Adlabs Entertainment IPO – Should you subscribe?

Adlabs Entertainment IPO-Should you investAdlabs Entertainment IPO – Should you subscribe?

Mumbai based, Adlabs Entertainment IPO would open for subscription on 10th March, 2014. Adlabs Entertainment Limited is mainly engaged in the business of theme park and entertainment industry. It own and operates Adlabs Imagica which is India's first and only international standard theme park. How good is Adlabs Entertainment IPO? What risk factors should you consider if you want to invest in this Adlabs Entertainment Limited IPO?


About Adlabs Entertainment Limited

It own and operate, Imagica – The Theme Park, which is one of the leading theme parks in India. Imagica – The Theme Park, is a part of Adlabs Mumbai, a ‘one-stop’ entertainment destination that offers at this location. Adlabs Mumbai also includes Aquamagica, a water park, which became fully operational on October 1, 2014, and a family hotel, Novotel Imagica Khopoli, the first phase of which is expected to be completed by March 2015. Adlabs Mumbai, spread over an aggregate area of approximately 132 acres, is located at Khalapur, which is 74 kilometres from Mumbai, off the Mumbai – Pune Expressway.

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Issue details of Adlabs Entertainment IPO

  • IPO opens: 10-March-2015
  • IPO closes: 12-March-2015
  • Face Value: Rs 10 per share
  • Issue price band: Rs 221 to Rs 230 per share. Retail investors would get Rs 12 discount on this issue price.
  • Minimum Shares to apply: 65 shares and in multiples of 65 shares thereon.
  • No of shares issued to the public: 2.03 Crore shares
  • Issue size: Rs 467 Crores based on higher price band before retail discounts
  • Lead Managers: Deutsche Equities India Private Ltd
  • Listing: BSE / NSE
  • Download Adlabs Entertainment IPO Prospectus from SEBI website here

Purpose of the IPO: The funds would be used for the following purposes.

  • Offer for Sale – Company will not receive any proceeds from the Offer for Sale. Thril Park limited is selling 20 L shares.
  • Partial repayment or pre-payment of the Consortium Loan; and
  • General corporate purposes
  • Benefits of listing of the Equity Shares on the Stock Exchanges.

Company Financials

  • Company generated revenue of Rs 35.57 Million for the year ended Mar-13 and Rs 1,069.18 Million for the year ended Mar-14.  It earned revenue of Rs  733 Million for 6 months ended Sep-14.
  • Company posted a loss of Rs 17.64 Million for the year ended Mar-13 and a loss of Rs 524.82 Millions for the year ended Mar-2014. Its loss are Rs  535.29 Million for 6 months ended Sep-2014.
  • EPS for FY2014 and last 3 years average are minus as it generated losses.

Reasons to invest Adlabs Entertainment IPO

  • Good revenue growth in last 2.5 years.

Reasons not to invest in a Adlabs Entertainment IPO

  • There are various proceedings pending against the company and its Directors, Promoters and certain Group Companies, which if determined against them, may have an adverse effect on its business.
  • Promoter, Manmohan Shetty has been subjected to inquiries by SEBI and RoC in the past.
  • Incidents or adverse publicity concerning these parks or the theme or the water park industry generally could harm its brands or reputation as well as negatively impact this business and results of operations.
  • This business and results of operations could be adversely affected by changes in public and consumer tastes or a decline in discretionary consumer spending, consumer confidence and general economic conditions.
  • Its business is seasonal in nature, and may be affected by weather conditions, school vacations, public holidays and weekends. Therefore, a sequential quarter-to-quarter comparison of results of operations may not be a good indicator of its performance. Currently, all its revenues are attributable to Imagica – The Theme Park and Aquamagica at Adlabs Mumbai. Any event negatively affecting its parks or the Mumbai – Pune region may have an adverse effect on its business and results of operations.
  • It has incurred substantial indebtedness that exposes us to various risks, which may have an adverse effect on its business and results of operations.
  • A large portion of the guests are school children, particularly children who visit these parks, as part of school groups. Catering to this category of guests entails different risks, which could adversely affect its business, reputation and results of operations.
  • If they are unable to commence operations of its hotel as expected, its results of operations could be adversely affected
  • The high fixed cost structure of operations can result in significantly lower margins if revenues.
  • Have a limited operating history, which may make it difficult to evaluate this company past performance and future prospects.
  • They have negative net cash flows from operating and investing activities in the past and may continue to have negative net cash flows in the future.
  • They have incurred a loss for the six months ended September 30, 2014 and cannot assure that they will not continue to incur losses in the future, which may adversely affect its ability to carry out business.
  • Its Group Companies have incurred losses in the last three financial years.
  • Complete risk factors can be read from “Risk Factors” section of the IPO prospectus from page no. 19 onwards.

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Recommendation / Investment strategy

  • Company has been incurring losses. With an issue price of Rs 221 to Rs 230 per share, P/E Ratio cannot be ascertained. Hence we cannot comment on issue price whether it is reasonably priced or over priced.
  • Adlabs Entertainment IPO has positive as well as negative factors. Good revenue growth, promising future outlook, discounted price for retail investors etc., are some of the positive factors. Company still incurring losses due to initial investments and other risk factors indicated above are some of the negative factors.   
  • IPO’s have not been performing well in recent months. Many IPO’s are trading below its issue price. Though it looks good revenue growth story, one need to wait and watch for the performance and improvement of margins. If these shares are available at discounted prices after listing, one can look for investment considering the risk factors indicated above.

Disclaimer: I would not be investing in this IPO nor I have intention to invest in near future.

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Adlabs Entertainment IPO – Should you subscribe



  • shiv anand

    Nice article.

  • Raj kumar

    Dear Mr.Suresh
    We can compare this share with wonderla holidays because of same park ? So compare the issue price if possible

    • Hi Raj, Wonderla is established company with profits. However Adlabs on other hand has started 2.5 years and still in losses. Comparatively, Wonderla is always better. Coming to price, yes wonderla price is high, however worth investing. We should wait and watch how Adlabs Entertainment would perform in coming years once they start investing these moneys in their upcoming projects.

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