the quarter was Rs.16 lakhs as against
the PAT of Rs.94 lakhs reported in the corresponding
quarter of the previous year. Our cash PAT that is PAT
plus depreciation declined marginally by 1.5% from
Rs.10.8 Crores in FY2019 to Rs.10.65 Crores in FY2020.
On a six-monthly basis, we saw our footfall increase by
6.7% on a year-on-year basis. Our half year revenue has
also increased by 9.1% from Rs.145.1 Crores in H1
FY2019 to Rs.158.4 Crores in H1 FY2020.
Our EBITDA for H1 stood at Rs.74 Crores, an increase of
11.3% in comparison to H1 FY2019 and our profit after
Page 4 of 34
Wonderla Holidays Limited October 31, 2019
tax for H1 stood at Rs.42 Crores an increase of 24.4%
from corresponding previous period. Our cash PAT stood
at Rs.63 Crores, which also increased by 17.6% for the
corresponding previous half year period. At our resort in
Bengaluru, the occupancy for H1 FY2020 was 51% and
revenue stood at Rs.6.3 Crores representing 14% rise over
the corresponding H1 of FY2019. With that let us start
with the question and answer session. I thank you all very
much.
Moderator:
Thank you very much, Sir. Ladies and gentlemen, we will
now begin the question and answer session. Ladies and
gentlemen, we will wait for a moment while the question
queue assembles. We have our first question from the line
of Abneesh Roy from Edelweiss. Please go ahead.
Abneesh Roy: My first question is on the Odisha and the Chennai
projects. In Odisha, which city has been shortlisted, and
have they given this proposal to others or only to you?
When you say asset-light amusement park, how is that
different from the Hyderabad park? I understand you are
evaluating the proposal, but is this a serious kind of
proposal or you keep getting this kind of proposals?
George Joseph: As you mentioned, we are evaluating and the board has
permitted the company to discuss and negotiate with the
Page 5 of 34
Wonderla Holidays Limited October 31, 2019
Government of Odisha. It is an exclusive offer for
Wonderla as we understand because
the concerned
authorities including the Minister of Tourism and the
Secretary to Tourism visited to our Bengaluru park, then
they came down to Kochi to meet us. We identified 4-5
locations, then zeroed in on a location in Bhubaneswar,
which is around 19 to 20 km from Bhubaneswar and about
2.5 km from the National Highway. We are happy to
mention to you that this is a very proactive State, they
want to develop their tourism and they have offered many
incentives. First is a long lease of 90 years at a very
competitive rate, the rate per acre comes only to Rs.6
lakhs. Secondly, they are giving 20% investment subsidy
capped at Rs.15 Crores. Thirdly, they have agreed to give
us access from National Highway to our park. As of now
there is a 30 feet road, they will convert it into a 60 feet
road with a double line and the government will bear the
cost. Number four, they will give potable water connection
from Mahanadi River directly to our site at their cost and
the water charge agreed is one-tenth of what we are paying
at Hyderabad. This is a great offer and we are keen to grab
it; however, we are doing a feasibility study to understand
the feasibility of the park in Bhubaneswar and thereafter
we will go to our Board and make the appropriate
investment. By asset-light model what we mean is that we
Page 6 of 34
Wonderla Holidays Limited October 31, 2019
do not need to incur heavy capex to obtain land-asset. If
we look at our Chennai park, the investment in land is
around Rs.75 Crores and in addition we have incurred
around 10.00 Crores for filling, levelling and compound
wall. In total it cost us around Rs.85 Crores whereas the
cost of land in Bhubaneshwar is only Rs.3 Crores. We told
the Government of Odisha that initially we will only go for
a water park plus a few land rides and later we will go for
some additional land rides depending upon the acceptance
or the reception of the park by the people of Odisha. So we
would like to restrict the initial investment to the extent of
about Rs.75 Crores to Rs.100 Crores.
Abneesh Roy:
Just one follow-up here, before we go to Chennai park, in
terms of the timelines, when can you start? Because it
looks too good on paper, so your timelines can be also
quite short?
George Joseph: Number one, the timeline as per the government’s
direction is that we will have to complete the promised
construction within a period of three years. Our first
priority is Chennai and we have the bandwidth to take up
the construction for Odisha and Chennai simultaneously.
