Wonderla Holidays Limited (WONDERLA) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Wonderla Holidays Q4 FY '21 Results Conference Call hosted by ICICI Securities Limited. [Operator Instructions]. Please note that this conference has been recorded. I now hand the conference over to Mr. Adhidev Chattopadhyay from ICICI Securities Limited. Thank you, and over to you.

Yes. Good evening, everyone. On behalf of ICICI Securities, I'd like to welcome everyone today on the call. Today from the management of Wonderla we have with us Mr. Arun Chittilappilly, the Managing Director; and Mr. Satheesh Seshadri, the Chief Financial Officer. I would now like to hand over the call to the management for their opening remarks. Thank you.

Good evening, everyone. This is Arun Chittilappilly. We welcome you to this conference call to discuss the fourth quarter results of the financial year 2021. Hope everyone continues to be safe, and I would like to start off by appreciating the relentless effort of various COVID warriors who make sure that people are safe during this pandemic. After reopening Bangalore and Kochi Park in November and December, respectively, the calendar year 2021 started off on a good note for us as Hydropower Park also resumed operations on January 9. All 3 of our parts are operational after a gap of more than 7 months. I would like to emphasize that our team was ready to immediately reopen the park, on the necessary clearances were received from the government. The team continues to excel with their dedication and resilience as we found innovative waste safely entertained nearly 4 lakh guests. Post unlock, Wonderla continued to be a preferred destination for outdoor entertainment in our 4 cities and we witness substantial demand once our parks resumed operations. In January, our parks were operational only from Thursday to Sunday, which was further increased to Wednesday to Sunday in February and in the month of March, all the parks were open all the days of the week. Our attendance consistently improved every month since we first reopened the parks. Wonderla is also the first theme park chain in the country to be awarded the highly committed COVID Safe certification by Bureau Veritas. Wonderla Bangalore and Kochi certified with Diamond certification and Hyderabad Park has secured a Platina certification. We introduced industry-leading safety standards and protocols to protect both our employees and our guests to come to and have a memorable day with us. This includes encouraging online reservation system for admission, touchless temperature and security screening, contactless transactions and enhanced sanitization. Our outdoor venues have tremendous amount of open space and our park are naturally conducive to social distancing. Over the decade, Wonderla has faced many challenges, FY 2021 was the toughest not just for Wonderla but the industry and the world at large. The results for the quarter and full year may not be comparable to the prior year due to the pandemic limitations. Coming to our performance for Q4 FY '21. Our focus on digital marketing and to use innovative approach, including influencer activities and PR campaigns that yielded good results. We recorded footfalls of 3.1 lakh visitors across all parks, which is more than 1 lakh per month. We also introduced innovative SMB and retail offerings in [indiscernible] events during the quarter. On a Y-o-Y basis, our footfalls are at 77% of prepandemic Q4. We registered a gross revenue of INR 347.9 million, clocking a recovery of 77% of INR 449.1 million revenue registered in Q4 FY '20. We are also EBITDA positive for Q4 FY '21. The company's robust balance sheet continues to be debt-free and has ample liquidity of roughly INR 930 million. Even though there was a setback for us due to the second wave, and we closed our parks in April, our team is motivated, and we are trying to put our best foot forward to drive the company to scale new heights. We have identified high performance and rewarded them with increments. Additionally, we are also working on vaccination efforts for all our staffs. We continue to focus on sustainable value creation from our resilient business. Despite the recent lockdowns, we are optimistic that it will generate a widespread desire, which will help us drive attendance in the coming quarters. We are looking forward to put the worst of the pandemic behind us and delight our guests in our parks as and when the time is appropriate. We thank you for your continued support and remain confident in emerging stronger as our strategic plan remain intact. We can now proceed to Q&A. Thank you very much.

[Operator Instructions] The first question is from the line of Sharma Kunal from Perfect Research.

So I have a few questions, so I'm asking them together. The first, when do you see the India open up like a U.S. where the post sufficient vaccination even masks are not required. And the second, sir, along with the opening of bigger park, shouldn't we also think indoor entertainment often in malls due to 2 reasons. The first is setting up these big parks in such a painful time consuming process and slower growth? Second reason is that the city people, would be able to use in the city entertainment option more regularly versus coming once implies to our big parks? Third question, any learning from running Wonder Nursery and Wonder Kitchen which could help us scale up our business later? And then lastly...

