Imagicaaworld Entertainment Ltd Management Discussions

AN OVERVIEW OF THE INDUSTRY The Global Parks Industry

The global amusement parks industry is expected to grow from $54.9 billion in 2022 to $82.4 billion in 2030 at a compound annual growth rate (CAGR) of 5.2%. Calendar Year 2022 has been a year of recovery from the pandemic and the companies have been rearranging their processes to better manage their operations, keeping in mind relaxation on COVID containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges.

Globally, parks started reopening in 2022 and as the international travel opened, the amusement park industry saw pent-up demand leading increased footfalls. The industry has recovered strongly even on the back slow down in global economic growth. Top players have already reached their pre-COVID footfall levels this year.

The Indian Parks Industry

The beginning of 21^st century saw the evolution of many parks like Appu Ghar in 1984 to Esselworld to Nicco Park and many more in small to big cities, depending on the class of the city, investment and many other factors. During last 20 years more than 150 parks have opened but the market continues to remain fragmented as only 15-20 parks are notable in terms of scale & size. According to Indian Brand Equity Foundation, the Indian amusement and theme park industry continues to be ~1% of the global amusement park industry, but expect this market to grow at 10% CAGR till 2027. However, the industry landscape is evolving with the increase in per capita income, favorable demographics, shift in spending pattern on more experience based entertainments, infrastructure developments and increasing focus of government to promote domestic tourism hubs.

Revenue Mix

In India, the revenue from parks is still highly dominated by admission tickets forming about 77% of the total revenues. Internationally, admission tickets revenues account for about 35% of the total revenue. The share of F&B, retailing and merchandise sales is low in India. However, this mix is changing and the revenue mix is expected to be aligned to international trend.

(Source: Alphastreet India)

COMPANY AND BUSINESS OVERVIEW

Imagicaaworld Entertainment Limited ("Imagicaa"/"the

Company") has now successfully created Indias First & Only

International Standard Entertainment Holiday Destination

"IMAGICAA", which includes a Theme Park, a Water Park, a

Snow Park & a Luxury Hotel - Novotel Imagicaa Khopoli.

Below are some of the achievements at Imagicaa:

• Guinness World Record - 2022 - Most number of people unboxing simultaneously

• Trip Advisors Travellers Choice Award - 2020

• FICCI Travel & Tourism Excellence Award - 2019

• VFS Global Times Travel Awards 2019 - Winner - Adventure Attraction Sector

• IAAPI National Awards For Excellence 2018-2019 - 5 awards

• Indias Retail Champions Award 2019 - Winner - Entertainment Category

• ET Business Icons February 2019 - Winner - Preferred Themed Entertainment Destination

• Guinness World Records - February 2019 - Most number of faces (258) washed by P & G at Imagicaa

• LIMCA BOOK OF RECORDS - Largest collection and distribution of Toys Drive (2018)

• HICSA Awards 2016 - Best New Hotel of the Year - Novotel Imagicaa Khopoli

• Indias Most Attractive Brands - Entertainment Category - Rank 1 (2015)

• Indias Most Trusted Brands 2015 - Theme Park category

• TripAdvisors Travellers Choice Awards 2015

• OTM Award for Excellence - Most Promising New Destination Award (2015)

Imagicaa - The destination

Imagicaa is a magical & fun-filled world of its own, offering entertainment, fun, relaxation, dining, shopping and accommodation at a single location. Offering a world class Theme Park, international standard Water Park, Indias largest Snow Park, & first theme park hotel - the luxurious Novotel Imagicaa, Imagicaa is Indias favourite family holiday

Business Review

destination. The Company to add novelty factor and repetitive footfalls has added House of Stars museum which will showcase interactive life-size figurines of leading Bollywood personalities; also added Eyelusion, which is based on illusion of the still picture and making customer as part to enjoy it.

Imagicaa is located off the Mumbai- Pune expressway at Khopoli; approximately a 90 minute drive from Mumbai & Pune. Due to its proximity, Imagicaa is easily reachable from anywhere in India via air, rail or road. Imagicaa also offers bus and car packages with pick up options from Mumbai and Pune. Spread over 130 acres, this all weather family entertainment destination provides interesting experiences to all its guests, 365 days a year.

