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00:00Hello and welcome, you are watching the small and mid cap show, I am Mahima Vacharajani
00:18and with me is Harsh Saita.
00:20Well, today the company that we are focusing on SMID show is Imagica World Entertainment
00:26and to discuss more about the newly acquired parks and amusement parks, we have with us
00:32Mr. Jai Malpani, Managing Director of Imagica World Entertainment joining us now, welcome
00:36to the show sir.
00:37Thank you, thank you for having me on show.
00:40The acquisitions, the synergies are playing out well.
00:43So we have recently finished and executed all the documents with regards to our transfer.
00:48So from 1st of April, all the revenues and EBITDAs and all the operations of the four
00:54parks which were operational are in the books of Imagica and this will considerably make
00:59our P&L and balance sheet much stronger, we will double our footfalls, it will increase
01:04our revenue by 1.5x and EBITDA by 1.7x based on the FY23 numbers and on the combined level
01:12our profitability of the company will increase as well because of these additions of these
01:17high margin properties and we expect that we will increase the market penetration, enhance
01:23the marketing effectiveness and even from pricing point of view, we will have a better
01:27pricing in this region and we will have multiple synergies because of the consolidation with
01:34regards to purchasing power, marketing, retail, F&B and cross-selling opportunities like
01:40combos across all our parks and we have always wanted Imagica to grow across India.
01:47So this deal facilitates that and accelerates our geographical expansion as well.
01:53I take your point Jai, well Mahima this side, can you quantify as to how much will this
01:58impact your margins and your bottom line, how much will your margins and bottom line
02:03increase by then?
02:04Sure, so currently we are at around 38 odd percent of EBITDA margins and the new parks
02:10which we are adding are about 57 odd percent margins at EBITDA level.
02:15We expect our combined margins to go in the range of between 45 to 49 percent in this
02:21next 2-3 years at a consolidated basis.
02:25Sure and just with regard to what the expectations or what the type of synergies are that you
02:33are likely to see from some of these acquisitions as well as more importantly, let me actually
02:38switch it over to funding.
02:39I want to try and understand from a funding perspective, how have these parks been funded
02:46and what's the plan like with regard to cash flows and where you will utilize them?
02:53Sure, so the way this deal is structured is that Malpani Group has given Imagica a timeline
03:00of 30 months to pay the whole consideration.
03:03So Imagica is a good, it's a deferred payment, so because of that, since the cash flows are
03:09in the books of Imagica from 1st of April, 60 percent of the cash flows will be funded
03:15through internal accruals itself and then the balance 40 percent will be a mix of debt
03:20and equity through which we will fund these acquisitions and at the portfolio level at
03:25Imagica, we have a threshold of 2.5x of debt to EBITDA, if the maximum will raise, the
03:31amount of debt will raise.
03:33So this is how the acquisition will be funded.
03:37Okay understood Jai.
03:38So also you've been taking a lot of cost control measure when it comes to Imagica, now getting
03:45these acquisitions into place, where do you think your cost will go to and will you be
03:50applying the same cost measures to these acquisitions as well?
03:55So we'll be putting the same cost measures to the acquisitions as well.
03:59When we are acquiring those four parks, they are already at 57-58% EBITDA margin, which
04:05is one of the highest in the country and even with regards to Imagica, since our parks will
04:09merge, a lot of our common teams will be set up to manage the back of the house, even our
04:14operations, even at the senior level, a lot of the teams will get merged because when
04:19we were operating these parks separately, the teams were double.
04:23But since we are all in the same entity now, we will see that these teams will be similar
04:27and we will see a good cost reduction on that part.
04:30Even with regards to purchasing power and marketing efforts, we will see a good amount
04:34of synergies and since we are in the same region, even with regards to pricing, we will
04:38see a good amount of pricing levers which will improve and Imagica has a very strong
04:43non-ticketing business, which is FNB and merchandise and we expect that both these
04:49things will be replicated across all our four parks and we expect to see good margin
04:54improvement coming from there as well.
04:56Understood and where should the borrowing number be at in terms of your cumulative
05:01borrowing for FY25?
05:04So cumulatively, we are still open to a mix of debt and equity and with a threshold of
05:112.5x of that number is something which we will have.
05:14On a consolidated basis, on the FY23 number, our EBITDA is around 170 odd crores.
05:21So we have a good cushion to borrow, but we'll have a good mix of debt and equity to fund
05:25these acquisitions.
05:26Okay, understood.
05:27Jai, I also want to understand, with respect to your other income, from what I've seen
05:33is that in March 23, it was negative 490 crores and then it went to positive 570 crores.
