BUY Talwalkars Better Value Fitness- Value fit:: IDBI capital

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Talwalkar Better Fitness Value (TBFV) is the largest health club player in the country and amongst top
twenty in the world. It is an early entrant into the health club market in India and has been able to build a
strong brand name by providing high quality equipment and service. TBFV is on an expansion spree and
plans to increase its owned gyms by ~2x to 143 by FY13 without any further equity dilution. TBFL will
have a CAGR in Revenue/PAT of 41%/38% during FY11-13 and will see its return ratios significantly
improving (RoE/RoIC~20%/13.7% in FY13). We believe TBFV to be a play on the growing healthcare
market in India and initiate with a BUY and a target price of Rs203 (16x FY13).
Investment Highlights
 Under penetration + Increasing income + growing health awareness = High growth potential
The penetration of fitness market in India is ~0.4% (taken for top 7 cities) as per IHRSA report
200809,
which is significantly lower than other nations (China 2.3%, Japan 3.1%). The growing
income, increasing urbanization and higher health awareness in India will result in higher penetration
of fitness market. As TBFV is the largest player in the market with a strong brand it will be a major
beneficiary of this growing market.
 Strong brand name + First mover advantage + Large reach = High growth
TBFV has a strong brand name in the health club market in the country. It has been able to provide
high quality equipment with good service which has thus enabled it to be a prominent player in the
otherwise fragmented market. TBFV is one of the first movers in the industry and has a pan India
presence (~50 towns) which will enable it to cater to the widespread market. We expect TBFV to
have a CAGR in Revenue/PAT of 41%/38% during FY11-13.
 Number of gyms to double by 2013 without any further dilution
TBFV will increase its owned gyms by ~2x to 143 gyms by FY13. TBFV had raised ~Rs774 mn in
2010 through an IPO to repay high cost debt (~Rs206 mn) and to fund its expansion plans for
27 gyms (~Rs502 mn). The company has been able to deploy the funds as per expected use and will
now require no further dilution for its future growth plans (35 gyms each in FY12/FY13). With no
further dilution required and the benefits of expansions to come, the return ratios are going to improve
(ROE/ROIC of 20%/13.7% in FY13).
 Attractive Valuations: BUY with a target price of Rs203
TBFV is a play on the growing healthcare market in India. It has a strong brand name and is now
capitalizing, with rapid expansion. There are not any listed comparable players and thus its closest
comparable peers are the consumption companies (Jubilant Foodworks, Page Industries, Titan
Industries etc) which trade at an average PER of ~28x FY13. As TBFV will have lower return ratios in
the near term and also its execution capabilities will be under scanner, we believe it will trade at a
discount (~40%) to the comparable peer set. We initiate with a BUY and a target price of Rs203 (PER
16x FY13).

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