Should long term investors bet on Waterways Leisure IPO?

ET Intelligence Group: Waterways Leisure Tourism, a domestic ocean cruise operator, plans to raise ₹585 crore through a fresh issue to fund its subsidiary’s lease payment and general corporate purposes. The promoter group’s stake will fall to 89.3% after the IPO from 99.3%. The company covers domestic destinations including Mumbai, Goa, Kochi, Chennai, Lakshadweep, Visakhapatnam, Puducherry, and select international destinations such as Sri Lanka, Thailand, Singapore, and Malaysia. Around two-third of the passengers come from Mumbai, signaling high dependence on one port. It has recorded negative cash flow from operations in FY26 due to lease payments. It also has a high attrition rate, which has increased to 43% in FY26 from 33% in FY24. The business is susceptible to risks arising from security threats and regional conflicts Given these factors, investors may wait to see clarity in financials.

Business

Incorporated in 2020, Waterways Leisure Tourism currently operates a single cruise vessel, the ‘MV Empress‘, with a passenger capacity of 2,005. It has acquired two new cruise vessels on lease, which will be introduced in the current and next fiscal years with a combined capacity of up to 3,940 guests. The company outsources maintenance, operations and management of gaming arcade, spa, and casino to third-party providers, with nearly 21% of its revenue allocated to these services. Average ticket price grew 9% annually to ₹10,979.9 and revenue per passenger rose 7% annually to ₹12,036.4 between FY24-26.

Financials
Revenue declined 2% year-on-year to ₹579.7 crore while net profit tumbled 69% to ₹52.1 crore in FY26. Operating margin before depreciation and amortisation contracted to 20% from 36% during the period. Over 90% of revenue comes from cruise ticket sales. Passenger load factor moderated to 85% in FY26 after improving from 78.5% in FY24 to 91.6% in FY25. Since fuel costs account for 17-20% of revenue, fluctuations in fuel prices may pressure margins, as the company may not be able to fully pass on increases through ticket pricing.Valuation
Considering the post-IPO equity and net profit for FY26, the company seeks a steep price-earnings (P/E) multiple of up to 112. It does not have a direct Indian-listed peer. The company has given a mix of hotel and entertainment peers, which have P/E between five and 41, which includes companies such as Taj GVK Hotels & Resorts, Juniper Hotels, Samhi Hotels, Lemon Tree Hotels and Wonderla Holidays.