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Last Updated : Dec 17, 2016 12:34 PM IST | Source: CNBC-TV18

Will repay debt by diluting stake or monetising assets: Adlabs

More than focusing on profits, Adlabs Entertainment would look to increase the footfalls, says Chairman Manmohan Shetty, Chairman.

Whenever a business is based on creative thinking there is always a risk involved said Manmohan Shetty, Chairman, Adlabs Entertainment in an interview to CNBC-TV18.

Talking about the outlook for the business going forward, he said more than focusing on profits they are working out how to increase the footfalls. The company, since its start, has changed its pricing strategy and have experimented with pricing, he said.

Demonetisation also has impacted their business because people usually prefer to spend cash, said Shetty. November and December is the peak season for them, he added.

When asked how they plan to repay debt, Shetty said they would look at either monetising their real estate or by diluting stake.


They would also be open to strategic partners coming in, said Shetty.

Below is the transcript of Manmohan Shetty and Pooja Shetty Deora’s interview to Mangalam Maloo on CNBC-TV18.

Q: Why would you get into a business just for the creative aspect when it is not giving that kind of returns to the investors, when you spoke about a business being good only if it returns to the investors? Any thoughts on that?

Shetty: When you create something new, you think out of the box and create which does not exist in this country, there is a element of risk, what you are taking whether this product will be liked by people or not. We are in that little situation that whoever comes here likes the product so well and almost four million people have seen the park since it opened, we have that many people who are speaking about it as word of mouth which is good.

Q: As more people talk about it, there should be more people coming as well. In the first half of this year, if footfalls are down 21 percent.

Deora: Yes but we have also done a lot of pricing. We have changed our pricing strategies from the first year to now about two or three times. And we have had to experiment and see where is the sweet spot, what are people taking to. So, you have to also understand that when you are setting up a new business and you are creating new benchmarks, you have to allow room for some experimentation.

Q: Can we expect the company to turn profitable in the very near foreseeable future?

Shetty: We are still hoping on the footfall to go up, we are trying to maintain the price strategy as she just mentioned and the footfalls have to go up. Now what will happen is in case the footfalls do not go up at the end of this quarter, we probably will reduce the prices and see how it is going to work.

Q: But what happened in this quarter is a massive demonetisation scheme which was announced by the government. What kind of impact would you think would happen to someone like you?

Shetty: This is an unexpected Tsunami came, because otherwise our November-December is the largest footfall and highest priced time. We have around 40-50 percent pay in cash. That has reduced a lot. It is in effect. But I do not know. As all other businesses are affected, we are also affected.

Deora: It has affected the wedding market, it has definitely affected us, the quantum of which we cannot define as yet. This is a very important quarter for us. We will know by the end of December what our projections were and what we have landed up at.

Q: So, how far does this push your timelines by, the expected things that you had to do, the debt repayment which was supposed to come by from the start of FY19? Does this push things off the course a little bit?

Shetty: It should. All the efforts as we said, we are working it out, but also, we have assets which is not in the core business in the park. We have a hotel, we have real estate, areas here which will try to monetise in a different form in the course of time.

Q: You had a tie-up with Rustomjee, any development on that?

Shetty: We are just waiting for the few permissions to come to start and we have signed up with them.

Q: What kind of numbers are you internally working with for the real estate monetisation?

Shetty: I do not know. It is too early to say. We have 170 acres to be exploited.

Q: So, Rs 170 crore at least?

Shetty: It will be much more than that.

Q: Between Rs 300 and Rs 500 crore?

Shetty: Possible. Why not?

Q: When can we expect the debt to be repaid and what kind of debt?

Shetty: What kind of efforts we are trying to do is one is the footfalls and the price and how to achieve that turnover and the earnings before interest, taxes, depreciation and amortisation (EBITDA) margins. The other one is can we monetise the assets and reduce the debt so that we will be comfortable. Third is also, if we get a strategic partnership which is only financial or the people who are in the field, we are also looking for that.

Q: So, are you in talks with the likes of Disney, Six Flags or any such strategic partners?

Shetty: I do not know, we have some agencies worked out who works on mergers and acquisitions (M&A). They are working on a strategic partnership kind of a thing. We will see the opportunities and decide on that. I have no problem in terms of larger partner coming in and taking over.

Q: Any timeframe as far as equity raising is concerned?

Shetty: We want that to happen as early as possible, but that is not in our hand and people are working on it. It happens as soon as possible.

Q: So you are looking to raise some capital, at the cost of diluting your stake as well?

Shetty: Diluting stake or monetising the assets, both ways.

For full interview, watch accompanying videos...

First Published on Dec 13, 2016 04:51 pm