On to the business itself – Talwalkars own and operate gyms in India – in a market that is largely dominated by unorganized sector – Talkwalkars has established a brand name for themselves, and people associate them with a premium gym. They have been in the gym business for a long time now, and the first gym was set up by the late Mr. Vishnu Talwalkar in 1932 in Mumbai. Currently, Talwalkars operate 58 health clubs in 28 cities with 55,000 members. The chain has been growing of late with revenues of Rs. 594.22 million in 2009, Rs. 384.98 million in 2008, Rs.222.88 million in 2007, and Rs. 102.54 million in 2006. The company has turned in a profit for all those years too, with Rs. 56.87 million last year, Rs. 45.17 million in 2008, Rs.10.94 million in 2007 and Rs.4.20 million in 2006.
Object of the Talwalkar IPO
Talwalkars is coming out with this IPO to raise money to repay their existing debts, and fund future expansion. They have earmarked Rs.502.20 million to fund expansion, and Rs. 205.92 million to repay existing debt. They want to add 27 health clubs by the end of 2011, and these IPO proceeds will help in that.
What caught my eye was that they were raising these funds to pay off unsecured debts, even when the balance sheet shows that they have secured loans of Rs.509.28 million as on March 31 2009, as against unsecured loans of Rs.303.34 million on the same date.
The fact that most of these unsecured loans are granted to the company by promoter groups goes a long way in explaining this action.
These were some interesting things that caught my eye while looking at the Talwalkar IPO, and will hopefully help you make a final decision when you consider this IPO.
FY 09, our revenue was Rs 59 crore and we expect at least Rs 70 crore in FY 10. We are growing fast and aiming for a Rs 125-130 crore revenue this fiscal," the company's Managing Director & CEO, Prashant Talwalkar, told reporters here.
The company is presently in the process of declaring its FY 10 result, Talwalkar said.
The company has grown at a compounded annual growth rate of 80 per cent over the last three years and sales turnover has shot up from Rs 10 crore in 2006 to Rs 59 crore in 2009.
Talwalkars presently has 58 health centers with more than 55,000 members pan-India. The company plans to open 32-35 more centers by the end of this fiscal (FY 11).
"We will invest Rs 50 crore to set up 27 more health clubs in Tier I and II cities by the end of the current fiscal," he said.
"We have built a strong brand equity and market leadership in the fitness industry in the country. Our success over the decades leads us to believe that we can replicate our business model and take our health clubs to overseas market as well," Talwalkar said.
The company plans to issue 60.5 lakh equity shares through the issue. The price band has been fixed at Rs. 123-128 a share. The issue will constitute 25.09 percent of the fully diluted post issue capital of the company. The qualified institutional buyers have been allotted 50 percent of the shares, high net worth individuals 15 percent and retail 35 percent.
The IPO had attracted bids for over 28 times the number of shares on offer. While institutional investors subscribed 35.42 times to the shares on offer, retail investors sought to buy 8.43 times their allotment.
The initial public offer had received robust demand from institutional, as well as non-institutional and retail investors.
The firm's IPO of 60.5 lakh shares was opened for subscription between April 21-23 at a price band of Rs 123-128 each
Talwalkar ipo Grey market price
Talwalkars better value fitness ipo issue price is Rs128 and grey market price is Rs165- 170
Talwalkar ipo scuscribed total 28.39 times with Retail 8.4 times and Non Institutional Investors 51.45 times. so sell on first day near rs170 and buyback again for Rs 110/ 120 in6 months
The company has also entered into arrangements with established local fitness operators to accelerate gym ramp-up in specific locations. For instance, it has formed JV with Pantaloons Retail (India) to promote mall-based gymnasiums in India. The strategy is to leverage the large number of daily footfalls in Pantaloon Malls as potential clientele. The health clubs under this format are bigger in size and have more number of equipment. Currently it owns 6 gyms named 'Fit & Active' through this JV viz, one each at Mumbai, NCR, Nagpur, Siliguri (WB) and two at Bangalore.
