Wonderla Holidays Ltd Management Discussions.

Economy Overview

The Year 2019-20 coincided with the end of a decade of remarkable changes and developments which were not even conceivable ideas when the decade began. Our country and the world at large has seen significant progress on many fronts. Indias GDP growth has been among the highest in the world in the past decade - regularly achieving annual growth of between 6-7%. In 2010, Indias GDP was in 9th place, trailing that of countries such as Brazil and Italy. Now, data from the IMF1 shows that India has risen to become the worlds fifth- largest economy when ranked by nominal GDP. In the process, it has leapfrogged France and the UK. As seen below, the size of the Indian economy expanded by more than 50% over the decade.

Some of the noteworthy developments over the last year include:

A jump of 79 positions to 63 in 2019 from 142 in 2014 in World Banks Ease of Doing Business rankings.

Biggest corporation tax reduction in 28 years, the government slashed rates by up to 10 percentage points, effectively 1.4 trillion tax break — in a bid to revive the economy.

However, the economic growth in India decelerated to 4.9% in 2019. The subdued growth was a result of insufficient credit availability and reduced domestic consumption, while also facing some impact of the trade wars between the worlds major economies.

Global economic growth decelerated last year because of continued weakness in global trade and investment. As per the IMF, world GDP stood at 3.4% in 2019 (Jan-Oct). Bilateral negotiations between the US & China were in spotlight throughout the year as the world awaited the outcome with bated breath. Financial market sentiment was tepid for prolonged durations in the last year. Slowing economies led to a weakened global growth rate of 2.4% - the lowest rate of expansion since the global financial crisis. The muted outlook had already

triggered monetary policy easing across major economies. This had an adverse impact on yields, with zero & negative interest rates observed across different markets.

While countries across the world were tackling various issues to get their growth back on track, 2020 began with the onset of a global pandemic following the outbreak of the COVID-19 virus. Facing pandemic is an unprecedented humanitarian challenge for countries across the world. It is inflicting increasingly high human & industrial loss worldwide. A significant portion of the economy is in a de facto shutdown. As per IMF, the global economy is projected to contract sharply by 3% in 2020, much worse than the 2008 - 09 financial crisis. Unlike some countries, India took a proactive measure & implemented a nationwide lockdown to arrest the spread of Covid-19 virus even before a spike in positive cases. As of May 2020, the lockdown has been in place for almost two months.

The Indian government has taken unprecedented and proactive measures to navigate the socio-economic challenges faced by the country during the crisis and has passed enabling resolutions to aid in recovery post the pandemic.

Industry Overview - Global Amusement Park Industry

Amusement park industry has seen a significant improvement over the last few years. It has succeeded in drawing the attention of modern consumers looking to spend on experiences rather than products. In 2019 1.15 billion2 people visited amusement parks worldwide. The market size was $52 billion and growth in 2019 was 7.1%. The trend has sustained with the increasing use of social media. Amusement parks generate a huge amount of revenue with an average of millions of consumers coming in and celebrating the uniqueness of the place. Parents are keener on field trips that can prove to be more beneficial to their childs mental development.

Amusement parks offer an avenue to have an immersive day-long experience, which is captured by them as photos and videos and further shared on social media. Unlike cinema and live music, there is no in-home equivalent to a theme park. People tend to return to the parks in a ritualistic manner as they crave for an irreplaceable experience. This has led to all major parks having a successful loyalty program which encourages, and rewards repeat visitors.

The Amusement Parks industry has experienced strong growth over the years to 2019, driven mainly by an increase in international and domestic visitors, and the rising propensity of consumers to travel and chase new experiences. However, the industry is highly competitive, with five major players (The Walt Disney Company, NBC Universal Media, Cedar Fair, SeaWorld Entertainment and Six Flags Entertainment) dominating the industry. Most of them have used their intellectual property rights in the form of major film franchises, characters and other entertainment to their advantage. Furthermore, the expansion of the economy in the US has enabled consumers to increase spending on amusement park admissions and vacation packages. Amusement parks have also

become savvier at garnering revenue from their guests through sales beyond the cost of admission, including purchases of food, merchandise, games and souvenirs to cherish the memory of their experience, which is also duly shared on social media.