However, we do not want to combine those two, we will
start Chennai first and thereafter, after stabilizing the
construction activities in Chennai, we will go to Odisha
Page 7 of 34
Wonderla Holidays Limited October 31, 2019
Abneesh Roy: So, now let us discuss Chennai in terms of timelines?
George Joseph: We have already submitted the papers for approval of
Chennai park. As mentioned in our press release on
Chennai, The Government of Tamil Nadu has given the
permission to exempt our park from the LBT (Local Body
Tax) for five years from November 1, 2019. As per the
Order, the Project execution period is also included in the
exemption period of 5 years. This is an anomaly.
Therefore, we are meeting
the Chief Minister and
representatives of Government of Tamil Nadu, this week,
to request exemption for five years from the date of
commencement of operations, instead of from the date of
order. We have just uploaded the required documents for
necessary approval. We hope to get the approval in a
couple of months’ time. Hopefully we would like to
commence the construction by January 2020 after the rainy
season.
Abneesh Roy: Sir my second and last question is on the Kochi park, we
have a good footfall growth of 60%. I understand base was
smaller, and even this year we had higher rainfall. Why
Kochi has done better and Bengaluru has really suffered
because of the rains?
Page 8 of 34
George Joseph: In Kochi park, the base was low. As you are aware, last
Wonderla Holidays Limited October 31, 2019
year we lost around 1.67 lakhs of visitors due to the
excessive rainfall, the Nipah virus, the hartal due to
Sabarimala issue and the floods. During the current year,
though we almost had a flood like situation, it did not
culminate into a calamity like last year. Due to our BD,
BDP related activities, there is a good growth in groups
footfall, especially from Tamil Nadu. But we could not
bring back the entire crowd, we lost last year due to floods.
If you look at Bengaluru, the groups have grown by almost
about 60%, but there is a de-growth in the walk-in. Almost
every day it was raining, and when it rains in Bengaluru,
the temperature comes down. People are reluctant to come
out on such days and avoid outdoor activity. Another
reason was the political situation. On account of the arrest
of one of the Ex-Minister, Shri D.K. Shivakumar, there
was all-round protest resulting in closure of the Bengaluru
park for a day and road blockage on many days. We also
witnessed the demand recession across all our locations.
Abneesh Roy: Thank you, Sir. Very detailed answer. Thank you.
Moderator:
Thank you. We have next question from the line of Tejas
Shah from Spark Capital. Please go ahead.
Page 9 of 34
Tejas Shah:
Thanks for the opportunity. Sir, first question pertains to
Wonderla Holidays Limited October 31, 2019
the final arrangement with Tamil Nadu Government. Is
this arrangement as per your initial demand because we
believe we wanted the abolition to be permanent and not
for only five years and the subset of that question is how
does it change our calculations on payback period or IRR
for the project.
George Joseph: It is exactly not as per our initial demand. Our initial
demand was for a permanent exemption covering all
amusement parks, not Wonderla alone. The other parks in
Chennai are not happy and they are pursuing their case
with the Authorities.
Tejas Shah:
Sir, when is the park expected to commence operations?
George Joseph: We hope to commence commercial operations by July
2021 i.e., 18 months from the date of commencement of
construction.
Tejas Shah:
Sir, was Odisha on our potential list?
George Joseph: I have not covered second part of your first question. I
would like to take you through the earlier regime of
entertainment tax, which was very low across all our parks,
and subsequent service tax @ 15% and then 28% GST,
thereafter reduction of GST to 18%. During the period of
Page 10 of 34
Wonderla Holidays Limited October 31, 2019
hefty increase in Tax, the reduction in footfall was around
7.5% and reduction in revenue was 5%. Therefore we
assume that, even if the LBT is introduced after five years,
the maximum impact on the footfall and revenue would be
around 7.5% and 5% respectively. We are confident that
Chennai being the largest market, we will be able to reach
our projections as per plans.
Tejas Shah:
Sir, second question pertains to Odisha, was Odisha on our
potential list at all or the state government invitation has
made us consider the opportunity here?
George Joseph: Odisha was not in our radar initially. However, we have
made some study after the government authorities invited
us and find that an asset-light model will definitely be a hit
in Odisha. There are no amusement park worth mention in
Odisha. There are couple of small water parks. They are
badly maintained. In our analysis we find that, being an
asset-light model and the ticket prices lesser than what we
have in our other parks, it will definitely be financially
viable and we will have the same payback period like other
parks.
