Adlabs Entertainment IPO Review - Issue priced at negative P/E (Apply at your own risk)

Review By Dilip Davda on Mar 2, 2015

Adlabs Entertainment Ltd (AEL) is promoted by Manmohan Shetty and Thrill Park Ltd. It acquired 302 acres of land and has kept 170 acres as a land bank for developing at a future date. In the 132 acres AEL owns and operates, Imagica – The Theme Park, which is one of the leading theme parks in India. It features a diverse variety of rides and attractions of international standards, food and beverages (“F&B”) outlets and retail and merchandise shops, designed to appeal to a broad demography of the Indian populace, delivering memorable experiences, with a strong value proposition. Imagica – The Theme Park, is a part of Adlabs Mumbai, a ‘one-stop’ entertainment destination that the company 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.

Imagica – The Theme Park is a one-of-a-kind offering in India and currently has 25 rides and attractions, which are spread over six theme-based zones. It also offer entertainment through live performances by acrobats, magicians, dancers, musicians and other artists throughout the day in various parts of its theme park. Company’s retail and merchandise offerings provide guests an opportunity to memorialize their experiences at the theme park by purchasing products such as toys, apparel, bags, caps and commemorative mementos and photographs, which carry the ‘Imagica’ brand or are based on one of the rides or attractions in our theme park and also retail candies, chocolates and other utilities such as hats and sunglasses. Aquamagica, is a water park located adjacent to AEL’s theme park, became fully operational on October 1, 2014. It offers 14 kinds of water slides and wave pools and has a separate admission ticket and a separate entrance from the theme park. The first phase of AEL’s proposed 287 key hotels, to be called Novotel Imagica Khopoli, comprising 116 keys, is expected to be completed by March 2015. This project has been funded by equity fund of Rs. 550 crore and debt of Rs. 1100 crore.

To reduce its debt partially and to raise corpus fund, it is offering 20326227 equity share of Rs.10 each via book building route in a price band of Rs. 221-230 Consisting fresh equity issue of 18326227 shares and offer for sale of 2000000 shares. Issue opens for subscription on 10.03.15 and will close on 12.03.15. The issue will constitute 25.44% dilution of total equity capital. Minimum application is to be made for 65 shares and in multiples thereon, thereafter. Retail investors are being offered discount of Rs. 12 per share. Issue is lead managed by Deutsche Equities India Pvt Ltd., Centrum Capital Ltd and Kotak Mahindra Capital Co. Ltd. Link Intime India Pvt Ltd is the registrar to the issue. During February 2010-August 2012 it issued shares at a price of Rs. 60 per share and during December 2012 - January 2015 it issued shares at a price ranging Rs. 138-230. Post issue its equity of Rs. 61.57 crore will jump to Rs. 79.90 crore. Post allotment shares will be listed on BSE and NSE. Except for minuscule discount to retail masses, it has neither opted for grading of the IPO, nor given any safety net. Pricing is very aggressive discounting next few years’ earnings.

For the financial year ended March 31, 2014, company’s total income 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 was Rs. 53.53 crore respectively. Thus the company posted negative EPS of Rs. 11.23 and Rs. 11.04 (not annualized). Thus company has carried forward losses of operations. Its NAV stands at Rs. 54 as on 30.09.14 is due to preferential issues made at hefty premiums. Based on this the issue is at a negative P/E and at P/BV of 4 plus.


Conclusion / Investment Strategy

As usual, on pricing point, despite SEBI’s suggestions quite often, merchant bankers have taken shelter of feedbacks from P/Es and QIBs rather than using their own expertise on the subject. We have seen the disaster of free pricing in the past with majority IPOs failing to reward investors post listings.

Disclaimer: Author has no plans to invest in this IPO. Investors can use their own discretion for investing in this IPO, as any investment in stock market is attached to market risks.

Review By Dilip Davda on Mar 2, 2015

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Adlabs Entertainment IPO FAQs

  1. 1. Why Adlabs Entertainment IPO?

    The initial public offer (IPO) of Adlabs Entertainment Ltd offers an early investment opportunity in Adlabs Entertainment Ltd. A stock market investor can buy Adlabs Entertainment IPO shares by applying in IPO before Adlabs Entertainment Ltd shares get listed at the stock exchanges. An investor could invest in Adlabs Entertainment IPO for short term listing gain or a long term.

  2. 2. How is Adlabs Entertainment IPO?

    Read the Adlabs Entertainment IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Adlabs Entertainment IPO what should investors do?

    Adlabs Entertainment IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Adlabs Entertainment IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Adlabs Entertainment IPO good?

    Sorry, we didn't rate the Adlabs Entertainment IPO.

  5. 5. Is Adlabs Entertainment IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the Adlabs Entertainment IPO.

  6. 6. When will Adlabs Entertainment IPO allotment status?

    The Adlabs Entertainment IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Adlabs Entertainment IPO allotment status to check.

  7. 7. When will Adlabs Entertainment IPO list?

    The Adlabs Entertainment IPO will list on Monday, April 6, 2015, at BSE, NSE.
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