05:40Then in September, it was around negative 50 crores and now it's, you know, in December,
05:45it was around 0.5 crores only.
05:47So what is happening exactly there with respect to your other income, because it's pretty
05:52volatile there?
05:55So actually, the other income are mainly accounting entries, which have been there because of
06:00the resolution plan, which the group had concluded in 2022.
06:04So there are multiple legs to the resolution plan and one leg was with regards to land
06:09and the other leg was with regards to the promoter OCRPS conversion, which we just finished
06:13in April.
06:14So these are those entries, which are more accounting entries, which have been part of
06:19the resolution plan.
06:20So going ahead, you won't see any big fluctuation in that number and the number will be pretty
06:25stable going ahead.
06:27What does this other income comprise of currently, Jai?
06:31So currently, I think the one of the thing was with regards to OCRPS conversion, which
06:36was there.
06:37So part of it is converted and other is written off.
06:41So I think that was the number which was there in the other income this time.
06:44All right.
06:45And with regard to just return on capital, you know, large amount of capital, which is
06:50expected to be deployed.
06:53What's the ROCE that you're really expecting on some of these numbers, ROEs, ROECs?
06:58What's the kind of return ratio that one can expect?
07:01So the parks are of different size and scales.
07:04And going ahead, we are planning on putting up different parks in the various different
07:09tier one and tier two towns across India.
07:12So based on the demographic and location we choose, these ratios are expected to vary
07:16between 15 to 18 percent.
07:19And in some cases, if the park is a mid-size with a very good location like Sabarmati,
07:23which we were just awarded.
07:25So the ROCs are expected to be in the range of 18 to 20 percent as well.
07:29But the range is 15 to 18 percent is what we are considering for these parks.
07:34OK, Jay.
07:35And going forward, let's say in the next four to five years, how many parks do you wish
07:40to, you know, build, acquire organic, inorganic expansion?
07:44What are the plans?
07:46So we have a good pipeline in place right now.
07:49We have two projects on the way, a water park in Indore, which should start this year, and
07:53a Sabarmati Riverfront Entertainment Hub, which is a downtown project, which will start
07:58next year.
07:59So our plan is to have one park at least every year, which will get added to Imagica.
08:04And so that's the plan going ahead.
08:06So two parks in pipeline.
08:08And our plan is to add one park every year going ahead.
08:11OK.
08:12And just with regard to, you know, as you scale, what's the kind of revenue potential?
08:20So you spoke about 1.5x revenue FY25.
08:24That would be compared to FY24.
08:27Is that the correct number to take?
08:30And therefore, when I'm looking at your, you know, overall numbers, broadly trailing 12
08:34months at 250 crore, so you'll roughly be doing around maybe 500 crore, sorry, 400 crore
08:42in FY25.
08:43Is that the correct way to look at it?
08:45Yes.
08:46So we have just combined the FY23 numbers for all our parks together.
08:50And that number comes out to around 400 odd crores.
08:53So that's the number we are hoping to do this year.
08:57And some growth with regards to that as well.
08:59OK.
09:00And Jai, what are the CAPEX plans going ahead for FY25?
09:05So from CAPEX point of view, Malpani Group had invested almost 25 odd crores in the existing
09:10four parks which were transferred.
09:12So there is no new CAPEX which will be done on those four parks.
09:15And even Imagica just added six new water slides, a beautiful water fountain show last
09:20year.
09:21So for FY25, in the current parks, we don't expect major CAPEX to happen.
09:26It's already been incurred last year.
09:28The only CAPEX which will happen is for the Indore Park, which is already accounted for.
09:32So other than that, no major CAPEX as such for the existing parks.
09:37Got it.
09:38And equity dilution, Jai, what's the sense?
09:44So we, I mean, to raise the money, we are looking at a mix of debt and equity.
09:51So some bit of, we're still exploring multiple options with regards to how to raise the equity
09:56as well.
09:57So as and when the plans get consolidated, we'll get back and update you on the same.
10:01The promoter will continue to hold 74%, sorry, very, very quickly.
10:06I mean, we want to hold 74 odd percent.
10:09And if we raise a bit of preferential allotment or we do some QIP, then there might be some
10:15dilution with regards to that.
10:17But our aim is to hold as much as possible.
10:19Sure.
10:20Understood.
10:21Okay.
10:22Thank you so much for that perspective, Jai.
10:23Of course, we'll wait.
10:24We'll wait for the FI24 numbers and FI24 numbers, and we'll call you back and get some more
10:27perspective.
