Your Directors are pleased to present 13th Annual Report on business andoperations with the audited financial statement for the year ended 31st March2016:
BUSINESS AND FINANCIAL HIGHLIGHTS
The highlights of your Company's standalone financial performance for the year ended 31stMarch 2016 are summarised below:
| || ||Rs. in millions |
|1 Summarized Financial Results ||31.03.2016 ||31.03.2015 |
|Total Income ||2673.11 ||2248.66 |
|Profit before interest depreciation and taxation ||1417.18 ||1134.90 |
|Financial Expenses ||155.85 ||109.14 |
|Depreciation ||435.64 ||366.77 |
|Exceptional Items ||(0.28) ||- |
|Profit before tax ||825.69 ||658.99 |
|Provision for taxation ||268.35 ||211.68 |
|Deferred Tax ||23.42 ||17.47 |
|Profit after tax but before minority interest ||533.92 ||429.84 |
|Share of minority interest ||- ||- |
|Profit after tax ||533.92 ||429.84 |
|Excess provision of Income Tax written back ||- ||- |
|Balance brought forward ||1115.88 ||852.10 |
|Total available for appropriation ||1649.80 ||1281.94 |
|Proposed Dividend ||49.84 ||39.27 |
|Corporate Dividend Tax ||10.13 ||7.85 |
|Debenture Redemption reserve ||59.83 ||48.03 |
|General Reserve ||26.70 ||21.49 |
|Depreciation adjusted ||- ||8.02 |
|Arrears of depreciation ||- ||41.40 |
|Balance carried forward ||1503.30 ||1115.88 |
Your Company continues its leadership position as largest Fitness Chain with 176fitness centres across 85 cities and towns. At Talwalkars we generate multiple fitnessand wellness streams that extend beyond core gymming which comprise of value- addedservices like Transform Reduce NuForm nutrition spa massage aerobics yoga anddietary regimes among others.
Review of Operations
Your Company is focused on its goal of raising fitness standards in the Country andspreading healthy living. The multiple health and fitness services are provided by theCompany through five fitness centre formats of Talwalkars Premium/Large format GymsTalwalkars (formats mostly located in Metros) PWG (Power World Gyms at ColomboSrilanka) HiFi (low cost format mostly located in non-metro locations) and Zorba Studiosyoga studios chain).
The Talwalkars brand has become synonymous with the Indian fitness industry. Ridingbrand goodwill and management competence our Income from Operations (Net) on a standalonebasis grew at a 3 year CAGR (FY14 - FY16) of 19.32% achieving H2292.24 millions duringFiscal 2016. Similarly our EBITDA and Profits after Tax on a standalone basis for theyear ended 31st March 2016 were H1350.26 millions and H533.92 millionsrespectively growing at a 3 year CAGR (FY14 - FY16) of 29.41% and 26.43% respectively.
During the year along with the financial performance your Company's profit before taxas well as profit after tax and minority interest recorded a healthy growth of 17.36% and19.41% respectively. The volume of the business also displayed an increase of 13.96% overlast year.
No material changes affecting the financial position of the Company have occurredbetween the end of the financial year 2015-16 and the date of this Report 5thMay 2016.
During the year Authorised capital of the Company increased from H30 crores to H32crores vide postal ballot conducted in pursuance of Section 110 of the Companies Act 2013read with the Companies (Management and Administration) Rules 2014.
Paid up capital of the Company increased from H261808880/- to H297048560/- pursuantto the placement of 3523968 equity shares to Qualified Institutional Buyers throughQualified Institutional Placement.
Your Directors are pleased to recommend for the consideration of shareholders adividend @ 15% (H1.50/- per equity share of H10/-) for the year ended on 31stMarch 2016. The dividend has been recommended in accordance with your Company's policy ofbalancing dividend pay-out with the requirement of funds for its growth plans.
The Directors proposes to transfer H26.70 millions (5% of the net profit) to theGeneral Reserve out of the amount available for appropriations and an amount of H1503.30millions is proposed to be retained in the Profit and Loss Account.
During the year under review Company has not accepted any fixed deposits from thepublic falling within the purview of Section 73 of the Companies Act 2013 and rulesframed there under.
Subsidiaries and Associate Company
Your Company has continued the process of expansion including acquiringoperationally-efficient local gyms/fitness centers across India and abroad.
