Talwalkars - Centrum 24032015

INDIA
Buy
Talwalkars Better Value Fitness

Company Update
Retail
24 March 2015
From fitness to wellness
Target Price
Rs465 Key Data
CMP*
Rs353 Bloomberg Code
We are impressed by TBVFs well-calibrated steps to transform itself from fitness to

a wellness player, after a phase of setting standards in the gym industry, and
reiterate Buy with TP of Rs465. Our bull-case valuation based on global/Indian
deals at Rs605 (5x FY17E EV/Sales) implies FY17E PE of 20x. We believe that the
company can continue to surprise positively on revenue and profitability in the
near term with: 1) Rising contribution from value added services; 2) Focus on the
wellness quotient through Reduce and products like NuForm; 3) Entry into
premium gyms, and aggressive gym rollout. Club business in partnership with
David Lloyd could enhance the upside.
Upside
31.7% Curr Shares O/S (mn)
26.2
Previous Target
Rs465 Diluted Shares O/S(mn)
26.2
Previous Rating
Buy Mkt Cap (Rsbn/USDmn)
9.3/148.5
To expand market share in organized fitness industry: We expect Talwalkars to

expand its market share in the organized fitness industry which is mere 27.5% of the
total 1234 fitness centres in India. Talwalkars has ~44% market share in the
organised fitness industry with 150 fitness centres (and can potentially have 300
centres by FY20). TBVF has also started addressing the top of the pyramid with entry
into the premium gym segment which can add significant value. First premium gym
in Hyderabad gym got an excellent response with ~700 members within first 2
months of launch with ~30% share from value added services. It may also consider
M&As to increase gym count in the near term given subdued economic sentiment.
Set to transform from fitness to a large wellness player: The company has
migrated from being a gym to a fitness company with services/products such as
Reduce, NuForm, Zumba in the past 1 year. It has launched a unique, value added
Transform program a combination of NuForm and Reduce. Launch of Transform
in more than 150 centres will lead to higher realisation and return ratios. The
company should further transform itself to a wellness player with entry into the spa
and dietary supplements segments with potential partnership with global leaders in
the space to reduce the time to market and maintain its leadership across services.
With this, it will have a presence across the value chain in the wellness industry.
Partnership with David Lloyd to offer significant upside in club business: TBVFs
tie-up with David Lloyd, a European premium health sports and leisure club chain
for targeting gated communities, high-end residential townships and corporate
campuses, can be a huge opportunity in the club business given low penetration
levels and increasing urbanisation. We believe the company will capitalise further as
the management has the vision to expand to multiple cities in the next 3-5 years
creating significant shareholder value. David Lloyd, incidentally, was valued at
830mn by acquirer TDR Capital in 2013.
Valuations & Risks: While TBVF has already begun to re-rate, we believe the stock is
significantly undervalued: global fitness companies are trading at an average of 18x
FY16E PE and 15x FY17E PE, while Indian retail companies trade at 20x FY17E. Global
and Indian deals in the wellness industry are happening at 4-7x EV/Sales. Based on
global/Indian deals, we believe stock can trade at Rs605 (5x FY17E EV/Sales), an
implied FY17E PE of 20x while in our base case scenario we value the stock at Rs465.
Key risks are slower than expected growth in value added services and high capex.
Y/E Mar (Rsmn)

FY13
FY14
FY15E
FY16E
FY17E
Price Performance (%)*

1M
6M
1Yr
TALW IN
5.6
72.3
131.3
Nifty
(2.3)
6.7
31.7
TALW IN
52 Wk H / L (Rs)
410/152
5 Year H / L (Rs)
410/104.2
Daily Vol. (3M NSE Avg.)
295702
*as on 23 March 2015; Source: Bloomberg, Centrum Research
Shareholding pattern*
(%)
Dec-14
Sep-14
Jun-14
Mar-14
Promoter
47.7
53.4
53.4
54.8
FIIs
11.3
10.8
10.5
10.4
DIIs
6.7
5.9
7.9
7.7
34.3
29.9
28.2
27.1
Others
Source: BSE, *as on 19 March 2015
Centrum vs. Bloomberg Consensus*

Particulars
(Rs mn)
FY16E
FY17E
Centrum
BBG
BBG
Var (%)
Sales
2,866
2,878
(0.4)
3,429
3,467
(1.1)
EBITDA
1,519
1,460
4.0
1,839
1,731
6.2
617
546
12.9
807
664
21.5
PAT
Var (%) Centrum
Bloomberg Consensus*
BUY
SELL
HOLD
Target Price
(Rs)
350
Centrum
Target
Price
(Rs)
Variance
(%)
465
32.9
*as on 23 March 2015; Source: Bloomberg, Centrum Research Estimates
Ankit Kedia, ankit.kedia@centrum.co.in; 91 22 4215 9634
Revenue
YoY (%)
EBITDA
EBITDA (%)
Adj. PAT
YoY (%)
FDEPS (Rs)
RoE (%)
RoCE (%)
PE (x)
EV/EBITDA (x)
1,509
1,873
2,312
2,866
3,429
26.4
24.1
23.4
24.0
19.6
726
927
1,226
1,519
1,839
48.1
49.5
53.0
53.0
53.6
301
366
483
617
807
38.5
21.9
31.8
27.8
30.9
11.5
14.0
18.4
23.6
30.8
17.1
16.3
18.5
20.0
21.8
11.2
11.0
12.7
14.1
16.3
30.8
25.2
19.1
15.0
11.4
14.4
11.9
9.0
7.2
5.7
Source: Company, Centrum Research Estimates
Centrum Equity Research is available on Bloomberg, Thomson Reuters and FactSet
Set to capture significant share in the Indias wellness industry

Talwalkars Better Value Fitness is well positioned to capture a substantial pie in the Indian wellness
industry which had a market size of Rs680-720bn in 2013 and is set to grow at a CAGR of 15-17% over 3
years to Rs1.1trillion by 2015 according to FICCI-PwC Wellness Report. Beauty care industry including
salons (35%), cosmetic products (60%) and beauty treatment (5%) are expected to grow by 17-19% to
be Rs455-490bn industry by 2015. Health & wellness food and beverages will grow the least at 14.5%
while Alternate therapy will grow at 10-15%. Fitness and slimming market is set to become Rs100bn
industry and grow by 18-25% over 3 years.
Exhibit 1: Indian Wellness industry market size
(Rs bn)
Beauty Care
Health & Wellness food and beverages
Fitness & Slimming
Rejuvenation
Alternate Therapy
Total
2012
2015E
3 years CAGR (%)
285-290
170-180
60
7-8
160-180
680-720
455-490
270
100-115
11-12
210-270
1050-1150
16.9-19.1
14.5-16.7
18.6-24.2
16.3-14.5
9.5-14.5
15.6-16.9
Source: FICCI PwC Wellness Report 2013
Exhibit 2: Share in health, wellness foods and beverages
70
55
50
60
40
50
30
22
20
(%)
(%)
60
Exhibit 3: Share in beauty care segment
18
10
60
40
35
30
20
10
0
Fortified foods
and beverages
(FFB)
Dietary
Naturally healthy Better-for-you
supplements
(NH) products (BFY) products
Source: FICCI-PwC Wellness Report 2013, Centrum Research
0
Beauty Centres
Cosmetic Products
Beauty Treatments
Source: FICCI-PwC Wellness Report 2013, Centrum Research
In the Indian fitness & slimming market, fitness services such as gymnasium comprise 45% (Rs30bn)
and is under-penetrated with less than 5% penetration of the urban population. Fitness equipment is
20% of the market with institutional segment contributing to the bulk of current demand. However,
future demand is expected to be driven by the home segment. The high-priced segment is dominated
by international brands sold through Indian distributors such as Cardio Fitness, Cardiomed and Proline
Fitness with Indian manufacturers catering primarily to the low-priced segment. Slimming services
have a 20% market share and is growing at 20-25% in a highly fragmented market. Slimming products
account for 15% of the market and include meal-replacement slimming products and weight-loss
supplements with key growth drivers being increased availability through organised retail channels.
Exhibit 4: Fitness & Slimming market in India

