Wonderla Holidays Ltd Management Discussions

Economic overview

Global economy

The global economy faced a series of severe and mutually reinforcing shocks -the COVID 19 pandemic, the war in Ukraine and resulting food and energy crises, surging inflation, debt tightening, as well as the climate emergency. The most important indicators for the future economy will be the threat of resurge of COVID-19, the war between Russia and Ukraine, and climate change. The IMF predicts in a more recent update, that there will be no global recession. The new projection is for global growth to decline to 2.9% in CY2023 before increasing to 3.1% in CY2024. Several key economies, including China, Russia, the US, Germany, and Italy, have had their CY2023 GDP forecasts raised significantly, while the United Kingdoms forecast was downgraded by almost 1% point.

The global growth outlook remains uncertain as economic dynamics that have been propelling the post-pandemic recovery are compounded by the conflict in Ukraine. This conflict has intensified supply disruptions and elevated commodity prices, thereby fuelling inflation. But the world economic outlook report shows a silver lining. Global inflation is set to fall from 8.8% in CY2022 to 6.6% in CY2023 and 4.3% in CY2024, stated the IMF. The price rise is stabilising for two main reasons: o Central Banks across the world resorted to liquidity tightening measures. Higher interest rates drag down overall demand for goods and services, which in turn slows down inflation. o In the wake of faltering demand, prices of different commodities — both fuel and non-fuel — have come down from their recent highs.

In CY2023, advanced economies are expected to have an inflation of 4.6% while emerging economies will continue to face an inflation of 8.1%. About 84% of countries are expected to have lower headline (consumer price index) inflation in CY2023 than in CY2022. Macroeconomic policies need to be carefully calibrated to strike a balance between stimulating output and stabilising inflation. It is anticipated that the pent-up demand in numerous economies, along with a significant reduction in inflation, will contribute to accelerated economic growth in CY23.

Indian economy

The Indian government has managed to maintain a favourable domestic policy environment and prioritise structural reforms, allowing the countrys economy to remain resilient amid global challenges. Projections indicate that Indias economy will continue to progress and expand at a rate of 7% during the fiscal year 2022-23. Additionally, the countrys stable inflation rates, higher disposable income and continued investment in infrastructure development are expected to contribute positively to economic growth in the future. Various high-frequency indicators, such as GST collections, railway and air traffic, electronic toll collections and E- Way bill volume, suggest a robust economic recovery in India. This persistent growth momentum has positioned India as an attractive investment destination.

Moreover, India is expected to retain its status as the fastest-growing G-20 nation in the coming years. Indias presidency of the G20 Summit in 2023 has also bolstered its international stature. Despite the challenges, the Indian governments prudent initiatives, such as the PM Gati Shakti - National Master Plan, the National Monetisation Plan (NMP) and the Production-Linked Incentive (PLI), have been instrumental in fostering economic growth. The Reserve Bank of India (RBI) has also taken prudent and proactive measures to ensure financial stability and address liquidity constraints. These factors have contributed to the Indian economys resilience and stimulated substantial investments.

In response to monetary policy actions by the RBI, together with other supply-side measures, headline CPI inflation has gradually declined from its peak of 7.8% in April 2022 to 5.7% in March 2023 and is projected to moderate further to 5.2% in Q4, 2023-24.

The capex outlay for FY 2023-24 was hiked by 33% to INR 10 trillion to provide a massive infra boost, which will be instrumental for economic growth, job creation, and incentivising private investment flows. These budget estimates offer a promising outlook for the Indian economy.

Tourism and mobility

Tourism, travel and hospitality industries have continued to struggle post the pandemic, with sinusoidal performance data, even into the early part of FY2022. Through FY2022, the domestic and international tourism industry gradually reopened. The primary driver of the positive impact on the industry was the governments vaccination drive, coupled with the widespread distribution of vaccines throughout the country. As the Indian economy gradually recovers, travel and mobility are now more accessible.

Many travellers, however, choose personal transportation due to their lack of trust in the safety of public transportation. Various organisations, such as malls, theatres, and amusement parks, have implemented strict guidelines for web ticketing, mandatory mask-wearing, thermal screening, sanitiser provision, physical barriers, and disinfection protocols for public spaces to ensure proper safety protocols while improving mobility. The tourism sector in India is a significant economic multiplier and is becoming increasingly important as the country strives for rapid economic growth and employment creation. Despite the tourism sector being severely affected by COVID-19, India witnesses a jump in Foreign Tourist Arrivals in 2022.