Your Company's subsidiary model encompasses the full services fitness centers under theTalwalkars brand with each fitness outlet spread across around 4000 - 5000 sq.ft.largely targeting customers in Tier I and Tier II cities.
The Company has following 7 subsidiaries as on 31st March 2016 and oneassociate Company within meaning Section 2(6) of the Companies Act 2013:
(1) Denovo Enterprises Private Limited with gym spread in Northern and Western India.
(2) Equinox Wellness Private Limited with gym spread in Eastern India.
(3) Aspire Fitness Private Limited with gym spread in Western India.
(4) Jyotsna Fitness Private Limited with gym spread in Western India.
(5) Talwalkars Club Private Limited is a wholly-owned Subsidiary of the Company.
During the year the Company acquired a controlling stake in the following Companies:
(6) Talwalkars Club Systems Private Limited is a wholly- owned Subsidiary of theCompany incorporated in March 2016 to own lease and manage recreational/ lifestyleclubs by providing all kinds of sports games recreational and hospitality facilities.
(7) Inshape Health and Fitnez Private Limited is a fitness centre service providercatering to the middle income and upper middle income group in Chennai.
Your Company acquired the stake of 51% of share capital in Inshape Health and FitnezPrivate Limited a health and fitness centre having operations in Chennai. This investmenthas enabled Talwalkars to further strengthen their presence in a fitness conscious ChennaiMarket.
Your Company has achieved a significant scale and size to pursue inorganic growth whichgives it an access to newer markets strengthen its presence in existing markets and helpit to achieve a larger scale within a relatively shorter timeframe. In line with thisthinking a strategic partnership is entered into with Power World Gyms Limited (PWG)('Associate Company') a leading Colombo Sri Lanka based health and fitness chain. Wehave acquired 49.50% stake in PWG.
The Company has signed up to invest growth capital into Gymtrekker Fitness PrivateLimited a leading online health and fitness center discovery platform.
In continuation of the Company's strategy to expand its wings within Country and acrossglobe it has also announced the acquisition of 50% stake in yoga studios chain Zorba - ARenaissance Studio.
Also during the year Talwalkars and David Lloyd Leisure Limited announced theirintention to create 50:50 joint venture to develop leisure clubs in India.
In accordance with Section 129(3) of the Companies Act 2013 ('Act') a statementcontaining salient features of the Financial Statement of our Subsidiaries and Associatecompany in Form AOC - 1 is attached as Annexure - I to this Report. Further pursuant tothe provisions of Section 136 of the Act the financial statement of the Companyconsolidated financial statement along with accounts in respect of subsidiaries areavailable on the website of the Company.
Our footprint in 176 fitness centres in 85 cities and towns across South Asia iswitnessed as below:
Management Discussion and Analysis
A detailed Management Discussion and Analysis forms part of this Annual Report.
Corporate Social Responsibility (CSR)
The CSR policy of your Company is aimed at exhibiting care and concern for the Society.The Company broadly undertakes the activities related to health awareness educationmedical check-ups promotion of Art and culture etc. The Board plans to increase CSRexpenses.
The initiatives undertaken by the Company on CSR activities during the year are set outin Annexure - II of this Report in the format prescribed in the Companies (CorporateSocial Responsibility Policy) Rules 2014. The policy on CSR as approved by the Board hasbeen uploaded on the Company's website.
Weblink to Company's CSR Policy: http://www.talwalkars.net/pdf/CSRPolicy12716164414123.pdf
DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(5) of the Companies Act 2013 yourDirectors confirm that:
(a) In the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;
(b) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit of the Company for that period;
(c) The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) The Directors have prepared the annual accounts on a going concern basis; and
(e) The Directors laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and were operating effectively.
(f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
Based on the framework of internal financial controls and compliance systemsestablished by the Company work performed by the internal statutory and secretarialauditors including audit of internal financial controls over financial reporting by thestatutory auditors the Board is of the opinion that the Company's internal financialcontrols were adequate and effective during financial year 2015-16.
DIRECTORS BOARD COMMITTEES KMP AND REMUNERATION
Your Company has thirteen Directors including seven Independent Directors and a womanDirector in accordance with Corporate Governance norms of the Listing Agreement with theStock Exchanges SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015("Listing Regulations 2015") and the provisions of the Companies Act 2013.
