MANAGEMENT DISCUSSION AND ANALYSIS
A. Industry Structure and Development
First amusement park in India i.e. Appu Ghar was opened in 1984 in Delhi. Thereal growth of the amusement park industry was witnessed during 90'R when the largeparks like Essel World in Mumbai, Nicco Park in Kolkata, Ramoji Film City in Hyderabadwere set up, The mid 90's also saw emergence of domestic equipment manufacturers toserve the amusement park industry in the country. In the next decade, most of the existingand upcoming amusement parks started focusing on integrated offering combining amusementpark services with others like resorts, water parks etc. In this decade, some of theamusement parks went for strategic alliances with foreign players in Order to bring inmore capital for expansion and access the know.how.
Currently, India has around 150 amusement parks of which around 16 .18 fallIn large category, 40.45 are in the medium category and rest are in the smallcategory as per CARE Research. The amusement parks in India witness an estimated annualfootfall of 58.60 million.
Emerging Trend and Fulure Outlook
Amusement park industry in India is estimated to be worth 7 26 billion. A totalof Rs 175 billion of investments pertaining to 12 major projects are linedup over next 3.4 years. Demographic advantages, rising income levels, increasedspending on Tourism & leisure activities, rising urbanization and growth in tourismall contribute to the growth of this industry.
Some of these large projects may avail viability gap funding from the StateGovernments. CARE Research expects that considering the difficulties in land acquisitionand saturation in key locations in cities, new amusement park addition will slow down inmetres and Tier I cities, whereas new capacities will come up in the upcoming Tier IIcities, outskirts of major cities and major highways. A total of 4,500 acres ofcapacity is expected to come up in the amusement park space in the next 3.4 years.This new capacity and the existing parks will be one of the major drivers for the footfallwhich is expected to see growth of 10 to 15% and is expected to reach around78.80 million over next couple of years, Revenue is expected to grow by 15 to18% on account of rising footfall and increased spend on other items like food andbeverages, spas etc.
B. Business Strategy
Your company is in the business of leisure and entertainment and is providinginteractive, participative and educative form of entertainment with its amusement park inKolkata for wholesome recreation for the families. Set up in 1991, over 27 millionguests visited this theme amusement park during the last 21 years.
Having gathered immense experience in maintaining and running amusement parks, theCompany has diversified into extending overall consultancy for setting up theme parks andwater parks in addition to engineering, manufacturing and supply of amusement park'srides, Company also undertakes turnkey contracts for setting up composite amusement parkand water park from concept to commissioning. With the rapid growth of amusement parkindustry many small manufacturer of rides and attractions are mushrooming all over thecountry. But, Nicco Park being "One Stop Shop" for setting up parks and sincethere are hardly any company in India and abroad who can offer such facilities, Nicco Parkhas earned good reputation and is in demand to offer such services. Nicco Park has alreadyset up 8 amusement parks and 4 water parks in India Including 1 largecomposite park in Bangladesh, Many enquiries for such proposal for setting up thecomplete park on turnkey basis are being received by the Company and business potentialfor same is good.
Nicco Park with Its highly professional and experienced executives guided by the Boardof Directors pursues achievement of long term sustainability of the company involving itsstakeholders. Your company practices the contemporary management style to calculate theimpact that the business had in terms of social, infrastructural and financial return forits long run sustainability. Your company has many achievements in respect of economic,environmental and social return which are shown on the following pages.
This year, your Company achieved a rare distinction of becoming India's first SmallMedium Business Enterprise to achieve CII EXIM Bank's "Business Excellence"Prize/Award on European Foundation of Quality Management (EFQM) model.
Sustaining high quality top line and growth in earnings.
Debt Equity Ratio continues to be extremely favourable for future growth of thecompany. Paying dividends for last consecutive 19 years.
Excellent track record and very high credibility with banks and financial institutions.
Nicco Park maintains high novelty of the park by continuous addition of various ridesand attractions. This helps in releasing better per capita spend from visitors every year.Nicco Park is most popular and a happening place in Kolkata. This results in better incomeevery year from other recreation facilities as well.
The Company has been paying dividend for the last 19yrs. Last year (2011.12) therate of dividend declared was 15%, a 3% increase over 2010.2011.
During the last 5 years employee benefits have increased 74%
Debt Equity ratio of the Company continues to be favourable for future growth.
Nicco Park's contribution to the State & National Exchequer is one of the highestamongst SMB's by way of payment of entertainment tax, license fees, luxury tax and otherssuch as service tax, VAT as well as income tax. Every year the total tax payment now worksout to over Rs 6 Crores
The pattern of 'Distribution of Value Added' depicts the contribution to thestakeholders, employees & Government Exchequer in percentile over the periods
Nicco Park always concentrated to create a wonderful ambience with greeneries to offerwholesome recreation in a healthy environment to visitors.
Several thousand trees were planted during inception and every year several hundredtrees are planted in the Park. It has also created artificial water bodies, hillocks andgreeneries inside the park.
