“Talwalkars Better Value Fitness Limited Q4 FY-18 Earnings

Conference Call”

May 8, 2018

MANAGEMENT: MR. PRASHANT TALWALKAR – MANAGING DIRECTOR

& CHIEF EXECUTIVE OFFICER, TALWALKARS BETTER
VALUE FITNESS LIMITED
MR. ANANT GAWANDE – EXECUTIVE DIRECTOR &
PROMOTER, TALWALKARS BETTER VALUE FITNESS
LIMITED
MR. GIRISH NAYAK – CHIEF FINANCIAL OFFICER,
TALWALKARS BETTER VALUE FITNESS LIMITED
MS. AVANTI SANKAV – COMPANY SECRETARY,
TALWALKARS BETTER VALUE FITNESS LIMITED
MODERATOR: MR. ANKIT KEDIA – CENTRUM BROKING PRIVATE
LIMITED

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Moderator: Ladies and gentlemen good day and welcome to the Talwalkars Q4 FY 2018 Earnings
Conference Call hosted by Centrum Broking Limited. As a reminder, all participant lines will
be in the listen-only mode and there will be an opportunity for you to ask questions after the
presentation concludes. Should you need assistance during the conference call, please signal an
operator by pressing ‘*’ then ‘0’ on your touchtone phone. Please note that this conference is
being recorded. I now hand the conference over to Mr. Ankit Kedia from Centrum Broking.
Thank you and over to you, sir.

Ankit Kedia: Good afternoon everyone. We at Centrum Broking are very pleased to host the Q4 FY18
Results Conference Call for Talwalkars Better Value Fitness.

Today from the management we have Mr. Prashant Talwalkar – Managing Director & CEO;
Mr. Anant Gawande – Executive Director & Promoter and Girish Nayak – CFO.

I would now like to invite the management for their opening remarks followed by which we
can have an interactive Q&A. Over to you, sir.

Prashant Talwalkar: Good afternoon everyone. This is Prashant Talwalkar. Very glad to speak to all of you. Good
thing is that the last quarter was an excellent quarter for us and there are so many things and
progressive things happening. I am very eager to share with you all the information required
for all my investors and my friends here and I am sure that all the good things which are
coming through another good thing is the demerger.

I am glad to let you know that all the necessary statutory compliances everything related to it is
has been completed and up to the mark. But I am sure there will be some more questions to my
investors here and I will be glad to answer them. So I will handover to now Anant Gawande.

Anant Gawande: Good afternoon everybody. This is Anant Gawande. I truly welcome you to the lifestyle part of
our business. We will be taking questions from everybody relating to any matters relating to
the lifestyle company. As you can all very well understand that gym company is about to get
listed and our company secretary will give you much more detailed information on the timings
specs on it. Because of the fact that it is not still listed the gyming part of the company cannot
be discussed due to various regulatory situations.

We have tried to in this presentation which we have emailed to the stock exchanges and the
website which contains the presentation very, very lucidly explain two parts. One is what is the
lifestyle company; two is when will the name change happening; three is the process of
demerger explain very meticulously one is for posterity and two is for our wonderful
shareholders who are patiently waited with us to understand the entire process. And the
resulting situations which we have had on that.

And last and the most important part where we would like to spend most of our time today is
the fact that there are businesses here which five years back the company had a zero business
in the lifestyle part of the company, today that turnover has gone to almost Rs. 55 crores, Rs.

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60 crores and should be increasing over the period of next one, one-and-a-half, two years and
its business prospects.

So we want to touch up on those areas or any other areas which you wish to discuss with us.
Thank you so much for being with us. I will shift the line to Girish Nayak who is the CFO and
then to Avanti Sankav who is the company secretary.

Girish Nayak: Good afternoon everybody, this is Girish Nayak speaking. We would like to elaborate any
query and answer any questions which you can ask about the lifestyle company.

Avanti Sankav: Good afternoon to one and all. I am Avanti Sankav the company secretary of Talwalkars Better
Value Fitness Limited. I would like to give you an insight about our entire demerger process.
We have been giving the timely updates on demerger to our valued shareholders as we are
highlighting only on the main points. The rationale of the demerger the gym business and
lifestyle business of the company have divergent business profile, growth potentials, risk
rewards and capital requirements and are largely independent of each other.

In order to achieve better management and to have clear focus on business operations the
management of Talwalkars Better Value Fitness Limited decided to demerge gym business
thereby transferring the gym business of the company to Talwalkars Lifestyles Limited in the
interest of maximizing the overall shareholders’ value. The business has demerged into
resulting company which consists of gym business operated by the company or through its
subsidiaries and franchisees the resulting company that is Talwalkars Lifestyles Limited will
be into core gyming activities and will not venture into lifestyle and wellness segment.

The share entitlement ratio is one equity share having face value of Rs. 10 each of Talwalkars
Lifestyles Limited for everyone equity share having face value of Rs. 10 equity share of
Talwalkars Better Value Fitness Limited each having fully paid. We have complied with all
regulatory norms in the entire demerger process right from inception of the demerger process
existing company were going to be the lifestyle company which was subject to the approval
from the various regulatory authorities, the shareholders and the creditors they have given their
approval which is up to 99.9% then the requested NCLT for its final order.

The NCLT has given its final order and also to replace the names of the company to reflect the
appropriate niche of the business. At the time of passing the order NCLT directed the name
change to ROC this was informed to the exchanges side it was put it up on our website and this
was done well before the record date. We are in receipt of NSE’s in principle approval, BSE’s
in principle approval and we have submitted these approvals to SEBI for its final approval post
which the shares of the company will be listed.

Thank you very much. Now I hand over.

Anant Gawande: We can start the Q&A.

Moderator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session.

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The first question is from the line of Dimple Kotak from SKS Capital. Please go ahead.