The outstanding bank loan as on March 31, 2023 is 1,969.88 Lakhs.

The weighted average rate of interest is 4.59% p.a.

Since April 2013, more than 11 million people have visited the parks. While these numbers and guest feedbacks give us a good idea of their expectation and appreciation of the product, we have a long way to go in making this project every Indians must-visit holiday destination.

Segment Performance

Novotel Imagicaa Khopoli comprises of 287 rooms, which is the highest room inventory of a hotel near Greater Mumbai. The hotel has been consistently receiving excellent reviews and feedbacks. The ARR (including Room, F&B and Others) of the hotel was over 10,645/- for FY 2022-23. Novotel Imagicaa in a short period of operations has been able to firmly establish its niche in the leisure and social segments and has firmly established Imagicaas position as complete family holiday destination.

The total revenue of the Company increased by 248% YoY*, driven by growth in business as the industry start rebounding post COVID. Both footfall and revenue have jumped this year after nearly two years of lockdown. Ticketing revenue increased by 288% YoY* and non-ticketing by 270% YoY*, while Hotel revenue increased by 118% YoY*.

*It may be noted that FY 2021-22 was a Covid impacted year and the parks were not in complete operations due to lockdown, resulting in a lower base.

KEY STRENGTHS OF THE COMPANY

The Companys primary competitive strengths are set out below:

• The Company is uniquely positioned to capitalise on the increasing propensity of Indians to spend on entertainment

Favourable macroeconomic and demographic factors such as economic growth, rising disposable income, a growing young population, an expanding middle class and rapid urbanisation have resulted in the Indian population spending more on entertainment. With the rise in education levels and exposure to international trends, Indian consumers are willing to pay a premium for quality entertainment.

Imagicaa is the only One Stop Entertainment Destination in India, designed to provide a wholesome and value for

money entertainment option for guests. The Company offers entertainment options for all age groups through a variety of rides and attractions, which the Company believes are comparable to and provide the international standards of experience that leading theme parks and water parks offer globally. Companys offerings are also customised to Indian tastes. This positions Imagicaa to capitalise on the increasing number of Indian customers spending on good quality entertainment.

• The Company is strategically located in an attractive catchment area

Imagicaa is located off the Mumbai - Pune expressway. Currently, it attracts guests from Mumbai, Pune and the rest of Maharashtra and Gujarat, which are some of the more economically developed areas in India. Mumbai is well connected to other large cities in India by air, road and rail with multiple flight options in a day. Further, Imagicaa is located in a region that experiences suitable weather throughout the year for spending a day outdoors. In addition, the majority of the rides, attractions and queuing areas in the parks are covered to avoid any inconvenience during the monsoon season.

• Rides and Attractions of International Quality Standards which are customised to Indian tastes and preferences

Imagicaa is attractively themed and aims to deliver high- quality entertainment, aesthetic appeal, shopping and dining options.

The Parks have been designed by internationally acclaimed design consultants. The rides and attractions for the theme park have been designed by and sourced from global industry leaders such as Bolliger & Mabillard Inc., Zamperla Asia Pacific Inc., Sally Industries Inc., E2M Technologies B.V. and Santec Fabricators (India) Private Limited, which is a part of the Sanderson Group. The water slides and equipment in the water park have been sourced from global industry leaders such as Whitewater West Industries Limited, Neptune Benson (Defender Water Filtration Systems) and Polin Dis Tic. Ltd. Sti. The Company also follows high levels of park security and safety standards to offer a safe and injury free environment for its guests to enjoy the parks.

• Competitive advantage through entry barriers

The Company has the opportunity to leverage the first-mover advantage through Imagicaa. There are significant barriers to entry in the business of theme and water parks in India and it is difficult to replicate a project of similar scale and size in India. Among the most important of these barriers is the need for significant capital expenditure to set up theme and water parks, the difficulty to identify and purchase large and suitable parcels of land on commercially viable terms and the long lead-time from the conceptualisation to the launch of rides and attractions. The Company believes that its location off the Mumbai - Pune Expressway, the large parcel of land owned by the Company, the rides and attractions of international quality and standards and the qualified management and operations team provide the Company with a significant competitive advantage over any new park.