10:28Very, very interesting with regard to the growth plans of Imagica World.
10:32Thanks Jai.
10:33Thank you so much.
10:34We have with us a very special guest, Neel D'Souza, CEO of Tata Consumers, now joining
10:40in.
10:41Mr. D'Souza, thank you very much.
10:42Thanks a ton for joining us today on the show.
10:44Firstly, congratulations.
10:45FI25 is behind us.
10:48You had managed to pull out quite a good quarter.
10:50A couple of areas that we'd like you to start with.
10:54Firstly, of course, comment on the quarter behind us, revenue was largely in line with
10:58street expectations, margins have seen an uptick, international business is finally
11:02picking up, and you've got the substantial acquisitions as well now behind you.
11:06Yeah.
11:07So thanks.
11:08Thanks for having me on the show.
11:09And yes, we had a pretty decent quarter and a good end to the year, 9% top line, 22% EBITDA,
11:17profit before tax, before exceptionals, plus 46.
11:22I think what the reported numbers would be net of A, we had a stamp duty on account of
11:29the merger with Tata Coffee and some prudent provisions that we took for underutilized
11:34assets as well as a financial instrument.
11:36Other than that, like you said, I mean, all businesses on growth, that's pleasing to see.
11:44We've had two months of capital foods, with that, the food business is powering ahead
11:47with that 20% top line growth.
11:50International, we've always said margins should be accretive to the India business.
11:57And they've come to the party now, very strong numbers.
12:01Canada was always strong, UK, very strong numbers, US is also turning around the corner.
12:07Strong growth in our growth businesses in India.
12:12Most importantly, our EBITDA margins for the quarter came in at 16.1%, which was pleasing.
12:18We've always, last quarter, we said our new benchmark is 15 plus, and this quarter,
12:22we delivered more than that.
12:25The good part was we've reduced working capital, cash has grown at 27% versus last year.
12:32Cash as a percentage of EBITDA is 101%, so we reduced working capital substantially.
12:37ROC 280 bps ahead of last year.
12:40Strategically, shares more or less on track, outlets now 4 million, innovation firing well,
12:475% plus, costs well within control, distribution expansion on track.
12:53So all in all, a pretty decent quarter.
12:55Do you think, do you expect an upside risk to margins in the next few quarters, or the
13:02next financial year?
13:03Upside, I wouldn't call it a risk.
13:05I said upside is a-
13:06It's a pleasure.
13:07It's a surprise.
13:08Correct.
13:09It's a surprise.
13:10Yeah, while we've delivered 16.1% this quarter, if you look at the full year gone by, we're
13:15at a 15.3%.
13:17So that's why we said 15 is the base, and we'll continue to, we will deliver above 15%,
13:22that's for sure.
13:23But we're setting the base at 15%, and we feel quite confident that as we go through
13:27the year, we drive top line and scale, keep costs within control, take out synergies,
13:32we're sure we can beat our numbers.
13:36You've also improved enormously in operational efficiency.
13:40Let's talk about capital foods and organic.
13:45Going into the next couple of quarters, because I'm assuming by then you'll be completely
13:49integrated and available at all sort of, through your distribution chain, what is the revenue
13:55target that you're expecting or working with in terms of contribution from organic and
14:00capital foods?
14:01So, like I said, I mean, capital foods were distributed in about 250,000 outlets.
14:07I'm directly distributed in 1.6 million.
14:10So that's a huge headroom.
14:11We said we will complete the integration in 100 days.
14:15We are on track.
14:16We did the acquisition early February, and by the end of this month, we should be done
14:21and dusted with the entire integration piece.
14:24Organic India, we've just started, it was middle of April by the time we finished.
14:27So that will take three months from there.
14:30And for both these businesses, like I said, I mean, now they're part of our growth portfolio.
14:35So the growth portfolio itself, 20% of the portfolio was growing 30.
14:40Now we're adding this 10% and say we'll grow at 30.
14:42So broadly, both capital foods and organic will continue to grow at a 30% plus, at least
14:47for this year.
14:48You know, I want to talk about Nourishco, because that's what you also referred to in
14:53the Concord earlier.
14:55The guidance set out for that was close to about a thousand, you've closed in at about
14:59825 crews, seasonal issues, I believe.
15:03When do you see the shortfall getting filled in?
15:06Do you think by next quarter, we will see a sharper uptick on Nourishco?
15:11Yeah.
15:12So Nourishco-
15:13And if you target 25, what are you working with internally?