Dimple Kotak: Sir, I have just few queries like in back in 2017 when we were planning about the demerger
some results are given for FY16 that around 20% of the revenues come from the lifestyle
business, accordingly profitability comes but then, seeing FY17 numbers on the slide, it shows
that around currently 17% of the revenue comes from this ex-gym business 18% EBITDA and
profitability of 10% so will this be maintained? What is the kind of growth we are seeing in
this? And second is that if gym business was expected to be debt free, then if I am taking the
half yearly debt of Rs. 487 crores, then only 40% is passed on to the non-gym business and sir
if you can just clarify on that?

Anant Gawande: Dimple, I will take the first question first. Actually, I will take the second question first and
leave this first question to Girish Nayak – the CFO. As far as the debt goes, the total debt is
something like Rs. 500 crores. What we have said is considerable amount of debt because
there is a result in property shifting and all the value-added business is shifting will shift to the
gym to the lifestyle company, which is the curent company.

` It is impossible that all the debt will come here. One is that will lead to a significant drop in the
profitability of the lifestyle company as you can make out, because the lifestyle company’s
total turnover as a whole is about 20%. So we had taken whatever debt can be taken directly
attributable to each activity which is being done in the lifestyle part of the business, whether it
is Zorba, whether it is David Lloyd or the property.

Dimple Kotak: Sir, how will you bifurcate like Zorba happens in the same gym property, right?

Anant Gawande: So you want to know the revenue breakup or you want to know the asset base?

Dimple Kotak: No, if I am saying that Zorba are they different rental properties for Zorba or it is in the same
location where gym operates?

Anant Gawande: So I can answer it. We have separate Zorba as well as Zorbas within gyms.

Dimple Kotak: So how do we differentiate that Zorba within the gyms?

Anant Gawande: So the Zorbas which are within the gym the CAPEX which was spent on Zorba or Mickey
Mehta or Reduce or Nuform as you can understand we would have segmentally that CAPEX
with us has been shifted to the lifestyle company or kept in the lifestyle company. Two, is the
rent which has been paid for that space which is utilized by them will be paid by the lifestyle
company to the gym company. Three is the staff and employees of each of these activity will
or have shifted to the lifestyle company.

So let us take a super market in which there are different segments. For want of a better
example let us take a central mall or an Akbar Ali’s. So there are different departments but the
billing is done commonly but all the departments are charged a rent. That is the exact model

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which we are doing, just like in the central mall if you go there are different spaces given to
different brands, Aero, Lee, Levi’s, etc. So we were opted the same model.

We have taken the CAPEX appurtenant thereto, actually your answer is given in the fact that
the revenue which is shifting to 20% to 22% but a dead shift is 40%, which itself makes and I
cannot discuss it beyond a point here as I explained earlier, which itself means that a gym
company becomes lesser leveraged and more profitable.

Dimple Kotak: And cash is around 60% was being shifted to lifestyle?

Anant Gawande: That is right.

Dimple Kotak: Okay and sir one year earlier the guidance was that a considerable amount of debt will be
shifted to lifestyle but then?

Anant Gawande: Compared to the size of the company we have shifted a considerable amount of the debt. See if
you look at the size of the company which is 20%, 22% the debt shifting is 40% which is
double of the size of the business.

Dimple Kotak: And sir in terms of profitability, as on FY17 it was showing a 10% the lifestyle contributes
10%. So on FY18 basis how much does it contribute to the overall?

Anant Gawande: We have given the results.

Dimple Kotak: Yes sir, you have given the results, but I was just trying to find out that if top line is 20% since
I have FY17 balance sheet?

Anant Gawande: I do not think you will have to wait too long for it Dimple. We are really expecting and
wanting the final approval of demerger. I mean if you have really gone through our
presentation, there are 44 steps which we have complied till now in the process of demerger. It
is unreal how much we all have to go through. Because one of your shareholder and the whole
process started well over 15 months back but I genuinely believe we are at the fag-end of it and
we are literally ready with all our papers on the other side of the river. As you can see the
company on its own has a profitability and turnover which will grow quite significantly which
is what we will do in terms of business.

Dimple Kotak: What is the kind of growth we are looking at and the CAPEX?

Anant Gawande: See let me put it this way. Each part of the component will have to be discussed separately.
What we would like to do is our first work was to explain what this company does, which we
have done efficiently just now. And Girish and his team has put up a presentation which gives
you a good insight into what we do actually. I am happy about that and I am happy about the
fact that this company can stand on its two feet and can grow from here at a good pace.

Dimple Kotak: Okay sir. If you can quantify what kind of growth you are looking from here?

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Anant Gawande: Let me put it this way. The combined growth rate was about 20%. I think the lifestyle
company should grow at a pace which is equal to or more than that. This was a historical rate
at which we have grown earlier in the last three, four years.

Dimple Kotak: And sir, just globally I wanted to understand that what would be the multiple given to global
gym companies currently?

Anant Gawande: There are two kinds of gym company globally those which are brought by PE Fund Buyout
Funds or others. Generally, they are bought at between 10 and 15 times EBITDA 10x to 15x.
This is information available on several sites. The listed companies are mostly in United States
or in South East Asia and generally they have been quoting at a PE multiple of between if I go
broader in between 18 and 30.

Dimple Kotak: PE of 18 and 30 and EBITDA of 11 to 15?

Anant Gawande: I would say 10 to 15.

Moderator: Thank you. The next question is from the line of Jinesh Sheth from Arete Group. Please go
ahead.

Jinesh Sheth: Sir, would it be possible for you to provide some color at least directionally on our
performance of gym business during the quarter?