• A well-positioned brand and marketing focus

In the short operational history, the Company has been able to establish brand recognition in Mumbai, Pune and the rest of Maharashtra and Gujarat markets. The Company believes that it has been able to achieve this through a combination of factors:

- Delivering superior visitor experiences in the parks through the diverse offerings of rides and attractions and other entertainment options and

thus, developing a brand recall through word of mouth publicity;

- The Company has also actively focused on attracting school groups as the Company believes that school children who visit the parks act as the Companys brand ambassadors and have the potential of bringing the entire family back on another visit;

- Dynamic and attractive pricing strategy to coincide with various events, festivals, seasons and holidays throughout the year;

- Existing well-established position of the Imagicaa brand in the media and entertainment industry; and

- Engaging with various target groups through focused marketing, consisting of regular electronic, print and digital media campaigns and direct sales efforts.

- New Promoters supported by proven and experienced management team

- Malpani Group is well diversified business house active in Renewable energy, FMCG products, Amusement and Water Park, Real estate, Education etc. In the Parks business, the group has experience of more than 18 years in park operations as well as new project development.

- Companys senior management team includes experienced media and entertainment, marketing and consumer businesses executives, with an average tenure of more than 15 years in such industries.

FINANCIAL RATIOS

The Debtor turnover ratio stood at 63.11 times the average debtors in FY23 from 21.5 times in FY22, this was due to increase in the revenue for FY23. The Inventory turnover ratio increased to 11.8 times the average inventory in FY23, compared to 3.9 times the average inventory in FY22. The Interest Coverage ratio for FY23 was 1.62 times, this was at 0.02 times in FY22. This ratio has improved as the EBITDA improved. The current ratio of the Company improved to 0.16 in FY23 from 0.02 in FY22.

The Operating Profit Margin of the Company has improved from -386% in FY22 to 54% in FY23 due to improvement in revenue during the year, while the Net Profit Margin has improved from -350% in FY22 to 107% in FY23, mainly due to extraordinary items during the year on account of the debt resolution with the lenders. The Debt Equity ratio improved to 3.42 times.

Return on Net Worth was 152% in FY 23 due to the increase in the equity base from issue of fresh equity to the new promoters as part of the resolution plan and increase in profits from one-time write-off of debt and interest and reversal of impairment of fixed assets which was originally done in FY20 based upon valuation report available at that juncture.

OUTLOOK AND OPPORTUNITIES

Post COVID, the demand for experiential outdoor entertainment has been on the rise and nearing the previous levels achieved. Footfall of all major parks have reached pre-pandemic levels. Demand for theme and water parks is expected to increase in India over the next few years driven by increasing disposable income, favorable demographics, changing consumer preferences, growing affinity towards experiences, and a dearth of limited outdoor entertainment activities in cities. The state governments in the country are starting to realize the potential of amusement parks and are working with industry to implement conducive policies. The industry constantly needs to innovate and introduce fresh themes, experiences, as well as focus on stronger marketing strategies to draw larger audience.

Medium & Long Term Business Strategies

The Company is adopting the following business strategies to grow the business in the future:

• Expand in newer geographies

The company plans to expand its reach and leverage its brand to newer geographies. In line with this philosophy, the Company has already ventured to a new state - Gujarat. This year, we have started operations of Aquamagicaa, Water Park, in the city of Surat. Gujarat is a thriving market for water/amusement parks and there is strong brand affinity of Imagicaa/Aquamagicaa from audiences across the state.

• Develop Imagicaa, Khopoli, as an Integrated Holiday Destination

Currently, a significant majority of the guests are residents of the catchment area i.e. Mumbai, Pune, rest of Maharashtra and Gujarat who make day-trips to the theme park off the Mumbai - Pune Expressway. With the launch of the hotel Novotel Imagicaa, the Company

intends to market Imagicaa as a multiple day holiday destination and attract guests for a longer stay. The Company intends to offer various cost promotion and combination packages of admission tickets to its parks and stay at the hotel to take advantage of cross selling opportunities. In addition, the Company aims to market its facilities as a suitable venue for hosting wedding receptions, parties, conferences and meetings and other corporate events.