Independent Directors of your Company have given declaration confirming theirindependence and fair conduct in performance as provided in Section 149 of the CompaniesAct 2013 and the Listing Requirements of the Stock Exchanges.
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Mr. Girish Talwalkar and Mr. Anant Gawande Directors of theCompany retire by rotation at the ensuing Annual General Meeting and being eligible offerthemselves for reappointment. Resolutions for the re-appointment will be placed for yourapproval at the ensuing Annual General Meeting.
Seven Board meetings were held during the financial year 2015-16 with requisite quorumpresent for each of them the details of which are given in the Corporate GovernanceReport.
The Board of Directors has carried out an annual evaluation of its own performanceBoard Committees and individual Directors pursuant to the provisions of the Act and thecorporate governance requirements as prescribed by Listing Regulations 2015. Theevaluation inter alia covered different aspects viz. composition of the Board and itsCommittees qualifications performance inter-personal skills submissions done by theDirector in varied disciplines related to the Company's business etc.
Company's Policy on Directors' Appointment and Remuneration
The Company's policy on directors' appointment and remuneration and other mattersprovided in section 178(3) of the Act has been disclosed in the Corporate GovernanceReport which forms part of this report.
The details pertaining to composition functions performed and meetings of AuditCommittee are included in the Corporate Governance Report which forms part of thisreport.
Your Directors highly value the suggestions of the Audit Committee and have neverturned down any of it.
Related Party Transactions
During the year under review all related party transactions entered into by theCompany were in the ordinary course of business and on an arm's length basis. No relatedparty transaction was in conflict with the interests of the Company. All Related PartyTransactions were placed before the Audit Committee for its review and approval. Thesetransactions were entered as per the Company's Policy on Related Party transactions. YourCompany has not entered into materially significant related party transactions with any ofits related parties. The policy on Related Party Transactions as approved by the Board hasbeen uploaded on the Company's website www.talwalkars.net (web link:http://www.talwalkars.net/pdf/ PolicyonRelatedPartyTransactions12716165958474.pdf).
Your Company has constituted Risk Management Committee to identify and mitigate variousrisks faced by the Company from time to time. The details of the Risk Management Committeeand its terms of reference are set out in the Corporate Governance Report.
Particulars of loans guarantees and Investments
The particulars of loans guarantees and investments have been disclosed in thefinancial statement forming part of this Annual Report and the same were given for theprincipal business activities.
Particulars of Employees
Pursuant to Section 197 of the Act read with Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 None of the employees of the Companywas in receipt of the remuneration during the financial year 2015-16 in excess of H60lakhs per year or H5 lakhs per month or in excess of the remuneration drawn by theManaging Director or Whole-time Director or Manager and holds by himself or along with hisspouse and dependent children two percent or more of the equity shares of the Company.
The statement of particulars of appointment and remuneration of managerial personnelpursuant to Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is as under:
(i) Ratio of the remuneration of each Executive Director to the median remuneration ofthe Employees of the Company for the financial year 2015-16 and the percentage increase inremuneration of Chief Executive Officer Chief Financial Officer and other ExecutiveDirector and Company Secretary during the financial year 2015-16:
|Sr. No. ||Name of Executive Director ||Designation ||Ratio of remuneration of each Director to median remuneration of Employees ||Percentage increase in remuneration |
|1 ||Girish Talwalkar ||Executive Chairman ||- ||(100.00) |
|2 ||Madhukar Talwalkar ||Whole-time Director ||4.26 : 1 ||- |
|3 ||Vinayak Gawande ||Whole-time Director ||4.26 : 1 ||- |
|4 ||Prashant Talwalkar ||Managing Director & CEO ||4.26 : 1 ||- |
|5 ||Anant Gawande ||Whole-time Director & CFO ||4.26 : 1 ||- |
|6 ||Harsha Bhatkal ||Whole-time Director ||4.26 : 1 ||- |
|7 ||Avanti Sankav ||Company Secretary ||Not Applicable ||22.62 |
(ii) The percentage increase in the median remuneration of Employees in the financialyear: 9.18%.