50
45
45
40
35
(%)
30
25
20
20
20
15
15
10
5
0
Slimming Products
Slimming Services
Fitness Equipments
Fitness Services
Source: FICCI PwC Wellness Report
Global health club industry was worth $78.1bn in 2013 according to IHRSA 2014 report with total
membership growing to 138mn. According to the report, India accounts for less than 0.7% of the total
health clubs worldwide and 0.3% of the total members.
Exhibit 5: Global Market size
Continent
Industry Size (USD bn)
Total Clubs
Total Members (mn)
Avg members/club
Rev/club (USD mn)
Europe
North America
Asia
-India
Australia
South America
Africa
32.9
25.0
12.0
0.5
1.8
6.2
0.2
49197
38400
19104
1234
2700
53617
2282
44.9
58.6
15.5
0.4
1.9
15.3
2.6
912
1,526
811
357
704
285
1,150
0.67
0.65
0.63
0.43
0.67
0.12
0.09
Total
78.1
165300
138.7
839
0.47
Source: IHRSA 2014, Centrum Research
To expand leadership in the organized fitness industry

The company is set to expand its market share in the organized fitness industry which is mere 27.5% of
the total 1234 fitness centres in India. It has ~44% market share in the organized fitness industry with
150 fitness centres and is targeting 250 centres in the next 3 years. With its focused approach to
having a pan India presence in 78 cities, it will extend its reach over competition in the medium term.
Organized industry is slowly increasing its share with demand for quality fitness centres. Increasing
incidence of lifestyle diseases will propel the demand for fitness related products and services as more
and more people become health conscious. This will make people proactive, taking corrective action
for a healthy and fit life.
Exhibit 6: Leader in the Indian organised fitness industry
Unorganised
43.9%
Talwalkars
Golds Gym
27.5%
72.5%
26%
Fitness One & Pink
12.6%
Snap Fitness
12%
5.5%
Others
Source: Talwalkars presentation, IHRSA2014 global report, Company website as on Nov 2014
Aggressive rollout plan

The company has aggressive expansion plans over the next 5 years with gym counts expected to
double by FY20. From the current 150 gyms we expect the company to increase the count to 300 gyms
by FY20E in our bull case scenario. The share of owned gyms is expected to fall from 70% in FY15 to
55% in FY20E. The company will get aggressive in adding subsidiary and HiFi gyms which will have
lower capex requirements. Coupled with this, for the first time in FY15, it has opened premium gyms
catering to the top of the pyramid population.
Exhibit 7: Aggressive rollout plan
500
450
400
153
(Centres)
350
133
300
93
6
250
200
150
100
50
0
11
0
44
11
0 7
67
10
6 7
6
6
87
7 7
16
84
94
FY10
FY11
FY12
FY13
NuForm / Transform
Premium gyms
95
6
13 7
19
23
100
43
6
26
30
33
36
115
125
113
6
7
40
42
137
6
7
6
7
47
48
149
7
54
54
162
FY14 FY15E FY16E FY17E FY18E FY19E FY20E

Licensed Franchaisee Subsidiary Hi-Fi
Owned
Source: Company, Centrum Research
Follows low capex and high RoI business model

To aggressively roll out and explore untapped opportunity from Tier-II and Tier-III towns, the company
has envisaged a brand HiFi under the franchisee format. There are several Tier II/III cities and towns
and select suburbs in large cities where a full service Talwalkars health club would not be commercially
viable.
Target minimum 25%

RoCE/RoE for new gyms
or new products/services
to be launched
The management has now envisaged a strategy to open a new gym or enter a new business with
minimum 25% RoE/RoCE. Unlike the previous strategy to capture market share, the company could
now focus on healthy balance sheet and profitability without compromising on growth.
Exhibit 8: Focus on low capex and high RoI business model
Source: Company
The advantages
It would have lower capex requirement of ~Rs10mn as a no frills health club of ~2500-2800sqft
compared to 5000sqft full service Talwalkars health club.
With a small sized format, HiFi health club can be rolled out in 8-10 weeks against 14- 16 weeks for
a typical Talwalkars health club. Hence the time to market would be faster and help in aggressive
rollout.
It would be affordable to the customers as the entry price point would be at 60% of the typical
Talwalkars health club. Hence the company would reach a wider customer base across the
pyramid.
This would help the company expand its brand Pan-India without incremental cost as this is under
the franchisee format.
Franchisee gets full support from TBVF with regards to the set-up of gyms, equipment and
trainers. The franchise agreement ensures quality supervision of gym equipment, trainers, and
ambience among others by TBVFL. The company offers turnkey solutions to its franchise partners
for setting up health clubs.
Company charges Rs1mn for upfront one time royalty and another Rs1mn for equipment supply.
Apart from this, the franchisee needs to pay a royalty of 6% of revenues for the first 3 years which
is further increased to 8% thereafter. Without any capex, the company garners significant
revenues under this business model.
Exhibit 9: Business model comparison

Particulars
% ownership
Business Model
Size (Sq ft)
Fees (Rs)
Facilities
Target Market
Capex (Rs mn)
Capex Outgo
Rollout Time (weeks)
Talwalkars
100.0
Ownership
4,500 - 5,000
13,000 -16,000
Gym + additional
Metros, Tier-I, II
20-23
Full
14-16
Talwalkars Premium Gyms

100.0
Ownership
10,000 13,000
30,000 36,000
Gym + additional
Metros - Premium Locations
60-80
Full
16-20
Talwalkars Subsidiary
51.0
Subsidiary
4,500 - 5,000
13,000 -16,000
Gym + additional
Metros, Tier-I, II
20-23
Half
14-16
Royalty Earned (Rs mn)
Zero
Zero
6% of revenues for 1st 3 yrs

which is 8% thereafter
RoIC Implication
Buy back option
Neutral
NA
Neural
NA
Higher
Anytime at 3.5x EV/EBIDTA
HiFi
0.0
Franchise
2,500 - 2,800
7,500 - 9,500
Only Gym
Tier-II,IIII, IV
10 -12
Zero
08 -10
2 + 6% of revenues for 1st
3 yrs which is 8%
thereafter
Highest
Not available
Entry into premium gyms to help cater to up market clients

Talwalkars has entered into the premium gym category to cater to high end clients and capture
significant market share at the top of the pyramid. In the next 5 years the company could open 18
gyms in this segment. Premium gyms are in 10-13K sqft area with fees of Rs30,000-36000/member.
Capex in this division would be Rs60-80mn having capacity of 4000+ members. These premium gyms
also help the company push other services such as Transform, Reduce, Zumba etc which will help it
realise higher RoCE. The company has the potential to garner revenues of Rs1663mn by FY20E from
premium gyms with operating profit of Rs645mn.
First premium gym in