• Continue to focus on increasing the number of guests hosted at the parks

The Company plans to increase attendance at the parks through the following strategies:

- Increasing awareness of the parks, and Imagicaa brand through effective media and marketing campaigns, aimed at various target groups including families, young kids, college students and young professionals. The Company will also continue to reach out to a greater number of schools and corporates for increasing attendance at its parks;

- Offering a variety of ticket options and disciplined pricing and promotional strategies to coincide with events and holidays throughout the year. The Company also aims to follow a dynamic pricing model which will enable us to adjust admission prices for the parks based on expected demand and attract diverse segments of customer base;

- Adding new options especially for evening entertainment. The Company is adding a fountain show in the Theme Park lagoon area. Once launched fully, this will prompt repeat visitation, increase dwell time for park visitors thus potentially adding retail / F&B revenues and create an anchor for evening entertainment or events in the park.

- By periodically introducing new attractions especially in the Water Park, differentiating experiences and enhancing service offerings, the Company believes that word of mouth is the most important marketing tool for our product and, therefore, the Companys primary business objective is to make the time spent by the guests in its parks as enjoyable as possible. The Company specifically focuses on entrance and security procedures, queue management, cleanliness, quick availability of F&B products and retail merchandise to make the guests experiences as comfortable and entertaining as possible; and

• Focusing on sales and marketing initiatives in the secondary catchment areas, such as the print campaign from time to time in major cities like Delhi NCR, Bangalore, Hyderabad and Jaipur, to attract tourists visiting the Mumbai - Pune region.

• Diversify our Revenue Streams

Sale of admission tickets comprises a significant portion of the Companys total income and going forward the Company intends to increase its non-ticketing revenue through the following strategies:

- Focus on F&B and retail & merchandise operations by targeting the per capita spending of guests. The Company believes that by providing guests additional and enhanced offerings at various price points, the Company can increase spending in its parks. The Company will continue to innovate in its F&B offerings to cater to the diverse preferences of its guests.

- Monetise the crowd movement in the parks by offering sponsorship opportunities to advertisers for special events, naming rights for the rides and attractions, partnering in destination advertising and assisting in products and brand activations;

- With the hotel, the Company intends to position Imagicaa as a destination for varying customer requirements, including for entertainment, corporate meetings and off-sites and other social events;

- The Company aims to develop an emotional connect with the guests through its brands and characters developed by the Company, which will provide the opportunities to leverage the intellectual property portfolio, and to develop new media and entertainment options and to increase the sale of consumer products, in and outside Imagicaa.

• Increase profitability and achieve cost optimisation

The Company believes that increased attendance at its parks and an increase in the per capita spending will allow the Company to make its business more profitable because of the relatively fixed cost-base and the high operative leverage involved in the business. The Company will continue to focus on F&B and retail and merchandise spending to improve its operating margins. The Company shall continue to offer more dynamic pricing to account for seasonal fluctuations in attendance. The Company

also aims to achieve better cost optimisation through economies of scale by measures such as company-wide and centralised procurement and sourcing strategy and integrated marketing campaigns. In addition, the Company aims to benefit from shared services such as security, ticketing, F&B and general administration of the parks. As an environment friendly measure and a cost saving initiative as well, the Company is setting up a captive solar power plan. This is expected to result in substantial savings in the power costs.

PARK SECURITY AND SAFETY

The Company was awarded with an ISO certificate for Integrated Management Systems by Bureau of Indian Standards (BIS) for Imagicaa Theme Park. Following is the list of ISO certifications awarded:

• Quality Management System- IS/ISO 9001:2008

• Environmental Management System-IS /ISO 14001:2004

• Occupational Health and Safety Management system - IS 18001:2007

The Company recognises park security and safety as one of its most important focus areas in ensuring the success of the parks. The park security and safety plan is based on three principles: being proactive, the utilisation of an optimum combination of technology and, manpower and meeting international standards on security and safety. Some of the key features of the security and safety plan are set out below:

• Security Agency: The Company has engaged one of the leading security solutions providers in India for its security needs and has developed a security plan based on a study of threats and vulnerabilities. The scope of services provided by its security solutions service provider includes the development of, setting up and operating the security infrastructure in the parks, deploying security personnel and carrying out regular training for the employees for security related issues, particularly emergency response situations.