Tejas Shah:
Sir, as a firm do we have the capability to work on two
parks simultaneously or we will still go one by one as we
have done in the past?
Page 11 of 34
George Joseph: Yes, we do have the management bandwidth. We are very
Wonderla Holidays Limited October 31, 2019
confident about it. But this is the first time we are going
for
two parks simultaneously. Therefore we will
judiciously space the Project work in such a way to avoid
any strain on our Resources. We will initially start the
work in Chennai and thereafter, after stabilizing the Project
flow there, we will initiate work in Odisha. There will be a
gap of about 6-9 months between commencement of work
in Chennai and Odisha.
Tejas Shah:
Any update
to understand when will Mr. Arun
Chittilappilly resume active management?
George Joseph: Mr. Arun was with us in our recent Board meeting at
Bengaluru and he is also joining us in meeting the Chief
Minister later this week. Even though he is not physically
available, he is actively involved in the management. We
interact with him regularly. Yesterday he was with us
attending the Annual Day Celebrations of our Bengaluru
Park. He will take an appropriate call on resuming duties,
after his preoccupation abroad.
Tejas Shah:
Great Sir. Thanks for very elaborate answers and all the
best.
Page 12 of 34
Wonderla Holidays Limited October 31, 2019
Moderator:
Thank you. We have next question from the line of Rohit
Balakrishnan from Vrddhi Capital. Please go ahead.
Rohit Balakrishnan: Thanks for the opportunity. Sir if I look at footfalls at
your Bengaluru and Kochi park over the last five years,
there is a decline across both these parks. If I look at
Bengaluru park, over a five-year period footfalls are down
by 2% and even Kochi is down 4% to 5% till 2017
excluding 2018 for heavy floods. Sir, is it fair to say that
these parks have reached their peak in terms of visitor
potential?
George Joseph: Mr. Balakrishnan, if you analyze the footfall decline with
respect to macro environment, the decline is related to
certain events. It is not that we have reached our potential.
If you look at 2008 there was a recession that has affected
the footfall. Thereafter we were slowly getting back to the
growth trajectory and around 2014-15, we had peaked.
Then came the levy of service tax at 15% and there was a
resultant decline. That was followed by 28% GST which
resulted in a further downturn. Later in January 2018, GST
was reduced to 18% and we saw an uptrend in footfall. So
you can observe that the footfall movement is related to
certain events. We believe that such events are bound to be
in the economy. Currently the climatic conditions and the
slow down are impacting the growth. We are sure that the
Page 13 of 34
Wonderla Holidays Limited October 31, 2019
growth will pick as we see economic upturn. We are aware
that at the 19-year-old park in Kochi, 14 year old park in
Bengaluru, customer is looking for new experiences. We
are adding new rides in every park every year. In fact last
month we inaugurated two new rides in Bengaluru. We
also find that we have not exploited the potential of the in-
bound tourists to each of the States where we are currently
operating. For example, Kerala gets about 1.5 Crores of
tourists every year. We have not tapped this segment fully.
Similarly, Karnataka, Telangana, Andhra Pradesh get large
tourist inflow. Currently a small percentage of them are
coming to our park. We are going to target them in a big
way and exploring the strategies required for attracting the
inbound tourist to our park. We have not even covered 5%
of the target group in all the states. So there is still ample
scope to boost footfalls.
Rohit Balakrishnan: If I look at both parks, Bengaluru Park sees 10 lakhs
visitors per year and similar numbers were seen at the peak
for Kochi Park. So do you still feel that there is enough
headroom?
George Joseph: Yes, there is enough headroom and we are confident about
it. I have always said, good decisions are taken during the
bad times. Right now we are taking some strategic
decisions to tap the inbound tourist segment. For example,
Page 14 of 34
Wonderla Holidays Limited October 31, 2019
we have now appointed prominent tour operator in Kochi
as our BDP. This tour operator has large inbound tourists
base on hand and 120 buses. Similarly we have lined up
around four prominent tour operators in Hyderabad. We
are selling our ABC i.e., Advanced Booking Coupon
through these Tour operators in Hyderabad. These are the
segments we have not exploited till now.
Rohit Balakrishnan: When you said 1.5 Crore tourists visiting, you mean
this is for Kochi?
