Management Discussion and Analysis AN OVERVIEW OF THE INDUSTRY The Global Parks Industry The global parks industry traces its origin to the 1950s when the first parks were open in the USA and Canada. These were a natural extension of the town fairs that were held periodically to coincide with cultural and religious events. As per International Association of Amusement Parks and Attractions (IAAPA), an Amusement Park is defined as 'a large, high-profile attraction that offers guests a complex of rides, food services and games'. Park format are broadly classified as amusement parks, theme parks and water parks. A theme park is defined as a unique setting or rides with specific themes. Water parks, on the other hand, offers a range of water based activities. The total global parks industry was estimated at over US$ 28 billion in terms of revenues. This is expected to rise US$ 32 billion by 2017. Geographically, parks in the USA and Europe are near maturity levels now, and Asia is fast emerging as the new growth hot-spot for in the industry. Footfalls and Attendance In terms of footfalls, there was an increase of 5.4 per cent in 2015 compared to 2014 in the top 25 Amusement Theme Parks worldwide. In absolute terms, total global footfalls increased to 235.6 million in 2015 compared to 223.5 million in 2014. Footfalls in the top 20 theme parks in Asia increased by approximately 6.9 per cent. Overall, the top 20 parks in Asia recorded footfalls of 130.9 million compared to 146.3 million in the North America. In water parks, Asia is ahead of North America in 2015 with a total footfall of 19.5 million compared to 15.9 million in the USA. The growth in Asian Theme Park market & Water Park market has been led by Chinese Parks. The Indian Parks Industry The Indian amusement park sector is valued at USD 400 million (INR 25 billion) is at a very nascent stage when compared to the USD 25 billion (INR 1,625 billion) global amusement park segment (Source The Future: Now Streaming, KPMG 2016). With the rising income levels, increasing domestic tourism and favourable demographics, the sector is estimated to grow by a Compounded Annual Growth Rate (CAGR) of 19 percent over the next five years, thereby offering immense growth opportunities in this sector. (Source The Future: Now Streaming, KPMG 2016). There is a significant gap in the market for brmium outdoor entertainment destination in the country comparable with the best in the world. The small and mid-level amusement parks currently do not offer the same quality of fun and entertainment as international theme parks. India conspicuously lacked a world-class, international quality, brmium theme park experience destination. Ticket Prices While ticket prices in India have to be adjusted to suit the local markets, ticket prices are now fast being aligned to international levels. The typical ticketing model in India is the single-pay ticket priced between INR 600 to INR 1,000 per adult. Some parks are also offering pay-as-you-go tickets. There are discounts ranging from 15 percent to 20 percent for children, while some parks also offer the same discounts for senior citizens. Revenue Mix In India, the revenue from parks is still highly dominated by admission tickets forming about 75 percent to 80 percent to the total revenues. Internationally, admission tickets revenues account for about 50 percent of the total revenue. The share of F&B, retailing and merchandise sales is low in India. However, this mix is fast changing and the revenue mix is expected to be aligned to international trend. COMPANY AND BUSINESS OVERVIEW Adlabs Entertainment Limited is the brainchild of Mr. Manmohan Shetty who has been closely associated with the entertainment business in India. As one of the pioneers of the multiplex business in India, Mr. Shetty was instrumental in transforming the film exhibition business through India's first IMAX theatre and Adlabs chains of multiplexes that brought world class cinematic experience to the Indian audiences. Adlabs Entertainment Limited has now successfully created India's First & Only International Standard Entertainment Holiday Destination "IMAGICA", which includes a Theme Park, Water Park, Snow Park & a Luxury Hotel -Novotel Imagica Khopoli. Below are some of the achievements at Imagica: • India's first International Theme Destination; • India's first International Standard Theme Park; • Imagica Snow Park is India's Largest Snow Park; • Novotel Imagica Khopoli is India's first Theme park based Hotel; • OTM Award for Excellence - Most Promising New Destination Award; • TripAdvisor's Traveller's Choice Awards 2015; • India's Most Trusted Brands 2015 - Theme Park category; • TRA Research 2015 - India's Most Attractive Brands, Entertainment Category; • IAAPI Awards 2016 - Most Innovative Ride; • IAAPI Awards 2016 - Electronic Media - TV Channel; • IAAPI Awards 2016 - Print Media; • I For India - For the first time in Asia Pacific a simulation ride that gives flying experience over India's exquisite monuments and varied landscapes; • Mr. India-The Ride is India's first Bollywood movie integrated ride; • Nitro is India's Longest, Tallest & Fastest roller coaster; • Deep Space is India's first indoor high speed roller coaster; • Rajasaurus is India's longest flume ride; • Wrath of God is India's first attraction that is a blend of live theatre, special effects and multimedia; and • Aqua Loop is India's first water park loop ride. Imagica Theme Park was completed in a record time of 24 months and launched in April 2013. It is very