Talwalkar fit to maintain 30-35% growth ahead: Gawande

Meanwhile, the company will be unveiling new gyms ahead. "We will be opening new gyms in both the format which is Talwalkars and Hi Fi. Moreover we just opened a new segment of premium weight loss and fitness product or fitness studios in Mumbai. Six of them were opened in the last two months called as NuForm," he elaborated.

Below is the edited transcript of Gawande’s interview with CNBC-TV18. Also watch the accompanying video.

Q Your FY12 numbers have been pretty good and ahead of expectations what can you promise investors for FY13, how is it looking?

A: FY13 has started on a good note. We will be opening new gyms in both the format which is Talwalkars and Hi Fi. Moreover we just opened a new segment of premium weight loss and fitness product or fitness studios in Mumbai. Six of them were opened in the last two months called as NuForm. These are at a price point which is about 2.5 times a normal gym so usually in a gym we get about Rs 15,000-18,000 per annum, in NuForm we are charging between Rs 36m000-42,000 per annum.

The initial response on this has been very good. We have done some soft advertisement and the people who have gone to these gyms or studios enjoyed the weight loss program which they have done, this is an emphasis on weight loss. On gyming per se we should be opening many more gyms. We grew 30% on topline, about 48% on bottomline last year and I think in that range we should be able to maintain ourselves between that 30-35% in the current year too hopefully if we go ahead and have a good year.

Q: A 30-35% sales growth?

A: My own feeling is what will happen is the new kind of product which we have launched it’s more accretive to return on equity (ROE) and return on capital (ROC). The capex is lower so turnover may not go up as substantially because we don’t need it to go up. But, margins will expand significantly in the current year as they did in the last quarter.

Q: Your margins actually went up to about 46% last year, do you see it going to 50% then with the new product that you are talking about?

A: This is a combination of two things, one is we could hold a price line and we frankly increase in some gyms our pricing. Two more factors are added in, last year we started a significant amount if subsidiary which is what you call as franchised gym and pure franchised gym.

Their royalty income has started kicking in as well as the NuForm gym which we have opened they will be having a higher product EBITDA as we go ahead because of the price point. Hopefully, this should be able to help us achieve a higher level of EBITDA in the current year.

Q: Do you see the possibility of price increases during the course of the year or have you taken price increases across gyms already in the month of April?

A: In significant amount of gyms we have taken a price increase in April which is post March results, so hopefully that will show resultant benefits in the coming time. As I explained to you NuForm is a different kind of studio itself and priced at a significantly higher premium for people who are more conscious of weight loss then only of health and fitness in gyming. If that works out then I think we could be in a position to deliver a much better performance than expected.