Wonderla Holidays Ltd Management Discussions

Annexure-II

Global economy

In CY 2023, the global economy showcased remarkable resilience, growing by 2.7% which was just slightly above the 2.5% threshold and is often associated with a global recession. This growth prevented a slight outright contraction and several major economies like the US, China and India registered solid economic performance.

However, this growth was primarily driven by private consumption, surpassing income growth. This suggested that it was largely fuelled by debt accumulation. At the same time, private investment remained dismal in 2023 and is expected to be even worse in 2024.

Meanwhile, pressing challenges like climate change, rising inequality and lack of development progress are growing more severe but lack coordinated solutions. Carbon emissions continue rising, workers share of income is shrinking in both developed and developing countries and years of underinvestment are hindering sustainable development efforts, especially in developing nations facing fiscal constraints and mounting debt burdens. However, the anticipated easing of monetary policy could provide some relief on debt servicing costs.

World output growth add (%)

	2022	2023	2024
World	3.0	2.7	2.6
US	1.9	2.5	2.0
China	3.0	5.2	4.9
India	6.7	6.7	6.5
Europe	2.9	0.9	1.5

Outlook

The global economy is projected to grow by 2.6% in 2024, marking the third consecutive year of declining growth compared to the pre-pandemic period. Meanwhile, the shortage of productive investment remains worrisome. While some easing of monetary policy may provide modest relief, bolder policies focused on boosting public and private investment in sustainable development priorities like renewable energy, infrastructure and reducing inequalities will be critical to accelerating progress on major global challenges. Safeguarding policy space for strategic public investment will be vital for the global economy to make substantive advances.

Indian economy

The Indian economy has witnessed remarkable growth as it established itself as the worlds fastest-growing major economy. The country recorded an impressive growth rate of above 8.2%. This expansion was driven by strong infrastructure development, a thriving services sector and innovative welfare programmes.

The government has paved the way for a unified national market by prioritising the expansion of physical and digital infrastructure. With 149 airports, which is double the number from a decade ago and the addition of 10,000 km of roads and 15 GW of solar energy capacity annually, India is increasing its connectivity and embracing renewable energy. Moreover, India has made efforts to build intangible infrastructure, such as digital payment systems, modern capital markets, banks and a unified digital tax system, enabling businesses to capitalise on economies of scale.

Additionally, the government has also announced further reforms in one of the budgets, including a reduction in corporate tax rates from 30% to 22%, the establishment of new railway and port corridors and a focus on developing tourism infrastructure on islands like Lakshadweep to boost employment opportunities. The budget also highlighted governments efforts to attract foreign direct investment (FDI) in the tourism sector.

Indias services sector, particularly in information technology and related domains, has emerged as a global powerhouse. Indian IT firms have established "global capability centres" that offer multinational corporations a wide range of services, including research and development, legal and accounting services. This sector has been a driving force behind the countrys economic growth and position as a services export hub.

Despite its technological advancements, India remains a semi-rural society, prompting the government to implement a novel welfare system. This system involves providing digital transfer payments to hundreds of millions of underprivileged citizens. Notably, the share of the population living on less than $2.15 per day (a global measure of poverty) has fallen from 12% in 2011 to below 5% in 2017, reflecting the impact of these initiatives.

Outlook

For FY24, the countrys GDP growth forecast is above 8%, driven by robust public and private investment as well as a strong services sector performance. This growth momentum is expected to remain consistent into fiscal year 2025, with a projected growth rate of 8.2%, buoyed by improved goods exports, increased manufacturing productivity and a rebound in agricultural output.

However, various unanticipated global shocks, such as supply chain disruptions or weather-related events affecting agriculture, could pose risks to the economic outlook.

Nonetheless, the governments focus on fiscal consolidation, coupled with an enabling business environment and efforts to boost manufacturing competitiveness, is expected to support Indias growth trajectory in the coming years.

Industry overview

Global amusement park industry

The market size for the global amusement park industry has experienced exceptional growth. It was valued at USD 48.8 billion in 2019. The open-air leisure and entertainment areas, focused on fictional characters and themes, cater to people of all ages.