Can you limit your questions to 2 because I will not be able to answer all of them otherwise.

Then the last question, is there any opportunity of inorganic acquisition of the park in India?

Sorry, I didn't hear the last one.

The last 1 is, is there any opportunity we see of inorganic acquisition of other parks in India?

Yes. So your first question was when do we see the pandemic kind of receiving. That will only happen with at least 50% of the population is vaccinated as you may already be aware. Now in a large country like India, it could take 5 months, it could take 6 months. It could take 1 year, it could take 2 years. It's all up to the government, let's hope for the best. They are saying that we will finish vaccination by December, but I highly doubt it. Maybe a year is what I think. Second question, what is it? Is about -- sorry, could you repeat the second question?

Shouldn't we think about indoor entertainment?

Indoor entertainment yes. So indoor entertainment is a different format. It's not -- it does not come under the amusement park business. It's a completely different business and the entry barrier for something like that is relatively low. Like you rightly said building a large part is always much more costly and time consuming. But our expertise is in the large format parks, so we don't to get into the small park business because I don't think there are enough margins and I don't think there are any players who have been really successful at it. I don't -- yes, so I'm not really bullish. I mean for me, I don't think it makes sense for this company. Third question -- the last question was -- sorry, could you repeat your last one, I forgot your question. Please limit your questions to 2 questions next time.

Sure, sure, sir. Any learning from the -- like the Wonder Nursery and Wonder Kitchen?

Wonder Nursery and Kitchen and all was only for -- it was only to engage our guests -- sorry, our staff during the pandemic last year because we had an extended lockdown. Once we recover from the lockdown and we were in a position to open the parks, we found it difficult to run both the businesses together. And also running a takeaway food outlet had its own challenges because it's heavy low margin, high-volume business, and we did not have enough -- we couldn't recruit more staff to grow that business. And at the same time, you were also trying to reopen the parks. So we have to take a call on which we want. We obviously prioritize reopening of our parks and getting footfall ramp-up over the other businesses. So those continue to be there only as -- I mean we are not doing the Wonder Kitchen anymore, but Wonder Garden continues to be there, but it's a very low CapEx, very small operation. So we could come back and look at it again. There is a market opportunity, especially in the Kitchen business. But right now, I think because we are constantly going in and out of lockdowns, we don't have the bandwidth to run both. So I hope that answers.

Sir, your question is answered.

Actually, last 1 is just remaining. There is like opportunity, we see the inorganic acquisition of the other parks.

We are not looking at any inorganic acquisitions right now.

The next question is from the line of Rajesh Ranganathan from Doric Capital.

It's a tough time. So obviously, you're doing the best you can. But could you please give us an update on Chennai project? What is the current thought process around that? And secondly, we've tried different businesses but within our own park business, have we used the time that we've had in terms of downtime to make it better when things open up?

Yes. So I think for us, the downtime is mostly are using it for strategizing and trying to improve our businesses when we reopen. And I think that has helped us a lot, especially when being opened during the -- in the last quarter. We also had a fundamental shift in our strategy in terms of how we market our parks to our visitors. So that is gone through a new change and we are much more digital heavy rent right now. But a lot of that work is still in progress. So it's still not a finished product. Maybe we take off another year change in our marketing and customer experience to a fully digital system. So we are still working on it. So that's -- those kind of works are going on. We are also revamping some of our offerings in terms of F&B outlets and things like that. So small upgradation work and those kind of things are going on right now.

So are you saying that, let's say, this 12 months or 18 months that we've had as a downtime, there isn't any significant project in terms of upskilling of employees systems. Normally, we are not able to do in the running park, but we used to -- so that you can involve your clients when you walk in next time?

Yes. So that's what I said, we are working towards that, but it's more like a digital heavy. They are doing a digital transformation in the company in that sense. But yes, it's still early days. It will probably take us a year or 2 to finish a substantial part of it.

And on Chennai if you don't mind.

Chennai is kept on hold because we are not able to start work on it. So it has been put on hold for at least till the end of this financial year.

But we have the land for that? Or is that not yet?

Yes, yes. The land -- some land development -- some basic work is going on, but nothing -- we are not building the park as of right now.

Why is that? Is it because of lack of availability of labor or what is the reason behind that?

