Waterways Leisure Tourism IPO: Expensive ticket, uncharted oceans ahead

Domestic ocean cruise operator Waterways Leisure Tourism (Cordelia Cruises) is aiming to raise ₹585 crore via its IPO, which opens on June 23. It is a completely new issue, with no offer-for-sale component. The company is promoted by NRI Rajesh Chandumal Hotwani and Global Shipping and Leisure (with a registered office in Mauritius). The promoters hold a 99.27 per cent stake pre-IPO and would hold about 89 per cent post-IPO.

The company proposes to use about $50.4 million, or ₹480 crore, from the IPO proceeds to fund deposits, advance lease rentals and charter hire payments through its step-down subsidiary, Baycruise Shipping and Leasing (IFSC). The remaining IPO proceeds are earmarked for general corporate purposes.

Baycruise IFSC, incorporated in November 2024 and based in GIFT City, will lease two vessels, Norwegian Sky and Norwegian Sun. The total lease rental for each vessel is $160 million, or about ₹1,523 crore, per RHP. The company has already paid a total of $22 million from internal accruals ($16 million for Norwegian Sky, $6 million for Norwegian Sun). The balance of lease rentals would have to be paid over time by the company.

The IPO is a bet on whether a one-vessel operator can quickly become an efficient three-vessel platform without hurting occupancy, yields or margins. The small-cap company has first-mover advantages in a niche domestic cruise market, but the issue is aggressively priced, even assuming successful execution rather than current earnings.

The risk-reward, therefore, appears better suited to investors who can wait for post-listing evidence of demand absorption and cash-flow stability, rather than commit at the IPO stage today.

Waterways Leisure Tourism currently runs a single cruise vessel, the 35-year-old ‘MV Empress’ with a passenger capacity of 2,005 guests (796 cabins), which has been in operation since September 2021. The company has outsourced cruise operations, including crewing, hospitality, and entertainment, to third-party vendors.

The company offers premium cruise vacations across 7 domestic and 7 international destinations with an Indian-centric onboard experience. For FY25 as well as FY26, over 90 per cent of revenue came from cruise ticket sales and the rest from onboard revenues.

The single-vessel company’s occupancy rate was 85 per cent in FY26 (down from 91.6 per cent in FY25), which is higher than the listed multiple-property luxury hotels in India (70-75 per cent) but lower than 100 per cent rates reported by mature global cruise operators (with 40-90 vessels). The company’s management has attributed the dip in occupancy rate to the Indo-Pak war and major flight cancellations.

Revenue per passenger per day for Waterways Leisure, including onboard spending, was ₹12,036 in FY26 (almost flat vs FY25). This is much lower than global cruise operators such as Carnival Corp. and Royal Caribbean for their last reported full financial year. Though not directly comparable, listed pure-play luxury hotel firms such as EIH and Leela generated 50-60 per cent higher revenue per available room (RevPAR) in FY26.

The company reported 20 per cent EBITDA margins in FY26 (vs 36 per cent in FY25 and 25 per cent in FY24). This is lower than the 27-38 per cent adjusted EBITDA margins reported by global cruise operators and also lower than those of listed luxury hotel chains (as per Bloomberg data). One of the main reasons the company’s EBITDA margin decreased in FY26 was a structural change in vessel charter arrangements. Consequently, major operational costs previously borne by the promoter were recorded as direct operating expenses in FY26.

As of FY26, it had short- and long-term borrowings and lease liabilities totalling ₹118 crore, and cash & cash equivalents totalling ₹63 crore.

Cordelia Cruises accounts for nearly 79 per cent of the market share in value terms in FY25, per RHP. However, the overnight ocean and coastal cruise industry in India was estimated at just Rs 732 crore, a niche and small market.

The market grew at an 8 per cent CAGR over the FY20-25 period, partly affected by Covid disruptions. Still, the future growth projection of 20-25 per cent for the FY26-31 period mentioned in the RHP is quite ambitious, even if we account for Waterways Leisure Tourism’s expansion plan and government initiatives to boost cruise tourism in India. Total cruise passenger CAGR for CY23-25 showed just 1.2 per cent growth.

That being said, the company, to accommodate demand and offer more diverse itineraries, is adding two vessels, Norwegian Sky (2,004 guests/1,002 cabins) and Norwegian Sun (1,936 guests/968 cabins) to its fleet. It intends to introduce cruises aboard Norwegian Sky by FY2027 and Norwegian Sun by FY2028. The new vessels are around 23-25 years of age. The vessels are currently pending delivery and are not yet operational.

The two new vessels are broadly the same size as MV Empress. So the business case is simple - replicate the current ship economics across two more ships. Mention whether the routes will be different. Revenue will almost certainly rise if new vessels are commercialised. The risk is whether occupancy and margins will hold. At some point over the next 18-20 months, the current capacity will triple, but lease rentals will also jump, and the company will have to absorb this supply with demand, or else yields will get compressed. It remains to be seen how the company handles this extra capacity. Note that a new cruise vessel needs a minimum of 12-18 months, or one to two full sailing seasons, to reach an 80-90 per cent occupancy on a sustainable basis.

At the upper end of the IPO price band, Waterways Leisure Tourism is priced at 112x P/E based on FY26 reported PAT (Rs 52 crore). Shares of much larger global peers trade at 12-36x P/E based on the trailing twelve-month period, per Bloomberg. On an EV/EBITDA basis, the issue is similarly demanding at 50x FY26 EV/EBITDA (45x post-issue cash-adjusted) versus 9-24x for global cruise peers. Waterways Leisure Tourism is also expensive compared to domestic listed entertainment parks and hotel stocks.

While one can argue that, at FY26 unit economics, a mature three-vessel fleet could generate around ₹1,700-1,900 crore in revenue, and EBITDA could move towards ₹325-375 crore (19-20 per cent) by FY29-30. But current valuations ignore execution risks. Investors are being asked to pay a valuation for it today as if execution would be absolutely clean and smooth.

A better approach is to track the company after listing and watch three things: occupancy after Norwegian Sky enters service, revenue per passenger cruise day, and cash strain from lease commitments. If these hold up, the business may become investable later. At the IPO stage, the valuation already prices in a successful three-vessel journey, while execution risk lies ahead.