conveniently located off the Mumbai-Pune Exbrssway, just 74 kms from Mumbai. Sbrad across a sprawling area of 132 acres, Imagica is a ONE STOP destination for NON STOP fun with an estimated daily capacity of 15,000 visitors. It offers a one-of-its kind experience with 25 rides. The concept and design of the theme park was done by the internationally acclaimed design consultant Peter Smulders of Attraction International. The rides and attractions have been designed and sourced from global industry leaders like Bolliger & Mabillard Inc., Switzerland, Zamperla Asia Pacific Inc., Italy, Sally Industries Inc., USA, E2M Technologies B.V., Netherland, Premier Rides, USA, Hafema Rides Gmbh, Germany and Santec Fabricators (India) P. Ltd. - part of the Sanderson Group, Australia. The Company also owns and operates a range of Food & Beverages (F&B) outlets at Imagica. These include Roberto's Food Court - a multi-cuisine food court with a separate Jain restaurant, Red Bonnet - an American diner-styled restaurant, Imagica Capital - an Indian buffet restaurant as well as Zeze bar and grill themed on an African Zulu village. There is also Armada - a cafe and bar modelled as a ship giving a panoramic view of the entire theme park. In addition to these, there are several kiosks dotted across the park. To enable visitors take back fond memories of the experiences at Imagica, we have six retail stores and numerous kiosks all over the park. The retail & merchandising on offer includes toys, apparel, bags, caps and mementos with a prominent Imagica branding based on rides and attractions at the park. The Company also sells Imagica merchandise on-line through its own website as well as other popular e-commerce websites. The Company has a strict quality and safety policy with all its vendors compliant with international standards and certifications like - ASTM, European or EN Standards. TUV SUD South Asia Pvt. Ltd. was engaged to carry out inspection, testing and installation certifications. Imagica Theme Park became fully operational on November, 2013. There was an immediate and overwhelming response as visitors were awed and amazed at the world-class and international standard of experience that they could now enjoy in India. In FY 2016, the annual number of visitors to Imagica was 15,54,199. On October, 2014, the Company launched its water park, adjacent to Theme Park. Inspired by the Greek island of Mykonos that is famous of its typical blue-and-white painted buildings, Water Park offers a range of 14 water slides and wave pools. The estimated daily capacity of Water Park is about 5,000 visitors. The water slides and the equipment at Water Park have been sourced from global industry leaders like Whitewater West Industries Ltd., Canada, Polin Dis Tic Ltd., Turkey and Neptune Benson (Defender Water Filtration Systems), USA. The Company's consultants and vendors have worked with many leading theme parks and water parks globally and have provided invaluable expertise in brining international experience in India. The positioning of Water Park has been primarily focussed on the youth and young party goer, Company's offerings are therefore, aligned to this positioning. Events that connect with the youth like Bollywood events, electronic dance music events, popular Indian and international DJs parties are held over the weekend. Accordingly, the F&B offerings also are primarily designed as 'grab and go' options. In addition, there is Ammos - a street styled, dine-in, multi-cuisine food court. Other F&B options include Sun Beatz - Pizzeria, Lebanese & Bar located next to the wave pool, Cones - offering a variety of ice-creams and sundaes, Sandy Sipps - offering a choice of juices, shakes and smoothies, and many more. In addition to the two parks, the Company is also promoting a 287 key hotel -Novotel Imagica Khopoli through a management agreement with AAPC India Hotel Management Private Limited (AAPC), a company of the Accor Group, which operates several hotel chains. The Company has also entered into a service agreement with AAPC for certain consultancy and design services. The first phase of Novotel Imagica Khopoli comprises of 116 rooms and was launched in September 2015 and the Company is extremely enthused by the performance of its Hotel Novotel Imagica. For 2015-16 the average occupancy of the hotel stood at a healthy 75% at an average Room ARR was Rs. 5800+. Novotel Imagica has been able to establish itself amongst the leaders in the MICE, Leisure and social event segments of the markets. This reiterate the Company's belief of establishing its position as a "Holiday destination". The Hotel has consistently generated an excellent customer feedback and reviews. Facilities include banquet halls, conference rooms, speciality restaurants, a gourmet bar, recreation areas, swimming pool, spa, kids activity areas and a fitness centre. The Company has also entered into a Revenue Sharing arrangement with ACME Entertainment, whereby ACME has constructed, installed, erected and is operating the Snow Park. The snow park has build upon the experience by adding a totally new option and augment Imagica's positioning as a ONE STOP ENTERTAINMENT destination. The Company has surplus land of approximately 138 acres, this land has been transferred to our 100% subsidiary Walkwater Properties, which has applied to the Government of Maharashtra for an approval for a special township. We plan to engage with reputed real estate players to develop a township on this land, and monetize it. Business Review The outstanding bank