Conservation of energy by use of efficient lighting, energy efficient drives andby Water conservation and Water recirculation. Company takes various measures to becomeCarbon and Water Positive.
Park's wastes are utilized for making vermi.compost and Organic manure and the same areused for Park's horticulture and beautification.
All Management Systems in Nicco Park for Quality, Environment, Health and Safetyconform to International Standards, First Amusement Park to obtain rare distinction ofachieving all the three ISO Certificates i.e. ISO : 9001, Quality ManagementCertification; ISO ; 14001, Environment Management Certification and OHSAS : 18001,Safety Management System Certification form renowned European Certified Authority, M/s.Det Norske Veritas.
The State Government appreciated Company's effort and declared the Park as "Plastic Free Zone".
A recipient of Certificate of Appreciation at the ICC Environment Excellence Award in 2012.
Employee's are trained on nature care and mountaineering Medicinal gardencreated inside the Park.
Pisciculture in the water bodies at Water Park.
Maintains high quality hygienic water of international standard in Water Park
Business generates livelihoods for over 500 families.
Takes many initiatives and measures for society's infrastructure improvement in andaround the park.
With the help of NGOs, takes initiatives towards eradication of illiteracy innearby societies. 6 employees engaged in "Teach India" programme.
Sponsored and subsidized visits of over 5000 orphanage and destitute visitorsthrough philanthropic organization.
Does not employ any child labour and ensures that the same is observed by allits franchisees and vendors.
Bargainablc employees' salaries are reviewed at regular intervals and finalizedthrough negotiation.
First Aid Centre inside the park is attended by the registered Medical Practitionersand Nurses, with stand.by Ambulance.
Park observes "Children Day", 'Independence Day", ''Republic Day"every year and organize social camps for its employees and neighbours for "PulsePolio Immunisation", "Eye Care Camp", "General Health Check.upCamp", "Road Safety Week".
The First and the only Park in India to obtain SA : 8000 . Social AccountabilityCertification from M/s. Det Norske Veritas.
Physical health check up for all employees started through our First Aid Centre for allemployees including contractual labours and franchiesee staff and records maintained.
Observed World's AIDS Day in association with Health Dept., Govt, of West Bengal.
QIT Achieved "Par Excellence Award' at Kolkata chapter on the qualitycircle organized by QFCI.
River Cave Ride of Nicco Park has been awarded as "The Innovative &Most Popular Ride" in India during 2009.10 by Indian Association of Amusement Parks& Industries.
QIT achieved "Gold Award" at International Convention on QualityCircle organized by QCFI
QIT achieved "Par Excellence Award at National Convention on Quality Circleorganized by QCFI,
ICC Corporate Excellence Award 2011: Nicco Park was awarded the ICC CorporationExcellence Award for Small and Medium Enterprises in Best Star Performing Small and MediumEnterprises category for the year 2011.
QIT achieved "Par Excellence Award at National Convention on Quality Circleorganized by NCQC in year 2011.
IAAPA, USA nominating committee has nominated and elected Mr. Arijit Sengupta, MD &CEO of Nicco Parks & Resorts Limited to join the IAAPA Board of Directors for theperiod 2011.13.
C. Segmentwise Performance
a. Park Operation
To maintain novelty of the Park and to increase repeat visits the Company iscontinuously adding new rides, attractions, facilities and events. Market Research Dataindicates that your Company has about 60% repeat visitors. With such high level ofcustomer loyalty, there is a business compulsion to constantly re.invent ourselves to addnew attractions, to conduct low cost high profile events and to carry out various salespromotions to benefit and attract the visitors.
During the year we conducted a high profile event "Winter Carnival" which hadgreat novelty value. The ever.popular "Ice Land" was brought back again totallyrevamped. Both these attractions were enjoyed by large number of visitors.
However, there was a drop in overall footfall of around 10% over previous year.
b. Consultancy, Contract and Sale of Ride Components
The amusement park business is growing rapidly in the developing countries. With 21years of experience In running and maintaining amusement park successfully, your Companyhas expanded its activities to provide overall technical consultancy, design, engineeringand supply of rides on turnkey basis. With the help of Company's technical collaboratorsin UK and Europe the Company has started getting project orders to supply rides in Indiaand world over.
Your Company's products and services are expected to receive wide acceptance abroad asit has obtained 4 major certifications such as ISO: 9001:2008. Quality Management System,ISO: 14001:2004.Environment Management System, OHSAS : 18001 : 2007 Occupational Health& Safety Management System and SA : 8000 : 2008 Social Accountability from therenowned European Certifying Authority . M/s. Det Norske Veritas.
Your Company is also exploring the possibility of working together in some of the largetheme park and Heritage projects coming up in India and UK, and also signed Non.DisclosureAgreement with a few international renowned companies in the field of Amusement park ridesand attractions manufacture.