Anant Gawande: Jinesh, I would love to do it. I am smiling while I am talking, I genuinely would okay. I mean
if you have gone through any of our con calls, we have been the type of management which
has been transparent. You would now know both the companies are separate. They are legally
separate, correct. So it is inappropriate to comment on an unlisted separate company.

You can well appreciate my problem on this. I do not think you will have to wait for too long
because as I said, this process is now almost it is near end and we will be immediately after
that declaring results, Jinesh. So it is not as if we do not want to do anything. It is only that we
are constrained by so many regulatory issues that we do not want to be on the wrong side of it
at the last part of the permissions.

Jinesh Sheth: So when is our gym business getting listed, any tentative timeline?

Anant Gawande: I think Avanti has just mentioned would you like to tell again, Avanti?

Girish Nayak: Jinesh, the thing is we have received the permission from BSE and NSE but I cannot really
firmly say how much precisely say that how much SEBI will take the time. But it is at the fag-
end now.

Jinesh Sheth: Coming to the lifestyle business, sir how much return on capital employed can this part of our
business achieve and by when do you believe it can reach that goal?

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Girish Nayak: The thing is that we will be growing at all the segmental analysis we should be growing about
top line to about 18% to 20% and the bottom line should be around 20% to 25% we will be
growing.

Jinesh Sheth: Sir, in terms of return on investment I mean how much can we see it generate on an ROE or
ROC basis?

Girish Nayak: The thing is that as the businesses get implemented slowly and progressively it will go up
because the growth rates will be slightly faster because this business being asset light we
expect the ROC and ROE to improve quite significantly faster than the other businesses.

Jinesh Sheth: Okay because where I am coming from is that currently it is around 4% to 5% on an ROC
level. So when can we see it getting or hitting the double-digit mark?

Girish Nayak: The thing is that in our previous con calls and presentations if you have noted that we had also
said that we can monetize the assets which will improve the ROC, ROE of the business. At an
appropriate time and from the right value we will do that exercise for the benefit of the
company and that will really improve the ROC, ROE immediately. But our more interest will
be in growing all the businesses segmentally and deliver the result to our shareholders.

Jinesh Sheth: Sir, what should be our steady state effective tax rate for Lifestyle? There is a sharp decline in
ETR over last fiscal, I mean it’s literally half?

Girish Nayak: Because we are currently under MAT it is down. Probably if the business is grow which we
hope they will continue to grow then it will be in the range of around 20% to 30% we should
be growing into that.

Moderator: Thank you. The next question is from the line of Shailesh Kumar from Sunidhi Securities.
Please go ahead.

Shailesh Kumar: My first question would be if we can have the breakup of Rs. 57.5 crores among Zumba,
Nuform, Reduce, Transform, Yoga and maybe other segments and what kind of EBITDA
margin we have clocked segment wise?

Anant Gawande: Shailesh, we will not be providing that information currently unfortunately, but we surely do it
as we go ahead on a quarterly basis in some manner or the other.

Shailesh Kumar: Can we have the breakup of Rs. 336 crores of fixed assets on the books?

Anant Gawande: Which one?

Shailesh Kumar: Rs. 336 crores of fixed asset which is showing on the balance sheet?

Anant Gawande: The biggest chunk of that is property because the property is in this company.

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Shailesh Kumar: So to the tune of what property?

Anant Gawande: I think about Rs. 150 crores.

Shailesh Kumar: Rs.150 crores, then we will have equipments?

Anant Gawande: The rest of it will be movable asset, equipment, furniture which were utilized for each
component of the lifestyle activity like Zorba, Zumba, David Lloyd all of them.

Shailesh Kumar: And how much of the Club component is there in this fixed assets?

Girish Nayak: It is around Rs. 50 crores.

Shailesh Kumar: Mainly land or some construction as well?

Girish Nayak: The construction has started, that is in the presentation.

Anant Gawande: I would like Prashant to give you some information on the Club project that you understand
because we are in advanced stage of getting the Club into the next option. Would you like to?

Prashant Talwalkar: Hi Shailesh, this is Prashant here. I will just brief you on the progress of the Club construction
basically because after all the permissions and all the necessary licenses required for the
construction, the construction began almost five months ago and hope to complete by end of
this year. So work is in full swing and full throttle is the right word. And we have also printed
a few photographs for progress of the work.

And as explained about the expenditure incurred not only just the land but at this construction
stage, the cash flow is pretty high and required in full speed. So Rs. 50 crores which just now
Mr. Girish has explained is a part of the construction cost also. And hope to complete the work
by year end and also we will be looking at now the sales part of our membership and other
things. So this is how far the Club has come.

Shailesh Kumar: And sir, how much we have already put and how much we are yet to put by the end of the year
till it is finished?

Girish Nayak: Are you talking about the Club?

Shailesh Kumar: Yes.

Girish Nayak: The Club cost is expected to be Rs. 82 crores to Rs. 85 crores. So the thing is that we have
already gone past the 50 so this is balance I think so it should be we will be doing in the
current year.

Shailesh Kumar: And David Lloyd as a JV partner has already put the money chipped in with the money?

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Anant Gawande: They have applied for the permissions with the regulatory body, they have allocated the funds.
As soon as they get that permission they will put the money in.

Shailesh Kumar: And sir, what kind of fixed asset turnover should we expect in this Club business at optimum
capacity utilization?

Anant Gawande: Let me put it this way. Let me ask Prashant a question on your behalf as to how many
members can we get?

Prashant Talwalkar: Yes we will open the membership in various categories, Shailesh. So as an information to you,
India is one country which permits you to take a life membership. Rest of the countries do not
allow more than 12 months or 24 months. Now that is one big advantage for us. Now once we
open the membership here, we would like to rather give first the life membership as numbers
as possible and then open up for the lesser duration. Then there are corporate memberships and
then there are categories wherein you bring in a single membership to the family membership.
Life membership will be of 25 years as a number of years concerned.

