Talwalkars Better value Fitness Ltd - Good fundamentals

(django) #44

Dear fellow investors,

Wish to inform you that i spoke with an acquaintance who used to work with Talwalkars.
Following are the 2 short notes:

  1. The company’s corporate governance is a question mark. Projects are given to promoters’ relatives to siphon off money. (This can be correlated with an unnaturally high ‘related party transactions’ in the Annual Report FY16)

  2. Mr Atul Gawande is a great manager and is very well respected within the company. Also, he does what he commits.


Discl. Sold my holding 2-3 months back.

(Shiv Kumar) #45

Even today there is VAT. I ask any service provider like plumbing or electrical contractor and they say tax will be levied if payment is made by cheque. After GST they may pay the tax on the goods purchased in white since they will be getting refunds, but the service part rendered by themselves only would be in cash since these chaps won’t want to pay income tax on their profits.

IMHO GST is not some manna from heaven for cleaning up tax evasion. For example, a restaurant owners buys vegetables by paying cash cooks and serves food and takes payments in cash has not paid GST or any tax to anyone and is not obligated to extract the same from a customer.

(Parag) #46

Modus operandi of the spin-off is:
1- Management announces the spin-off.
2- Management expects the spin-off company to list at a lower price because their options are priced at the listing (or closing price) on the first day.
3- After listing, management starts publishing positive/bullish views about prospects for the company.

This is pretty much a standard template for a spin-off and many renowned value investors have outlined it in details in their respective work, notable amongst them is Joel Greenblatt in his book “You Can Be a Stock Market Genius”.

More info can be found in this fantastic article which outlines spin-off process in general.

It is not clear if TBVL follows the same pattern, only time will tell, but I won’t be surprised if something similar happens after listing the spin-offs.

(eyesice) #47


(Indie) #48

This adds 60 additional centers. Any ides on the deal consideration? I guess the amount hasn’t been declared.

(atishay1) #49

Disclosure says, authorized capital is Rs. 8 Crores so don’t think deal value would be too much impactful but happy to see the wider implications through franchisee model learnings from SNAP.

Discl. Invested

(Parag) #51

Power World gym take around 3cr to setup, and it is much lower as compared to Talwarkars. It will cost Talwalkars to around 180cr to setup 60 gyms, conservatively. Assuming 50% stake around 90 cr (I know this is not the best way to value a deal, but given the information, there is not one can guess).

I think the deal size be around 70 to 100 cs. If it materializes, it will consume most of the cash from TBVL and they will have to raise money by issuing more debt.

The management talks about Franchising often, but they have done much in term of HI in last five year. One would have expected more growth in HI-FI considering it is less capital investment and high ROIC, but it’s growth is muted. The management often says opening so many HI-FI, but they do not mention when they are closing.

(atishay1) #52

Thanks for sharing your views and agree on the valuation. It would be difficult to say the exact value but let’s see how the story unfolds. Debt levels have been the concern and that’s why stock is trading at PE of 10-11 given the long term potential and operations sustainability compared to high flying IT/Pharma stocks. Its not a simple business for everybody to run and one should take a call whether this management can pull off the profitability they are targeting. If the situations improve the stock will not be available at this price so its a call on the future always one has to decide upon.

Discl. Invested

(Parag) #53

Thanks @atishay1 . I agree it is a call on future. At the end of the day, what matter is what is priced in the stock. At looking at 10-11 PE, it is clear that not much is priced in the stock.

The biggest concern is debt, as you have rightly highlighted. The management has an enormous appetite for taking on debt, and they have lapped up every opportunity available to raise money using debt or equity over the last 4/5 years IMO.

Having said that, they have become cash positive last year (operationally); hopefully, they will keep it that way going forward. If the management’s promise of increasing ROE/ROCE to the tune of 20+ materialize, it will bode well for the stock. I suspect, they will make more announcement after the spin-off.

(Sandip Parasnis) #54

Talwalkar has opened 10 Zobra- renaissance studios as per notice sent to BSE.

(nprao) #55

The Snap Fitness center in Mumbai is in dispute with the landlord for non-payment of dues. Current status is that the landlord has removed all trainers and management staff from the gym and is keeping the facility open for members. The landlord’s security guard is stationed outside. The landlord has also filed a court case (in Bangalore) against Force Fitness (the parent?).

I don’t own any shares of Talwalkars, but I am a user of the Snap Fitness center. I thought you guys might find this information useful.

(ASPN) #56

Hi @nprao, just wanted to know how this news is related to Talwalkars.

(Hardik) #58

(Parag) #59

Another attempt to raise money through debt/pref shares.


I think the management wants to raise as much money before the spin off happens.

(Aditya Mehta) #60

So, they are issuing 13,00,000 shares on preferential basis to promoter group. If m not wrong promoter holding should go upto 40.59% from 37.99%.


(Parag) #61

The question is what price they are allocating the preferential shares? If it is near to current market price- then it is not a bad thing as it indicates the confidence of management in company’s future.

Does anybody know what is the guidelines for setting up the price for preferential shares?

(Marathondreams) #62

I was loyal shareholder for this company for more than 4 years but I have lost hope and sold all of my holding in this company. I did not like company’s continuous corporate actions whether promoter share sales, acquisitions, demerges, pledging, QIP and now preference shares issue. Their business model of Hi Fi gyms as well as their related party transactions are not above suspicions. They have namesake called Talwalkars Gym (seems like blood relative of promoters but no ownership involved) which is outright fraudulent and have damaged brand image of Talwalkars.

Their capital allocation policies are flawed and management have done few flip-flops about debt reduction plans. All in all, I felt it is not worth holding any longer :tired_face:.

(Aditya Mehta) #63

what i analyse out of it is that the price should be near the prevailing CMP.
Still someone else may give better clarity who understand these terms clearly.

(narender) #64

exactly spot on. i held this share for sometime in past, but sold because of management issues. this management is hyperactive with qips, restructuring (earlier as part of restructuring they tried to bring nuform and reduce etc business under one roof)… recent acquisitions and opening of some new gyms underneath those jvs; further convolutes the structure.

and also i didnt like the business model. its capital intensive and hyper competitive. its like the worst of restaurant business (location, accessibility, parking interiors etc) and asset leasing business (you charge retail to use facility/ machines and recover money over years),

(Aditya Mehta) #65

Wonder what type of trade receivables this co. might have?? Rs.29 cr of trade rcvables while there are no trade payable at all.
Can anyone explain it…Thanks in Advance