Bowler's Den, the air.conditioned sports bar and multi.cuisine restaurant continues todo well. Due to its ever increasing demand, the interiors of Nicco Super Bowl wererestructured, Bowler's Den was refurbished and upgraded during this year. Acknowledged asa family dining center, its locational advantage, atmosphere, ambience and niulti cuisineshave made it very popular to the locals of Salt Lake area and to the workforce fromInformation Technology, BPO, Call Centre and Electronics Industry located in the closeproximity. Incomes from other recreational facilities have increased substantially overthe last 2.3 years. In order to increase this business further, Company has set.up twoA.C. Banquet Halls, "Water Side . I" and "Water Side . II" during lastfinancial year and business from the same look prosperous.
D. Risks and Concerns
"Visitors' safety" being of utmost concern, your Company continuously ensureshigh quality maintenance of all its rides and attractions.
The entertainment provided by your Company is interactive and participative in natureand faces competition from various other forms of entertainment In the leisure industry.The business has seasonality and being outdoor, climatic conditions have a bearing on itssuccess. Sponsorship earnings also depend upon overall business conditions of variousindustries within the country.
With respect to project operations, although there are several renowned and reputedcompanies in the field worldwide who have a domineering presence, India has a costadvantage, which your Company is attempting to leverage. However, the Consultancy,Contracts and Sale of components for rides are also subject to variation depending uponthe number of contracts.
Recognizing the needs associated with the various facets of the business of yourCompany, your Company had already formulated a Risk Management Framework in consultationwith various functional heads to indentify, assess and mitigate the major areas of riskassociated with the business of the Company. The Risk Management Framework is reviewed bythe Audit Committee and Board of Directors on a regular basis.
E. Internal Control Systems and their Adequacy
Your Company has adequate internal procedures commensurate with the Company's size andnature of business. The objective of these procedures are to ensure efficient use andprotection of the Company's resources, accuracy in financial reporting and due complianceof statutes and Company procedures.
The existing system provides for structured work instructions, clearly laid downprocedures of authorizations and approvals for purchase and sale of goods and services,reserved responsibility of custodial control with identified personnel, and use ofcomputerized systems to ensure controls at source. Internal Audit is done by an externalagency. Post audit checks and reviews are carried out to ensure follow up on theobservations made by the audit teams. The Internal Audit reports, the progress inimplementation of recommendations contained in such reports and the adequacy of internalcontrol systems are reviewed by the Audit Committee of the Board in its periodicalmeetings.
F. Human Resource Management
Ours is a continuous quest to offer the finest guest experience and we are constantlyreinventing ourselves in a sector that is on the move. People power is one of the pillarsof our success.
Your Company firmly believes that its greatest strength lies in the quality of itsmanpower. The Company's "people philosophy" has given it a competitive edge asits guests are served by bright, enthusiastic and committed employees who anticipateguests needs and deliver exceptional service with genuine warmth.
There is a conscious effort on the part of the management to develop the Knowledge,Skills and Attitudes of its people through a variety of Training interventionsspecifically aimed at an individual's need with a specific thrust on enhancing functional/ domain knowledge across disciplines.
Four year wage agreement with the bargainable employees is over and the new agreementis under negotiation. The IR situation continues to be peaceful.
Employee . Management relations remained cordial through 2012.13, As on 31st March,2013 the number of people employed by the Company was 227.
G. Opportunities and Threats
Eastern India experience growth in leisure and entertainment business in recentyears.
Gradual shift of center of gravity of the city to Salt Lake due to developmentof large townships, Govt, offices and Information Technology industry in and around thisplace.
Opportunity for expansion through Joint Venture in other parts of India andabroad.
Large export potential for Company's international standard quality products atcompetitive prices.
The Company's products and high quality services receive wide acceptance in India andabroad due to International Standards Organisation (ISO) certifications obtained by theCompany.
"Brand equity" of the Company is perceivably high.
Development of similar large parks in the city.
Increase in operational cost due to change in Statutory Govt, policies includingrates, taxes, etc. Park business is seasonal.
Dependency of Project Division's performance on order availability, which may behighly cyclic.
Alternative indoor entertainment options like Multiplexes, Malls etc.
H. Financial And Operational Performance
Your Company is a trendsetter in the amusement parks industry in India with many firstsattached to its name and is a profit.making organization in this sector.Incorporated in 1989, it is the only listed company in the StockExchange in the country's amusement park industry. Your Company also has thedistinction of showing profits since inception and paying dividends continuously fornineteen years.
With aggressive marketing schemes, good number of booking for events and with anemphasis on increasing F&B sales, barring any unforeseen circumstances, your Companylooks to the future with confidence.
J. Cautionary Statement
Statements in the Management Discussion and Analysis Report in regard toprojections, estimates and expectations have been made in good faith. Many unforeseenfactors may come into play and affect the actual results, which could be different fromwhat the Directors envisage in terms of future performance and outlook. Industryinformation contained in this Report, have been based on information gathered from variouspublished and unpublished reports and their accuracy, reliability and completeness cannotbe assured.