So in this manner, the capacity of Club will be around anything between 2,500 to 4,000. Now
why I said such a wide gap is also because the number of families enrolled then I consider four
as a family. Therefore, it is 2,500 to 4,000 is the capacity of the Club. Now there is a category
within the family also, that is once the children grow above 18, they have to opt for their own
membership. So we have to keep that little space for them in that category also. But full-
fledged capacity is 2,500 members for sure.

Shailesh Kumar: So sir, I mean how are we going to account for this lifetime membership in our revenue? I
mean see in the first year assuming a hypothetical number we are going to get say 500
members lifetime members at Rs. 10 lakhs membership fee. So what we are going to get is Rs.
50 crores. So how are we going to account for it in our P&L and all these things?

Prashant Talwalkar: There is one more charges which will be there which will be a quarterly subscription charges,
Shailesh. Those subscription charges are quarterly charges. Over and above what happens is
there are facilities which you need to pay separately when you opt for special training
programs whether it is swimming, whether it is any sport rather. So that revenue will keep
coming in in that format every quarterly, you know it is a lifetime charges.

Shailesh Kumar: No, you are absolutely right sir. What I wanted to understand let us separate these two things,
one is a day to day or maybe quarterly thing another is membership fees. So if we get Rs. 50
crores of membership fees for lifetime membership how are we going to account say in the
first year, how much will come in P&L and maybe then amortize over a period of time? I mean
how are we going to do that?

Girish Nayak: Of the life membership 50% will be treated admission fee and the balance will be amortized
over the entire period and for the short term members which Prashant mentioned, will be
amortized over those tenures only.

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Shailesh Kumar: And we seem to have been seeking enabling provision to raise NCD worth Rs. 500 crores. So
what are the probable uses for this?

Girish Nayak: See the thing is that this limits which we have taken for debentures or anything for borrowings
are within the overall borrowing limit and we are just taking the enabling provision without
basically the cardinal rule that we will not exceed 1:1. The thing is that we would like to retain
the debt-to-equity at much lower level, but that is the cap which we have put on ourselves and
we will not be breaching that.

Moderator: Thank you. The next question is from the line of Rajesh Agarwal from Money Ore Investments
Advisors. Please go ahead.

Rajesh Agarwal: Sir, my first question before the demerger we were given some rough demerger financials. My
only question why is this divergent we have shown profit after tax in the lifestyle business for
Rs. 15 crores, but now really when we see the profit, profit is around Rs. 8.7 crores?

Anant Gawande: When did we give the figures for your…..

Rajesh Agarwal: You have given sir I will tell you exactly the presentation. Page #14 you gave around the day I
do not know, up to 2016 you have given the figures?

Anant Gawande: Up to 2016 we have given the figure and at that time it was Rs. 14 crores?

Rajesh Agarwal: Rs. 15.1 crores profit after tax?

Anant Gawande: Unfortunately, I mean Girish is sitting with me and I will tell you why. Because in a true sense
the lifestyle company part of the business only picked up in 2015 it must be till 2017 and 2018.
In 2016, the entire company’s profit after tax would have been approximately Rs. 45 crores.

Rajesh Agarwal: See you have given the breakup like that Rs. 15 crores for the lifestyle, Rs. 38 crores for the
gym company, so the profit after tax figure, see the turnover is matching. Everything is
matching only two figures are not matching, profit after tax and the fixed assets?

Anant Gawande: Let me put it this way that I remember us saying several times that the gym company will be
75% to 80% of the business and the lifestyle will be between 18% and 25% of the business.
You can see right now based on the nine monthly results and the last year results, because
2017 you have got the full year results of the entire company and you have got the full year
results of the lifestyle company with which you can extrapolate the gym company, correct
Rajesh?

Rajesh Agarwal: Why there were divergence, only the question was?

Anant Gawande: There was no divergence, that is what I am trying to explain to you. If for any reason you can
point this out separately to us we would be more than happy to help you on it.

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Rajesh Agarwal: Fixed asset was also given at 196, now when I see the current balance sheet is 336, so they are
diverging in to two aspects, one is the fixed assets, one is the profit after tax?

Anant Gawande: No, that is because there is a valuation which we have to give just for the property done,
Rajesh.

Rajesh Agarwal: Okay, the offices?

Girish Nayak: Earlier it was IGAAP accounting, now our company follow the IndAS accounting.

Rajesh Agarwal: So we can take it that as a market value?

Girish Nayak: It is at market value as per IndAS.

Anant Gawande: When somebody asked me just now, we just mentioned right, the market value of the property
is so and so.

Rajesh Agarwal: Okay and sir what is the timeframe we want to demonetize that?

Girish Nayak: At an appropriate time if we get that opportunity we will definitely do it.

Anant Gawande: See let me explain the technicality to that Rajesh because I know you people do a lot of good
research. If we sell the property, the way it is then we will have to incur capital gains which is
35%. As a shareholder are you tell us to do it, we will look at that as a serious option, I think
we should not correct. Now the only other option that means is to try and do some kind of
monetization in a different way which has got some creativity in terms of taxation. In Rs. 150
crores I lose Rs. 50 crores of my shareholders’ money you can well imagine what will happen
to the wealth right.

So our own struggle which we are talking to lot of consultants and which we did not talk to till
the demerger process has happened is how do we do it by minimizing the tax element? See
valuing the asset at a fresh value is a requirement, but how do you pay tax is a different
requirement. So I am not even mentioning here for example that we may get the benefit of a
lower taxation because companies below Rs. 250 crores of turnover, have 25% tax valuation.
You are aware of it, right?

Rajesh Agarwal: I am aware of it but capital gains also is applicable for that?