loan as on March 31, 2016 is Rs. 9,628.64 million. The said outstanding is post br payment done vide Initial Public Offer proceeds. Since April 2013, over 3.4 million people have visited the parks. While these numbers and guest feedback give us a good idea of their expectation and apbrciation of the product we have a long way to go in making this project every Indians must visit holiday destination. In FY 2015-16, the Company had launched "Happy Tuesday" offer which had an entry price of Rs.999 and this property and this offering has shown some tremendous traction. With this we are able to sample a segment of the population who are price conscious but are still aspirational. Now they got the opportunity to enjoy Imagica. So a normal dull, middle of the week Tuesday has transformed itself into a busy and buzzing day and the Company has seen great success and improved its capacity utilization tremendously. The Company launched its Hotel 'Novotel Imagica Khopoli' on September 16, 2015 with 116 rooms. The Company is pleased to inform that the hotel has got off to a great start with average occupancy of 75% in the first six months of operations. Novotel Imagica, within a short period of operations, has been able to establish it's niche in the leisure and social segments and has firmly established Imagica's position as family holiday destination. During the six months of operations till March 2016, Novotel Imagica, Khopoli has hosted over 150 corporates and 6 destination weddings. This is a sort of record in this industry and ARR has also shown steady improvement since launch. Novotel Imagica has garnered excellent customer feedback and reviews on TripAdvisor and other hotel review websites. In fact, Novotel Imagica within few months of operations has received an award for the best "New Hotel in the Upper Mid Segment Category" by HICSA which is the Hotel Convention of Southeast Asia in Delhi in the month of March, 2016. Imagica has worked on a new branding and positioning and have decided to merge the entire offering under a single brand of 'Imagica'. We feel that consolidating the Theme Park, Water Park and now the Snow Park under a single brand name Imagica will lead to an optimization of marketing cost and a much better brand recall. This will also facilitate focus penetration of Imagica brand in the non-catchment area with the philosophy of positioning Imagica as a holiday destination. We have also launched a new brand logo bodying the Imagica experience as "Imagica badi interesting jagah hai" The Company completed the Snow Park development in March, 2016 and thereafter conducted trial runs for the same. The Snow Park was commercially launched in April, 2016. The Snow Park area is built over 30,000 sq. feet and is the largest Snow attraction in India. The Snow Park has a capacity of 3,500 guests to 4,000 guests per day. The park will have daily nine sessions of about 45 minute each and each session can host about 400 guests. The Company has actively pursued every stream of potential revenue such as Food and Beverages, Retail, Advertising and Sponsorships, Weddings, and MICE and continue to believe that we are at the brink of a large potential in every stream. The Company has surplus land of approximately 138 acres, this land has been transferred to our 100% subsidiary Walkwater Properties, which has applied to the Government of Maharashtra for an approval for a special township. We plan to engage with reputed real estate players to develop a township on this land, and monetize it. KEY STRENGTHS OF THE COMPANY The Company's competitive strengths are set out below: • The Company is uniquely Positioned to Capitalise on the Increasing Propensity of Indians to Spend on Entertainment Favourable macroeconomic and demographic factors such as economic growth, rising disposable income, a growing young population, an expanding middle class and rapid urbanisation have resulted in the Indian population spending more on entertainment. With the rise in education levels and exposure to international trends, Indian consumers are willing to pay a brmium for quality entertainment. Imagica is the Only One Stop Entertainment Destination in India, designed to provide a wholesome and 'value for money' entertainment option for guests. The Company offers entertainment options for all age groups through a variety of rides and attractions, which the Company believes are comparable to and provide the international standards of experience that leading theme parks and water parks offer globally. Company's is offerings are also customised to Indian tastes. This positions Imagica to capitalise on the increasing number of Indian customers spending on good quality entertainment. • The Company is strategically Located in an Attractive Catchment Area I magica is located off the Mumbai - Pune Exbrssway. Currently, it attracts; guests from Mumbai, Pune and the rest of Maharashtra and Gujarat, which are some of the more economically developed areas in India. Mumbai is well connected to other large cities in India by air, road and rail with multiple flight options in a day. Further, Imagica is located in an area that experiences suitable weather throughout the year to spend a day outdoors. In addition, the majority of its rides, attractions and queuing areas in the parks are covered to avoid any inconvenience during the monsoon season. Rides and Attractions of International Quality Standards which are Customised to Indian Tastes and Preferences Imagica is attractively themed and deliver high-quality entertainment, aesthetic