15:16So Nourishco actually has been firing on strong cylinders with a combination of distribution
15:21expansion, powering up the portfolio and innovation to sales in Nourishco is close to 20%.
15:28In Nourishco from 650,000 outlets, we've gone to 950.
15:32We've already built the supply chain and the distribution to take advantage of this
15:37season.
15:38And I said, last quarter, actually, right up to January, we were quite confident of
15:43hitting the 900 to 1,000 crew number, middle of February onward, we started seeing unseasonal
15:49weather patterns.
15:50And more importantly, I think Holi this year was shifted by 20 days.
15:54And I still remember from my old beverage days that Holi is the onset, it doesn't matter
16:00what the outside room temperature is.
16:02Holi is the onset of summer for most parts of India.
16:04So I think that's what has happened.
16:06Summer has come in very, very strongly.
16:07So we feel quite confident that we will come back to the same, I would say 25 to 35% growth
16:15rate for Nourishco in this quarter itself.
16:18I want to talk to you about Tata Sampan, great growth there as well.
16:23And interestingly, there's so much happening in that part of the industry with everything
16:27we're learning about the regulator, with the Singaporean authorities, Hong Kong authorities
16:31cracking on your competition.
16:33Now, if I call it a risk, you might question me again, but have you seen that impacting
16:39your business?
16:40I mean, Tata as a brand is associated with quality.
16:45And imagine the Everest of the world, other masala companies are losing market share.
16:50This could be a big gain for you.
16:51And we might potentially see an impact of that in the next quarter.
16:54See, I wouldn't comment about the other companies, but I would say as an economy develops, as
17:03products proliferate, as consumers become more aware, I would start to expect that regulations,
17:10the standards will be continued to go up.
17:12And I think the FSECI is doing a fantastic job in bringing up the standards overall in
17:17the country.
17:19That said, I think for us specifically as a Tata group, we are very, very mindful of
17:26the value that the Indian consumer places, the trust that the Indian consumer places
17:32in the Tata brand name.
17:34And therefore, I mean, irrespective of what it is, we will be following regulations very
17:39closely.
17:40We will make sure our products are of the highest standard.
17:42So Sampan, for example, very simply put, I'll give you a very, very simple example.
17:47Just by going to the border on moisture content, I could improve my profitability.
17:52But no, I want to make sure that I'm well within the range of the moisture content.
17:56We've got internal standards on broken, type of grains, etc.
18:01I know that by moving a little bit, there's a little bit of money to be made.
18:05But as a Tata group company, we value the consumer trust in our product and our quality
18:11more than anything else.
18:13We are here for the long term.
18:15So therefore, I wouldn't be too worried about what's happening.
18:19The good part is we just need to double down and make sure we execute properly.
18:24Double down and execute properly.
18:26So while of course, top line will be focused quality, I think is what the Tata brand is
18:32synopsis with.
18:33I want to ask you about Starbucks.
18:36Growth was slightly tepid for Starbucks.
18:39But of course, I mean, in the bigger picture, it's very clear that Tata is serious about
18:44this.
18:45Starbucks has become a name, a household name for most.
18:49How is that sort of doing?
18:52What is the sort of expectation you're setting out for yourself there, F525 target on Starbucks?
18:57Do you think the pickup will be more front loaded over the next few quarters?
19:03So Starbucks, yes, I mean, we are playing the long game, number one.
19:06So we made a commitment saying that we'll have 1000 stores by FY28.
19:11Now just to put that in perspective, I think for the first eight years of the business
19:14from FY12, when we started to about FY20, we added about 200 stores.
19:24And last year, we added 95.
19:26So in one year, we've added almost half of what we did in the previous eight years and
19:30will continue at that rate for a long time to come.
19:33Now last quarter itself, I think Q3 and Q4 overall were a bit stressed for the QSR industry
19:41itself, primarily driven by lack of traffic.
19:44I mean, in Q3, a lot of people talked about the World Cup and that happening, but that
19:49continued a bit into Q4.
19:52The good news is that March came in at better than February and April right now is trending
19:58better than March.
19:59So we remain quite confident of the traffic coming up.
20:02But apart from that, right now we are at 421 stores, 60 cities.
20:06And as we expand, as we populate the bigger cities with more Starbucks, and as we go down,
20:12we are making sure that we are tweaking the business models to make sure that it is stronger
20:18and better even in the face of slightly lower traffic itself.
20:23Average ticket per store has not been the issue, it's only traffic.
20:27Like I said, it's improving.
20:28And at the same time, we are making sure we're making the right tweaks to the business to
20:32drive traffic.