• Identified Perimeters and Zones: Company has divided its parks into various layers with defined internal and external perimeters for effective monitoring and response. The Company has deployed access control measures at the identified entry and exit points to reduce trespassing and monitor crowd movement. The Company has also divided the parks into various zones to facilitate effective emergency response, evacuation and deployment of resources and manpower.

• Command Centre: The Companys command centre has been planned as an integrated set-up, capable of monitoring and controlling the management of the parks and responding to all circumstances which may have an adverse effect on guest experiences. The functions of the command centre include controlling and monitoring all access controls across the parks, including the entry and exit points and for other rides and attractions; coordinate the response to any situation that requires attention; operate the public address system which is designed for effective communication for functions such as crowd management; Companys security infrastructure consists of necessary equipment such as metal detectors, explosive vapour and trace detectors, radio sets, forced entry resistant door system, panic buttons, hooters and retractable barriers, which have been deployed at vantage points across the parks.

• Safety Procedures: The most important aspect of the safety procedures is regular training and assessment of the ride operators and attendants to prevent accidents or injuries resulting from unsafe acts and conditions. In addition to monitoring for any hazard or unsafe condition, the ride operators carry out inspections at predesignated intervals and report any unsafe condition to the maintenance department for correction. A detailed inspection and monitoring procedure is followed for some of the critical rides and attractions, such as the roller-coasters. The Company has also engaged qualified lifeguards, who are on duty during the operating hours of the water park.

• Fire and Medical Emergency Plan: The Company also has a comprehensive fire and medical emergency response plan. The Company has installed smoke and heat detectors in its offices and indoor attractions and water sprinkler and fire hydrant systems and fire extinguishers across the parks. In addition, there is a team of fire-men stationed in the theme park throughout the operational hours. There is a medical centre in the theme park & water park including a five- bed ward, which is staffed by a team of one doctor and eight nurses to respond to any medical emergency in the theme park up to such time that the guests are moved to the nearby hospitals. There are two ambulances which are deployed in the parks throughout the operational hours.

MAINTENANCE

The Companys maintenance team is responsible for the inspection, upkeep, repairs and testing of the rides and attractions. The Company has appointed a safety officer as a member of each of its parks management team to supervise the maintenance and ride operations teams, and carry out regular audits and surprise inspections.

Every ride and attraction at the parks is inspected regularly, according to daily, weekly, monthly, and annual schedules. The Company has formulated detailed maintenance guidelines and checklists for each of its rides and attractions with the objective of ensuring that the rides and attractions are operating within the manufacturers criteria and that maintenance is conducted according to internal standards, industry best practice and standards, as well as the ride designer or manufacturers specifications. The Company has installed a networked enterprise software system which is used to plan and track all the maintenance activities. The maintenance system of some of the rides and attractions is also linked over VPN to the respective vendors to ensure effective monitoring, data sharing and resolution of issues, if any. All ride maintenance personnel are trained to perform their duties according to internal training processes, in addition to recognised industry certification programs for maintenance activities. The Companys infrastructure maintenance function comprises upkeep, repair, preventive maintenance and improvement of the parks infrastructure.

The Company obtains safety certifications from its vendors certifying that the rides and attractions installed at the parks have been designed and manufactured in accordance with international standards such as the American Society for Testing and Materials, or the ASTM standard, the European, or the EN standard or the Deutsches Institut fur Normung e.V., or the DIN standard. The Company has also engaged TUV SUD South Asia Pvt. Ltd., a leading global technical services organisation to carry out inspection, testing and installations certifications for the rides and attractions. The Company also periodically engage the services of third-party maintenance audit agencies to inspect the maintenance procedures.

RISKS

• The business is seasonal in nature, and may be affected by weather conditions, school vacations, public holidays and weekends.

The theme and water park industry is seasonal in nature. The parks could experience volatility in attendance as a result of school vacations, public holidays, weekends and adverse weather conditions such as excessive heat and monsoons. It is believed that attendance at the theme and water park and revenues from F&B and retail and merchandise operations is, and will continue to be, higher during school vacations, public holidays and weekends.

