Wonderla Holidays expects 20-25 percent growth in topline in next two years at least, says MD Arun K Chittilappilly. According to him, since the company has reasonable ticket prices, it is easier to pass on the 10 percent hike annually to consumers.
The amusement park operator garnered around Rs 180 crore through initial public offering in May 2014 and has so far deployed only Rs 7 crore towards getting approvals. The company now has all its approvals in place for FY15 capex plans.
The debt of the company stands at around Rs 12 crore.
Wonderla Holidays is likely to begin construction of Chennai park when the Hyderabad project is on stream. The extra revenue generated from the Hyderabad park will be used to develop the Chennai project, adds Chittilappilly.
Below is verbatim transcript of the interview:
Q: I was reading the recent report that has come out from one of the brokerages, they had a management visit with you all and one of the things indicated in terms of the takeaways is that you expect a 5-7 percent growth in footfalls and around 8-10 percent growth in ticket prices in the medium-term. What are you clocking on those two parameters at this point in time and when you say medium-term, what does it mean?
A: Right now we are getting about 7-8 percent growth in our footfall in the first half and we are hoping to continue that. We see the same kind of growth pattern going forward in the next couple of years at least. That is what we mean by medium-term.
The healthy sigh that we see is that we are getting a lot of new footfalls which is first time visitors to our amusement parks in Cochin and Bangalore. So that is a very healthy sign and that is what is driving these growth numbers.
We have priced our ticket prices quite reasonably and are able to pass on that 10 percent hike in our ticket prices annually and are reasonably confident of doing that in the coming years as well. So both clubbed together, we will see 20-25 percent growth in our topline for the next two years at least. After which we will have a new project come on-stream and then we can see a jump in our revenues at that point.
Q: How much of your IPO money have you already deployed and how much of it is left to be deployed?
A: We have raised about Rs 180 crore through our IPO out of which we have deployed maybe about 6-7 as of now, mostly for approvals and basic work that we have started in our Hyderabad site. But we have got all approvals and are just starting our major expansion into that work at this point.
Most of the capex will happen in the next financial year because that is when all the big machinery and a lot of capital civil structures and those kinds of things will happen more in the next financial year and so, that is when most of the money will be utilised.
Q: You are also planning to start a park in Chennai. How do you plan to raise money for that because the IPO money would entirely be used for the third plant plus you would need some more money because the overall money required for that is Rs 250 crore or so?
A: As part of our five-year plan, we had planned two parks, one in Hyderabad and one in Chennai and these two projects are coming pretty close to each other.
We believe to do 1:1 debt equity ratio and as of now we have only Rs 12 crore debt on our books. So once we deploy our IPO money for Hyderabad, we will still be debt free and by the time we start construction in Chennai, a Hyderabad project will be onstream and it will be revenue generating. So we will be able to fund a chunk of our investment in Chennai through this added cash flow that we are going to generate.
Also we will take a small amount of debt, probably about Rs 120-130 crore of debt when Chennai project is fully on-stream.
After taking the debt on, we will still not be at 1:1 and will still have lower debt than our equity. So that is the plan for our growth.
Q: Can you give us a sense whether the two parks that you are operating currently have already broken even? What is the rollout plan in tier I cities, by when can we expect it, you spoke about Chennai in particular but what are the other cities you are targeting and by when and what would be the capex involved?
A: We are running medium-sized to large-sized amusement parks and the way we run it, we are looking at Rs 250-300 crore kind of investment per location including land and our current two projects are already broken even, all our projects are operationally profitable from year one and at a profit after tax (PAT) level profitable from year three or year four. So our current parks have been profitable for at least four-five years for Bangalore and almost nine years for Cochin.
When we have two new projects, which is Hyderabad and Chennai, these two projects will also behave in a similar manner, they will be operationally profitable from year one and at a PAT level, they will be profitable from year three or year four. Our vision is to have these sized amusement parks in larger tier II and tier I cities.
Right now we are focusing on Hyderabad and Chennai but after that we will look at Pune, Mumbai. We are looking at all the big cities because we feel there is scope to do something like this there as well.
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