Hyderabad got an
excellent response with
~700 members within
first 2 months of launch
with ~30% share from
value added services.
Exhibit 10: Having presence across the pyramid
Building first showplace

gym in the up-market
Banjara Hills, Hyderabad
Hi end Large
Format Centres
Increase through ownership

and Franchise route
Talwalkars Gyms
Increasing presence with

Franchise formats Low
capex
Hi Fi Centres
1
FY16E
FY17E
Source: Centrum Research Estimates
FY18E
FY19E
FY20E
FY17E
FY18E
1,663
FY19E
645
1,210
FY16E
Revenue
445
820
FY15E
FY15E
276
473
127
12
197
15
1800
1600
1400
1200
1000
800
600
400
200
0
48
18
26
6
20
18
16
14
12
10
8
6
4
2
0
Exhibit 12: Strong revenue traction in premium gyms
(Rs mn)
(Nos)
Exhibit 11: Steady rollout of premium gyms
FY20E
EBIDTA
Focus on value added services to improve return ratios

TBVF is increasing its focus on optimizing its product offerings and introducing new services to
leverage the current asset base and existing customer portfolio. It is on constant lookout to keep pace
with global industry trends for offering new and diverse suite of services to clients. This allows the
company to attract more members for different services and increase revenue potential from existing
members at the same gym thereby increasing same store sales growth.
Exhibit 13: Different Service offered
Fitness Training
Nutrition Centre
Value add-ons
Personal Exercise Program

Body Sculpting
TRX / Kettle Bell
Body Shaping
Weight Loss & Maintenance Program

Weight Gain Programme
Reduce
Kiloburner
Spa/Massage
Aerobics
Zumba
Spinning
The services include gyms, spas, aerobics and health counselling along with personal training
programmes with dieticians working on weight management programs, specialized fitness training
programs and diet counselling. Typically, each gym comprises general trainers, as well as experts
including cardio trainer, personal trainer, dietician, masseur, aerobics instructor, spa therapist and
yoga trainer, each schooled at the companys Training Academy. The company currently garners 24%
of revenues from allied services.
Exhibit 14: Enhancing productivity with value added services
Source: Company presentation
Transform format to further increase RoI

The company has partnered with Miha Bodytec, a German company, to launch NuForm in India. It uses
various technological tools for focused weight loss through EMS, diet counselling along with food
products having benefits of total fitness, weight loss and fat removal, enhanced muscle formation and
stimulation, muscular strength and endurance. The EMS session is just 20 minutes work out once a
week and is aimed to cater to potential customers who avoided gyms due to shortage of time, health
and aging issues. It is mainly targeted as Tier- 1 cities with focus on upwardly mobile and affluent
classes. The company has launched a unique, value added Transform program a combination of
NuForm and Reduce. It has already ordered the NuForm machines and is set to aggressively expand
this offering. We expect Transform to be introduced in 50% of the gym centres by FY20 and have
revenue of Rs1810mn in FY20.
Exhibit 15: Aggressive expansion for Transform
Exhibit 16: Strong revenue growth seen from Transform
180
153
160
133
140
113
93
100
(Rs mn)
(Centres)
120
80
60
43
40
20
13
2000
1800
1600
1400
1200
1000
800
600
400
200
0
FY12 FY13 FY14 FY15E FY16E FY17E FY18E FY19E FY20E

1,810
1,403
1,039
692
285
85
25
42
FY13
FY14
FY15E FY16E FY17E FY18E FY19E FY20E
Exhibit 17: New initiatives to increase SSSG and improve return ratios
Capex
NuForm
Zumba
Reduce
Transform
Rs9-10mn
Rs1.5-2mn
Rs0.7-0.8mn
Rs10-11mn
Revenue/centre
Rs8-9mn
Rs1-1.2mn
Rs2mn
Rs10-11mn
EBIDTA Margins
42-48%
55-60%
40-45%
40-45%
27-33%
Rs36,00042,000/annum
Gym Membership
29-32%
Rs2,0002,500/month
Aerobics
75-80%
Rs15,00020,000/quarter
Nutrition
33-37%
Rs50,00064,000/annum
NA
Rs14,000-Rs20,000
Rs700-750/month
Rs2,000-2,500/quarter
NA
2.5-3x
2.5-3x
6-8x
NA
RoCE
Avg Realisations
Existing offering
Avg Realisations
Premium over existing
offering
Apart from selling Reduce with Transform, the company would also start to sell Reduce products on
standalone basis given the strong product offering through third party channels. This will also give the
company an opportunity to partner with pan India retail chain and capture the growing phenomena
of healthy food consumption in India.
Exhibit 18: Healthy revenue growth seen from Reduce
450
422
400
350
309
(Rs)
300
250
210
200
150
123
77
100
50
16
0
FY15E
FY16E
FY17E
FY18E
FY19E
FY20E
Complete 360 degree wellness offering with entry into spa and nutrition segment
We expect the company to transform into a wellness player in the medium term and offer spa services
along with nutrition. The market potential for spa segment is high as shown in exhibit 1. The entry into
this segment could complement the existing business as the company already offers this service in its
existing gyms. Hence standalone spa can add significant value to the company. The company could
have a partnership with a global leader in this space and have an exponential growth in a short time
frame. The global player would also benefit having partnered with the largest gym player in India and
getting access to the fastest growing consumption economy in the world. The company has
demonstrated its ability to tie-up with biggest players globally having tie-ups with Zumba and David
Lloyd.
Company
could
potentially
have
a
partnership with a global
leader for entry into spa
and nutrition segment
Along with this the company would like a presence in the dietary supplements market. It can do
marketing for some of the global leaders in this segment as they have captive clients for these
products. Dietary supplements account for 22% of the potentially Rs270bn industry.
Entry into club business to garner significant cash flows

The company has tied up with David Lloyd, European premium health sports and leisure club chain for
Talwalkars clubs targeting gated communities, high end residential townships and corporate
campuses. David Lloyd has 91 health clubs with over 45,000 members and an annual turnover of
$510mn. TBVF has also identified land near Baner, Pune for its first recreational and sports club in India.
All fitness activities will be managed by the company while non-fitness activities will be outsourced.
Capital investment in the club will be ~Rs530mn with a built up area of ~90K sq.ft. It will have a
member capacity of ~8000-9000 with life membership cost of Rs0.5mn. We expect the club to begin
operations in FY17 as the company will start accepting memberships from Q4FY16.
The club could garner revenues of Rs530mn by FY20 with operating profit margin of ~60% and PAT
margin of ~25%. We expect healthy cash flow generation from the club business as incremental capex
is marginal over the next few years. The payback period will be ~2 years with high return ratios.
The opportunity in the club business is huge in India given the low penetration levels and increasing
urbanisation in Tier-I cities. Hence we feel the company will get capitalised further as the management
has the long term vision to expand to multiple cities in next 3-5 years. David Lloyd was valued at
830mn Euros when it was acquired by TDR Capital in 2013 (Source: www.edelhelfer.eu). Club
businesses globally have always had significant investor interest and deals have happened at premium
valuations. Hence the club business will offer significant cash flows and can give significant upside in
the medium term for TBVF.
Opportunity in the club

business is huge and
hence the management
has the long term vision
to expand to multiple
cities in next 3-5 years
Exhibit 19: Club to offer all fitness and non-fitness activities
Source: Company presentation
Bull case financials

