The Imagica Story!

I always wondered, as amusing as a visit to an amusement park is, is running the business itself, so fun?

High Capex, High Maintenance, Insane Amount of Funding & Approvals Required, Safety Standards & Constantly Adding New Attractions which would restart the whole Capex, Funding, Maintenance, Approvals, Safety Cycle.

That’s not all, despite all of this, there’s a limited market.

A market limited by

1) Geography

2) Infra & Approach to the venue

3) Limited Number of Visits (How often do you visit the same park anyway?)

4) Weather

5) Brand, Perception

6) Other/Cheaper Entertainment options.

So, with that as a backdrop, I went with a lot of Questions to meet the man who started India’s first Multiplex Theatre, successfully exited & in his second innings, took up the challenge of making India’s Most Global Amusement Park.

Here’s my key takeaways from a day spent with the Shettys at Adlabs Imagica (Though, I must tell you, I’ve visited the place before in personal capacity & loved the experience).

1)     Mr Shetty is a passionate man & you can see that in every little thing at the park. He set out to make a world class park in India, and he’s achieved a substantial amount in realizing that dream. You must visit the park yourself to see this.

2)     Despite that, I sensed a tinge of disappointment at his passion project not being received as well by the people as he imagined it to be.

3)     The aforementioned difficulties have cast a huge burden of Debt on the Company & that’s the biggest trigger on the Imagica Story. Repayment of Debt would improve their financial health drastically, while additional debt would weaken their backs further. Operating Leverage is the best friend in good times (no pun intended) & the worst foe in bad times.

Adlabs Debt Trajectory:

FY14 – 1140 Cr

FY15 – 1123 Cr

FY16 – 1004 Cr

FY17 – 1048 Cr

4)     The company does have some plans for Debt Repayment  -

Monetization of 170 Acres of Surplus Land

New Theme Parks via JV Options in Hyd & NCR

Debt Repayment Begins in FY19

5)     Increasing Acceptability of the Park and More Visitors would hopefully help their cause, given, the strength in the underlying product offering

6)     As more ppl visit the park, expenditure on Non Ticket Items like Food, Merchandize would further aid the Company’s Cause.

7)     Interestingly, they’ve also started sharing space in the park to advertisers; that’s an interesting way to sweat assets and get free cash.

8)     Finally, Mr Shetty in his earlier avatar hasn’t shied away from selling out in a good deal (sold Adlabs multiplex biz to Reliance), in the interview too, he said would like to look for a strategic partner. So the Big Q is; if Disney/Six Flags look at entering India finally, could there be a potential partnership? Only time will tell.

Hope You enjoy the chat.

Keep The feedback Coming.

Much Love.

M

PS: Don't treat that as investment ideas; I personally Don't Invest/Trade.