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Diversification on the cards

Quick Pointers:

* Enters family entertainment business via a strategic partnership with Hello Park – world’s largest chain of immersive phygital playparks for children.

* Received environmental clearance for Sabarmati riverfront project.

We cut/increase our FY26E/FY28E PAT estimates by 26%/5% as we tweak our other income assumptions given capital subsidy receipt timelines for the Indore park have been re-aligned. In a seasonally weak quarter, IMAGICAA IN reported an EBITDA loss of Rs91mn (PLe loss Rs60mn). While footfalls declined 10.0% YoY to 0.23mn, ARPU increased 12.7% YoY to Rs1,299 aided by nonticketing revenue. IMAGICAA IN has entered family entertainment business via strategic partnership with Hello Park. This collaboration provides IMAGICAA IN with exclusive rights to launch Hello phygital playparks for children in India. The phygital family entertainment business model is scalable, synergistic to the existing outdoor park business and asset light in nature. Beyond this diversification move, IMAGICAA IN has also received environmental clearance for the Sabarmati riverfront project and plans to launch a new water park in Ahmedabad for a capex of Rs2.5bn. We expect sales/EBITDA CAGR of 10%/14% over FY25-FY28E and retain BUY with a SoTP based TP of Rs73 valuing both the park/hotel business at 21x FY27E EBITDA (no change in target multiple).

Revenue increased 4.6% YoY: Top line increased by 4.6% YoY to Rs418mn (PLe Rs403mn) as demand environment remained subdued due to heavy monsoons. Footfalls declined 10.0% YoY to 0.23mn (PLe 0.25mn) while blended ARPU increased by 12.7% YoY to Rs1,299. Occupancy of the hotel stood at ~65% in 2QFY26.

EBITDA loss stood at Rs91m: EBITDA loss came in at Rs91mn (PLe loss Rs60mn) as compared to EBITDA loss of Rs35mn in 2QFY25. Higher employee expenses at Rs142mn (PLe Rs119mn) along with elevated other expenses at Rs321mn (PLe Rs294mn) led to a widened loss at an EBITDA level.

Adjusted loss stood at Rs393mn: Loss for the quarter stood at Rs389mn. After adjusting for gain on fair value change in NCRPS of Rs4mn, adjusted loss stood at Rs393mn (PLe loss Rs205mn) as compared to a loss of Rs66mn in 2QFY25. Divergence at bottom line level was primarily on account of a deferred tax charge of Rs42mn as against our expectation of a tax write back of Rs68mn.

Key highlights from our interaction with the management: 1) The target audience for Hello Park would be children in the age group 4-14 years. Hello Park centers would be rolled out in malls & high footfall locations. 2) IMAGICAA IN would be incurring nominal capex of ~Rs80-100mn per center and the business model will be asset light. Typically, each center will have an area of ~10,000 sq. ft. odd. 3) The plan is to open 2-3 centers each year. 4) As per the terms of agreement, 5% revenue-based royalty will be paid to Hello Park. 5) Annual footfalls per center are expected to be closer to ~90,000 while ARPU is expected to range between Rs1,300-Rs1,400. 6) On a steady state basis, the family entertainment business can deliver an EBITDA margin of 25-30%. 7) Sabarmati Park’s ground-breaking is expected in Dec-25. 8) Capex for FY26E/FY27E stands at ~Rs300mn/Rs1bn respectively pertaining to Sabarmati Park. 9) The first tranche of capital subsidy for Indore Park is likely to be received in 1QFY27E. 10) The 6.65 MW solar power plant acquired by IMAGICAA IN in Solapur is expected to result in annual power cost savings of ~Rs40mn. 11) The upcoming new water park at Ahmedabad is estimated to be completed within 18 months after commencement of construction. Total capex ear-marked for the park stands at ~Rs2.5bn, including land cost of ~Rs750mn.

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