Yes. We don't have labor. We are not able to move people there. Also, we have some outstanding disputes with the government in terms of tax holidays and things like that. So those kind of things are being sorted. So we will announce whenever it's ready. So I don't see anything happen for the remainder of this year.

Okay. And then this tax dispute, how serious is it? How long is it likely to take those? Because that's 1 of the growth drivers for you when things open up right?

Yes. So I mean we are asked for a tax holiday exemption from the local body tax in Chennai. I don't know if you are aware, but Tamil Nadu is the only state which there is an extra tax on tickets. So we will not be able to build a large format park and run it with [indiscernible] tax in place. So they have categorically agreed the previous government, but now the government has changed, so we'll have to work again and see how -- we don't know how long it will take.

Okay. And from when did you, let's say, pre-COVID we have a certain 70%, 77% EBITDA. And let's say things should open up and we reached 77% in fourth quarter and maybe you can also comment on why, I mean when other businesses you're going to reach 100% maybe we have some peculiarities why even not able to, but suppose we do reach 50% at some point, will our EBITDA be similar or better or lower? What do you think?

It will be better or at least the same as before, once the COVID pandemic. The reason why we had only 77% footfall is because we were not allowed to open every day of the week initially when we opened. Only 1 month out of the 3 months, that is only in March, all 3 parks were open, all days of the week. The other 2 months to some days, we were open, someday we were not open because we have to limit the crowd also, right?

The next question is from the line of Parimal Mithani from Credential Investments.

First, sir, is it safe to assume the last year, we had the worst year in the company's history going forward? The second question is in terms of footfall.

Sorry, can you repeat your first question? I couldn't hear you.

Sir, there's a disturbance coming from your line, sir.

Now can you hear me properly now?

Yes, it's still disturbed, but I can hear you.

[Operator Instructions]

So is it safe to assume the last year was the worst year in the company's history in terms of financial performance wise?

Yes. It was one of the worst, yes.

Second is, it will be the base for the year of going higher, right, in terms of since the pandemic, it was the worst year that we've been that way, right?

Yes.

And second thing, sir, this footfall of 3.1 lakh, which you achieved in this last time of -- I think you were the operations 3 months and given the pandemic restrictions and all that. Both India reaching critical vaccination drive, do you see this number to surpass your prior expectations also?

Actually, we -- so I think 3.11 lakh is a pretty good number. In fact, it's kind of what we would achieve also. We had pretty good footfalls in all the 3 parks. So I think there is a lot of the latent demand. People are wanting to go out, but obviously, because of the pandemic, there is a lot of restriction lockdowns, all those things. Once the lockdown restrictions all the things is out, assuming that at least 60% of the population gets vaccinated, which you can already see in other countries happening now, I think the demand will be coming back strongly is what we think. And that is what we are seeing from other parks and other countries as well.

Status of the theme parks [indiscernible] lockdown over [indiscernible]?

Sorry, I can't hear you.

What are status of the park? Are they in lockdown or they're partially opening the parks...

They're all lockdown. Every -- all 3 of our parks are in a lockdown.

Okay. And sir, this footfall worried because of the open discounts or anything or there was just a latent demand which was there people wanted to travel?

I think it's because of -- mostly because of latent demand, but we also had some discounts and some offerings have been set up but mostly not discounted because our ARPU is also better than last quarter.

And sir, last question, if I'm seeing your company for next 3, 4 years, in terms of how do you see yourself in terms of the coming years? I won't quote you to it, I just want to understand the business from how you plan [indiscernible].

Yes. I think once the pandemic received, I think we will slowly get back on to our growth path again in terms of adding new locations to our portfolio, things like that. We're already working on it. Like, for example, we have Chennai and we have another project that we have signed in Bhubaneswar for a smaller -- like a small version of the park with the government there. But again, because of the pandemic, we've not been able to. We have a couple more opportunities 1 from Gujarat and there is another opportunity from Colombo in Sri Lanka as well. We are evaluating all these options. And then whenever time is right, we will start working on these projects. And also our existing parts also, we are upgrading them slowly. And once we reopen, I think we'll be able to give our visitors a better experience.

So the same ticket price range or like?

I think you've run out of your questioning time.