Anant Gawande: Capital gain here will be applicable at the full rate. That is the problem. See I mean let me put
this way. This is a rudimentary answer we have been given, we will obviously consult the best
people.

Rajesh Agarwal: My only concern is unless we monetize the fixed assets turnover we will never go more than
one in the next five six years?

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Anant Gawande: You can be sure that we will be ceased of that situation. We need to figure out what can be
done innovatively to do this.

Rajesh Agarwal: And second question sir, for the Club suppose we take a subscription of Rs. 2 lakhs or Rs. 5
lakhs any figure in mind now?

Prashant Talwalkar: There are various categories, Rajesh. Life membership I would rather there will be some few
invitational memberships where we would like to invite what we call the reputed people from
the society and offering them and then there will be a category where we have a pre-open
offer. But average life membership should be somewhere near hoping to be at say Rs. 10 lakhs.

Rajesh Agarwal: And how much members we are targeting sir life members?

Prashant Talwalkar: Initially 250 members in the first year and simultaneously we will be selling the short term
maybe ten years, five years membership also. Again, there is the category of single
membership to the couple membership to the family memberships so there are various
categories, Rajesh.

Rajesh Agarwal: And we will be charging the annual maintenance fee or something like that also?

Prashant Talwalkar: Yes, every quarter what we call the subscription fees will be charged.

Rajesh Agarwal: And as per usable will also be charged?

Prashant Talwalkar: As per usable it depends. You know the Club rules are if you use anything less than three times
in a month, then I think this is the per time charges are charged over and above actually. But I
have not given a good thought to that yet.

Rajesh Agarwal: Sir, one question in that. Suppose we get Rs. 5 lakhs per yearly life membership and we are
targeting maybe 200 members so we get Rs. 20 crores, Rs. 25 crores upfront. Will that become
a self-funding mechanism for other Clubs also?

Prashant Talwalkar: Could be.

Anant Gawande: We hope it should because we have been constantly guiding that we do not want to expand our
spend on capital infusion in the lifestyle company.

Rajesh Agarwal: If this is successful sir, we will be adding one or two Clubs every year, no?

Anant Gawande: No, we have mentioned is over the last two years that let the first Club at least get that
minimum economic quantity of members which helps us and the investors both to understand
that this is a good concept. Then I am sure if that is true, then Rajesh you and all the
shareholders will say okay let us do more.

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Rajesh Agarwal: And the final question is how do the operating leverage from Lifestyle company comes? So
today we are at Rs. 57 crores turnover. Suppose we grow by 20% every year, so how do the net
profit grow, whether we get a 20% growth in net profit or 40%, 50% growth in net profit?
Somewhere the operating leverage has to come in this business?

Anant Gawande: See first of all the present turnover does not include the Club turnover. So that will get added
at a particular point in the current year. The second part is some of these businesses will grow
so for example Zorba has gone to 78 studios and if that goes to 100 and 150. So these elements
have to grow on its own and outside GYM space. This company now has to stand on its two
feet.

Moderator: Thank you. The next question is from the line of Abdul Kareem from HDFC Securities. Please
go ahead.

Abdul Kareem: May I know is this seasonality impact in Lifestyle business?

Anant Gawande: Actually, it is a very good question. The seasonality impact in the Lifestyle business if I take
Club also a business which has started operation, Abdul will be minimized significantly. I will
not say it will be completely nullified because what happens is we do cross sales schemes
during the schemes as in August, September and January, February, correct Prashant?

Prashant Talwalkar: Yes renewals and. See this seasonal thing is definitely there it exists, but we try to work from
time to time with various schemes and opportunities. And most important part is what we do is
that we concentrate in such times our renewals and the members within our premise. So we try
to beat this seasonal effect but it does exist, yes.

Abdul Kareem: And the second question is could you give the CAPEX amount in FY18 in Lifestyle business
and is there any guidance for FY19?

Anant Gawande: Without the Club project the CAPEX guidance for the Lifestyle Company is literally minimal
because most of the activities are asset light so I do not think, Girish do you want to?

Girish Nayak: There will be very minimal for CAPEX in the Lifestyle business.

Anant Gawande: I do not think we are discussing a significant CAPEX here. Whatever is required is to expand
those small studios and the Yoga parlors and Mickey Mehta outfits. So you can very well
understand those are not they may combine into a figure but I do not think the figure is
hundreds of crores.

Abdul Kareem: And one more question. The subsidiary there was some Rs. 1.3 crores to Rs. 1.4 crores almost
loss made by subsidiary company in FY18. So could you give some guidance?

Anant Gawande: In the Lifestyle subsidiary?

Abdul Kareem: Lifestyle.

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Girish Nayak: No, the Lifestyle subsidiary is that if there is any effect is that they have become only
subsidiary which is there is the Club and due to the IndAS adjustment and the deferred tax
those kind of things but there is no losses made obviously this Club which is a subsidiary is
only capital is going on but there is no revenue so there is no loss also in that.

Moderator: Thank you. The next question is from the line of Samarth Singh from CPF Capital. Please go
ahead.

Samarth Singh: I just wanted clarity on one thing. You said that the total CAPEX of this Rs. 85 crores out of
which we have already spent Rs. 50 crores?

Anant Gawande: Sorry what did you say? You said Rs. 85 crores is the total CAPEX on which we have spent
Rs. 50 crores. Is that the question? You want to know whether the balance CAPEX is Rs. 35
crores, is that right?

Samarth Singh: That is right.

Anant Gawande: Yes, it is.

Samarth Singh: And the remaining Rs. 85 crores would come from David Lloyd, is that how that is structured?

Anant Gawande: Sorry what did you say?

Samarth Singh: And the balance Rs. 85 crores would come from?

