Wonderla Holidays Plans IPO Outing

Wonderla Holidays, a popular name in theme parks, is planning an IPO in the next month. The issue size would roughly be around Rs 200 crore, as indicated by the company.

With this issue, the company will issue 14.5 million of new shares. Of this, 50% is for QIBs, 15% is for non-institutions and 35% for retail investors. It is not clear whether the company would provide any safety net for retail investors. It is also looking to get anchor subscription, and 30% of the QIB is reserved for the same.

We recently went to visit the theme park of Wonderla Holidays located in Bengaluru, where we met up with Arun Kochouseph Chittilappilly, the Managing Director, who told us more about the company. Chittilappilly, who is the son of Kochouseph Chittilappilly, Chairman of listed entity V-Guard Industries, started this company 10 years ago. The market has seen a fantastic performance V-Guard Industries, and hence, it remains optimistic on the Wonderla IPO. The primary market has remained very lacklustre this year, and this IPO may bring some cheer in this dismal scenario.

Wonderla Holidays currently operates two theme parks, one in Bengaluru and the other in Kochi. It has various rides and indoor activities in both these parks. The Kochi theme park is spread out over an area of 92.95 acres and has a total of 56 land and water-based attractions. The one in Bengaluru is located on 81.75 acres of land and also has a resort. The company owns the land on which these parks are built.

The parks recorded total footfalls of 2.26 million in FY12 and 1.82 million for the first nine months of FY13. The annual footfalls have seen a CAGR of 18.5% from FY10-FY12.

The company runs a model which involves the use of a lot of cash. If one sees the cash flow statement, it has reported a healthy cash flow from operations every year from 2008 to 2012. By December 2012, it had cash of Rs 17 crore and reserves of Rs 82 crore in the balance sheet. By the same time, its debt was Rs 12 crore. Hence, it remains a debt-free company.

The proceeds of the proposed IPO would be used towards setting up a new theme park in Hyderabad. The company has already acquired 46.17 acres of land, and has taken most of the necessary regulatory approvals too.

The company also plans to open another theme park in Chennai, which will be funded by debt funds. The target debt-to-equity ratio of the company is 1:1, and hence, it has good headroom at this time to raise funds for a new theme park. Both the Hyderabad and Chennai-based parks would be ready for commercial operations by FY16.

The amusement industry is not particularly tracked in the country. There are a total of 150 amusement parks, which has a host of small players and also some larger players like Essel World, Nicco Park, etc. The industry itself is undergoing a change due to the rise in the consumer expectations as well as the growing numbers of nuclear families.

The company has hinted that it will be looking to set the issue price at a forward price-to-earnings ratio of 20x. This would mean that the IPO price could be around Rs 150. The issue is likely to open for subscription in the next month.