In a world where the daily news can get depressing, people have a desire to escape. Amusement parks meet this demand. As leisure activities, theme parks and amusement parks suffer when the economy slows down. However, since amusement parks are about pure fun, one can expect them to recover fast. The outbreak of COVID-19 and the consequent pandemic brought the industry to a grinding halt with major parks across the world shutting down to aid social distancing and prevent the spread of the virus.

Shanghai Disneyland was the first park to close due to the pandemic. Interestingly, it is also among the first one to open. In the first week of May 2020, advance bookings for the first day were sold out in a few minutes, and for the first week in a matter of hours.

Disney also announced that it will reopen its Orlando park in phases. First phase will see Disney Springs open up on 20th May, 2020 with limited admits, parking & operating hours and extra safety measures implemented for visitor safety.

Similarly, some parks across South East Asian countries like Thailand, Indonesia and Malaysia planned phased reopening over May - June 2020.

In a post-pandemic world, amusement parks will adopt new measures to facilitate social distancing and avoiding dense crowds. Initially, parks will have to operate at reduced capacity (30-50%) with an increased focus on health, safety and sanitation.

Amusement parks fulfil a basic human need for which there is no real substitute. They will continue to provide a unique & irreplaceable form of value. Our desire as humans to roam, play, and experience will never leave us. The industry will adapt to survive, prosper, and continue to deliver value in the future.

Industry Overview - Indian Amusement Park Industry

The very thought of amusement parks brings a smile to our faces and puts forth a picture of unending fun & frolic. It sparks our imagination in a way that takes us right back to our childhoods. The beginning of the 21st century saw many parks and water parks coming up in small, medium and large cities. Today, there are more than 150 amusement parks in India, across metros, Tier I and Tier II cities, and smaller locations. In the last ten years, at least 40 new parks3 with varied investments of 5 to 30 crore have been set up in cities other than the metros.

Amusement parks in India attract over three crore visitors annually and contribute nearly 40% of the total leisure industry turnover, which are the key drivers of growth among the services sector in India. About 30-35% of visitors are from outstation and thus a major source of tourism.

In the financial year 2019-2020, the decrease in discretionary consumer spending and a widespread slowdown had an impact of the footfalls in amusement parks. This was further amplified by the nationwide lockdowns implemented from March 2020 to prevent the spread of COVID-19 virus.

Company Overview - Wonderla Holidays

Wonderla Parks are a destination where WONDERS NEVER CEASE! Our visitors come to our parks to escape the monotony of regular life, to get an immersive experience and make memories to cherish forever. We strive to make their visit a safe and pleasant affair and offer a venue for an all-round joyful revelry. To extend the experience, we also provide our visitors an opportunity to stay at our luxurious & cosy 3-star resort at Bangalore park.

Our strength and expertise in running a complex amusement parks business most optimally have been greatly appreciated across the country. It is also reflected in our successful track record. In this year, our Kochi Park, which was started as Veegland, has completed two decades of operations. Our Bangalore park is completing one and half decade, and our Hyderabad park is now in its fourth year of operations.

Over the decades Wonderla has stood the test of time and emerged stronger from the challenges it has faced. Our inherent strength comes from our people and the values in place. We foster a sense of belonging and togetherness in our team. As a result, our organisation officially certified as a "Great Place To Work". This appreciation has been conferred by the Indian chapter of International "Great Place To Work" Institute. For an organisation to get certified, 70% or more of its employee respondents should rate the organisation as a great workplace and its people practices should be rated 2.5 or more on a 5 point scale by Great Place to Work Institute.

In the last financial year, we settled a long-standing taxation dispute. The company opted to avail Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 announced by the Government of India in Sept. 2019. As per this scheme, the Company will get a relief ranging from 40% to 70% of the disputed service tax demands and a full waiver of interest and penalty thereon.

We value our visitors experience above everything else and strive to provide them with the highest standards of safety, hygiene and most importantly, an exciting thrill at our parks. In our added efforts towards visitor engagement and providing them with increased novelty at our parks, we installed new rides across our three operational parks this year.

