This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]
I covered Wonderla Holidays initial public offer (IPO) last year in April. Wonderla raised approximately Rs. 181 crore by issuing 1.45 crore shares at Rs. 125 a share. Its share price is trading close to Rs. 271 on the stock exchanges right now, a jump of 117% in less than a year.
Now, Adlabs Entertainment has launched its IPO to raise money for retiring its debt and expanding its footprint in the amusement park business. The issue opens today and will get closed on Thursday, March 12th. Wonderla Holidays is the only listed company with which we can compare Adlabs to take our investment decision. But, as Adlabs has a very short operating history, it is very difficult to compare these two companies as well.
What’s on Offer?
Adlabs has fixed its price band to be between Rs. 221-230 per share and is offering Rs. 12 per share discount to the retail investors. The issue is a mix of fresh issue of 1.83 crore shares and offer for sale of 20 lakh shares by the existing investors. The company will not receive any proceeds from the offer for sale.
The company will be issuing a total of approximately 2.03 crore shares to the investors as the offer gets fully subscribed. 10% of the issue size is reserved for the retail individual investors. At Rs. 230 per share, the company plans to raise approximately Rs. 465 crore in the IPO.
Bid Lot Size – Investors need to bid for a minimum of 65 shares and in multiples of 65 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 13,585 at the lower end of the price band and Rs. 14,170 at the upper end of the price band.
Objective of the Issue – The company plans to use the IPO proceeds to make partial repayment of its existing loan and for other general corporate purposes. However, the break-up of the issue proceeds for the repayment of loan and general corporate purposes will be disclosed after the issue gets closed.
IPO Grading – The company has opted not to get its IPO graded by any credit rating agency. SEBI had made IPO grading voluntary in December 2013.
Listing – The shares of the company will get listed on both the exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
Adlabs Entertainment Limited (AEL) is a company promoted by Manmohan Shetty and Thrill Park Ltd. Adlabs currently owns and operates two amusement parks – Imagica and Aquamagica, which is a part of Imagica itself with a separate entrance. It is situated near the city of Khopoli on Mumbai-Pune expressway in Maharashtra.
Adlabs Imagica – The Theme Park, is one of the fastest growing theme parks in India. The park was opened on 18th April, 2013 on a land of 132 acres. Imagica is a one-of-a-kind offering in India and currently has 25 rides and other attractions of international standards, food and beverages (“F&B”) outlets and retail and merchandise shops spread over six theme-based zones.
It also offers entertainment through live performances by acrobats, magicians, dancers, musicians and other artists throughout the day in various parts of its theme park. It can accommodate as many as 20,000 visitors.
Aquamagica is a water park, which became fully operational on October 1, 2014. Aquamagica offers 14 kinds of water slides and wave pools and has a separate admission ticket and a separate entrance from the theme park.
Adlabs has an additional land of 170 acres around Imagica which it plans to develop in future. Adlabs is also exploring the hospitality business with its Novotel brand of hotels, which is under construction and the first phase of which is expected to get completed by March 2015.
Risks
* Limited Operating History – Adlabs Imagica became partially operational on April 18, 2013 and fully operational only on November 1, 2013, while Aquamagica became operational on October 1, 2014. So, the company has a limited operating history which might adversely affect its ability to implement its growth strategies.
* Huge Investment – Amusement parks business is capital intensive, as these companies require huge investments in land, equipments etc. Regularly adding rides to keep visitors’ interest and replacement of existing equipments also require huge funding.
High Debt – As on December 31, 2014, the company currently has debt of approximately Rs. 1,278 crore, which is likely to increase in the next few years due to company’s expansion plans in Hyderabad etc.
* Limited Diversification – The company derives all of its revenues from Imagica and Aquamagica. Its operating results might get adversely affected if the company is not able to operate these two parks successfully.
Financials of the Company
For the financial year ended March 31, 2014, total income of the company was Rs. 106.92 crore and loss was Rs. 52.48 crore. For the six months ended September 30, 2014, its total income was Rs. 73.32 crore and loss stood at Rs. 53.53 crore.
As the company has limited operational history, high interest cost due to its high level of debt, limited sources of revenue generation as of now, high capex requirements due to its expansion plans, I think it will take the company at least 3-5 years to turn profitable. As there is a high degree of uncertainty with its revenues, growth, profitability and debt retirement plans, I think this IPO is for high risk takers only. Risk-averse investors should avoid this issue as of now and closely monitor its operating performance before taking a plunge.
please we are waiting for your views on inox ipo
Hi Nitesh,
Till now I haven’t started working on it as I am not getting time to cover it. If I get time to cover it by today evening, then you will get it in tomorrow’s newsletter.
Day 6 (March 17) subscription figures:
Category I – Qualified Institutional Buyers (QIBs) – 1.17 times
Category II – Non Institutional Investors (NIIs) – 0.49 times
Category III – Retail Individual Investors (RIIs) – 1.37 times
Total Subscription – 1.11 times
The issue finally sails through. I hope it doesn’t make its investors suffer losses!
I guess they roped in some investors…..nothing to worry though….Infosys too had to rope in Goldman Sachs in 1993…, when they launched their IPO. I guess with expanding middle class and change in lifestyle, it was worth taking a chance…..:)
I hope so!