George Joseph: No, that figure is for Kerala. Out of the 1.5 Crores, tourists
flow about 1 crore are inbound from other States and 50
lakhs travelling within the State. Whereas our footfall is
around 7 to 9 lakhs per annum. So if we rightly tap the
inbound tourist market, we can expect higher footfall.
Rohit Balakrishnan: The population of Bengaluru will be close to about a
Crore?
George Joseph: Yes.
Rohit Balakrishnan: And we are already at about 10 lakhs to 11 lakhs. If
you take 1 to 1.1 Crores people in your overall catchment
area in Bengaluru, then you are broadly at 10% to 11%
penetration. Is that a fair number or you think it can go
higher?
Page 15 of 34
George Joseph: Our catchment area is not just Bengaluru city alone but the
Wonderla Holidays Limited October 31, 2019
entire Karnataka state. We have a strong BDP setup in the
State. In addition, as I mentioned, there are people coming
from Kerala, Tamil Nadu, Andhra, Telangana etc., to
Bengaluru park promoted by BDPs in these States. So if
you look at it from a broad perspective, we have not
exploited even 5% of our target crowd. The BDP setup is
doing well and we want to realign the setup further. Our
market penetration initiatives will hopefully see us through
higher numbers in the coming years.
Rohit Balakrishnan: Thank you.
Moderator:
Thank you. We have next question from the line of Rohit
Potti, who is Individual Investor. Please go ahead.
Rohit Potti:
Thank you for the opportunity. I would like to express my
appreciation for transparency in detail with which you
answer each question. I also find it insightful to interact
with your investor relations team that interacts with the
shareholders, because they are probably the most prompt
team that I have seen. My first question is on the Odisha
Park. Sir, the way you are approaching construction is
quite interesting because you are slowly scaling up over
time; starting up with primarily a water park and then may
Page 16 of 34
Wonderla Holidays Limited October 31, 2019
be adding rides in future. Why not go for something
similar in the new park at Chennai as well?
George Joseph: Chennai is a very big market and we want to come up with
a park which can attract the large population in Chennai. In
Odisha, as I mentioned, they are not used to parks. They
have some water parks in and around Bhubaneswar, which
have not been maintained well. So with a water park of our
standard, and a couple of land rides, we will be able to
attract sufficient crowd in the first year of operations. We
promised to the government that in the second year we will
come up with a land park and then in the third phase we
will create a convention center and in the fourth phase we
are planning a resort in Odisha. In Chennai we need full
model with all activities because there are competing parks
like Kishkinta, MGM, VGP’s ocean park & aquarium. So
our offering should be better than current offerings in
Chennai.
Rohit Potti:
One follow-up there, how large is the land parcel that you
are getting in Odisha?
George Joseph: It is 50 acres at lease rental of Rs. 6 lakhs per acre, totaling
to Rs.3 Crores for 90 years lease.
Page 17 of 34
Wonderla Holidays Limited October 31, 2019
Rohit Potti:
That is a great deal. Second question, could you speak a
little more on the Hyderabad Park, because I do not think it
is doing up to your expectation so far?
George Joseph: Even though we had a footfall growth of 5% in the current
quarter, it is lower than our expectation. But there were un-
seasonal rains in Hyderabad. I was in Hyderabad last week
and I told our staff that the rain should be welcomed,
because if the temperature comes down, people should be
out enjoying the environment. But the on-ground reality is
that these rains are affecting the people, as they fall sick,
contract viral fever, dengue etc. Hence, people are afraid to
venture outdoors in the rainy season. This phenomenon has
majorly affected the Hyderabad park footfalls, but then in
Q3 and Q4, we are confident to see a rise. In Q3FY19 we
had 2 lakh footfalls in Hyderabad last year. We are
confident that we will improve upon it in this year. We are
also doing a lot of activation in Hyderabad. We have
appointed more BDPs and BDs. We have been regularly
doing certain outdoor market activation programs in
Kerala during Onam, Christmas etc., Our Teams go around
the entire State during these festival seasons and with the
help of the local BDP, perform Wonderla show in crowded
places like beaches, malls etc., These shows are quite
popular. We are going to replicate this in Hyderabad and
Page 18 of 34
Wonderla Holidays Limited October 31, 2019
nearby places and even in Chennai to stimulate the market.