Anant Gawande: Total CAPEX is Rs. 85 crores. Out of which Rs. 50 crores has been spent, Rs. 35 crores has to
be spent, Samarth.

Samarth Singh: Okay. And is David Lloyd also going to put in Rs. 85 crores? Is that right?

Anant Gawande: No, what will happen is there will be a component of equity ended. Whatever equity is
contributed by us, the same amount will be contributed by David Lloyd. The agreement with
David Lloyd is very clear that whatever is put is put in the ratio of 50:50.

Samarth Singh: Okay.

Anant Gawande: As and when we require we have capped that we will not put more than Rs. 50 crores.

Samarth Singh: And that Rs. 50 crores what is the ratio of the debt to equity?

Anant Gawande: Sorry what did you say?

Samarth Singh: Debt to equity?

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Anant Gawande: No, as I said we will not take the amount of equity from David Lloyd which is more than ours.
It will be equal and at an overall level we have already guided that we will not do, we will not
even remotely touch the debt equity of 1:1. It will be lower than that.

Samarth Singh: Okay thank you and second question was on can you give I know you are not giving breakup
by segment, but could you tell us what is the rental income in the topline?

Anant Gawande: I am so sorry we cannot hear you properly, Samarth.

Samarth Singh: Let me try one more time. What is the rental income in the topline?

Anant Gawande: For 31st March 018 and 017 because these are the years which passed by Samarth, we had
taken only a rental income proportionate to the period which was required but we have not
taken for the full year. Because rental can only be prospective and not retrospective. Because
all kinds of other taxes, GST all of that becomes a part of it.

Samarth Singh: Okay. So for example out of the Rs. 58 crores in topline, what is the rental income in that?

Girish Nayak: It will be very minimal.

Management: Very minimal there is hardly anything in this. Because the demerger has taken place means the
order came in February. So you can say that the rental is very minimal.

Samarth Singh: Okay. So can you tell us going forward what is the expected rental income to be coming in
every year?

Anant Gawande: Let me put it this way. It will be in conjunction with what we require to do for the purpose of
securitization of rental with the banking system because both the companies borrow from
banks. And that part of the debt will be secured by the Lease Rental Discounting, LRD.
Because one company will be paying the rental to the other company, Samarth.

Samarth Singh: Right. But the LRD would be taken only by the lifestyle company, right?

Anant Gawande: The property will be owned by the lifestyle company. The rental will be paid by the gym
company which is hither to not listed. What we have to do we have to take into account the
requirement of the banking system. Our bankers the main bankers, so that we workout the
appropriate rental. So it will be inappropriate for me to give a figure which then goes wrong.

Samarth Singh: Okay. The loan that will be backing I guess that will be securitized by the rental that will be
sitting with the lifestyle company, right?

Anant Gawande: The loan will be in the lifestyle company but the rental amount or rather the installment based
on the rental amount has to be fixed by the bank. Are you with us?

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Samarth Singh: Right. And so this Rs. 193 crores that we see on the balance sheet as of today that will be
securitized by the rental income coming in?

Anant Gawande: Part of it.

Moderator: Thank you. The next question is from the line of Mayur Gathani from OM Portfolio
Management Services. Please go ahead.

Mayur Gathani: Sir, what is the cash in the books for lifestyle?

Anant Gawande: We have given it Mayur, Rs. 50 crores.

Mayur Gathani: And all the rental income that you have mentioned let us say Zorba or the activities that are
happening in the gym even they would end up paying the gym premises some rent?

Anant Gawande: Absolutely you are absolutely right.

Mayur Gathani: And overall rent the gym will be paying the lifestyle business some rent as well?

Anant Gawande: Overall the gym will be paying the lifestyle a rental for the purpose of the properties.

Mayur Gathani: Yes.

Anant Gawande: That is right.

Mayur Gathani: And the tax rate, is MAT for FY18 so how long the next 1 or 2 years we see it as MAT or?

Anant Gawande: First is as I explained to one other speaker we are still trying to get an opinion about this less
than Rs. 250 crores turnover. As you know the present amendment in the income tax, less than
Rs. 250 crores turnover has a taxation rate which is lower, right? Okay so we want to get that
opinion very clearly defined. In which case anyway our higher rates, if that is true will be 25%.
We do not know that. I mean we do not want to make a commitment which we do not know
about because there are so many loopholes going around. Overall, we believe that there could
be some small concession on the taxation but not a major one unless the tax rates improves.

Mayur Gathani: Okay. And so you been maintaining a margin of 65% plus in the last 2 years what we see
FY17-FY18. Do we see this sustained for the next few years?

Girish Nayak: Yes. We should be able to sustain that. There is a good potential for the growth of this business
so we can definitely do that. And in the earlier speaker, I had mentioned in that topline should
grow at 18 to 20% and PAT should be growing at 23% to 25% in that range.

Mayur Gathani: Okay. I mean with the rental income coming in should not the EBITDA increase more
significantly?

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Girish Nayak: With this company with all the segments will go on their own stream. Initially maybe the
rental component may look significant but over a period of time the rental income will give
stability to the company initially but then it will be a small component in future.

Mayur Gathani: Okay. And this year itself you will start membership from the Club business right? So we will
see some revenues generated from the Club?

Girish Nayak: Yes, the Club operations are going to start in the current financial year. So definitely there will
be income.

Moderator: Thank you. We will take the next question from the line of Rajesh Agarwal from Money Ore
Investments Advisors. Please go ahead.

Rajesh Agarwal: Going forward what will be interest component in the lifestyle company? Now annually we are
paying how much and what will be going forward?

Anant Gawande: Actually, this is too much Rajesh because there is a treasury of about Rs. 50 crores and a debt
of about Rs. 200 crores. So Rs. 125 crores, Rs. 150 crores is the net debt. If we can do what
you are suggesting on the property we would hopefully try and evolve the company to a
significantly lower debt level.