Just watched CNBC a while back, Adlabs IPO has finally been subscribed. So, I think the company will not terminate it now.
Shiv,
One point that I want to add here is, there was an accident in the Imagica theme park, in which a family of 4 met with an accident while on the ride and the last known status was at least 2 of them were in coma.
I did not see much press reporting on the incident after that and I feel the management kind of hushed up the whole issue.
When I was in the US in the theme park Six flags, there was one accident when a mentally challenged kid feel off a roller coaster and the whole theme park was closed for a few months and only after all the agencies investigated the issue and agreed that the fault was that the restraint was not properly locked and it had nothing to to do with the apparatus as such that they allowed the park to open after a through retraining to their staff.
In this case the park was not closed even for a day, so I did not know what checks the park themselves did to confirm that everything was in order. So I will not invest my money with such management.
Regards,
SK
This is India, a lot of such things do happen in this manner here. But, I think accidents also do happen and not always due to a service provider’s fault only. I don’t know whose fault it was when the accident happened that time, but I think the matter should have got investigated. Stopping the whole business worth crores of investments and which provides employment to thousands of people is not a solution.
I think we the people and authorities should work for the development of this country and laws should be made so that enough safeguards are placed well before any such unfortunate event occurs. I think that is the only way in which such things can improve here. Its good that you raised this point though. Investors should consider your point before they take a final decision.
Day 5 (March 16) subscription figures:
Category I – Qualified Institutional Buyers (QIBs) – 0.53 times
Category II – Non Institutional Investors (NIIs) – 0.36 times
Category III – Retail Individual Investors (RIIs) – 1.11 times
Total Subscription – 0.60 times
Thanks Shiv – Fortunately I did tick cut-off box, and 215/- was auto populated I only entered 65 (under number of shares column). Just for understanding, what does ‘cut off’ price means? Appreciate your efforts to make us informed investors….:)
Cut-Off price means whatever price company fixes for allotment, the bidder is fine with that price, be it Rs. 180 or Rs. 215 or any price between these two prices.
Day 4 (March 13) subscription figures:
Category I – Qualified Institutional Buyers (QIBs) – 0.40 times
Category II – Non Institutional Investors (NIIs) – 0.11 times
Category III – Retail Individual Investors (RIIs) – 1.10 times
Total Subscription – 0.47 times
I withdraw my application of 1 lot from icicidirect. Even though icici has such facility to withdraw application, i am not sure whether there will be any charges\fine for this. Anybody in this forum know about this?
Thanks,
Amit.
There should not be any charges for withdrawal of application.
I applied 1 lot @ higher end of revised price range. If the rate is decided at 180/- will I get shares at 203/- or 168/-?
If you have not ticked the “Cut-Off” box, then you would be allotted shares at Rs. 203.
Hi Shiv,
Should one subscribe this IPO now as the price band has been revised downwords; Also does retail investor still get a benefit of Rs 12 per share after the price band change.
Regards,
Parijat
Hi Parijat,
Sentiment has changed against this IPO. It has become more riskier now to invest in this IPO. So, I think one should avoid this IPO as of now. However, Rs. 12 discount stays and at Rs. 168 (Rs. 180 – Rs. 12 discount), I think it is worth taking some risk. It is investor’s call now.
Day 3 (March 12) subscription figures:
Category I – Qualified Institutional Buyers (QIBs) – 0.40 times
Category II – Non Institutional Investors (NIIs) – 0.11 times
Category III – Retail Individual Investors (RIIs) – 1.10 times
Total Subscription – 0.44 times
IPO closure date has been extended by 3 days and price band has been cut to Rs. 180 – Rs. 215. Now, the issue close date is March 17th. Very poor response from the institutional investors so far.
It s a nice assessment & quit helpful giving insight to subscribe to think twice before taking a plunge… Thank you…
Thanks Mr. Vijay!
Hi Shiv
Good analysis with complete picture that helps anyone decide whether to invest or not. I shared it on my website too.
Thanks Rachna! 🙂
Day 2 (March 11) subscription figures:
Category I – Qualified Institutional Buyers (QIBs) – 0.18 times
Category II – Non Institutional Investors (NIIs) – 0.09 times
Category III – Retail Individual Investors (RIIs) – 0.35 times
Total Subscription – 0.18 times
Very poor response till now. Tomorrow is the last day of this IPO.
so whats your recommandation for this Adlabs IPO?
Should we go or not? please confirm
If you are comfortable taking a risk, then you should go for it, otherwise it is not recommended for a risk-averse investor.
Day 1 (March 10) subscription figures:
Category I – Qualified Institutional Buyers (QIBs) – No Bidding
Category II – Non Institutional Investors (NIIs) – 0.06 times
Category III – Retail Individual Investors (RIIs) – 0.15 times
Total Subscription – 0.03 times
today’s supscription figures please
Shares worth Rs. 60 crore have been allotted to the Anchor investors @ Rs. 221 per share.
http://www.thehindubusinessline.com/markets/stock-markets/adlabs-entertainment-allots-rs-60cr-worth-shares-to-anchor-investors/article6977840.ece
In my view this is not the beneficial deal, as company is in debt and it may increase too other net income is not impressive
Hi Ahmad,
There is no doubt that it is a high risk – high return proposition. But, if executed well, the company has the potential to be a multibagger. Its business model is very unique and can be rewarding as well.