In our bull case scenario we expect the company to post revenue CAGR of 33.5% over FY15E-20E to
Rs9486mn. Revenue growth would come from all quarters with premium gyms (129% CAGR) and
transform (84% CAGR) contributing significantly to this growth while owned gyms and subsidiary
gyms growing at a CAGR of 20% over the same period.
Operating profit would grow at a CAGR of 30% over FY15E-20E to Rs4221mn with operating margins
at ~45% by FY20E. PAT would grow at a CAGR of 38% over same period to Rs2320mn.
Exhibit 20: Revenue CAGR of 33.5% over FY15-20E
10,000
45%
41.6%
40%
34.0%
32.7%
6,000
35%
29.2%
26.3%
4,000
30%
(Rs mn)
8,000
(Rs mn)
Exhibit 21: Operating profit to grow at CAGR of 30%
25%
2,000
20%
2,310
3,096
4,383
FY15E
FY16E
FY17E
Revenues
5,815
7,512
9,486
FY18E
FY19E
Growth
FY20E
15%
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
53.0%
54%
52%
50%
48.1%
48%
44.9%
1,225
1,488
1,970
FY15E
FY16E
FY17E
EBIDTA
44.5%
43.5%
44.0%
2,527
3,302
4,221
FY18E
FY19E
Margins
FY20E
46%
44%
42%
40%
We expect the capex to remain under check for the company. Hence we have modelled capex under
Rs1bn for each of the years. Though we expect the company to become FCF positive, we believe in
order to reduce debt, the company may further capitalise in the medium term. We have modelled
significant improvement in return ratios with RoCE expanding to 28% in FY20 and RoE to 24%.
Exhibit 22: PAT to grow exponentially
Exhibit 23: Capex to remain under check
2500
2320
1200
1078
870
896
934
926
FY15E
FY16E
FY17E
FY18E
1000
2000
1743
998
1261
(Rs mn)
(Rs mn)
800
1500
921
1000
482
600
400
627
500
200
0
FY15E
FY16E
FY17E
FY18E
FY19E
FY20E
FY19E
FY20E
Exhibit 24: Healthy improvement expected in return ratios

30%
28%
26%
24%
22%
20%
18%
16%
14%
12%
10%
27.9%
23.9%
20.0%
17.6%
17.8%
24.1%
20.3%
21.5%
19.8%
17.0%
14.5%
12.4%
FY15E
FY16E
FY17E
RoE
FY18E
FY19E
FY20E
RoCE
10
Valuation
TBVF has established a successful business model in own, subsidiary and HiFi formats and is one of the
leading fitness chains in the country. Given the current under penetration, strong growth in tier-II and
tier-III towns and paradigm shifts in healthy lifestyle habits we expect the company to surpass market
expectations for the number of gyms opened. With increasing share of value added services, we
expect realizations to move upwards with focus on improving return ratios.
We are confident that TBVF will continue to surprise markets on revenue over the next 3-5 years and
our premise is based on: 1) Rising contribution from non-membership related services which currently
stands at ~23%; 2) Focus on the wellness quotient with diet food under Reduce and NuForm; 3)
Focus across the pyramid with entry into premium gyms; 4) Steady growth in gym rollouts; 5) Entry
into the club business with partnership with David Lloyd. In our bull case assumption we have
modelled 33% CAGR in revenues over FY15E-20E to Rs9486mn and Adj PAT growing faster at a CAGR
of 38.4%to Rs2320mn. The capex light model will help the company increase its return ratios and at
the same time reduce its capex requirement and help it turn FCF positive even as it nearly doubles its
gym count.
Global fitness companies are trading at an average of 18x FY16E and 15x FY17E estimates while Indian
retail companies are trading at a significant premium of 20x FY17. TBVF is currently trading at 15.0x
FY16E and 11.4x FY17E EPS of Rs23.6 and Rs30.8 respectively at base case estimates. Given its strong
fundamentals, turning FCF positive and increasing return ratios the current valuations warrant a rerating. The current valuations also do not factor in the upside from the club business.
In another scenario, the

stock can potentially
trade at 15x PE FY19E
which when discounted
to 1yr forward results in a
fair value of Rs720
Global and Indian deals in the wellness industry are happening at 4-7x EV/Sales. Talwalkars is trading
at 3.2x FY17E EV/Sales. Based on global deals, we believe stock can trade at Rs605 (5x FY17E EV/Sales)
implied PE of 20x FY17E.
Exhibit 25: Rolling forward EV/EBITDA chart
Exhibit 26: Rolling forward P/E chart

28
14
12
10
8
6
4
2
24
20
16
12
EV/EBITDA
Mean
Mean + Std Dev
Mean - Std Dev
Source: Bloomberg, Company, Centrum Research Estimates
P/E
Mean + Std Dev
Mar-15
Nov-14
Jul-14
Mar-14
Nov-13
Jul-13
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
Jul-10
Nov-10
Mar-15
Nov-14
Jul-14
Mar-14
Nov-13
Jul-13
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
Nov-10
Jul-10
Mean
Mean - Std Dev
Source: Bloomberg, Company, Centrum Research Estimates
Exhibit 27: Comparative Valuations

Company
TBVF*
Weight Watchers
Life Time Fitness
Town Sports Int
Mkt Cap
(USD mn)
CAGR FY14-FY16E (%)

Rev.
149 23.7
555 (15.9)
2,761 8.0
154 (0.6)
PE (x)
EBITDA Margin (%)
EBITDA
PAT
FY14
FY15E
FY16E
FY14
28.0
(31.0)
8.5
(28.9)
29.8
(58.8)
1.7
NM
49.5
29.3
29.1
19.1
53.0
23.6
28.7
11.4
53.0
19.7
29.3
9.8
25.2
2.7
24.2
12.4
EV/EBITDA (x)
FY15E FY16E
19.1
4.8
23.4
NM
15.0
16.3
21.4
NM
FY14
11.9
8.0
8.2
6.7
FY15E FY16E
9.0
7.6
10.6
6.8
7.2
10.8
9.5
6.9
RoE (%)
FY14
16.3
NM
10.9
NM
Div Yield (%)
FY15E FY16E
18.5
(8.1)
10.5
15.0
20.0
(2.5)
10.8
5.7
FY14
0.4
1.6
0.0
1.1
FY15E FY16E
0.6
0.0
NM
5.0
0.8
0.0
NM
NM
Source: *Centrum Research Estimates, Bloomberg
11
Exhibit 28: Deals in the Indian Wellness industry

Date
Target
Buyer
Sanghvi Brands
Promoters Pvt. Ltd.
Tano India Private

Equity Fund II
13-Feb-13
Deal
Value Business Description
($ mn)
Country
Implied
Percentage
Equity Value
Sought (%)
($ mn)
EV /
Total
Income
Sanghvi Brands Promoters Pvt. Ltd. owns and operates 28 spas, gyms
and salons. It operates under the brand name L'Occitane spas,
Holyfirld Gyms, Ramona Braganza 321 Fitness and Warren Tricomi
salons. The company was founded in 2010 and is based in Mumbai
India
20
49.85
NA
Power Spa Pvt. Ltd.
CMYK Health
Boutique Pvt. Ltd.
Power Spa Pvt. Ltd. is engaged in providing customized solutions for

spa therapies. It offers mobile spa services for corporate, individuals
and spa consultancy. It also provides recruitment solutions and
therapist training. The company was founded in 2007 and is based in
Mumbai, Maharashtra.
India
100
NA
22-Nov-12
Wyann International
Company
VLCC Health Care

Ltd.
18.15
Wyann International Company owns and operates beauty

professional centres and retail brands. Its operations include sales,
marketing, distribution, franchising and operations of its beauty and
skin care products and services. The company was founded in 2005
and is based in Puchong, Malaysia.
Malaysia
100
18.15
NA
12-Sep-12
Star and Sitara

Wellness Pvt. Ltd.
Future Consumer
Enterprises Ltd.
3.25
Star and Sitara Wellness Pvt. Ltd. is engaged in operating salon and
wellness centres. It provides skin and hair related beauty services. The
company was incorporated in 2011 and is based in Mumbai
India
100
3.25
NA
R and R Salons Pvt.