They offer a diverse range of experiences, including mechanical rides, water parks, theme parks, arcades, casinos, hotels, resorts and refreshment areas. Amusement parks have also evolved to provide immersive cinematic experiences with high-definition light and sound performances, as well as theatrical productions appealing to both adults and children. Some of the major industry drivers include rapid urbanisation and the accompanying growth in the travel and tourism sector. The availability of cutting-edge rides, accommodations and licensed merchandise within these parks have further accelerated their expansion. Visitors are drawn to amusement parks by the accommodations, merchandise and innovative rides, catering to individuals of all ages. The industry is also expected to grow due to an increase in the number of tourists, especially children and parents, as these parks are based on fictional characters, allowing young visitors to interact with costumed characters from popular films.

A significant portion of the parks visitors comprise of generation Z and millennials. They are driving the industry to adopt clean energy sources, reduce waste and offer vegan food alternatives.

Parks are also responding to these demands by implementing solar power, reducing plastic waste and introducing plant-based food options. The overall efficiency and amusement park operations are enhanced by the use of technology such as internet of Things (IoT) and blockchain.

Outlook

The global amusement park market is poised for substantial growth, projected to reach USD 79.26 billion by 2031, expanding at a CAGR of 4.97%. The Asia-Pacific region is expected to hold a significant market share due to the presence of major players and increasing consumer interest in the region.

While the industry faces challenges such as labour shortages and safety concerns, the adoption of innovative technologies and the rising demand for unique experiences present significant opportunities for growth. The amusement park industry is well-positioned to capitalise on these trends and continue providing unforgettable experiences to visitors worldwide.

Tourism and mobility

The economic growth and prosperity of the nation is primarily driven by many factors. The tourism and hospitality sector is one such factor, serving as a fundamental towards the growth of Indias service industry. This dynamic sector acts as a catalyst for job creation, rapid development, and the stimulation of multi-use infrastructure growth, including world-class hotels, resorts, restaurants, transportation networks, and healthcare facilities.

India possesses a rich tapestry of geographical diversity, including awe-inspiring world heritage sites and niche tourism offerings. From cruise tourism and adventure tourism to medical tourism and eco-tourism, these unique experiences have led to an exponential increase in tourist arrivals, opening up vast employment opportunities across the country. The recent 2023 Union Budget recognised the importance of the tourism sector and placed it in the spotlight. The Ministry of Tourism is on a mission to promote the industry through active participation from all states, the convergence of government programmes and the establishment of impactful public-private partnerships.

The tourism industry is one of the leading employers of women, due to the increasing focus on diversity and gender empowerment. The government collaborates with stakeholders to create a conducive work environment that fosters equal opportunities and celebrates the contributions of female employees. Furthermore, the year 2023 has been designated as the ‘Visit India year, inviting the world to witness the splendour and magnificence that our nation has to offer.

Government initiatives

Almost 50 selected destinations as comprehensive tourism packages have been outlines by the Union Budget 2023 has outlined plans to develop at least 50 selected destinations as comprehensive tourism packages. Additionally, the government also aims to facilitate tourism infrastructure and amenities in border villages through the Vibrant Villages Programme, while also establishing Unity Malls in state capitals or prominent tourist centres.

The Ministry of Tourism is also planning to organise a Global Tourism Investors Summit, in collaboration with central ministries and state/UT governments. This event will showcase investment and trade opportunities, allowing global investors to explore India tourism products and services, fostering further growth and development in the sector.

Growth drivers

One of the primary growth drivers for the tourism industry is infrastructure development. More than half of the Ministry of Tourisms budget is channelised for funding the development of destinations, circuits, mega projects and rural tourism infrastructure projects, laying the foundation for a robust and attractive tourism ecosystem.

The Companys hotel and accommodation sector is another significant growth driver. Its revenue is projected to reach $7.66 billion in 2023 and a CAGR of 8.29% between 2023 and 2027. This segment provides investors and entrepreneurs with opportunities, having the potential to cater to 61.3 million customers by 2027 Indias unique geographical diversity and rich natural heritage offer untapped potential for niche tourism segments like adventure tourism, eco-tourism and medical tourism. With 70% of the Himalayas, a 7,000+ km coastline, vast forest cover and world-class healthcare facilities combined with traditional healing practices, these segments are poised for substantial growth in the coming years.