appeal, shopping and dining options. I magica has been designed by, an internationally acclaimed design consultant Attractions International for entertainment destinations. The rides and attractions for the theme park have been designed by and sourced from global industry leaders such as Bolliger & Mabillard Inc., Zamperla Asia Pacific Inc., Sally Industries Inc., E2M Technologies B.V. and Santec Fabricators (India) Private Limited, which is a part of the Sanderson Group. The water slides and equipment in the water park have been sourced from global industry leaders such as Whitewater West Industries Limited, Neptune Benson (Defender Water Filtration Systems) and Polin Dis Tic. Ltd. Sti. Imagica also follows high levels of park security and safety standards to offer a safe and injury free environment for the guests to enjoy the parks. Competitive Advantage through Entry Barriers The Company has ability to leverage the 'first-mover advantage' through Adlabs Imagica. There are significant barriers to entry in the business of theme and water parks in India and it is difficult to replicate a project of similar scale and size in India. Among the most important of these barriers is the need for significant capital expenditure to set up theme and water parks, the difficulty to identify and purchase large and suitable parcels of land on commercially viable terms and the long lead-time from the conceptualisation to the launch of rides and attractions. The Company believes that its location off the Mumbai - Pune Exbrssway, the large parcel of land owned by the Company, Its rides and attractions of international quality and standards and its qualified management and operations team provide the Company with a significant competitive advantage over any new park. The Company is a well-positioned Brand and Marketing Focus In our short operational history, the Company believes that it has been able to establish brand recognition in Mumbai, Pune and the rest of Maharashtra and Gujarat markets. The Company believes that it has been able to achieve this through a combination of factors: ? Delivering superior visitor experiences in the parks through its diverse offerings of rides and attractions and other entertainment options and thus, developing a brand recall through word of mouth publicity; ? Company has also actively focused on attracting school groups as it is believed that school children who visit the parks act as the Company's brand ambassadors and have the potential of bringing the entire family back on another visit; ? Dynamic and attractive pricing strategy to coincide with various events, festivals, seasons and holidays throughout the year; ? Existing well-established position of the 'Imagica' brand in the media and entertainment industry; and ? Engaging with various target groups through focused marketing, consisting of regular electronic, print and digital media campaigns and direct sales efforts. • Proven and Experienced Management Team and Execution Strength The senior management team includes experienced media and entertainment, marketing and consumer businesses executives, with an average tenure of more than 15 years in such industries. Mr. Manmohan Shetty is a well known entrebrneur in the media and entertainment business in India and has more than three decades of experience in consumer-facing entertainment businesses. OUTLOOK AND OPPORTUNITIES The all-round India growth story continues to remain strong and attractive. Both IMF and World Bank (WB) have brdicted the Indian economy to grow at 7.5% in 2015-16 and 2016-17. The key drivers of growth for the India economy are in place for a sustained and uninterrupted growth in the future. Both favourable macroeconomic factors as well as dynamic demographics indicate to a period of assured uptrend and growth in the Indian amusement parks industry. Against this positive and optimistic outlook of the economy, the outlook for the Company is extremely favourable and exciting, with a high potential for accelerated growth and expansion. The company is adopting the following business strategies to grow the business in the future: • Develop Adlabs Imagica as an Integrated Holiday Destination Currently, a significant majority of the guests are residents of the catchment area, Mumbai, Pune, rest of Maharashtra and Gujarat who make day-trips to our theme park off the Mumbai - Pune Exbrssway. With the launch of the hotel, Novotel Imagica and Snow Park, the Company intends to market Imagica as a multiple day holiday destination and attract guests for a longer stay. The Company intends to offer various cost promotion and combination packages of admission tickets to the parks and stay at the hotel to take advantage of cross selling opportunities. In addition, the Company aim to market its facilities as a suitable venue for hosting wedding receptions, parties, conferences and meetings and other corporate events. • Continue to Focus on Increasing the Number of Guests Hosted at the Parks The Company plans to increase attendance at the parks through the following strategies: ? Increasing awareness of its parks and 'Imagica' brand through effective media and marketing campaigns, aimed at various target groups including families, young kids, college students and young professionals. The Company also continue to reach out to a greater number of schools and corporates for increasing attendance at the parks; ? Offering a variety of ticket options and disciplined pricing and promotional strategies to coincide with events and holidays throughout the