In addition, the water park is expected to generate higher revenues in the summer months. Conversely, the Company may face a reduction in revenues during the monsoon months. Further, unfavourable weather conditions such as forecasts of excessive rainfalls or heat may reduce the attendance at the parks.

• Companys business and results of operations could be adversely affected by changes in public and consumer tastes or a decline in discretionary consumer spending, consumer confidence and general economic conditions.

The success of the parks depends substantially on consumer tastes and preferences that can change in often unpredictable ways. The Company must adapt to these changes to meet consumer tastes and preferences. The Company carries out research and analysis before opening new rides and attractions and often invest substantial time and resources to gauge the extent to which these new rides and attractions will earn consumer acceptance. Further, the success depends to a significant extent on discretionary consumer spending, which is heavily influenced by general economic conditions and the availability of disposable income. Actual or perceived difficult economic conditions and inflationary periods may adversely impact park attendance figures, the frequency with which guests choose to visit the parks and guest spending patterns at the parks. Both attendance and total per capita spending at the parks are key drivers of its revenue and profitability, and reductions in either can adversely affect the business and results of operations.

• Incidents or adverse publicity concerning the parks or the theme or the water park industry generally could harm Companys brands or reputation as well as negatively impact the business.

The Companys brands and reputation are among the most important assets. The ability to attract and retain guests depends, in part, upon the external perceptions of the parks, the quality of the parks and services and performance of the operations team. The operation of the parks involves the risk of accidents, contagious, airborne or waterborne diseases and other incidents that may negatively affect guest satisfaction and the perception of the guests in relation to safety, health and security of the parks, which could negatively impact the brands and reputation and the business and results of operations.

• Impact of Epidemics and Pandemics

The Theme and Amusement park industry has been impacted by the recent pandemic of COVID-19. This is a new risk which has been faced by the industry. The theme park industry operates in a highly crowded environment where physical distancing may be difficult to maintain. The regulators have been targeting this industry for various restrictions, being categorised as a "non-essential" service.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has internal controls commensurate with its size. It has also adopted standard operating procedures, policies and process guidelines. These guidelines are well documented with clearly defined authority limits corresponding with the level of responsibility for each functional area. They are designed to ensure that transactions are conducted and authorised within their framework. Further, the Companys reporting guidelines ensure that transactions are recorded and reported in conformity with generally accepted accounting principles. These guidelines are regularly reviewed and updated to meet the expectations of the current business environment. The Companys Code of Business Conduct lays down ethical standards expected from each of its personnels and business associates in their day today actions. The Companys robust internal audit programme which works to conduct a risk-based audit not only tests the adherence to laid down policies and procedures but also suggests improvements in the current processes and systems. The audit program is agreed upon with the Audit Committee. Internal Audit observations and recommendations are reported to the Audit Committee, which monitors the implementation of such recommendations. The Company had appointed M/s BDO India LLP as the internal auditor during the financial year 2022-23.

SIGNIFICANT DEVELOPMENT IN HUMAN RESOURCES

People are one of the key and critical success factors for the Company. The Theme Park and Amusement Park industry in India is in the nascent stages. As such to find skilled manpower having experience of the industry is challenging. The Company has developed a very strong on-job training and development program, which cuts across the junior team members as well as the middle management layer. The senior technical & engineering team has been trained under supervision of global experts of theme park industry. The Company engaged these experts during the development

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Being located in the outskirts of Mumbai and Pune, the Company needs to ensure that the employees are motivated enough to travel the distance for work. The Company provides employee friendly transport and local stay facilities for the same. Employee satisfaction is a top priority, and the Company ensures that all its employees enjoy a safe, healthy and progressive work environment at all its offices. The Companys Human Resource team works cohesively with the employees to help them in their personal as well as professional development. The Company has a well- defined Code of Conduct that guides all employees in their interaction with the various stakeholders of the Company. The Company has a unique work-culture based on team building and bonding through cross-job training.

As of March 31, 2023, the total number of permanent employees on the rolls of the Company were 552.

CAUTIONARY STATEMENT

This document contains statements about expected future events, financial and operating results of Imagicaaworld Entertainment Limited, which are forward looking. By their nature, forward- looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the Managements Discussion and Analysis section.