Company overview

Wonderla Holidays Ltd. is a popularly known amusement park operator in India. It offers a unique blend of thrilling rides, immersive experiences and family-friendly entertainment. With strategically located parks in Kochi, Bengaluru and Hyderabad, Wonderla has created a niche for itself as a premier destination for visitors seeking unforgettable memories. Since its inception in 2000, Wonderla has consistently prioritised innovation, safety and customer satisfaction. This has earned it a reputation as one of the most visited amusement parks in the country. The Companys vision is to bring people closer together through the creation of awe-inspiring amusement spaces that deliver fun, thrilling and hygienic experiences.

Wonderlas success can be attributed to its highly skilled management team, dedicated workforce and a deep understanding of the industrys dynamics. The Company has constantly introduced new attractions, utilising its in-house ride designing and manufacturing capabilities, ensuring that visitors are treated to novel and exciting experiences with each visit.

The Wonderla advantage

Industry pioneers with unrivalled brand recognition

With over two decades of experience in the amusement park industry, Wonderla Holidays Ltd. has cultivated deep operational expertise. The Companys proficiency spans across every aspect of park management, from designing the rides and construction to maintenance and customer service. The companys ability to consistently deliver remarkable experiences has earned it a stellar reputation, with over 40 million visitors having graced its parks since 2000. The Companys brand equity is further solidified by its strong customer ratings, numerous accolades and a 93% occupancy rate during peak seasons, a testament to its operational prowess and brand recognition.

Expansive facilities and untapped growth potential

Wonderlas extensive infrastructure is spread across huge areas of land. The Kochi park spans 94.26 acres, while the Bengaluru and Hyderabad parks cover 81.75 acres and 51.70 acres, respectively.

However, with lots of under-developed land available within these parks, the Companys growth potential goes beyond its current footprint. For instance, the Bengaluru park still has approximately 30 acres of unutilised land, providing a significant opportunity for future expansion and the addition of new attractions. Similarly, the Hyderabad Park has 20 acres of undeveloped land, creating room for potential development and meeting the growing demand of the region.

New parks on the horizon

Wonderlas commitment to growth is reflected in its strong pipeline of new park developments. The Company is actively constructing two new parks, one in Bhubaneswar, Odisha and another in Chennai, Tamil Nadu. The Bhubaneswar Park is expected to commence operations by the end of first Quarter of FY25 spanning over 50.63 acres and featuring an impressive array of rides and attractions. Meanwhile, the Chennai Park, which recently received a 10-year local body tax exemption, is in the preliminary construction phase and is slated to open in last quarter of FY26. Additionally, Wonderla has signed a Memorandum of Understanding (MoU) with the Gujarat government during the Vibrant Gujarat Summit, indicating its intention to establish a presence in the state.

Prioritising pristine environments

The Company prioritises the maintenance of cleanliness and hygiene standards across all its parks and other infrastructures. Wonderla employs a dedicated team of over 500 professionals, responsible for ensuring meticulous cleaning and sanitisation protocols.

Wonderla invests heavily in state-of-the-art cleaning equipment and technology, allocating approximately 5% of its annual revenue towards maintaining stringent hygiene measures. Furthermore, the Company also conducts regular audits and implements strong quality control measures to ensure compliance with industry best practices. These efforts have earned the Company numerous accolades, including the "Best Civic Management of Tourism Destination" award from the Department of Tourism, Government of Telangana.

Debt-Free Pathway to Growth

The Company has successfully maintained a low-debt profile for a long time. This reflects its prudent financial management strategies. During the fiscal year 2024, the Company had a negligible debt of Rs. 3.11 million, representing zero percentage of its total assets.

The debt-free position has proven to be the foundation of Wonderlas approach. This enabled the Company to allocate its resources more effectively towards growth initiatives and strategic investments. Additionally, the Companys strong cash flow generation, along with cash from operations of Rs. 1,776.85 million in fiscal year 2024, further reinforces its financial stability and capacity for self-funded expansion.

Asset-light model

Wonderlas model is asset-light and it leverages its in-house ride designing and manufacturing capabilities to optimise costs and increase its operational efficiency. This approach has also allowed the Company to customise and modify purchased rides, customising them to meet the unique preferences of its visitors while minimising capital expenditures.

In the fiscal year 2024, Wonderlas capital expenditure (sustaining and new Parks) was a modest Rs. 2,233.82 million which is a fraction of its overall revenue of Rs. 5,060.25 million. By adopting the asset-light strategy, the Company can allocate resources more effectively, maintain a lean operational structure and swiftly respond to the changing market dynamics.