We will also increase ad and communication spend in
Hyderabad and tie up with tour operators. As I already
mentioned, four tour operators are selling our ABCs right
now. We also have a tie up with the tourism department,
and our name appears
in
the
tourism website
in
Hyderabad. Visitors who come through the tourism
department get a discounted offer. I think all of these will
improve the situation in Hyderabad. As you have rightly
mentioned, we are not happy with the growth we achieved
in Hyderabad especially the current year, but we are
hopeful that the things will improve.
Rohit Potti:
Great, thank you. I want to just end with one suggestion. I
meet few businessmen from the north, and most of them
have kids, which are the perfect target group for Wonderla.
But even though most of the businessmen do travel to
Bengaluru and Kochi, they are not aware of our parks. I
am primarily from south and I am aware of your parks and
I love the experience you provide. So I found it surprising
that people who seem to be the perfect target group and
also visit Bengaluru are somehow not aware of the brand.
So when we get these people flying in, if there is
something about Wonderla that might help.
Page 19 of 34
George Joseph: Thank you very much for your feedback and suggestion. It
Wonderla Holidays Limited October 31, 2019
is very valid. We will have to make Wonderla as a brand
known across the country. With upcoming project in
Odisha, our visibility across the country will be better. We
are also targeting major cities in north, West and the East,
wherein we are going to conduct one-to-one meeting with
the tour operators. We are also exploring the idea of
communication in the national media, both print and the
electronic.
Rohit Potti:
Thank you, Sir.
Moderator:
Thank you, Sir. We have the next question from the line of
Kaustubh Pawaskar from Sharekhan. Please go ahead.
Kaustubh Pawaskar: Good morning, Sir. Thanks for giving me the
opportunity. Sir, you just mentioned about the focus on
improving the footfalls in Hyderabad Park for Q3. As the
festive season has begun, have you seen any improvement
in walk-ins in all your three parks? Rainfall got extended
till Deepavali this year, so do you see an impact of the
same or have you seen some kind of improvement?
George Joseph: Mr. Pawaskar, as I mentioned in my opening remark, the
rains and the slowdown in economy have affected the
footfall across all the parks especially the walk-in. We
Page 20 of 34
Wonderla Holidays Limited October 31, 2019
could push group footfalls, which grew by about 50%
across the parks, but the reason for the overall drop in the
footfall is on account of the drop in the walk-ins. Q3 and
Q4 are going to be the predominant quarter for the groups.
We are particularly confident in Hyderabad because we
have lined up many groups. So across all three locations,
Q3 we will have the school & college season. With the sun
brightening up, there will be change in the mood of the
people and we will have better footfalls. But as mentioned
earlier the downward cycle in the economy will have its
impact and it will continue for some more time.
Kaustubh Pawaskar: In that case the realization of average ticket will be
lower considering the fact groups are given higher
discounts. So the realizations will be lower on Y-o-Y
basis?
George Joseph: I absolutely agree with you. Q3 is a quarter of groups
where we see increase in footfall at the same time lower
realization. However, on a Y-o-Y basis, I think there will
be at least minimum 5% growth in the revenue.
Kaustubh Pawaskar: For the second half of FY2020?
George Joseph: No, Q3.
Page 21 of 34
Kaustubh Pawaskar: Sir, your non-ticketing revenues have also seen a
Wonderla Holidays Limited October 31, 2019
decline. Previously even though you had drop in footfalls,
your non-ticketing revenues used to continuously grow.
But for the last two quarters, we have seen that even non-
ticketing revenues have seen a dip, so what is the reason
for the same?
Satheesh Seshadri:
In
the Bengaluru Park
it
is directly
proportionate to the footfalls. So when the footfall are low,
there is a dip the non-ticket. If you take the average non-
ticket revenue per customer, there is an increase both in
Hyderabad and the Bengaluru park while there is a small
dip in Kochi park, on an account of the dip in the F&B.
We are improving with new menus and other offerings, we
hope to catch it up.
George Joseph: As I mentioned, in Q2, there is a growth in groups, and a
dip in the walk-in. Groups from schools, colleges have
lower capacity to spend, hence the non-ticket revenue gets
impacted due to the change in mix of the footfall.
Kaustubh Pawaskar: There were plans to bring in some value for money
food options in all the three parks, so are you working on it
or still it will take some time?
