Recommendation Buy
Price Band Rs 123-128/- INDUSTRY OVERVIEW
Bidding Date 21st -23rd April 2010
Lead Manager India Infoline Ltd. ¾ The wellness services industry is a fast growing
sector in India today. It encompasses a large
number of service segments including beauty
Retail Application-Detail At Cut services (salon, treatment based beauty
Number of shares 50 Shares products), personal health counselling,
rejuvenation (Yoga, Spas) and fitness
Application Money Rs 100000
segments. Within this, the Fitness segment, viz.
Amount Payable Rs 100000 Gyms, is experiencing healthy growth rates and
currently has an estimated market size of USD
113mn.
Share Allocation ¾ As of 2008, there are 765 fitness clubs in India
QIB 30,25,000 with total membership of 0.23 million
Non-Institution 9,07,500 members.(Source: as per the statistics of The
Retail 21,17,500 IHRSA Asia Pacific Market Report, 2008)
Total 60,50,000 Indian fitness industry is a hugely under
penetrated market compared to several
developed and developing countries in the
Offer Structure for different categories world.
QIB 50% ¾ For instance, 16.0% of the US populations have
HNI 15% fitness club membership compared to a mere
Retail 35% 0.4% for Indian markets (taken for Top 7
Lot size 50 shares cities). This is despite the fact that India has the
Issue Size 74.42-77.44 Crore highest incidence of diabetes people in the
world pegged at 50.8 million people.
Face Value 10
Nitesh Bang 022-4062 8887
nitesh_bang@ajmeras.com
IPO Note Talwalkars Better Value Fitness
• This high degree of fragmentation, lack of product differentiation, and customer price
sensitivity result in prevalent price competition and low margins.
• Yet, on the other hand, awareness about fitness and a healthy lifestyle is growing; along with
higher disposable incomes and a growing young population. India presents a huge opportunity
for the health and fitness industry with over 65 towns having a population greater than 500,000
as per Census 2001 statistics.
• Clearly, there is a huge supply-demand gap in the health and fitness industry. There is a visible
pent-up demand for quality health & fitness services at affordable price. This is where the
organized sector has stepped in.
• To tap this vast potential, organized domestic players brands like Talwalkars and Fitness One
along with international chains like Gold Gym and Fitness First have announced expansion
plans into India, attempting to have a national footprint. Market share of top 5 players by
number of clubs is 14.4%.
• This compares with over 40% market shares in Japan and Singapore and about 20% in
Mainland China, Australia and New Zealand for the top 5 players. Thus, the organized players
in India have huge scope of consolidation going forward.
IPO Note Talwalkars Better Value Fitness
BUSINESS
Overview
• One of the largest fitness chain in India (Source: as per the statistics of The IHRSA Asia Pacific
Market Report, 2008) offering a diverse suite of services including gyms, spas, aerobics and health
counseling under the brand “Talwalkars”. “Talwalkars” has pioneered the concept of gyms in India
and today is a recognized name in the health and fitness industry.
Management Structure
Brand Equity
• We believe the long existence of our brand and the strength of our brand equity enables us to stay
ahead of the competition.
• Today, we are one of the largest fitness chains in India. Our brand “Talwalkars” known for
consistent standardized quality offerings has a good brand recall which helps in breaking the
competitive clutter within the industry.
IPO Note Talwalkars Better Value Fitness
Market Leadership
• One of the largest fitness chains in India as per the statistics of the IHRSA Asia Pacific Report,
2008. We operate 58 health clubs in 28 cities across the country serving over 55,000 members.
Being a pioneer in the health and fitness industry, we enjoy a significant lead over our competitors.
IPO Note Talwalkars Better Value Fitness
Distribution Strategy
Talwalkars Better Value Fitness Limited, operating health clubs under the brand name “Talwalkars” has
today, become one of the largest fitness chain in India (as per the statistics of IHRSA 2008 Asia Pacific
Report). As on the date of this Red Herring Prospectus, we have 58 health clubs dotting across 28 cities
in India with over 55,000 members. To excel our growth we intend to increase our presence and reach
further broadening our member base.
Our Company believes that listing will enhance our Company’s brand name further and create a public
market for its Equity Shares in India. The main objects clause of our Memorandum of Association and
objects incidental to the main objects enable us to undertake existing activities as well as the activities for
which the funds are being raised through this Issue.
IPO Note Talwalkars Better Value Fitness
INVESTMENT RATIONALE
Credit Rating
IPO Grading
The issue has been graded by CARE and has been assigned IPO Grade 3 indicating average
fundamentals.
Key success factors for the industry
• Location, availability of quality gym equipment, range of add-on facilities, skills and experience of
gym staff, membership pricing and club ambience are some of the key success factors in the
industry. A fitness club taking care of all these factors can expand its membership base very
rapidly.
Location:
• A dominant driver for gym selection is convenience of location. In fitness industry, a 15-minute
driving distance in metro cities is considered as the maximum anyone would travel for a gym.
Hence, to target a particular locality, setting up a gym in near proximity is essential.
Facilities:
• Gym equipment like cardio, strength and free weights from reputed suppliers are an integral part of
quality service offering. Additionally, basic facilities like separate area for warm up and free style
exercise, locker rooms for customers and juice bars are necessary to create a differentiated product
offering.
• Advanced facilities like aerobics, spas, spinning equipment, sauna bath, massage and personal
training programs etc can help attract more members as well as enhance revenues from existing
members thus increasing profitability of the gyms.
Quality Gym staff:
• The most important success factor in a service industry is the quality of the service staff. It is
essential that gym trainers are knowledgeable, experienced, has good communication skills and is
soft-spoken.
• In absence of any accrediting body for gym trainers and instructors, a customer is quick to form his
own perception of the service levels at a particular fitness club. The ability of the local club
management to maintain the service quality levels has a major impact on a club’s success.
Viral Marketing – In a locality with more than one gym, most people make a decision of which gym to
join based on word of mouth recommendations by existing members who could be
friends/families/acquaintances. Additionally, fitness industry has a very peculiar characteristic that
enrolment often happens in groups of two or more, which could be either friends or relatives. Thus,
service quality offered to existing members has a direct and major impact on future potential of garnering
more memberships.
IPO Note Talwalkars Better Value Fitness
Price:
• Customers tend to look for best price and quality proposition. Typically, a young person in his
early twenties would be ready to pay about 12,000 p.a. while customers in the 30s and 40s would
be ready to try the advanced facilities in a gym which would cost an additional INR 2,000-10,000.
Lack of Standardization
• The industry does not have established standards for the infrastructure facilities, trainer’s
qualification, quality of services, type of equipment etc.
• There are no accreditation agencies in India for regulating the quality of service offerings being
offered. Thus, the unorganized sector suffers from this customer perception of variable standards in
service offering.
Disclaimer
The information contained in this report is obtained from reliable sources and is directed at market professionals and
institutional investors. In no circumstances should it be considered as an offer to sell/buy or, a solicitation of any offers to,
buy or sell the securities or commodities mentioned in this report. Ajmera, and/or its affiliates, may or may not have
position in securities mentioned in this report. No representation is made that the transactions undertaken based on the
information contained in this report will be profitable, or that they will not result in losses. Ajmera Associates Ltd and/or its
representatives will not be liable for the recipients’ investment decision based on this report.
IPO Note Talwalkars Better Value Fitness