Embracing the digital future

Wonderla has been devising a digital transformation strategy, recognising the importance of digital platforms and social media in todays rapidly evolving landscape, The Company has also invested significantly in revamping its website enhancing their user-friendly interfaces and adding features such as online ticket booking, virtual park tours and personalised recommendations. Additionally, the Company has also strengthened its social media presence, engaging with over 1.5 million followers across various platforms. These efforts have increased both brand visibility and also facilitated real-time customer interactions and feedback, enabling the Company to customise its offerings more effectively.

Redefining the Visitor Journey

Wonderlas main goal is to deliver the best and enhance the overall customer experience. The Company constantly seeks to elevate visitor satisfaction by introducing new rides and attractions based on thorough research and customer preferences.

Operational overview

For over two decades, Wonderla Holidays Ltd. has honed its operational expertise establishing itself as a leading amusement park operator in India. Three of the Companys parks are strategically located in Kochi, Bengaluru and Hyderabad, that collectively feature an impressive array of 164 thrilling rides, 15 restaurants, 10 banquet halls, 3 food courts and 1 lounge bar. The world class facilities provided by the Company, caters to a diverse range of visitors, attracting over 40 million guests since the inception of the first park in 2000. The operational prowess of the Company is further exemplified by its in-house ride designing and manufacturing capabilities. The Companys unique competency allows it to customise and modify purchased rides, ensuring a fresh and captivating experience for visitors while optimising costs and enhancing maintenance efficiency.

Marketing and events

Wonderla has constantly devised and implemented innovative marketing strategies to improve visitor engagement and drive footfall across its parks. The Companys creative and festival-based campaigns have been useful in captivating audiences and generating a sense of excitement around its offerings. In FY24, Wonderla hosted several marquee events, including the Sunburn music festival at the Kochi Park, a New Years celebration at the Hyderabad park as well as a live concert featuring singer Vijay Anthony at the Bengaluru park.

Apart from large-scale events, Wonderla has also proved its excellence in creating immersive and themed experiences for its visitors. Throughout the year , the parks were adorned with special festive decorations. Themed food and product offerings were also introduced to improve the overall visitor experience. These efforts have attracted new visitors, and has also fostered loyalty among existing patrons, contributing to the impressive footfall of Rs. 32.52 lakhs across all parks during the fiscal year 2024.

Furthermore, Wonderla has also embraced digital platforms and social media as potent marketing tools, engaging with over 1.5 million followers across various channels. The companys revamped website featuring user-friendly interfaces and capabilities such as online ticket booking and virtual park tours, have further enhanced customer engagement and facilitated real-time interactions.

Cost leadership

Wonderla Holidays Ltd. has successfully delivered value to its customers while also maintaining its profitability by putting a strong focus on cost optimisation. The companys asset-light model, which utilises its in-house ride designing and manufacturing capabilities, has been a key driver towards cost efficiencies. Furthermore, Wonderlas prudent financial management strategies have played a vital role in maintaining a low-cost structure. The Companys negligible debt of Rs. 3.11 million of fiscal year 2024, has effectively eliminated the burden of interest expenses. This has allowed for a more efficient resource allocation. The fiscal discipline, combined with rising cash flow has positioned Wonderla to self-fund its growth initiatives and strategic investments, further reinforcing its cost leadership position within the industry.

Financial overview

Wonderla Holidays Ltd has showcased exceptional financial discipline and profitability, supported by its strategic approach to operations and resource allocation. During the fiscal year 2024, the Company reported impressive revenue of Rs. 506 crores, representing a 11.8% year-over-year increase. This strong top-line performance translated into an EBITDA of Rs. 250 crores, with an EBITDA margin of 49.4%, reflecting Wonderlas operational efficiency and cost control measures. Wonderla Holidays Ltd. has consistently delivered impressive earnings per share (EPS) growth. This reflects on its ability to generate a sustained profitability and shareholder value. In the fiscal year 2024, the Company reported an EPS of H27.93, representing a remarkable 6.00% year-over-year increase. This strong EPS growth can be attributed to the Companys focus on operational excellence, cost optimisation and strategic investments in enhancing visitor experiences across all its parks.