Page 22 of 34
Wonderla Holidays Limited October 31, 2019
Satheesh Seshadri:
We have already launched all-day meal
coupons, which is running for sometime now and we have
also introduced buffet options. We have seen good traction
in these two numbers.
Kaustubh Pawaskar: Thanks for the clarification.
Moderator:
Thank you, Sir. We have next question from the line of
Sanjay Ladha from Concept Investwell. Please go ahead.
Sanjay Ladha: Going forward, from a 3 to 5 years perspective, what are
the parameters for the sustainability in amusement parks
business?
George Joseph: If you look at the CAGR of the amusement park industry
in the country, it has been growing at around double digits
over the last decade. If you compare with the global
model, the penetration of the amusement park industry is
much
less
in India. Once economic activity gains
momentum and the GDP and per capita income go up,
there will be about 10% to 12% CAGR across the years to
come.
Sanjay Ladha: From your point of view, business will grow at 10% to
12% on revenue for a longer timeframe, not in short term?
Page 23 of 34
George Joseph: Exactly. In the current year, across the County there has
Wonderla Holidays Limited October 31, 2019
been a de-growth in footfall for all listed parks. Even
though Wonderla has not de-grown, there is a flat growth
in the current quarter. We are in touch with all other parks,
and we find that in all parks there is a de-growth in the
footfalls.
Sanjay Ladha: Sir, all the points you have mentioned are external factors,
but what are the internal factors towards ensuring business
sustainability?
George Joseph: We must look at our strengths. At Wonderla, our USP is
cleanliness, hygiene, and safety, which are unmatched
across the industry. No other park can match the
cleanliness, hygiene standards of Wonderla. The high NPS
score reflects that all our visitors are thrilled and they will
definitely come back in higher numbers. Even though there
was a decline in the footfall of other parks in Q1,
Wonderla could show a growth of about 10% to 12%
because of our business process re-engineering. Plenty of
activation have been done internally and we are confident
to register a growth higher than the industry. We will
continue to add new rides and give a new look to all our
parks across locations. We have the best talents and our
people are our strength. I am happy to mention that our
company has been certified as a “Great Place to Work” by
Page 24 of 34
Wonderla Holidays Limited October 31, 2019
the “Great Place to Work Institute”. Globally, about 10000
companies participate in the survey on an annual basis and
only a few of them get certified. We have been certified as
a Great Place to Work in the first year of our participation
in the survey. The trust index of the company that includes
trust by the employees and the cultural index are extremely
high compared to firms of similar size (employing 500
people or more). Then we also have a strong BD, BDP
network, which are unique to us. We recently had an
annual celebration for the BD & BDP and they have been
recognized and awarded prizes. Apart from footfall and
revenue, we evaluate the BDPs on many qualitative
parameters like quality of their staff, the office setup, CRM
implementation and other initiatives. For a BDP who
scores 60% in the current appraisal we tell them you
should score at least about 85% to 90% in the next
appraisal. We are constantly trying to improve the quality
of our people including the BDPs. We are apprising them
every quarter on a five point scale and we are pushing their
potential and the capability so that they will continue to
benefit, not only the company, but also themselves by
earning good commission and hope they will stay with us
forever. These are some of the initiatives, which give us an
edge over other companies and other parks. We are
confident that our superiority in the business will continue.
Page 25 of 34
Wonderla Holidays Limited October 31, 2019
Sanjay Ladha: In the previous call you have mentioned that you are
looking to operate other parks, what is the progress on that
front?
George Joseph: Yes, we were looking at it and there is no update on that
front.
Satheesh Seshadri:
We checked some parks in Karnataka
region and some other region, but the quality of the rides
and other things was not to our level, so we could not take
it up.
Sanjay Ladha: Okay Sir. Thank you.
Moderator:
Thank you. We have next question from the line of Rahul
Agarwal from VEC Investments. Please go ahead.
Rahul Agarwal: Good morning. Thanks for the opportunity. Mr. Joseph, I
have two questions. Firstly, on the way you plan a park. It
is a top down question. After initial setup costs, do you
look at certain occupancy levels for about three to four
years to calculate your paybacks? How will this change in
the new parks wherein you will have a lesser capital cost
for the land as you have a long-term lease. Further
question is on the older parks where you own the land.