The Draft National Tourism Policy is a holistic framework for sustainable and responsible growth of the tourism sector in the country. India is observing ‘Visit India 2023 in order to develop tourism and accelerate Indias rise towards world leadership in the tourism sector. Tourism is becoming increasingly important for India as it generates income, creates jobs, helps reduce poverty, and promotes sustainable development. According to the World Tourism Organisation, the sector provides for 10% of the worlds GDP, 7% of the global trade and creates one in every 11 jobs worldwide.

The travel and tourism sector in India has the potential to grow much faster and support 46 million jobs by 2025, provided the right investments and policies continue to be implemented. With optimistic predictions of about 13.34 million foreign tourists arriving by 2024, there is a pressing need to upgrade our security systems especially to provide a flawless security blanket cover to foreign tourists.

Vaccination drive

As per National COVID-19 Vaccination Programme (the worlds largest vaccination programme), more than 220 crore COVID vaccine doses have been administered as of 6 January 2023. 97% of eligible beneficiaries receive at least one dose of the COVID-19 vaccine, and 90% of eligible beneficiaries receive both doses.

Positive consumer sentiments

Consumer sentiment in India improved significantly in January 2023. Consumer sentiment was 83.9 in September-December 2015, according to the Index of Consumer Sentiments (ICS), which is computed with a base of 100. The ICS has reached its strongest point since consumer mood was severely impacted by the Covid-19-induced lockdowns. The positive trend continued in February 2023, with the ICS rising by another 5.1 in January 2023. Positive consumer sentiments reflect a favourable outlook towards the economy and personal financial well-being, resulting in higher levels of spending and investment. It can also stimulate business confidence, leading to increased investment and employment opportunities.

The improvement in consumer sentiments can be attributed to factors such as the increasing vaccination rates and the overall improvement in the economic situation. Consumer sentiment indicators, as tracked by CMIE and RBI, have shown gradual improvement since the pandemic hit. However, the recovery in consumer sentiment has been the slowest among all economic indicators.

CMIEs indices are based on responses from around 44,000 households, while the RBI survey collects data from about 6,000 respondents in 19 cities. Despite the steady improvement, there is still a significant gap to be bridged before pre-pandemic sentiment levels are achieved.

Industry overview

Global amusement park industry

The global outbreak of the COVID-19 has significantly impeded the growth of amusements market in 2020, due to lockdowns and travel restrictions imposed by governments worldwide. Amusement parks, in particular, have been severely impacted by the pandemic and social distancing measures, resulting in prolonged closures. However, it is anticipated that the amusements market will gradually recover from the setback in the forthcoming period.

Global Amusement Park market size was valued at USD 48.8 billion in 2021 and is poised to grow from USD 51.23 billion in 2022 to USD 79.26 billion by 2030, growing at a CAGR of 4.97% in the forecast period (2023-2030). The theme park market is poised for growth, driven by factors such as the expansion of urban population, rise in GDP per capita, and a growing middle class, as well as increased spending on international tourism. However, the market is not without its challenges, including currency exchange rate fluctuations, shifting regulations, and the inherent seasonality of the industry.

Amusement parks are expected to experience rapid growth in thecomingyears,asthereispent-updemandforentertainment options which provide immersive experience. Due to changing lifestyles and cultural transitions, amusement parks are popular across all age groups and corporate employees. Aside from the primary sources of revenue, food & drinks and merchandise sold at retail stores and restaurants within the park are projected to produce additional revenue.

The market is driven by factors such as increasing disposable incomes, urbanisation, and rising tourism. Modern-day consumers prioritise unique experiences with personalisation over purchasing goods, leading to a surge in the experience economy. Social media has become a key influencer in driving consumer demand for these experiences, as they are willing to invest their disposable income in them.

Outlook for global amusement parks

Amusement park companies are witnessing positive momentum towards pre-pandemic levels of business after facing covid induced headwinds in the recent years. The growth is due to the rearrangement of operations and recovery from pandemic restrictions involving social distancing, remote working and closure of commercial activities. The global amusement parks market grew from $67.16 billion in 2022 to $106.57 billion in 2023 at a compound annual growth rate (CAGR) of 58.7%. The Russia-Ukraine war impacted the chances of global economic recovery post the pandemic, at least in the short term. The war between these two countries has led to economic sanctions on multiple countries, a surge in commodity prices and supply chain disruptions, causing inflation across goods and services and affecting many markets across the globe.

The growing usage of social media and mass media is having a positive impact on the amusement park market. As an increasing number of visitors share their experiences on social media platforms, it helps in promoting the parks to potential customers. As a result, social media has become an effective marketing tool for amusement parks to attract new customers. The extensive use of social media is expected to drive the growth of the amusement park industry and companies are leveraging this tool to acquire new customers.