The Company has a revenue generation driven by a well-diversified portfolio of offerings, including ticket sales, food and beverage operations and ancillary services. During FY24, the Company recorded an Average Revenue Per User (ARPU) of H 1,430 across its parks, a 15.1% year-over-year increase. Wonderlas ability to utilise its brand equity and deliver enhanced value to its customers can be seen in its ARPU growth. This has been made possible through innovative product offerings and exceptional service quality.

Apart from its core amusement park operations, Wonderla has also diversified its revenue streams by venturing into the hospitality sector. The Company also operates a three-star rated leisure resort adjacent to its Bengaluru Park, featuring 84 luxury rooms. This resort not only adds to Wonderlas existing offerings but it also provides an additional revenue stream, contributing to the Companys overall financial performance.

Risk and concerns

The amusement industry, while all about fun and thrills, does face some significant risks and concerns. Here are some of the major ones:

• Safety: This is obviously a top concern. Ride malfunctions, improper operation by staff, or even guest recklessness can lead to injuries, sometimes even fatal ones.

• Security: Large crowds and open areas can make amusement parks vulnerable to crime or violence.

• Guest health: Amusement parks can be strenuous, especially in hot weather. This can lead to heat stroke, dehydration, or even heart problems for some guests.

• Liability: Even with precautions, accidents can happen. The amusement park could be held liable for any injuries or damages sustained by guests.

• Changing preferences: Keeping guests entertained and interested requires innovation and keeping up with trends. Parks that dont adapt risk becoming outdated.

Safety

The risk on safety is being managed by the following acts:

• A robust safety-audit mechanism is in place to verify compliance on internal standards and statutory requirements.

• Staff is trained on fire and all other emergency procedures. Attendants with 2-way radios are present in the parks.

• Fire detecting and firefighting equipment are installed, checked and maintained as per state legislative requirements.

• All rides carry a daily maintenance check by qualified maintenance staff.

• First aid services are available and staff is trained to offer first aid assistance if required.

Security

• Detailed security protocols are followed before individual have access to parks.

• Regular infrastructure reviews to reduce opportunity for physical threats to guests and staff.

• CCTV surveillance.

• Deployment of security personnel at critical areas.

• Appropriate insurance cover for guests, staff and assets.

Insurance

Public liability insurance is in place to cover liabilities that may arise from accidents and injuries to guests.

New rides and innovative marketing initiatives

To make the amusement activity fun filled, the Company invests on new rides. The Company has shifted its focus from traditional marketing to digital marketing wherein campaigns are run to attract the cohorts.

Information technology

The Company invests in a digital reinvention platform to enhance efficiency and accuracy across all its operations. The Company is automating numerous business processes to streamline its workflows and utilises the benefits of technology. A comprehensive framework has also been developed to capitalise on the opportunities presented by cutting-edge digital technology, enabling Wonderla to transform into a digitally savvy organisation.

In order to deliver a superior and seamless experience to its customers, Wonderla has made several innovative technologies and platforms as a part of its digital transformation plan. These initiatives aim to provide its customers with a more integrated and engaging experience, utilising the power of digital solutions to improve their overall journey within the companys amusement parks.

Internal controls

Maintaining robust internal controls is a top priority for Wonderla Holidays Limited. To ensure optimal and effective operations, the Company has engaged an external agency to conduct an impartial examination of its internal control mechanisms. This comprehensive review serves to safeguard and protect the organisations assets from unauthorised use or loss. Additionally, it verifies the authenticity of all transactions and ensures that proper accounting records are maintained in accordance with applicable standards.

Wonderla has also implemented a comprehensive system to ensure strict compliance with relevant laws and regulations governing its operations. The companys Audit Committee and Board of Directors undertake regular performance reviews to assess adherence to corporate policies and the achievement of established goals. Complementing these oversight measures, Wonderlas internal auditors play a pivotal role in guiding risk management policies and processes throughout the organisation.

The internal audit team is responsible for raising awareness of potential risks, developing robust reporting and monitoring procedures, and formulating strategies to keep the companys risk management framework up-to-date and effective. Through their diligent efforts, Wonderlas internal auditors contribute to the organisations overall risk mitigation efforts, ensuring a proactive approach to identifying and addressing potential vulnerabilities.

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.