year. The Company also aims to follow a dynamic pricing model which will enable the Company to adjust admission prices for the parks based on expected demand and attract diverse segments of customer base; ? By periodically introducing new attractions, differentiating experiences and enhancing service offerings, the Company believes that word of mouth is the most important marketing tool and, therefore, the Company's primary business objective is to make the time spent by the guests in its parks as enjoyable as possible. We specifically focus on entrance and security procedures, queue management, cleanliness, quick availability of F&B products and retail merchandise to make the guests' experiences as comfortable and entertaining as possible; and ? Focusing on sales and marketing initiatives in the secondary catchment areas, such as the print campaign from time to time in major cities like Delhi NCR, Bangalore, Hyderabad and Jaipur, to attract tourists visiting the Mumbai - Pune region. Diversify Revenue Streams Sales of admission tickets comprised a significant portion of the Company's total income. Going forward the Company intends to increase its non-ticketing revenue through the following strategies: ? Focus on F&B and retail & merchandise operations by targeting the per capita spending of the guests. The Company believes that by providing its guests additional and enhanced offerings at various price points, the Company can increase spending in its parks. The Company will continue to innovate in its F&B offerings to cater to the diverse brferences of its guests. ? Monetise the crowd movement in the parks by offering sponsorship opportunities to advertisers for special events, naming rights for the rides and attractions, partnering in destination advertising and assisting in products and brand activations; ? With the completion of the hotel, the Company intends to position Imagica as a destination for varying customer requirements, including for entertainment, corporate meetings and off-sites and other social events; ? The Company aims to develop an emotional connect with its guests through its brands and characters developed by the Company, which the Company believes will provide with the opportunities to leverage its intellectual property portfolio, and to develop new media and entertainment options and to increase the sale of consumer products, in and outside Imagica. Increase Profitability and Achieve Cost Optimisation The Company believes that increased attendance at the parks and an increase in the per capita spending will allow the Company to make its business more profitable because of the relatively fixed cost-base and the high operative leverage involved in its business. The Company will continue to focus on F&B and retail and merchandise spending to improve its operating margins. With the commencement of operations of the water park, snow park and hotel, the Company will be able to offer more dynamic pricing combo offers to account for seasonal fluctuations in attendance. The Company also aim to achieve better cost optimisation through economies of scale by measures such as company-wide and centralised procurement and sourcing strategy and integrated marketing campaigns. In addition, the Company aim to benefit from shared services such as security, ticketing, F&B and general administration of the parks. Expand Existing Operations and Foray into New Geographies in India In addition to the ongoing development of the hotel, we aim to pursue other expansion opportunities at the parks. The Company intends to add three to four rides and attractions over the next five years, including one major ride or attraction every two years, at the parks. The Company intends to use the existing areas available inside the parks for these new rides and attractions. The Company also intends to set up integrated holiday destinations in other locations in India, either through parks owned and operated by us or through a partnership or a franchise model. The Company believes it should have two more parks apart from Mumbai park i.e one in south and one in north. The size and scale of the parks will be designed basis the market potential of that region and financial viability. PARK SECURITY AND SAFETY The Company was awarded with an ISO certified for Integrated Management Systems by Bureau of Indian Standards (BIS) for Imagica. Following is the list of ISO certifications awarded • Quality Management System- IS/ISO 9001:2008 • Environmental Management System-IS /ISO 14001:2004 • Occupational Health and Safety Management system - IS 18001:2007 The Company recognise park security and safety as one of our most important focus areas in ensuring the success of the parks. The park security and safety plan is based on three principles: being proactive, the utilisation of an optimum combination of technology and manpower and meeting international standards on security and safety. Some of the key features of the Company's security and safety plan are set out below: • Security Agency: The Company has engaged one of the leading security solutions providers in India for its security needs and have developed a security plan based on a study of threats and vulnerabilities. The scope of services provided by its security solutions service provider includes the development of, setting up and operating the security infrastructure in the parks, deploying security personnel and carrying out regular training for its employees for security related issues, particularly emergency response situations. • Identified