Talwalkars says not selling stake

The company's stock rises 9% in reaction to the stake sale reports

Gym operator Talwalkars Better Value Fitness has denied reports of a 20 per cent stake sale to UK's David Lloyd Leisure, its partner for running health clubs in the country.

The company's stock rose in reaction to the stake sale reports, closing 8.74 per cent up at Rs 173.5 on Thursday on the BSE.

"We still believe that we do not require funds; our debt to equity (ratio) is comfortable. Even if we need money, we can sell our properties, which can easily fetch us Rs 80-90 crore. We will require money for growth but for that our internal accruals will be enough. For instance, this year we are expecting internal cash flow of Rs 55-60 crore, which is adequate for funding this year's capital expenditure," said Chief Financial Officer Anant Gawande.

At Rs 174 a share, 20 per cent in the company works out to about Rs 90 crore. For that amount, the company would have to issue 5.2 million shares, leading to an equity dilution of 16.6 per cent. This dilution could hit the stock price. About a year ago, the company raised Rs 42.4 crore through private placement at Rs 205.2 a share.

Talwalkars, so far focused on building gyms, needs capital for its new club business. Around December 2012, it partnered David Lloyd for operating, managing and advising its club business, operated under a separate arm in which both the partners can contribute equity.