Wednesday, May 30, 2012


Incorporated in 2003, Talwalkars Better Value Fitness Ltd (TBVFL) is the largest fitness chains in India offering a diverse suite of services including gyms, spas, aerobics and health counseling under the brand “Talwalkars”. It has pioneered the concept of gyms in India and today is a recognized name in the health and fitness industry. The company has grown rapidly since its inception and as on date operates 128 health clubs in 68 cities belonging to 18 states of the country serving over 1,25,000 members.

Pan India presence: Holds highest market share in the Organised health club market
TBVFL has pan India presence and holds highest market share in the organised health club market in India (~ 10%). In a fragmented health and fitness industry, where the demand for quality services is high while the supply is largely unorganized (primarily from singly city operators) and non-standardized, TBVFL has an edge over its peers.

Zero Capex model of “HI FI” gyms: results in accelerated expansion
The newly launched “HIFI” format has accelerated TBVFL’ penetration into the smaller markets. With a small sized format, “HI FI” health club can be rolled out in 8-10 weeks against 14-16 weeks for a typical “Talwalkars” health club. For FY13E, management has guided for ~25-30 additional gym roll out (including owned gyms/subsidiaries, franchises and JVs) taking the total number of gyms to ~160.

Focus on Franchisee/subsidiary model to improve return ratios
TBFVL is now focusing on adding more franchisees and also adopting a JVs/subsidiary model which we believe will result in lower capex (due to 51% holdings in subsidiary health club) and improve return ratios (as TBVFL receives a royalty of 6% of revenues for 1st 3 yrs which is 8% thereafter).

Broaden its scope from being a gym player to a fitness player: “Nu Form” Gym Studios
TBVFL has broadened its scope from being a gym player to a fitness player by introducing ‘Nu Form’ Gym studios (high product EBITDA) with a focus on weight loss using the EMS (Electric Muscle Stimulation) method. “Nu Form” is priced at a significantly higher premium for people who are more conscious of weight loss than only of health and fitness in gyming. Currently 6 ‘Nu Form’ Studios are operational in Mumbai. “Nu Form” studios opened in April 2012 received a great response with ~140 members in less than one month of its inauguration.

Consistent financial performance

  •  Number of Health Clubs has increased at a CAGR of 28% over FY07-FY13E.
  • Number of Members has increased at a CAGR of 29% over FY07-FY13E.
  • Achieved 4 year CAGR (FY’08-12) of 30% in Revenues, 35% in EBITDA & 44% in PAT.
  • The company continues to maintain debt equity of ~ 1:1. The company has properties which has current market values considerably higher than the book value.

At the CMP of `159.50, the stock is trading at 10.9x its FY14E EPS of `14.68. We recommend BUY on the stock with a 12-18 months target price of `220, providing an upside of 38% from the current levels.

To read report in detail: TBVFL
To read full report: TBVFL