Ltd.
Helion Venture
Partners II LLC,
Everstone Capital
Partners II LLC
10.7
R and R Salons Pvt. Ltd. owns and operates a chain of salons and spas
under the brand name YLG Salon and Spa. It offers head massage,
beauty care and hair treatment and spa services. It also launched
international skin and hair academy (ISHA), which runs diploma
courses for freshers and skill upgradation courses for beauticians and
hair stylists in the industry. The company was founded in 2008 and is
based in Bangalore.
India
58.32
18.35
7.39
Birla Kerala
Vaidyashala Pvt. Ltd.
Birla Wellness and

Healthcare Pvt.
Ltd.
Birla Kerala Vaidyashala Pvt. Ltd. operates as a chain of ayurvedic

therapy centres. It offers disease based treatments, wellness
treatments and panchkarma treatments for lifestyle disorders,
chronic health disorders, ayurvedic rejuvenation packages and day
spa procedures. The company was founded in 2009 and is based in
Mumbai.
India
48
2.08
4.12
India
40.37
4.35
1.25
20-Feb-14
27-Apr-12
14-Mar-11
9.97
21-Dec-10
Jawed Habib Hair

and Beauty Ltd.
Greenfield
Investments
1.76
Jawed Habib Hair and Beauty Ltd. owns and operates hair and beauty
salons in India. It offers oily hair, dry hair and anti-dandruff shampoo
treatments and conditioner, herbal hair oil, hand and body lotion
treatments. The firm also operates salons in Nepal, Bangladesh and
the United Kingdom. The company was incorporated in 2006 and is
based in Mumbai.
7-Oct-10
Jawed Habib Hair

and Beauty Ltd.
Sparrow Hill
Advisory Pvt. Ltd.
0.45
salons in India.
India
16.71
2.7
0.83
16-Sep-10
Jawed Habib Hair

and Beauty Ltd.
Brand Capital
2.59
salons in India.
India
54.07
4.79
1.34
23-Aug-10
R and R Salons Pvt.

Ltd.
Helion Venture
Partners II LLC
1.71
under the brand name YLG Salon and Spa.
India
20.46
8.36
5.85
7-Aug-10
Enrich Hair and Skin

Solutions Pvt. Ltd.
JM Financial India
Fund
10
Enrich Hair and Skin Solutions Pvt. Ltd. owns and operates chain of
enrich salons. It offers head massage, hair treatment and waxing
treatment for skin. The firm offers courses for freshers and skill
upgradation courses for beauticians and hair stylists in the industry.
The company was founded in 1997 and is based in Mumbai
India
46.67
21.43
4.28
17-May-10
Jawed Habib Hair

and Beauty Ltd.
Sparrow Hill
Advisory Pvt. Ltd.
0.87
salons in India.
India
40.27
2.15
0.71
India
13.65
21.98
0.9
12-Aug-09
VLCC Health Care Ltd.
ARIA Investment
Partners II LP
VLCC Health Care Ltd. is a fitness, health and beauty care centers. Its
products include skin-care, hair-care and body-care products. The
firm offers weight management, beauty treatments, spa, professional
and vocational courses in beauty, health, nutrition and management
services. The company was founded in 1989 and is based in Gurgaon,
Haryana.
29-Jan-09
Birla Kerala
Vaidyashala Pvt. Ltd.
Birla Wellness and

Healthcare Pvt.
Ltd.
10.14
Birla Kerala Vaidyashala Pvt. Ltd. operates as a chain of ayurvedic

therapy centres.
India
51
19.88
NA
1-Apr-08
R and R Salons Pvt.

Ltd.
Helion Venture
Partners II LLC
4.84
under the brand name YLG Salon and Spa.
India
60
8.07
NA
24-Jan-07
VLCC Health Care Ltd. Indivision I
11.3
VLCC Health Care Ltd. is a fitness, health and beauty care centers.
India
18.02
62.71
2.41
24-Jun-04
ARIA Investment
VLCC Health Care Ltd.
Partners II LP
10.88
VLCC Health Care Ltd. is a fitness, health and beauty care centers.
India
16.28
66.83
4.33
Source: VC Circle, Industry, Centrum Research
12
Exhibit 29: Deals in Global Wellness industry

Date
Target Name
Acquirer Name
Deal Value Deal Description
3/16/2015
Life Time Fitness
Leonard Green & Partners and

TPG
12/20/2014
32 fitness clubs
Bally Total Fitness Holding
Bally Total Fitness Holding Corp sold 32 fitness clubs to 24 Hour Fitness USA Inc.
12/3/2014
ShapeMed SPA LLC
Life Time Fitness Inc
Life Time Fitness Inc acquired ShapeMed SPA LLC.
11/14/2014
American Power Yoga LLC
Sunstone Yoga LLC
Sunstone Yoga LLC acquired American Power Yoga LLC.
8/21/2014
Sport & Health Clubs LC
US Fitness Holdings LLC
US Fitness Holdings LLC acquired Sport & Health Clubs LC.
8/6/2014
Fitness First Western Australian

portfolio
Ardent Leisure Group
7/21/2014
YogaWorks Inc
Great Hill Partners LLC
Great Hill Partners LLC acquired YogaWorks Inc.
6/26/2014
Achmea Health Centers BV
Fitland Groep BV
Achmea Health Centers BV sold 19 Health centers to Fitland Group BV.
4/9/2014
YouFit Health Clubs LLC
Perella Weinberg Partners LP
Perella Weinberg Partners LP acquired a minority stake in YouFit Health Clubs LLC.
3/3/2014
Anytime Fitness Inc
Roark Capital Group Inc
Roark Capital Group Inc acquired a minority stake in Anytime Fitness Inc. Anytime
operates more than 2,400 small, 24-hour health clubs in 19 countries, opening at least
250 new clubs in each of the past six years.
2/11/2014
Gym Group/The
Pure Gym
Pure Gym announced the acquisition of The Gym Group.
2/3/2014
Russian Fitness Group
Goldman Sachs Group