You spend a lot of money on the land to enhance it, hence
it takes longer to get your payback. If we divide the capex
Page 26 of 34
Wonderla Holidays Limited October 31, 2019
into these two parts where you have a long-term lease and
land ownership and how do you look at optimum levels of
occupancy, what is the payback period you plan currently?
If the optimum level of ROCE is 20%, in what timeframe
can the company achieve it on an overall basis? Thank you
so much.
Satheesh Seshadri: In case of Bengaluru and Kochi parks the payback
period was about 7 to 9 years because the investment
levels were also under control and in case of Hyderabad
park, we have invested about Rs.272 Crores, so the
payback period is going to be about 12 years. ROCE
excluding the reevaluation of land is about 6% to 7% now.
If you only take Kochi or a Bengaluru park, our ROCE is
much higher. In case of Chennai park, where the
investment is going to be about Rs.350 Crores plus and the
major part is on the land, the payback period could be
beyond 12 years. We are expecting ROCE on the parks to
start with about 4% to 7% and go up to 10% to 12%. But at
the same time, in the Odisha model where the investment
in land is minimal, we will pass on the benefit to the
people by reducing the ticket prices. But we expect higher
footfall on account of the affordable ticker prices.
Rahul Agarwal: So Chennai park will incur Rs.365 Crores of capex, of
which Rs 85 crores was on land?
Page 27 of 34
Wonderla Holidays Limited October 31, 2019
George Joseph: Yes.
Rahul Agarwal: And then the balance of 280 crores will be spent on?
George Joseph: It is will be spent on the rides and the equipment and civil
works.
Rahul Agarwal: Could you help with a broad percentage breakup between
ride, equipment and civil works?
Satheesh Seshadri: Building & civil work will be 30%, the rides will
account for another 30% and we have got the land for
30%, the balance 10% will be on plant and equipment.
Rahul Agarwal: For Chennai you will start with ROCE of 5% to 7%
peaking at 12% is that correct?
George Joseph: Yes.
Rahul Agarwal: And for Odisha if one is assuming it a 10-year life cycle of
ROCE would you generate on basis of current
assumptions?
Satheesh Seshadri: We are still working on the investment and pricing
strategy. As said in the beginning of the call, the survey is
being done and we will firm up on the pricing and then we
will get back to you on that.
Page 28 of 34
Wonderla Holidays Limited October 31, 2019
Rahul Agarwal: Do you have a benchmark rate when you start evaluating a
project below which you may not take up a project?
George Joseph: We do have that, and it is being evaluated.
Rahul Agarwal: In which year do you think the company will achieve 20%
ROCE overall on a blended basis? Is that a very high
number, and a 12% to 15% would be a reasonable range
over next 5 years?
George Joseph: Yes, that could be the number.
Rahul Agarwal: Alright. Thank you so much. Thank you for answering
my question.
Moderator:
Thank you. We have next question from the line of Rohit
Balakrishnan from Vrddhi Capital. Please go ahead.
Rohit Balakrishnan: What is the new tax rate applicable?
Satheesh Seshadri: We have already opted for the new tax rate of
25.63%. Earlier it was 35%. Considering our turnover
was under Rs.400 Crores, it came to 29%. Now it is at
25.63% inclusive of all cess, we do not have MAT or any
incentives under section 10. We have already availed the
benefit of reduced taxation during this quarter.
Page 29 of 34
Wonderla Holidays Limited October 31, 2019
Rohit Balakrishnan:
I would like to know what would be the projected
annual footfall for Chennai park broadly, just to get a sense
how big is the market?
George Joseph: Market is quite big. We have recently visited the
Vandalur Zoo at Chennai. We found that the average
footfall to the zoo is around 20 lakhs per annum and some
years it has peaked to 24 lakhs per annum. That being the
level of footfall is seen in a zoo, we are confident of good
visitor turnout at Chennai. We had recently gone to the
aquarium setup by VGP near OMR Road in Chennai and
found that there is good traction. We had footfall
concerns when we started Bengaluru Park, but then we
found that the Bengaluru Park turned out to be the best
revenue generating park.
Rohit Balakrishnan: Do you track the repeat footfalls?
George Joseph: More than 30% footfalls are repeated and we have a
mechanism to track it.
Rohit Balakrishnan: And this has been the same for a few years or that
has increased recently?