Sorry, if you can just comment because I'm just logging for the first time and it's [indiscernible] can give us a time that [indiscernible]. If you don't mind, and I'll go ahead. If there's a problem [indiscernible]

Yes. We told there only 2 questions per participant.

The next question is from the line of Geeta Mehta from [ LHS ]Ventures.

I only have 1 question. So recently, Gujarat government announced various incentives such as reduced electricity bills and property tax exemption for various multiplexes. Can we expect something similar for park industry?

I think the association of parks are actively talking to different bodies. But I think Gujarat has always been very pro industry, and they have been waiving some of those things, but I'm not seeing it as a countrywide initiative for other industries also. We are trying. We are hopeful that some kind of exemptions or the tax breaks, et cetera, might happen, but too early to comment.

So can we expect something similar in the other states as well?

I'm not sure. We are working on it. But at this point, we are not -- we can't comment on it.

[Operator Instructions] The next question is from the line of Meet Jagani from PS Associates.

I have 1 question. How the current initiative of 50% of this gain in traction, how is the response over there?

That's a new offer that we have just given because we are currently lockdown and we are not able to -- I mean open the park, but we are selling the tickets for a future date, only limited -- it's a limited time offer. And I think we had really good response. I think we've sold about 7,000-odd tickets in about a week. So it's not a bad thing.

Okay. And apart Chennai, are we looking at any other location? I mean, [indiscernible] location are looking currently?

We are looking at other states, like I told you, I mentioned in the last answer. We are looking at a few opportunities in other states like Gujarat, Odisha and also that we have an opportunity which has come up in Colombo in Sri Lanka as well. So we are evaluating a few opportunities.

[Operator Instructions] The next question is from the line of Nitin Dharmavat from Aurum Capital.

Just 1 question regarding Bhubaneswar, Odisha, the Board is approved for setting up this park. You mentioned that you have not worked out details about it. But if something is there in terms of what kind of investment that you are looking for because you mentioned that's going to be a smaller format. So what is the kind of investment that you're looking for this? And what will the time line once the things opened up?

It's very early stage. I mean, we want to do a very small format one. So it will be significantly lower investment compared to our existing parks. And also for us, Odisha seems like a smaller market as well. So we are trying to tailormade something working with the government, they have to see the way can do a small park. They have been very supportive. They have actually given us a lot of -- they've actually been very proactive in terms of helping us with the land and approvals and all those things. So -- but once the plans are finalized, we will be -- we will update everyone about this. Right now, it's still in the drawing board.

The next question is from the line of Manoj Dua, an Individual Investor.

Sir, when you look for a new opportunity like Colombo or Gujarat, what are the parameters you look into? What are the conditions you think that [indiscernible] opening of [indiscernible]?

We look at a few things. One is the area that there's a sufficient attachment area in terms of market size. We also look at that our business can operate 365 days or is highly seasonal, depending on weather conditions. We also look at how the government -- how proactive the government is in the state or area and how helpful they are. Then we also look at how far or how close are they to our existing project because you don't want to build 2 parks which are very close to each other because they may not -- they may cannibalize each other in. So there are a few parameters like that we look at.

And on infrastructure water, electricity, connectivity.

Water connectivity, water, basics like that as well .

Okay. Now if you want to see the company after 5, 10 years, the growth parameters of opening new park or [indiscernible]. If you are not able to open new park of the phase what you think and which has happened in the past, how [indiscernible] from our own parks [indiscernible] guideline because you talk about a condition in the past [indiscernible], we are not able to open new parks. So how far you can grow from our [indiscernible] in future?

I think our existing parks are still not saturated in terms of footfall. So that's something that we are looking at very seriously. So yes, unless we don't add new parks. I think there is sufficient headroom for us to grow in our native market. For example, Hyderabad, we still haven't reached one million footfall. Kochi -- we used to have 1 million-plus footfalls, and then it has dropped in the last 2, 3 years. So we need to fix that. So I mean there are some of those challenges we need to address as well. So I mean, definitely, there is scope for growth in our home market is what we feel because our parks, even if we have 1 million footfalls, it's still a very small percentage of the total addressable population of each of those cities.

The next question is from the line of Pavan from [indiscernible] Capital.

Most of my questions are answered. But just 1 additional 1 is what's the capacity or you just mentioned that, for example, Hyderabad has 1 million kind of capacity. So what's the kind of operating capacity that we can think about when we look at the business?