Inc/The,VTB Capital ZAO
Alfa Capital Partners sold a minority stake in Russian Fitness Group to a consortium led by
The Goldman Sachs Group Inc.
1/9/2014
Snap Fitness Inc
TZP Group LLC
TZP Group LLC acquired a minority stake in Snap Fitness Inc.
12/22/2013
Fitness One Vega
Swicorp
Swicorp acquired a minority stake in Fitness One Vega. Fitness One is a leading health
and fitness club management company, which owns and operates fitness centres in
Jordan, including six traditional women-dedicated fitness centers and a flagship Vega
center, which is a family-oriented facility
10/1/2013
Fitness Connection Ltd
Management Group,LNK
Partners
WestView Capital Partners LP sold Fitness Connection Ltd to a consortium led by

Management Group.
9/11/2013
LA Fitness/NY
Agree Realty Corp
9/4/2013
Steele Fitness
Snap Fitness Inc
Snap Fitness Inc acquired Steele Fitness.
8/27/2013
Xercise4Less
Business Growth Fund PLC
Business Growth Fund PLC acquired a minority stake in Xercise4Less.
7/30/2013
Pure Gym
Connection Capital LLP
Connection Capital LLP acquired a minority stake in Pure Gym.
4/5/2013
GoodLife Fitness Centers Inc
Penfund
Penfund acquired a minority stake in GoodLife Fitness Centers Inc.
4/1/2013
Extreme Fitness Group Inc
GoodLife Fitness Centers Inc
GoodLife Fitness Centers Inc acquired Extreme Fitness Group Inc.
4 bn USD
32.5 mn
USD
10.3 mn
USD
Gym operator Life Time Fitness Inc said it would be taken private by Leonard Green &
Partners and TPG.
Life Time operates 114 fitness centers under its Life Time Fitness and Life Time Althletic
brands in North America.
Ardent Leisure has acquired eight Fitness First clubs in Western Australia in a move to
bulk up the companys fitness footprint. Combined with the companys six Goodlife
health clubs in Western Australia, the total portfolio of fourteen clubs will create the
states largest health club chain. Total consideration for the Fitness First clubs is $32.5
million, equating to approximately 5.27x pro forma EBIDTA. .
Agree Realty Corp acquired LA Fitness/NY
Source: Bloomberg, Industry, Centrum Research
Exhibit 30: Sensitivity Analysis

Sensitivity to key variables (FY15)
Gym membership realisation
Employee Cost
% change
% impact on EBITDA
% impact on EPS
+1
+1
1.4
(0.3)
2.7
(0.7)
13
Quarterly financials, Operating Metrics and Key Performance Indicators

Exhibit 31: Quarterly Financials
Y/E Mar (Rs mn)
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
558.3
59.8
498.5
373.7
39.2
334.5
695.5
74.4
621.1
366.2
38.4
327.8
659.2
69.9
589.3
447.2
47.2
400.0
837.8
89.8
748.0
472.2
49.8
422.5
82.6
137.4
278.5
77.2
133.2
124.2
130.0
181.4
309.6
58.0
118.3
151.6
93.4
154.1
341.7
81.2
133.3
185.5
143.1
204.1
400.8
75.6
148.5
198.3
Depreciation
EBIT
Finance cost
Other income
Extra ordinary items
40.6
237.9
21.5
5.5
0.0
50.4
73.8
30.0
2.0
0.0
77.5
232.2
21.6
2.7
0.0
68.5
83.1
31.5
2.4
(0.3)
45.4
296.3
36.6
3.7
0.0
98.4
87.1
38.2
1.4
0.0
103.5
297.3
29.3
2.6
0.0
90.7
107.6
39.5
1.4
0.0
PBT
Tax
Tax rate %
PAT
MI
Adj PAT
222.0
89.6
40.4
132.4
11.2
121.2
45.8
6.4
14.0
39.4
5.4
34.0
213.3
52.1
24.4
161.2
13.5
147.7
53.7
11.8
22.0
41.9
6.6
35.5
263.4
108.2
41.1
155.3
6.4
148.9
50.2
6.5
12.9
43.8
3.5
40.3
270.6
60.2
22.3
210.4
13.6
196.8
69.5
10.9
15.7%
58.5
13.7
44.8
Margins %
EBIDTA
EBIT
Adj PAT
55.9
47.7
24.3
37.1
22.0
10.2
49.9
37.4
23.8
46.2
25.3
10.8
58.0
50.3
25.3
46.4
21.8
10.1
53.6
39.7
26.3
46.9
25.5
10.6
Growth %
Net sales
EBIDTA
EBIT
PBT
Adj PAT
30.7
33.7
32.3
38.4
32.3
31.2
35.1
24.8
28.2
21.0
24.0
22.7
8.1
15.4
21.3
29.0
47.2
23.2
28.4
20.7
18.2
22.7
24.5
18.7
22.8
19.6
49.4
18.1
9.7
18.5
20.4
29.5
28.0
26.9
33.3
28.9
30.8
29.5
29.2
26.1
KPIs
Total Gyms
Total Members ('000)
144
133
145
134
147
NA
149
NA
149
NA
150
NA
150
NA
150
157
FY13
FY14
FY15E
FY16E
FY17E
135
29
17
149
46
100
164
66
110
188
126
140
208
146
155
Sales
Service tax collected & paid
Net sales
Expenditure
Personal cost
Admin & other expenditure
Operating Profit
Exhibit 32: Assumptions

Assumptions
Fitness Centres
Zumba
Reduce
14
Financials
Exhibit 33: Income Statement
Exhibit 35: Balance Sheet
Y/E March (Rs mn)
FY13
FY14
FY15E
FY16E
FY17E
Net Sales
Growth (%)
Employee Cost
%of Sales
Admin & other expenses
% of sales
EBIDTA
EBIDTA Margins (%)
Depreciation
Interest expenses
PBT for operations
Other income
Exceptional item
PBT
Provision for tax
Effective tax rate (%)
Net Profit
Minority Interest
Adj Net Profit
1,509
26.4
312
20.7
471
31.2
726
48.1
146
108
471
13
484
158
32.7
326
26
301
1,873
24.1
359
19.1
587
31.3
927
49.5
242
120
566
11
(0)
576
178
31.0
398
32
366
2,312
23.4
414
17.9
671
29.0
1,226
53.0
393
143
690
7
697
174
25.0
523
40
483
2,866
24.0
498
17.4
849
29.6
1,519
53.0
451
137
932
12
944
274
29.0
670
53
617
3,429
19.6
595
17.4
995
29.0
1,839
53.6
511
119
1,210
22
1,232
357
29.0
874
67
807
FY13
FY14
FY15E
FY16E
FY17E
26.4
33.7
38.5
24.1
27.8
21.9
23.4
32.3
31.8
24.0
23.9
27.8
19.6
21.1
30.9
48.1
38.4
32.1
19.9
49.5
36.6
30.8
19.6
53.0
36.0
30.1
20.9
53.0
37.3
32.9
21.5
53.6
38.7
35.9
23.5
11.2
17.1
11.0
11.0
16.3
10.3
12.7
18.5
12.3
14.1
20.0
13.8
16.3
21.8
16.1
0.4
42.9
81.1
(4.3)
0.1
62.5
66.7
16.4
0.8
40.0
47.0
12.1
0.6
40.0
47.0
15.5
0.5
40.0
46.4
16.1
0.8
0.6
5.4
1.4
0.8
0.8
5.7
1.3
0.7
0.7
5.8
1.3
0.6
0.5
7.8
1.4
0.4
0.3
11.2
1.4
1.5
0.4
15.2
1.5
0.4
12.5
2.0
0.6
12.6
2.8
0.8
13.6
3.5
1.0
13.2
11.5
11.5
11.5
11.5
18.1
79.6
14.0
14.0
14.0
14.0
24.4
91.8
18.4
18.4
18.4
18.4
35.0
107.9
23.6
23.6
23.6
23.6
42.8
128.3
30.8
30.8
30.8
30.8
52.9
155.0
25.2
3.8
11.9
5.9
4.9
19.1
3.3
9.0
4.8
4.0
15.0
2.8
7.2
3.8
3.2
11.4
2.3
5.7
3.1
2.7
Exhibit 34: Key Ratios