Bangalore Park - Wave Rider: A family ride imported from Italy, it has a cabin wherein the riders stand at both sides. Cabin rotates on a pivot giving the riders an experience of surfing through waves. The ride has a capacity of 12 persons at a time with a duration of 2 minutes per ride.

Kochi Park - Fusion Slide: A water tube slide with a diameter of 1.4 meters, starts from a height of 9 meters. Two riders can enjoy at a time. Inflated tubes are used to carry riders through the slide.

Kochi Park - V R Coaster: This ride is an advanced version of a roller coaster, located inside a castle-themed building which goes up to a height of 6 meters and through 190 meters track with a steep incline, curves and dips. Each rider is provided with virtual reality headsets to experience the movement through virtual environment along with the movement of car through the track and a synchronised themed video.

Hyderabad Park - Funky Monkey: It is a Drop Tower specially designed for children. The ride takes the visitors to a maximum height of 4 meters, giving a miniature experience of a free fall. The capacity of the ride is six kids at a time with a duration of 4 minutes per ride.

Hyderabad Park - Rocking Tug: A family ride imported from Italy; shaped like a ship, it gives the riders a thrilling ship riding and sailing experience.

Future Outlook

As part of our ongoing initiatives to drive growth and innovation, we are always exploring new avenues for expansion. Over the last year, following developments gave a significant push to our growth plans:

The Tamil Nadu Government provided an exemption from the local Entertainment Tax for the first five years of operations at our Chennai Park. We have a land parcel of 64 acres in Chennai and have incurred capital expenditure of around INR 110 crore. The Company has received NOCs from the Fire Department, Pollution Control Board and the Forest Department etc., and awaiting the final clearance from the Department of Town and Country Planning (DTCP). The setup and construction of our fourth park are expected to begin next fiscal.

As a testimony to our operational efficiency, the Government of Odisha invited us to set up a new amusement park in the State. The Government of Odisha will provide the land on a long-term lease along with supporting infrastructure, thus enabling us to develop an asset-light and balance sheet friendly amusement park. The board has approved the project, designated as our fifth park and second project in the pipeline.

Across our three operational parks, we hold a land parcel of 224 acres, of which 95 acres have been developed and utilised for the parks. We have 129 acres of excess, unencumbered land bank available to expand our existing parks.

Even though we suffered a setback in the form of missed opportunity due to the nationwide lockdown from March 2020, we are hopeful of recovery in the next fiscal. Encouraging signs have been seen at international parks, which are opening up within two-quarters of the virus outbreak. We are optimistic that the same trend will be witnessed in India. We believe that domestic travel will boom after the return of normalcy. The Indian travellers will surely bounce back. In our opinion, outbound leisure travel may take a little longer to revise, and this will further increase the need for domestic travel.

Our offerings are quite broad-based family entertainment and basically in the nature of Fun under the Sun for every age group. At Wonderla, we will continue to provide cleaner, hygienic, sustainable and safe offerings and deploy professionally well-trained employees to achieve improved customer experience.

Financial Overview

Our reported Revenue, Profit Before Tax and Net Profit have been

Total Revenue for the Company decreased to 28,288 lakhs as against 29,166 in the previous year, down by 3%

Operating EBITDA decreased to 11,611 lakhs as against 12,396 lakhs in the previous year, down by 6%.

Operating EBITDA margins declined to 41% of net sales as against 43% in the previous year.

Profit Before Tax increased to 9,259 lakhs as against 8,404 lakhs in the previous year, up by 10%.

Profit After Tax increased to 6,478 lakhs as against 5,541 lakhs in the previous year, up by 17%

Our financial performance for FY2019-20 has suffered due to the unforeseen pandemic, which has shaken the world economy at its core. Footfalls were recorded at 23.81 lakhs. A constant watch on cost control has enabled us to maintain margins.

As our recent initiatives and projects in pipeline pave the way for increased footfalls & build an affinity among our visitors for the Wonderla brand, we are hopeful of delivering significant value to all our stakeholders.