Perimeters and Zones: The Company divided its parks into various layers with defined internal and external perimeters for effective monitoring and response. The Company has deployed access control measures at the identified entry and exit points to reduce trespassing and monitor crowd movement. The Company has also divided the parks into various zones to facilitate effective emergency response, evacuation and deployment of resources and manpower. • Command Centre: The Company's command centre has been planned as an integrated set-up, capable of monitoring and controlling the management of the parks and responding to all circumstances which may have an adverse effect on guest experiences. The functions of the Company's command centre include controlling and monitoring all access controls across the parks, including the entry and exit points and for the rides and attractions; coordinate the response to any situation that requires attention; operate the public address system which is designed for effective communication for functions such as crowd management; Company's security infrastructure consists of necessary equipment's such as metal detectors, explosive vapour and trace detectors, radio sets, forced entry resistant door system, panic buttons, hooters and retractable barriers, which have been deployed at vantage points across the parks. • Safety Procedures: The most important aspect of the Company's safety procedures is regular training and assessment of our ride operators and attendants to brvent accidents or injuries resulting from unsafe acts and conditions. In addition to monitoring for any hazard or unsafe condition, the ride operators carry out inspections at br-designated intervals and report any unsafe condition to the maintenance department for correction. We follow a more detailed inspection and monitoring procedure for some of the critical rides and attractions, such as the roller-coasters. The Company also engaged over 50 qualified lifeguards, who are on duty during the operating hours of the water park. • Fire and Medical Emergency Plan: The Company also has a combrhensive fire and medical emergency response plan. The Company installed smoke and heat detectors in its offices and indoor attractions and water sprinkler and fire hydrant systems and fire extinguishers across the parks. In addition, there is a team of fire-men stationed in the theme park throughout the operational hours. There is a medical centre in the parks including a five- bed ward, which is staffed by a team of one doctor and eight nurses to respond to any medical emergency in the parks up to such time that the guests are moved to the nearby hospitals. There are two ambulances which are deployed in the parks throughout the operational hours. MAINTENANCE The Company's maintenance team is responsible for the inspection, upkeep, repair and testing of the rides and attractions. The Company has appointed a safety officer as a member of each of its parks management team to supervise the maintenance and ride operations teams, and carry out regular audits and surprise inspections. Every ride and attraction at the parks is inspected regularly, according to daily, weekly, monthly, and annual schedules. The Company has formulated detailed maintenance guidelines and checklists for each of our rides and attractions with the objective of ensuring that the rides and attractions are operating within the manufacturer's criteria and that maintenance is conducted according to internal standards, industry best practice and standards, as well as the ride designer or manufacturer's specifications. The Company recently installed a networked enterprise software system which is used to plan and track all the maintenance activities. The maintenance system of some of the rides and attractions is also linked over VPN to the respective vendors to ensure effective monitoring, data sharing and resolution of issues, if any. All ride maintenance personnel are trained to perform their duties according to internal training processes, in addition to recognised industry certification programs for maintenance activities. The infrastructure maintenance function comprises upkeep, repair, brventive maintenance and improvement of the parks infrastructure. The Company obtains safety certifications from its vendors stating that the rides and attractions installed at the parks have been designed and manufactured in accordance with international standards such as the American Society for Testing and Materials, or the ASTM standard, the European, or the EN standard or the Deutsches Institut fur Normung e.V., or the DIN standard. The Company has also engaged TUV SUD South Asia Pvt. Ltd., a leading global technical services organisation to carry out inspection, testing and installations certifications for the rides and attractions. The Company also periodically engages the services of third-party maintenance audit agencies to inspect the maintenance procedures. RISKS • The business is seasonal in nature, and may be affected by weather conditions, school vacations, public holidays and weekends. The Amusement park industry is seasonal in nature. The parks could experience volatility in attendance as a result of school vacations, public holidays, weekends and adverse weather conditions such as excessive heat and monsoons. It is believed that attendance at the parks and revenues from F&B and retail and merchandise operations is, and will continue to be, higher during school vacations, public holidays and weekends. In addition, the water park