Y/E March
Growth ratios (%)
Revenues
EBIDTA
Adj Net Profit
Margin ratios (%)
EBIDTA Margins
PBIT Margins
PBT Margins
PAT Margins
Return Ratios (%)
ROCE
RoNW
RoIC
Turnover Ratios (Days)
Inventory period
Collection period
Payment period
Net Working Capital Cycle
Solvency Ratio (x)
Debt-Equity
Net debt-equity
Interest coverage ratio
Current ratio
Dividend
Dividend (Rs)
Dividend Yield (%)
Dividend Payout (%)
Per Share (Rs)
Basic (end pt) EPS - Rep
FDEPS (Adjusted)
Basic (end pt) EPS - Adj
FDEPS (Reported)
CEPS
Book Value
Valuations (x)
PER
P/BV
EV/EBIDTA
EV/Sales
M-cap/Sales
30.8
4.4
14.4
6.9
6.1
15
Y/E March (Rs mn)
FY13
FY14
FY15E
FY16E
FY17E
Share Capital
Reserves & Surplus
Total Shareholders Funds
262
1,821
2,083
262
2,141
2,403
262
2,563
2,825
262
3,096
3,358
262
3,797
4,059
Loan Funds
Capital Reserve on Consolidation
Minority Interest
Deferred Tax Liabilities
Total Capital Employed
1658
2
81
192
4,016
1982
2
113
238
4,737
2000
2
152
238
5,217
1900
2
206
238
5,703
1500
2
273
238
6,071
Fixed Asset
Gross Block
Less:- Accumulated Depreciation
Net Block
Capital WIP
Total fixed assets
Investments
3,608
455
3,153
425
3,578
227
4,741
689
4,052
453
4,505
88
5,618
1,082
4,535
453
4,989
88
6,439
1,533
4,906
453
5,359
88
7,296
2,044
5,252
453
5,705
88
2
177
293
229
1
320
282
60
5
253
301
63
5
314
373
134
5
376
446
127
701
664
622
825
953
490
211
4,016
519
144
4,737
482
140
5,217
570
256
5,703
676
278
6,071
FY13
FY14
FY15E
FY16E
FY17E
484
146
110
741
16
757
(123)
634
576
242
110
928
(105)
823
(171)
652
697
393
143
1,233
8
1,241
(174)
1,067
944
451
137
1,531
(45)
1,486
(274)
1,212
1,232
511
119
1,861
(29)
1,832
(357)
1,475
(1,033)
(3)
3
(1,032)
(1,085)
232
3
(850)
(877)
0
0
(877)
(822)
0
0
(822)
(857)
0
0
(857)
166
(35)
(135)
431
427
230
(46)
(154)
0
30
18
(61)
(143)
0
(187)
(100)
(84)
(137)
0
(320)
(400)
(107)
(119)
0
(626)
29
(169)
70
(7)
Inventory
Debtors
Loans & advances
Cash & bank balances
Other current assets
Total current assets
Current liabilities and provisions
Net current assets
Total
Exhibit 36: Cash Flow

Y/E March (Rs mn)
CF from operations
Profit before tax
Depreciation & amortisation
Others
CF before WC changes
Working capital changes
Cash inflow from operations
Income tax paid
Cash from Operations
Cash from investing
Capex
Investments
Other Income
Cash from investing
Cash from financing
Borrowings/ repayments
Dividend paid
Interest paid
Equity/ Share Capital
Cash from financing
Net change in cash
Appendix A
Disclaimer
Centrum Broking Limited (Centrum) is a full-service, Stock Broking Company and a member of The Stock Exchange, Mumbai (BSE) and National Stock
Exchange of India Ltd. (NSE). Our holding company, Centrum Capital Ltd, is an investment banker and an underwriter of securities. As a group Centrum
has Investment Banking, Advisory and other business relationships with a significant percentage of the companies covered by our Research Group. Our
research professionals provide important inputs into the Group's Investment Banking and other business selection processes.
Recipients of this report should assume that our Group is seeking or may seek or will seek Investment Banking, advisory, project finance or other
businesses and may receive commission, brokerage, fees or other compensation from the company or companies that are the subject of this
material/report. Our Company and Group companies and their officers, directors and employees, including the analysts and others involved in the
preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act
as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Centrum or its affiliates do not own 1% or more in the
equity of this company Our sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to
our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make
investment decisions that are inconsistent with the recommendations expressed herein. We may have earlier issued or may issue in future reports on the
companies covered herein with recommendations/ information inconsistent or different those made in this report. In reviewing this document, you
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affiliates of Centrum. Centrum or its affiliates do not make a market in the security of the company for which this report or any report was written.
Further, Centrum or its affiliates did not make a market in the subject companys securities at the time that the research report was published.
This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy,
purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection
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discussed in this report may not be suitable for all investors. The securities described herein may not be eligible for sale in all jurisdictions or to all
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or dealings in securities by nationals of other countries. The appropriateness of a particular investment or strategy will depend on an investor's
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his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved
in the securities forming the subject matter of this document.
The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant
uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates
on which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase
over time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently of the Company.
These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accented accounting
principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not
regard the inclusion of the projections and forecasts described herein as a representation or warranty by or on behalf of the Company, Centrum, the
authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you
should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report, including the
assumptions underlying such projections and forecasts.
The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may
realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital
may occur. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice. Centrum does not provide tax advice to its clients, and all investors are strongly advised to consult regarding any potential
investment. Centrum and its affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Foreign currencies
denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from
the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies effectively assume currency risk.
Certain transactions including those involving futures, options, and other derivatives as well as non-investment-grade securities give rise to substantial
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derivative transactions.
This report/document has been prepared by Centrum, based upon information available to the public and sources, believed to be reliable. No
representation or warranty, express or implied is made that it is accurate or complete. Centrum has reviewed the report and, in so far as it includes
current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. The opinions expressed in
this document/material are subject to change without notice and have no obligation to tell you when opinions or information in this report change.
This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publicly accessible
media and should not be reproduced, transmitted or published by the recipient. The report is for the use and consumption of the recipient only. This
publication may not be distributed to the public used by the public media without the express written consent of Centrum. This report or any portion
hereof may not be printed, sold or distributed without the written consent of Centrum.
The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform
themselves about, and observe, any such restrictions. Neither Centrum nor its directors, employees, agents or representatives shall be liable for any
damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with
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This document does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document nor anything
contained herein shall form the basis of any contract or commitment whatsoever. This document is strictly confidential and is being furnished to you
solely for your information, may not be distributed to the press or other media and may not be reproduced or redistributed to any other person. The
distribution of this report in other jurisdictions may be restricted by law and persons into whose possession this report comes should inform themselves
about, and observe any such restrictions. By accepting this report, you agree to be bound by the fore going limitations. No representation is made that
this report is accurate or complete.
16
The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of Centrum Broking
and are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this
report and there can be no assurance that future results or events will be consistent with any such opinions, estimate or projection.
This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its
directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its
directors or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or its directors or
any other person accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection
therewith.
Centrum and its affiliates have not managed or co-managed a public offering for the subject company in the preceding twelve months. Centrum and
affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this
report for service in respect of public offerings, corporate finance, debt restructuring, investment banking or other advisory services in a
merger/acquisition or some other sort of specific transaction.
As per the declarations given by them, Mr. Ankit Kedia, research analyst and and/or any of his family members do not serve as an officer, director or any
way connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensation from the above
companies in the preceding twelve months. He does not hold any shares by him or through his relatives or in case if holds the shares then will not to do
any transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our employees and are paid a
salary. They do not have any other material conflict of interest of the research analyst or member of which the research analyst knows of has reason to
know at the time of publication of the research report or at the time of the public appearance.
While we would endeavour to update the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are
under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent Centrum
from doing so.
Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable
regulations and/or Centrum policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certain other
circumstances.
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state,
country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject
Centrum Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Specifically, this document does
not constitute an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any
transaction to any U.S. person unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this
document may be distributed in Canada or used by private customers in United Kingdom.
The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading,
dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read Risk
Disclosure Document for Capital Market and Derivatives Segments as prescribed by Securities and Exchange Board of India before investing in Indian
Securities Market.
Talwalkars price chart