(iii) Permanent employees on the roll as on 31st March 2016 : 11
(iv) The explanation on the relationship between average increase in remuneration andCompany performance: PAT for the year ended 31March 2016 increased by 24.21% and themedian remuneration by 9.18%
(v) The comparison of the remuneration of the Key Managerial Personnel against theperformance of the Company: PAT for the year ended 31st March 2016 increasedby 24.21% and the remuneration of key managerial personnel increased by 22.62%
(vi) Variations in the market capitalisation of the Company price earnings ratio as atthe closing date of the current financial year and previous financial year and percentageincrease or decrease in the market quotations of the shares of the Company in comparisonto the rate at which the Company came out with the last public offer:
|Sr. No. ||Particulars ||As at 31st March 2016 ||As at 31st March 2015 |
|1. ||Market ||BSE H5632.04 ||BSE H9728.82 |
| ||Capitalisation ||millions ||millions |
| || ||NSE H5626.10 ||NSE H9787.72 |
| || ||millions ||millions |
|2. ||Price Earnings ||BSE 10.27 ||BSE 22.63 |
| ||Ratio ||NSE 10.24 ||NSE 22.77 |
The Company came with an Initial Public Offer in April 2010 at the price of H128/- perequity share at premium of H118/- of face value H10/- each. As on 31st March2016 the closing price of the Company's share was H189.60 on BSE Limited (increase of 48%over the share price at its last public offer) and H189.40 on The National Stock Exchangeof India Limited (increase of 48% over the share price at its last public offer).
(vii) During the financial year 2015-16 there was an average 6.04% decrease in thesalaries of employees other than the managerial personnel. Remuneration of the keymanagerial personnel rose by 22.62% in line with the volume of the Company's business andprofits earned by it and their responsibilities.
(viii) The key parameters for any variable component of remuneration availed by theDirectors: No variable component of remuneration is availed by the Directors.
(ix) During the year ended 31st March 2016 The ratio of the remunerationof the highest paid Director to that of the employees who are not directors but receiveremuneration in excess of the highest paid Director during the financial year was 0.76 :1.
(x) We hereby affirm that the remuneration paid is as per the remuneration policy ofthe Company.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Conservation of Energy and Technology absorption are not applicable to the Company.
Foreign Exchange earnings and Outgo:
| || ||Rs. in millions |
|Particulars ||2015-16 ||2014-15 |
|Total foreign exchange earnings ||0.01 ||- |
|Total foreign exchange outgo ||5.43 ||5.08 |
M. K. Dandeker & Co. Chartered Accountants Mumbai (Firm Registration Number.000679S) Statutory Auditors of the Company retire at the ensuing Annual General Meetingand are eligible for re-appointment. The Company has received a letter from the retiringauditor to the effect that their appointment as Statutory Auditors if made will be inaccordance with the provision of Sections 139 141 of the Companies Act 2013 read withthe Companies (Audit and Auditors) Rules 2014.
Your Company recommends appointment of M. K. Dandeker & Co. Chartered AccountantsMumbai as Statutory Auditors of the Company to hold office from the conclusion of ensuingAnnual General Meeting for a term of five consecutive years until the conclusion of the18th Annual General Meeting of the Company to be held in the calendar year2021 subject to ratification by the shareholders annually.
The Auditors' Report does not contain any qualification reservation or adverse remark.
Geeta Canabar & Associates Practicing Company Secretary have been appointed asthe Secretarial Auditor of the Company. The Secretarial Audit Report for the financialyear ended 31st March 2016 is given in Annexure - III to this report. There isno qualification reservation or adverse remark in the said Report.
Extract of the Annual Return
The extract of the Annual Return as provided under Section 92 (3) of the Companies Act2013 in Form No. MGT-9 is presented here under in Annexure - IV.
As per Listing Regulations 2015 Corporate Governance Report with a certificate ofPracticing Company Secretary thereon and Management Discussion and Analysis are attachedwhich form part of this report.
Your Directors take this opportunity to place on record its appreciation of sincereefforts put in by the employees of the Company in making the Company excel in the realm ofhealth and fitness.
Your Directors sincerely thank all the investors members bankers financialinstitutions business associates regulatory and government authorities for theircontinued support assistance and valuable co-operation to set a brand 'Talwalkars' withdifference.
For and on behalf of the Board Talwalkars Better Value Fitness Limited
|Prashant Talwalkar ||Anant Gawande |
|Managing Director & CEO ||Whole-time Director & CFO |
|DIN: 00341715 ||DIN : 00324734 |
|Date: 5th May 2016 || |
|Place: Mumbai || |