and snow park is expected to generate higher revenues in the summer months. Conversely, there may be a reduction in revenues during the monsoon months. Further, unfavourable weather conditions such as forecasts of excessive rainfalls or heat may reduce the attendance at the parks. • Company's 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. The success of the parks depends substantially on consumer tastes and brferences that can change in often unbrdictable ways. The Company must adapt to these changes to meet consumer tastes and brferences. The Company carrys out research and analysis before opening new rides and attractions and often invest substantial time and resources to gauge the extent to which these new rides and attractions will earn consumer acceptance. Further, Company's success depends to a significant extent on discretionary consumer spending, which is heavily influenced by general economic conditions and the availability of disposable income. Actual or perceived difficult economic conditions and inflationary periods may adversely impact park attendance figures, the frequency with which guests choose to visit parks and guest spending patterns at the parks. Both attendance and total per capita spending at the parks are key drivers of the Company's revenue and profitability, and reductions in either can adversely affect the Company's business and results of operations. • I ncidents or adverse publicity concerning the Amusement Park industry generally could harm the Company's brand or reputation as well as negatively impact the Company's business. The Company's brands and its reputation are among its most important assets. Our ability to attract and retain guests depends, in part, upon the external perceptions of the parks, the quality of the parks and services and performance of the Company's operations team. The operation of the parks involves the risk of accidents, contagious, airborne or waterborne diseases and other incidents that may negatively affect guest satisfaction and the perception of the guests in relation to safety, health and security of the parks, which could negatively impact the Company's brand and reputation and its business and results of operations. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has internal controls commensurate with its size. It has also adopted standard operating procedures, policies and process guidelines. These guidelines are well documented with clearly defined authority limits corresponding with the level of responsibility for each functional area. They are designed to ensure that transactions are conducted and authorised within their framework. Further, the Company's reporting guidelines ensure that transactions are recorded and reported in conformity with generally accepted accounting principles. These guidelines are regularly reviewed and updated to meet the expectations of the current business environment. The Company's Code of Business Conduct lays down ethical standards expected from each of its personnel's and business associates in their day to- day actions. The Company's robust internal audit programme which works to conduct a risk-based audit not only tests the adherence to laid down policies and procedures but also suggests improvements in the current processes and systems. The audit program is agreed upon with the Audit Committee. Internal Audit observations and recommendations are reported to the Audit Committee, which monitors the implementation of such recommendations. Company had appointed M/s. Deliotte Haskins & Sells LLP as the internal auditor during the financial year 2015-16. SIGNIFICANT DEVELOPMENT IN HUMAN RESOURCES People are one of the key and critical success factors for the Company. The Theme Park and Amusement Park industry in India is in the nascent stages. As such to find skilled manpower having experience of the industry is challenging. The company has developed a very strong on-job training and development program, which cuts across the junior team members as well as the middle management layer. The senior technical & engineering team has been trained under supervision of global experts of theme park industry. The Company engaged these experts during the development and initial operations of the Park. Being located in the outskirts of Mumbai and Pune, we need to make sure that the employees are motivated enough to travel the distance for work. The Company provides employee friendly transport and local stay facilities for the same. Employee satisfaction is a top priority, and the Company ensures that all its employees enjoy a safe, healthy and progressive work environment at all its offices. The Company's HR team works cohesively with the employees to help them in their personal as well as professional development. The Company has a well- defined Code of Conduct that guides all employees in their interaction with the various stakeholders of the Company. The Company has a unique work-culture based on team building and bonding through cross-job training. As of March 31, 2016, the total number of permanent employees on the rolls of the Company were 879. CAUTIONARY STATEMENT This document contains statements about expected future events, financial and operating results of Adlabs Entertainment Limited, which are forward looking. By their nature, forward- looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, brdictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those exbrssed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the management's discussion and analysis section. |