Amusement parks are incorporating virtual and augmented reality technology to enhance the overall customer experience. These technologies offer an immersive experience by creating a computer-generated environment that can interact with a person or by placing virtual objects in the real world. Rides and theatre-based attractions are among the areas where this technology is being implemented to enhance the visitors experience.

Company overview

Wonderla is a leading player in the Indian amusement park industry and continues to grow and innovate to provide visitors with unforgettable experiences. Wonderla parks have been visited by over 39 million visitors since 2000, making us the most visited amusement park in India. The Company has nearly two decades of expertise in administering parks in three different cities of Kochi, Bengaluru, and Hyderabad. With over two decades of experience in amusement park management, the Company has established in-house research and development team and ride manufacturing capabilities. Strategically located in close proximity to major cities, these parks provide a much-needed respite for the young and dynamic population from their busy lives. The Company has also diversified into the hospitality industry with the operation of high-end leisure resort attached to its Bangalore amusement park, ensuring a complete and fulfilling experience for its customers. Wonderla Parks provide a rare avenue for families and friends to bond together in a wonderful outdoor environment. The parks deliver a safe, out-of-the-ordinary and highly memorable experience.

The Company has received multiple awards and accolades for its exceptional performance and excellence in the amusement park industry, including several ‘Best Amusement Park in India awards. The Company places great emphasis on safety and hygiene, a crucial aspect for any International standard amusement park.

The Wonderla advantage

Strong operational expertise and brand equity

The founders and management team of the Company have vast experience and expertise in operating amusement parks. The Company has successfully managed all three Wonderla parks with the utmost efficiency and safety, building the ‘Wonderla brand into an iconic name. The Companys efforts have been recognised with several awards for running and managing attractive and highly efficient parks every year.

Extensive infrastructure and ample extra land to grow

Wonderla parks are near major cities and have enough room to accommodate tens of thousands of tourists each day. In addition to the existing infrastructure, Company has large, connected land parcels available for future growth, giving them the opportunity to organically expand their parks in response to the market demand and conditions.

New park development pipeline

Company plans to open Bhubaneswar and Chennai parks in the future and is considering expansion opportunities offered by various states with long-term land leases and tax benefits.

Cleanliness and hygiene

Wonderla parks prioritise cleanliness and hygiene, and with the COVID-19 pandemic, these aspects have become even more crucial. From school children to senior citizens, the Company ensures the health and safety of their visitors by paying close attention to hygiene and cleanliness. Wonderlas team implements daily cleaning and sanitisation procedures, and they have strict water and waste management policies in place. Park pools use reverse osmosis treatment technology, and they regularly monitor water purity and cleanliness.

Low debt profile

The Company adheres to a prudent financial philosophy, emphasising judicious debt management and organic growth to safeguard its balance sheets robustness. The Company refrains from overreaching its financial capacity through debt-fuelled expansions, opting instead for a cautious strategy. As a result, Wonderla has amassed a significant cash reserve to fund its upcoming initiatives, with a preference for utilising internal accruals as its primary funding source.

Asset-light model

Wonderla is committed to enhancing its Return on Capital Employed (ROCE) and optimising its capital investment. The Company intends to limit capital expenditure while maintaining a high level of efficiency and productivity by using an asset-light model in some of its planned parks. This plan will allow the Company to give their guests attractively low admission costs, making their parks more affordable and accessible to a larger audience.

Digital transformation

The Company is embracing digitization to improve internal processes and increase efficiency, safety, and productivity. The organisation runs frequent training programmes to provide its employees with the skills needed to adapt to new digital platforms that are released on a regular basis.

Customer experience enhancement

Wonderla strives to give its guests value for money and to assure their satisfaction. In order to accomplish this, the corporation engages in a number of marketing strategies, such as arranging theme-specific events, providing varied ticket pricing, and introducing new rides in order to maintain the novelty factor. These launches assist the organisation in understanding client preferences and maintaining their loyalty, generating excitement for guests to return to the park and enjoy the latest attractions.

Operational overview

Wonderla is financially stable company with a proven track record of profitability. As a customer-centric organisation, the Company understands the importance of adapting to evolving trends and patterns in order to capitalize on market opportunities. Companys strategic initiatives will focus on leveraging digital marketing, expanding our content, maintaining a consistent park experience, introducing innovativerides,andensuringaseamlesscustomerexperience. By implementing these efforts, the Company aims to increase footfall and contribute to the long-term profitability. Growth momentum was sustained with double-digit growth across all units. On aggregate, in FY23 the Company registered 33 Lakh footfalls highest in the history of its operations.

