Sunday, September 19, 2010

Multibagger series – A muscular one

Dear Readers,

As promised in the previous post, I wish to light on a probable multibagger stock from my list as belated Onam gift to readers. The stock has made a pretty jump during this period due to increasing demand shaped by the known fundamentals as well the support of on going market sentiments. I have already suggested this scrip to most of my clients well in advance and hope, all of you are positioned.

Following lines are my plain personal conclusions, compilations or suppositions to have and hold this stock for a long time or collectively inspiring me to act on the same. I feel comfortable on the horizon developing by this company or when I search for good scrips to invest, it is one of them I found with appealing rationales and hope the path ahead is promising. If you feel comfy, go ahead.

As we know, a healthy body can merely clinch a brilliant mind. Every one of us keeps a desire to shape or having a healthy and masculine physique or an elegant feminine figure. The wellness service industry is an emerging sector in India with vast opportunities ahead and it covers a large number of services/products related to health, beauty, fitness & rejuvenation line up (yoga, spa, massage etc.). We are going to discuss on a fuel filled business under the wellness service sector, innovative and efficient to tap the essence of health/fitness market.

The Indian equity market has witnessed an IPO, first in it’s kind in April 2010, nothing else but entry of a promising brand from the fitness industry. Talwalkars Better Value Fitness Limited (TBVF) is the leading, reputed as well experienced fitness chain service in India rather an established name in the industry. The company is already a distinguished name in the sector and I was eagerly waiting this listing by a couple of years. I think, the management has delayed the listing process till April this year, maybe cause of negative atmosphere linked with recession clutter or so. Here, I wish to disclose about one another company from my hot waiting list(ing), possible in a year or two, the “Unitek Power Solutions India Ltd”. Hope you will keep an eye on it.

Company : Talwalkars Better value Fitness Ltd
CMP : 239.35 (BSE-17-09-2010)
BV : 49.54
FV : 10.00
EPS : 3.91
PE : 61.21
52 Wk High/Low : 259.90/132.00
Promoter’s holding: 59.49

The fitness industry is growing at a fastest pace with support of various positive factors in conjunction with the promising Indian scenario. Average Indian’s rising disposable income, increasing numbers of young population and growing awareness on fitness/health concept are few of the supporting factors. There were 5mn people in India had annual income of more than Rs.6 lakh in 2005-06. The figure is expected to go up by 20mn by year 2014. I hope this portion of the population must provide a superior market for the fitness industry in the days to come.

We have more than 83 towns which have a population of around five lakhs, offers a massive opportunity ahead in the concept. There is a significant pent-up demand exists in most of the Tier I & II cities for a stylish health/fitness experience, only if, someone provide in an adequate manner with affordable pricing. However, in India, the age group of 20-45 can largely be identified as the key client group for fitness clubs. A study reveals, the proportion of people in that age group is estimated to go up from 37% in 2006 to 40% by year 2016.

Indian fitness industry is very much under-penetrated compared to several develop(ed, ing) countries in the world. Statistics says, about 22% of the US population have fitness club memberships, China has around 3% and we are at less than 0.4%. (Our count is even limited to Metro/Cosmo cities). According to International Health, Racquet & Sportsclub Association (IHRSA), about 30% of America’s larger firms sponsored health club memberships for their workforce. The number of companies providing such subsidies has increased significantly in the past few years. It’s a pure business strategy proven by researches and related to productivity issues, rather concerns on the fitness/health of employees. I hope our companies must follow this practice as usual. Shortly, genuine fitness companies have limitless opportunities ahead, cause of the huge supply-demand gap in the industry. Or, there is a visible unexpressed demand for value health & fitness services at average Indian’s affordable price where the term affordable is in a steady uptrend.

The Talwalkar story started in the year 1932 by late Mr. Vishnu Talwalkar in Mumbai and the long existence of the brand equity enables them to stay ahead of the competition. We must value this rich and long-standing experience (almost 8 decades) in the industry as one of the most significant advantage. Recall an ad word, “If you do something by long years, you will be master in it”. Today the company has enhanced their goodwill and clutched a pan-India presence, operating around 70 health clubs in 30 cities belonging to 12 states of the country, serving around 60000 members. By statistics, all these numbers are mounting at an amazing pace too.

TBVF offers a network of complete health clubs to achieve the goals in health, fitness or figure by providing a band of skilled specialists equipped with world class gym gadgets, ready to supply the top-notch fitness experience available in the country. The company offers a diversified suite of services including gyms, spas, aerobics and health counseling under the brand of Talwalkars. I think, they can attach the beauty salon/parlor facilities too for both the genders which will augment their business by availing full set of craze to the generation under a single roof. It seems, they are planning the same with "Star and Sitara" project and no doubt, our youngsters will throw money. The company also have a JV with Pantaloon Retail (India) Ltd, named as TPFPL ( Talwalkars Pantaloon Fitness Pvt. Ltd). The joint venture is focusing in the business to set up health/fitness clubs or similar services especially in reputed malls under the sub brand "Fit & Active".