Rajesh Agarwal: Suppose that does not happen it may take time so what will be the interest outgo?

Anant Gawande: Because then the lease rental income will be equal to my interest. Are you with me?

Rajesh Agarwal: Okay lease rental. So that is what I am not getting clarity. You have to make it clear for
everything. Suppose you take the property value market value of Rs. 330 crores. Suppose 2%
is the rental income in Bombay all the properties are in Bombay?

Anant Gawande: Rajesh, the property value is not Rs. 330 crores it is Rs. 140 crores.

Rajesh Agarwal: Market value?

Anant Gawande: Yes.

Rajesh Agarwal: Okay then another Rs. 200 crores of fixed assets is what sir?

Anant Gawande: All those are assets Rajesh, all the David Lloyd everything else is also there, right.

Rajesh Agarwal: Okay still sir Rs. 330 crores is not on the higher side fixed assets?

Anant Gawande: What do I answer a question like that? You tell me what am I supposed to say?

Rajesh Agarwal: The annual interest should be more than Rs. 5 crores to Rs. 6 crores a year no?

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Anant Gawande: What did you say?

Rajesh Agarwal: Annual rental for the lifestyle company will earn?

Anant Gawande: So Rajesh we have answered that question. So I understood what you have said. My answer is
simple that we will have to analyze with the banker and other things. As you rightly said there
is an incoming rental and outgoing rental. So bth have to be also looked at. And obviously all
of that will have to be reported to everybody including us and you on a quarterly basis.

Rajesh Agarwal: But no agreement nothing has happened that sort still yet?

Anant Gawande: Obviously we have.

Rajesh Agarwal: We must have fixed the rent, sir?

Anant Gawande: No, what agreement are you discussing?

Rajesh Agarwal: Between the lifestyle company and the gym company, now the company is separate it has been
demerged?

Anant Gawande: I have not understood your question. As I explained to you that whatever agreement which we
have prepare is the agreement for the space utilization Rajesh, Correct? Which is what I
explained to the earlier speaker too. So because you said you are confused which part of it you
are confused you please tell me I can try and illuminate you. But as I explained it would be a
better idea if we get this properly understood by you and try and meet you and get it done
correct?

Rajesh Agarwal: Okay.

Moderator: Thank you. The next question is from the line of Abhishek Agarwal from Prithvi Fin Mart.
Please go ahead.

Abhishek Agarwal: Sir, my question is we are in the industry which is characterized by low entry barrier. So how
we are different from others to command premium price and retain existing customer and
acquire new customers?

Prashant Talwalkar: This is Prashant here. Abhishek, it is a good question and that is what we have been doing for
so many years. Though the entry barrier has been low or easy we try to keep our retention, the
membership retention at a very high level. That is the plus point of it, definitely supported by
the variety and other things and what we call the new facilities to be introduced. So every
square inch of the premises revenue is increased by various ways.

So whether it is easy to enter into this business or low barrier thing does not matter because
there is no limit to any of these as an entry barrier, low entry barrier aspect. Tomorrow even if
you open a Club there will be people who would probably can come in like that. It is of the

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same kind. So it is a continuous effort of course it is very well supported by the goodwill and
these are the major aspects which I think has allowed us to float and remain where we are right
now.

Abhishek Agarwal: So like why am I asking this, suppose your marketing team is approaching a client or client is
coming to our gym and they are asking for membership fees of Talwalkar, okay. So like we
have premium price on our gym business or lifestyle business. So then when we will ask client,
what we communicate, how we educate client as Talwalkars is better than other gym? Because
by equipment wise or technology wise, how we are different? That I want to understand, sir?

Prashant Talwalkar: Abhishek, the very basic thing is that people come to us for two reasons. One is the brand
name and the second is the faith. Beyond these two factors everything else can duplicate.

Abhishek Agarwal: Correct sir.

Prashant Talwalkar: Yes, so I just tried to answer your question in one line. It just means that people would like to
be with people who know the business.

Abhishek Agarwal: Correct sir, and sir one more question like it has been almost one year from bringing power
gym format in India. So how is the performance? How it is different from regular gym
business technology wise?

Prashant Talwalkar: Okay, so I will answer your second question, that is technologically it is nothing less or more
than anywhere else or any of our gyms. Only thing is what we did is what we call as a budget
gym or an affordable gym. A simple format created without any frills. It is not an air
conditioned gym in most of the areas in India, yes. Secondly the as you said correctly earlier
also that the fee structure is pretty low, that means it is very affordable. So there is a category
not only because they cannot afford, there is a category of people who do not prioritize
spending money on the fitness. So they are also my members there.

Abhishek Agarwal: Okay, sir it is like a budgeted gym and secondly price is low, that is the only difference?

Prashant Talwalkar: Correct.

Moderator: Thank you. We will take the next question from the line of Ankit Kedia from Centrum
broking. Please go ahead.

Ankit Kedia: Congratulations on the demerger sir. Given that now the listing has happened, just wanted to
know, while our turn over is sub Rs. 60 crores today, in three to five years’ time which of the
lifestyle business is it Reduce, Nuform, Zorba, Mickey Mehta individually have the potential
to become a Rs. 50 crores or a Rs. 100 crores business and what are we doing to achieve that
given that we can individually now go outside the gym also to explore the opportunities on
each of these businesses?

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Prashant Talwalkar: Yes, very good question. Our effort and we strive to improvise. There is never a time that we
do not. I am going to answer your question directly, yes. It has got a potential to reach that
kind of level of individual facility. So whether it is a Zorba or it is Nuform or Reduce the idea
behind bringing this as an individual is to reach to those levels, high levels.

And to do that we do everything possible whatever is required. So to answer your question

whether it will be of that potential to reach that profitability, yes.