Marketing and events

Wonderla ran several special day marketing programmes and events that were very well received by the customers. The Company launched marketing campaigns such as OH SO MACHO, MAKE MO MERRY, and others. Onam, New Year and other festivals are observed here. On New Years Eve, Hyderabad Park hosted the Sunburn event, and Kochi Park had a live concert by famous vocalist Karthik. The incredibly successful events drew 2,400 people in Kochi and 2,600 people in Hyderabad. Festival and event-based advertising continued to drive footfall through innovative marketing initiatives. On Dussehra, Diwali, and Christmas, there was a high turnout. The Company is also noticing a surge in foot traffic from schools and universities. Wonderla recently hosted a splendid Holi celebration on March 8, 2023, which was a great success. Parks received excellent responses and high footfalls during these events.

The Companys events have been a huge hit with their customers, resulting in record-breaking attendance. In response to this success, Companys plans to hold more of these theme-based events on a regular basis. These events not only attract a large number of visitors but also add an element of excitement and joy to their experience at Wonderla parks. The Company is using social media platforms to promote their parks, and its proving to be successful. In the future, the Company will focus more on targeted marketing by analyzing customer insights. The Company will consider factors such as customer age group, location, and preferences to develop a more precise marketing plan.

Cost leadership

The Company is constantly looking for methods to optimize costs and improve efficiency. We utilise digital transformation techniques to increase efficiency in all of our departments and take steps to reduce operating expenses across all of our parks.

Financial overview

Business highlights

The Company achieved a robust and resilient performance throughout the year. The introduction of quarterly events, park activities, and expanded food and beverage offerings led to a rise in footfall, ultimately contributing significantly to the companys success. The Company reported total Revenue of H 452 Crores, and EBITDA of H 235 Crores, and PAT at H 149 Crores in this for FY2023. The Company received a total footfall of 33 lakhs for FY2023, as against 10.57 lakhs footfalls for FY2022. The Company registered a favourable increase in ARPU, which stood at H 1,243 in FY2023 as against H 1,098 for FY2022.

The sharp uptick in resort performance revenue was up 58% over FY2020 registering the highest occupancy of 69%. The performance in FY2023 is highly satisfactory, with a clear upward trend observed across all locations. The Company is planning to have two parks in Odisha and Chennai to be operational in next 2.5-3 years.

FY23 was a landmark year in the history of the company, marked by record breaking achievements across all key metrics. It was a stellar year wherein the company recorded its highest EPS ever, clocking 130% growth over earlier peak EPS of FY20. In the process of more than doubling the previous peak EPS, Wonderla has broken all the previous records and registered all time high footfall, revenue, EBITDA & PAT. These achievements have raised the bar of performance to unprecedented heights. Wonderla has always strived for generating value for all stakeholders and after a challenging couple of years, has delivered outstanding performance which has led to high returns for all stakeholders who supported the company.

Risk and concerns

Wonderla, like other companies in the sector, is subject to risks and uncertainties that might have an impact on its future profitability and capacity to operate. In consultation with top management, the Companys Board of Directors conducts a thorough assessment of these risks and takes actions to effectively mitigate them. The Board is convinced that the risks are regularly and effectively handled.

Information technology

Wonderla is investing in its digital reinvention platform to increase efficiency and accuracy. The company is automating as many business processes as possible. A framework has been developed to capitalise on the opportunities presented by new-age digital technologies and transform into a digitally savvy company. To provide a better and more integrated experience to customers, Wonderla has piloted some technologies and platforms as part of the plan.

Internal controls

An external agency is examining the Companys internal controls to ensure that our operations are optimal and effective. This impartial examination helps safeguard and protect our assets from unauthorised use or loss. It also ensures we keep proper accounting records and verify the authenticity of all transactions.

We have a system in place to ensure that we comply with all relevant laws and regulations. Our Audit Committee and/ or Board of Directors regularly review our performance to ensure that we are following our corporate policies and meeting our goals. Our internal auditors play a critical role in guiding our risk management policies and processes, raising awareness of risks across our organisation, and developing reporting and monitoring procedures. They also develop plans to keep our risk management policies up-to-date and effective.

Cautionary statement

Statements in this report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be ‘forward-looking statements within the meaning of applicable security laws or regulations. These statements are based on certain assumptions and expectations of future events. Actual results could however differ from those expressed or implied. Many important factors including global and domestic estimates, changes in government regulations, tax laws and other statutes, and force majeure may affect the actual result which could be different from what the directors envisage in terms of future performance and outlook.