George Joseph: We have a loyalty program which we introduced last
year, named Wonder Pass. We have issued around 30,921
Wonder Passes in the year 2018-2019 and in the current
Page 30 of 34
Wonderla Holidays Limited October 31, 2019
year till now we have issued around 40,000 Wonder Pass,
an increase of 33%. The redemption rate last year was 8%
and in current year redemption is 17% till date. So that
means we are able to get back 17% of the people who
took the Wonder Pass. This loyalty program will gain
popularity in the years to come and definitely we will see
further improvements in redemptions.
Satheesh Seshadri:
This is only on the walk-in, but the groups, we still
have the higher numbers repeating, schools and corporate.
Rohit Balakrishnan: Okay. This has been very helpful. Thank you very
much.
Moderator:
Thank you Sir. We have next question from the line of
Hardik Vora from Union Mutual Fund. Please go ahead.
Hardik Vora: Thank you for the opportunity. When we had two parks,
the ROCE was upwards of 35%, what is different now
because you are guiding for a lower ROCE going forward,
so what has changed as far as the business structure is
concerned?
George Joseph: After our two initial parks in Kochi and Bengaluru, we
added Hyderabad park with an initial investment of about
Rs.272 Crores and now with the addition of Chennai park,
Page 31 of 34
Wonderla Holidays Limited October 31, 2019
ROCE will get impacted. Going forward with addition of
parks, we expect the ROCE to come down.
Hardik Vora: Right, but once the Hyderabad park is mature that is five
years out, we would have three mature parks operating
right, so the ROCE should upwards of 20%, excluding the
land revaluation?
Satheesh Seshadri:
The ROCE
including
land
revaluation
for
Hyderabad park is about 4% and excluding revaluation is
about 5% for the H1FY20 and for Kochi park the ROCE
including
revaluation
is about 5% and excluding
revaluation is about 29% and for Bangalore park ROCE is
about is about 28% including revaluation and excluding
revaluation it is about 156%. Chennai park will also have a
similar ROCE in the initial years like Hyderabad park
because the capital base is going to be bigger number, in
4% to 7% range and rise up to 10% to 12% range.
Hardik Vora: Thanks. What is the expected lease rental for the Odisha
project.
George Joseph: For a 90 years lease, charges are only Rs.3 Crores for the
entire 90 year period.
Hardik Vora: And what would be the cost of setting up the project?
Page 32 of 34
Wonderla Holidays Limited October 31, 2019
Satheesh Seshadri:
We are looking at Rs.75 Crores to Rs.100 Crores.
Hardik Vora: Okay, got it. Last time you had indicated that you have
also rationalized your A&P spends. 22% was being spent
on print and you realized that a shift to digital will be more
cost effective, so has that happened in this quarter? Was
some benefit seen in this quarter?
Satheesh Seshadri:
Last time we spoke about moving from above the
line which is the print initiative to the BTL. We increased
below the line activities with more banners, Onam
processions, enabling the BDPs with pamphlets and also
pamphlets distribution. We are also simultaneously
working on the digital initiatives. We increased film
theater and on the radio advertisement compared to the
print advertisements. Full impact of our efforts in first
half was not seen due to the impact of rain due to which
the reachability was not effective.
George Joseph: Coming to digital, we have two models. First is direct
online booking via our website, second is through the
portals like Paytm, MakeMyTrip etc. These portals
initially offered a lot of discounts and cashback which
they have tapered down over a period of time. We found
that the booking through the portals has come down, and
Page 33 of 34
Wonderla Holidays Limited October 31, 2019
at the same time, the booking through our online portal
has substantially gone up.
Hardik Vora: Okay, thank you for answering these questions. All the
best.
Moderator:
Thank you Sir. Ladies and gentlemen that was the last
question. I will now hand the conference over to the
management for closing comments. Sir, over to you.
George Joseph: Thank you very much for the insightful questions.
Though the Q2 performance was flat, we are not unduly
worried as the Q2 accounts for around 16% of our annual
turnover. We are confident that with the new parks
coming up, we will have exciting days ahead for the
company. With our lofty standards, we are here to stay,
perform and flourish. I once again thank all of the
participants for the meaningful interaction, which will
enable us to improve further. Thank you very much.
Moderator:
Thank you very much Sir. Ladies and gentlemen on behalf
of ICICI Securities that concludes this conference call.
Thank you for joining with us. You may now disconnect
your lines.
Page 34 of 34