Expect to see topline inch up due to expansions: Talwalkars

In an interview to CNBC-TV18, Anant Gawande, CFO & Wholetime Director of Talwalkars spoke about the results and his outlook for the company.

Speaking about demonetization, he mentioned, "This step is only going to help us move towards cashless society".

"In some gyms we have hiked price for about 4.5-5 percent. The biggest move is we have opened 20 gyms on one day in Bengaluru. You will see a little inching up of the topline", he said.Below is the transcript of Anant Gawande’s interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: Before I ask you about your own numbers, do you expect to see any kind of impact because of the demonetisation scheme on demand?A: Last 2-3 days have been a little slower than normal. There is a reasonable amount of business, which we do which is in cash where people become members and some things which we do on card and some things which we do in equated monthly instalments (EMI). So, we have a machine in which you put a card or take a card, you can pay in 12 instalments and we have a scheme going with the bank. What we have done is very quickly put into place multiple credit card machines and multiple EMI machines.October, November and December is anyway one of our subdued quarter. The quarter which went by, the results which we are showing now was a good quarter and has been a good quarter. But I personally believe that what has happened just now is, one is it is a laudatory move and genuinely, it will only help people, because for us, the cash management of taking cash to the nearest bank itself was a big headache, the insurance attached to it, etc. So, today if you ask me, this great move which has been done is only going to help us to move towards a cashless society. We would also be happy with it because our rent, salary, electricity, most of our expenses -- 95 percent of our expenses are in cheque. So, we would be rather happy with that whole thing and what is happening is a very small blip, if I may say so, whether it is our company or generally at large.Latha: Your sense is that Q3 may see a blip?A: That is right. If I give you a sense of how it works, current quarter contributes less than 10 percent of my profit for the year.Latha: We will look at it year-on-year (Y-o-Y) as and when the numbers come and you think there could be a downtick?A: A small change for this one week. Because already people have started recalibrating what they should do, how they should pay and if they put the money in the bank, they may as well pay me by cheque.Sonia: So, what member additions did you see in the quarter that went, Q2, and what is the expectation?A: The quarter which went, we added about 4.5-5 percent members a store wise basis.Latha: Same sales growth was how much?A: About 9 percent was the same sales growth. We took in some gyms a price hike of about 4.5-5 percent. The balance was this. The biggest move which we did is we opened 20 gyms on one day in Bengaluru. So our headline titled this time for the quarter is T20 in Bengaluru. And this is an unprecedented thing. I have searched the internet everywhere. Nobody, anywhere in the world has opened 20 gyms on a single day. So, that is a huge news.Sonia: So what do you think could be the revenue growth by the end of the year? It is 11 percent in the first half. In the second half what is the forecast?A: We will now get these 20 gyms flowing in revenue and then some gyms will hopefully open in the last quarter, not this but Q4. So, you will see a little inching up of the topline. The bottomline we have been guiding anyway between 18 and 20 percent. We are around that mark, if you look at it. But we are absolutely in line for that achievement for the current year. Whatever new gyms we add will anyway give us a higher revenue for the next year.Latha: Therefore, these 20 gyms that you add will be cash positive by when?A: We feel that by March. Up to March, we will be neutral and by that time, we will get those 400-600 members which we need. If we can get them earlier, wonderful. By that time we would be cash positive, earnings before interest, taxes, depreciation and amortisation (EBITDA) positive and throwing in money. Also these gyms were set up at a significantly lower capex.Latha: That is important. Is it land rents that have gone down?A: Yes, we have got almost all the locations at less than Rs 1 lakh a month in Bengaluru and more importantly, the model is tweaked with the operating model to make the operating cost lower. So, return on capital employed (ROCE) can climb up.Latha: Give us an idea of 2018.A: Expansion is back. There is obviously a spring in the step. 20 gyms in one day itself shows that the company is very earnest about going in for expansion now. It should be with lower capex. We have consistently guided investors that we will do lower capex. So, let us hope that 2018 is better than 2017.