Moreover, the company through Denovo Enterprises owns health clubs at Indore and Jaipur while the company has also entered into an agreement with Equinox Wellness to own a health club at Kolkata. The company has five clubs under franchisee model with two each in Delhi and Nagpur and one in Mumbai.
The company has signed a Memorandum of Understanding (MoU) for a JV with Life Fitness India to set up 4 gyms in Pune. This gives the former a compulsory right to buy out these 4 gyms on March 31, 2013 and also an option to buy the existing 4 gyms currently operated by them.
The company offers three product/services: A) Fitness Training which includes personal exercise program, body sculpting and body shaping. B) Nutrition Centre which includes weight loss program, weight maintenance program and weight gain program. C) Value Add-ons which includes spa & massage, aerobics, spinning and steam & sauna bath.
In 2009, the company established a 7500 sq. ft. training academy at Thane, to impart training to fitness trainers both newly recruited as well as the existing staff. The course duration typically ranges from 30-45 days. A significant part of the training is focused on the nuances of fitness, incorporating both practical and theoretical aspects covering weight training, cardio vascular fitness, and nutrition
The company operates in a highly competitive market and face stiff competition from other players operating both in organized and un-organized sectors. Also big foreign players have also entered the Indian market, which can give tough competition to the company.
A group, controlled by Mr. Rahul Talwalkar, Mr. Rohit Talwalkar and Mr. Amber Talwalkar all being nephews of Mr. Madhukar Talwalkar, operates gymnasiums under the company 'Talwalkars Fitness Solutions Pvt Ltd' (TFSPL). They are operating their 13 gymnasiums at various locations namely Mumbai, Baroda, Ahmedabad, Raigad, Thane and Nasik. This group owns and operates gyms under the same or similar name and can claim the history of the brand
| Talwalkars Better Value Fitness : IPO Highlights | |
| No. of shares on offer (lakhs) | 60.5 |
| Price Band (Rs) | 123-128 |
| Post issue equity (Rs crore) | 24.12 |
| Post-issue promoter stake (%) | 59.49 |
| Issue open date | 21st April 2010 |
| Issue close date | 23rd April 2010 |
| Listing | BSE, NSE |
| Rating | 45/100 |
| Talwalkars Better Value Fitnes: Financials | |||||
| Particulars | 0912(09) | 0903(12) | 0803(12) | 0703(12) | 0603(12) |
| Net Sales | 44.08 | 52.97 | 34.14 | 19.86 | 9.23 |
| OPM (%) | 39.7 | 32.2 | 39.4 | 30.5 | 34.6 |
| OP | 17.49 | 17.07 | 13.45 | 6.06 | 3.20 |
| Other Income | 0.29 | 0.22 | 0.29 | 0.14 | 0.09 |
| PBDIT | 17.78 | 17.29 | 13.74 | 6.20 | 3.29 |
| Interest | 6.73 | 8.00 | 4.34 | 2.78 | 1.74 |
| PBDT | 11.06 | 9.29 | 9.40 | 3.42 | 1.55 |
| Depreciation | 4.49 | 4.57 | 2.27 | 1.52 | 0.91 |
| PBT before EO | 6.56 | 4.71 | 7.13 | 1.90 | 0.64 |
| EO: Profit/Loss on asset & compensation for loss of business | 0.00 | 2.80 | -0.05 | -0.10 | 0.00 |
| PBT | 6.56 | 7.52 | 7.08 | 1.80 | 0.64 |
| Tax | 2.27 | 1.83 | 2.56 | 0.71 | 0.22 |
| PAT | 4.29 | 5.69 | 4.52 | 1.09 | 0.42 |
| EPS (Rs) | 2.4 | 1.5 | 1.9 | 0.5 | 0.2 |
| Annualised on post-issue Equity of Rs 24.12 crore; | |||||