Talwalkars seriously focusing on the modern marketing strategies including event promotional programs, ads in cleverly selected media platforms etc..(Please watch the appealing ad at HBO). They usually runs several promotional schemes as part of the marketing strategy linked with elating occasions like New Year, Valentines day, Women’s day, Summer, August, and Christmas etc.. In addition, TBVF joins with various reputed national events focusing the brand building. Talwalkars were the Official Trainer” forStandard Chartered Mumbai Marathonfor the year 2008-10 as well Official Fitness Partner” forFemina Miss India Contest” 2009.

There are no existing listed peers in India which are purely into the fitness industry. The business model is proficient to unearth the primacy due to factors like strong sector fundamentals including increased demand. In addition, sturdy growth in income from operations as CAGR of 80% and PAT has grown at a CAGR of 100% in last three years. Talwalkars has been achieved a nationwide foot print in a fragmented health and fitness industry which is difficult to replicate. The continuous expansion plans will boost their brand presence on pan-India basis. TBVF has almost tripled the number of health clubs in the last 3 years. The company is continuously explores attractive and innovative business opportunities with reputed brands.

My View on the scrip

I had casual visits at couple of their locations in different cities. Yesterday only, I am visited my nearest branch at Calicut and honestly, I was thinking to set up such a business as my own, by return. I had a talk with few of their trainers and it was an impressive experience to assess the fundamentals of the company/business. The branch is just 3 month old, operating with more than 350 members, average 3-4 add ups in last 90 days in a Tier II city like Calicut!. The list of customers is compelling me to think like, the membership in Talwalkars gradually becoming a symbol of status by the time, the basic symptom I was searching and to confirm.

They are smartly arranged most of the must have things at their alluring centers. Glamorous club atmosphere, smartly selected location/premise, vast range of innovative add-on facilities, modern/quality gym gadgets from reputed brands; smart, structured, cool as well skilled set of gym staff, rare standard of customer care crew band, genuine membership pricing, flexible time scheduling etc.. It is a different world, where you can see few celebrities as your co-exercisers. Shortly, if you are subscribed for a good physique, health or for whatever, Talwalkars will induce you to reach them, every next day the time scheduled for you.

Youngsters are indeed in search to develop a six pack body structure, like our heroes. I too, wished to have such rolling balls on my arms/chest under tight fabrics, but in vain. Any way, fitness, figure and style are the blazing crazes of the generation, Talwalkars required to ignite all these passions properly. The busiest modern lifestyle compelled us or we are more interested to adopt paid exercises than the conventional ways. In other words, we are even ready to drive 10kms for a 10 minute tread mill walk instead of half an hour jog at out doors.

People, especially youngsters, who have such an affordable facility available in his/her surroundings will ready to take a membership in any compact/luxury fitness centre, whether intended to the fitness goal or as a status symbol. I do believe, this company will do miracles for investors and will endow with decent returns in next 4-5 years. The revenue growth of this company is sustainable and the business model is outstanding. The experienced management has set few practical goals which are likely to achieve in near future. The stock has very low downside risk and the upper side is unlimited.

Comment please..

“Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do” - Mark Twain

Regards & happy investing


  1. Hi Shabu,

    The real worry is the cut throat competition from other organized and unorganized players.Apart from that it will be very difficult for them to maintain the profit margins for long as there is not much entry barrier.Anybody can give them run for their money.Talwalkar's looks only good when u see their investors profiles like Ramesh Damani and Shivanand Mankekar.
    Please comment.....


  2. Dear Vikas,

    Thanks for the comment.

    The competition is there and I am taking it as a positive factor which will keep Talwalkars active to further innovative add ups in the business. I don't think Talwalkars will run the same styled gyms after few years where survival will be hard and I indicated the probable conversion horizons at para 9. Moreover, I think they know the pulse of the industry in all respects from almost 80 years of existence and I believe in the seniority concept and it works.

    May be I am wrong, but not interested to count who all the investor celebrities invest in a stock on which I am developing faith. Media is a place where we can beleive max 60%, only in genuine cases.

    Please have a look at following link


  3. One thing i want to tell about this type of particular investment that it is completely becoz of Company business & its unique vertical which industry still need to be analysed.

    Because of High break even point it seems tough next bull journey for Talwalkar but its aggressive expansion plan and expertise business method will overcome all this and will be next probable multi bagger.

    Its like a buffet choice buy business instead of share.
    Wish you good luck and please keep update with such a fine analysis.

  4. Sir,

    The stock didn't show any weakness since listing. According to me introduction on new machines have reduced need for hard manual labor. So in order to stay fit we need to use these products. The stock is trading at high valuation. But we should spend more to buy best things.

  5. Any person who is looking to buy stocks in a hope that it would become a multibagger, you must need to have a patience of 3 years atleast

  6. bookmarked!!, I love your blog!

    Here is my blog post :: diets that work fast for women



The blog is associated with information on Indian stock market and author’s investment view points on various emerging stocks/sectors. The contents discussed in this blog are purely my own personal opinion and in no case weigh it as any kind of recommendation for stock market investment. The sheer purpose of this blog is to educate the interested community on market related subjects based on my experience and I am, in no way, responsible for investment decisions based on the contents described in this blog.

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