400
350
300
250
200
150
100
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Talwalkars Better Value Fit
Source: Bloomberg, Centrum Research
17
Disclosure of Interest Statement

1
Business activities of Centrum Broking Limited

(CBL)
Centrum Broking Limited (hereinafter referred to as CBL) is a registered member of NSE (Cash, F&O
and Currency Derivatives Segments), MCX-SX (Currency Derivatives Segment) and BSE (Cash
segment), Depository Participant of CDSL and a SEBI registered Portfolio Manager.
Details of Disciplinary History of CBL
CBL has not been debarred/ suspended by SEBI or any other regulatory authority from accessing
/dealing in securities market.
Registration status of CBL:
CBL is in the process of preparing application for submission to SEBI

Talwalkars
Whether Research analysts or relatives have any financial interest in the subject company and nature of such financial interest
No
Whether Research analyst or relatives have actual / beneficial ownership of 1% or more in securities of the subject company at
the end of the month immediately preceding the date of publication of the document.
No
Whether the research analyst or his relatives has any other material conflict of interest
Whether research analyst has received any compensation from the subject company in the past 12 months and nature of
products / services for which such compensation is received
No
Whether the Research Analyst has received any compensation or any other benefits from the subject company or third party in
connection with the research report
No
Whether Research Analysts has served as an officer, director or employee of the subject company
No
10
Whether the Research Analyst has been engaged in market making activity of the subject company.
No
No
Rating Criteria
Rating
Buy
Hold
Sell
Market cap < Rs20bn

Upside > 25%
Upside between -25% to +25%
Downside > 25%
Market cap > Rs20bn but < 100bn

Upside > 20%
Downside > 20%
Market cap > Rs100bn

Upside > 15%
Downside > 15%
Member (NSE and BSE)

Regn No.:
CAPITAL MARKET SEBI REGN. NO.: BSE: INB011454239
CAPITAL MARKET SEBI REGN. NO.: NSE: INB231454233
DERIVATIVES SEBI REGN. NO.: NSE: INF231454233
(TRADING & CLEARING MEMBER)
CURRENCY DERIVATIVES: MCX-SX INE261454230
CURRENCY DERIVATIVES:NSE (TM & SCM) NSE 231454233
Depository Participant (DP)
CDSL DP ID: 120 12200
SEBI REGD NO. : CDSL : IN-DP-CDSL-661-2012
PORTFOLIO MANAGER
SEBI REGN NO.: INP000004383
Website: www.centrum.co.in
Investor Grievance Email ID: investor.grievances@centrum.co.in
Compliance Officer Details:
Kavita Ravichandran
(022) 4215 9842; Email ID: compliance@centrum.co.in
Centrum Broking Ltd. (CIN :U67120MH1994PLC078125)

Registered Office Address
Corporate Office & Correspondence Address
Bombay Mutual Building ,

2nd Floor,
Centrum House
6th Floor, CST Road, Near Vidya Nagari Marg, Kalina,
Dr. D. N. Road,
Fort, Mumbai - 400 001
Santacruz (E), Mumbai 400 098.

Tel: (022) 4215 9000 Fax: +91 22 4215 9344
18

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INDIA

Talwalkars Better Value Fitness

From fitness to wellness

Rs465 Key Data

Rs353 Bloomberg Code

We are impressed by TBVFs well-calibrated steps to transform itself from fitness to

31.7% Curr Shares O/S (mn)

Rs465 Diluted Shares O/S(mn)

Buy Mkt Cap (Rsbn/USDmn)

To expand market share in organized fitness industry: We expect Talwalkars to

Y/E Mar (Rsmn)

Price Performance (%)*

Daily Vol. (3M NSE Avg.)

*as on 23 March 2015; Source: Bloomberg, Centrum Research

Source: BSE, *as on 19 March 2015

Centrum vs. Bloomberg Consensus*

Var (%) Centrum

*as on 23 March 2015; Source: Bloomberg, Centrum Research Estimates

Ankit Kedia, ankit.kedia@centrum.co.in; 91 22 4215 9634

Source: Company, Centrum Research Estimates

Centrum Equity Research is available on Bloomberg, Thomson Reuters and FactSet

Set to capture significant share in the Indias wellness industry

3 years CAGR (%)

Source: FICCI PwC Wellness Report 2013

Exhibit 2: Share in health, wellness foods and beverages

Exhibit 3: Share in beauty care segment

Source: FICCI-PwC Wellness Report 2013, Centrum Research

Source: FICCI-PwC Wellness Report 2013, Centrum Research

Talwalkars Better Value Fitness

Exhibit 4: Fitness & Slimming market in India

Source: FICCI PwC Wellness Report

Industry Size (USD bn)

Total Members (mn)

Rev/club (USD mn)

Source: IHRSA 2014, Centrum Research

Talwalkars Better Value Fitness

To expand leadership in the organized fitness industry

Aggressive rollout plan

FY14 FY15E FY16E FY17E FY18E FY19E FY20E

Source: Company, Centrum Research

Talwalkars Better Value Fitness

Follows low capex and high RoI business model

Target minimum 25%

Talwalkars Better Value Fitness

Exhibit 9: Business model comparison

Talwalkars Premium Gyms

Royalty Earned (Rs mn)

6% of revenues for 1st 3 yrs

Source: Company, Centrum Research

Entry into premium gyms to help cater to up market clients

First premium gym in

Exhibit 10: Having presence across the pyramid

Building first showplace

Increase through ownership

Increasing presence with

Source: Company, Centrum Research

Source: Centrum Research Estimates

Exhibit 12: Strong revenue traction in premium gyms

Exhibit 11: Steady rollout of premium gyms

Source: Centrum Research Estimates

Talwalkars Better Value Fitness

Focus on value added services to improve return ratios

Personal Exercise Program