Ankit Kedia: So which of the segment would be the priority, initially first 3 years or individually every
business has its own CEO to run the business you think each will run parallely at the same
pace over the next 3 years?

Prashant Talwalkar: It has and as it grows also it will come in.

Moderator: Thank you. We will take the next question from the line of Shailesh Kumar from Sunidhi
Securities. Please go ahead.

Shailesh Kumar: What is our existing member count in lifestyle business?

Anant Gawande: Variety of business will have variety of membership base.

Shailesh Kumar: Overall?

Anant Gawande: See what happens is Shailesh we also sell membership. In August we sold a membership
which we also replicated in April where we give an All In Scheme which mean you can
become member of the GYM of Reduce, of Nuform if there was Zorba in that gym Zorba
which we call as the All Inclusive Scheme. So once you enter you do not have to work out
what is there. We have guided in our presentation that we have almost now 15,000 member of
some kind of the other in this business. David Lloyd of course has not started.

Nuform we have now at about 73 centers. Nuform is a very expensive different kind of
activity. I would not call it expensive I think Prashant will take on that. But basically Rs.
42,000 is what we charge per annum for that activity Shailesh and we have increased the
number of centers only after a period of 3 years.

Essentially each of the gyms or each of the Nuform studios will have about maybe 300, 400,
450, 500 members but they are paying Rs. 42,000 but it depends because the new 40 centers
were started about 6 months back so they will start giving momentum now. Mickey Mehta, we
have just opened some idea. Mickey Mehta the base is Ayurved for all the viewers and
listeners and we opened a certain amount of those ideas in and there are 25 verticals under that.
So that is another area where we charge directly. We are right now experimenting out of
Bombay and then we will come to Bombay.

Zorba has 25 kinds of Zorba and if you again look at the presentation we have given all the
Zorba kinds see the presentation. The effort has been to try and explain every activity in great

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detail. There are Zorba within gyms and there are Zorba outside gyms both kinds of Zorba. So
there are so many things. In Mickey there is swimming, there is height increase, there is
holistic exercises. Each of these activities can either get a standalone member or it can get a
member who does that with a gym or does that with a Nuform program or Mickey Mehta plus
Zorba. So you can create a bouquet of flowers.

Shailesh Kumar: Sir, what has been the Ad expense for FY18 for this lifestyle business and what we expect in
FY19?

Anant Gawande: Actually Shailesh, advertising is not a big component of our spending. Maybe Prashant can
explain. What happens gym is a very neighborhood friendly phenomenon.

Shailesh Kumar: Okay so it is word of mouth and?

Anant Gawande: And the fact that there is digital advertisement which we can do. One is I think you should
have a look at our website and the website of each of our activities. Then you will realize that
they themselves are our mechanisms and keep areas in which we can market very well.

Shailesh Kumar: Just one last question. Assuming we do not open any new outlet say in FY19 we are taking it
ex-Club I mean we are not including Club as of now. So for 2 years if we do not open any new
outlet what kind of turnover growth we can expect in our lifestyle business without opening a
single outlet?

Anant Gawande: Shailesh, you want to know the same store sales growth to say that no fine no problem. See let
me answer it differently. I think that activities which are done in the lifestyle company we can
increase the rates or we can increase the volume over the next 2 or 3 years quite a lot because
the capacities are still not full.

Shailesh Kumar: So basically, I was more keen to know the capacity utilization?

Anant Gawande: I will tell u why because Nuform has opened 40 outlets in the last 6 months. Obviously, I
cannot be at full capacity correct? In Zorba each class has 10 to 15 people correct? Now let us
say I have 8 classes correct and they go full. I can increase it to 10 classes, 12 classes, 14
classes. So gym there is a constraint which we have removed by putting these activities
because these activities are group activities if I put the right word which require individual
attention so the fee structure is different.

So I think going ahead each of these activities and their CEOs if I may put the right word will
be making tremendous effort to try and improve their own turnover profitability and
consequently what all we people should get in terms of return.

Shailesh Kumar: I mean for sake of generalization maybe over simplification can we put some kind of a fix
asset turnover ratio to these businesses combined ex-Club business?

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Anant Gawande: I would be happy if in 2 or 3 years the fixed asset turnover ratio which is presently without the
property I think we are at about 0.5, 0.6 times it should go to about 0.7 to 0.8 times in the next
couple of years because that I think is desired and that is necessary to both. Our endeavor will
be in that direction.

Moderator: Thank you. The next question is from the line of Abdul Kareem from HDFC securities. Please
go ahead.

Abdul Kareem: I have a bookkeeping question. Just I wanted to know the capital work in progress is Rs. 12
crores in FY17 and in FY18 it is Rs. 4 crores. So just I wanted to know the reason of decline of
the capital in work in progress?

Anant Gawande: He wants to know what is the capital work in progress?

Girish Nayak: In the lifestyle companies very less. And that is of the Club company which is there is entirely
would be classified with capital work in progress till it is completed in the current financial
year. That is the only thing. That is the major thing. Rest other things there are not much
capital on them about maybe Rs. 4 crores to Rs. 5 crores.

Moderator: Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over
to the management for their closing comments.

Prashant Talwalkar: Thank you everyone. It was nice once again talking to you and I hope when we meet again that
we more progressive to inform you. So thank you so much for chatting.

Anant Gawande: Thank you all of you. It was great pleasure talking to you as always. Hope to get back to you
with the good news of the listing of the other company really, really soon. Thank you for all
their wholehearted support, questions, queries and being part of our family. Thank you so
much for being with us.

Moderator: Thank you. Ladies and gentlemen, on behalf of Centrum Broking, that concludes today’s
conference. Thank you for joining us and you may now disconnect your lines. Thank you.

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