TALWALKARS BETTER VALUE FITNESS LIMITED

Table of Contents:
1. Introduction of the organization.

2. General Information.

3. Bidding / Issue period

4. Purpose of the issue.

5. Risk Factors.

 Internal Risk Factor

 External Risk Factor

6. BASIS FOR ISSUE PRICE

7. Shareholders Agreements

8. Talwalkars management

9. Selling & Marketing Cost

10. Net proceeds to the issuing company (issuer).

11. Balance Sheet

12. Names and address of all officers, directors, underwriters and stockholders owning 10% or more

of the current outstanding stock.

13. Copy of the underwriting agreement.

14. Legal opinion on the issue.

15. Declaration
Introduction:

• INDUSTRY OVERVIEW : The wellness services industry is a fast growing sector in India today.
It encompasses a large number of service segments including beauty services (salon, treatment
based beauty products), personal health counselling, rejuvenation (Yoga, Spas) and fitness
segments. Within this, the Fitness segment, viz. Gyms, is experiencing healthy growth rates and
currently has an estimated market size of USD 113mn. As of 2008, there are 765 fitness clubs in
India with total membership of 0.23 million members.

• OUR BUSINESS: We are 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.
The first gym was setup in the year 1932 by late Mr. Vishnu Talwalkar in Mumbai. Mr. Madhukar
Talwalkar, eldest son of late Mr. Vishnu Talwalkar, carried on with the legacy and started his first
gym in Bandra, Mumbai in the year 1962 by the name “Talwalkars Gymnasium”. Mr. Madhukar
Talwalkar has been instrumental in creating the brand “Talwalkars” over the past several
decades. Our Company, Talwalkars Better Value Fitness Limited, was co-promoted in the year
2003 by the Talwalkar Group and the Gawande Group with the object of developing “Talwalkars”
brand as a leader in health clubs. Through the industry expertise of Mr. Madhukar Talwalkar and
guidance of our co-promoters namely, Girish Talwalkar, Prashant Talwalkar, Vinayak Gawande,
Anant Gawande and Harsha Bhatkal, we have enhanced our brand equity and pan- India
presence. We have grown rapidly since our inception and, as on the date of this Draft Red
Herring Prospectus, we operate 51 health clubs in 24 cities belonging to 11 states of the country
serving over 55,000 members.

• Product/Service Offerings:

• Distribution Strategy:

• Our Competitive Strengths::

 o Brand Equity
o Standardized and Quality Offering
o Market Leadership
o Pan India Presence
o Promoters’ Experience and Expertise
o Proven Track Record

• Our Business Strategy:

o Geographic Spread and Penetration
o Expand Service Offerings
o Location Entry Strategy
o Increasing Customer Satisfaction and our base of Members
o Brand Promotion and Enhancement

• A comparison of Indian market with other markets is presented below:

General Information:

• Incorporation : Our Company was originally incorporated as “Talwalkars Better Value Fitness
Private Limited”, a private limited company under the provisions of the Companies Act, 1956,
vide certificate of incorporation dated April 24, 2003 with CIN U92411MH2003PTC140134, issued
by the Registrar of Companies (“RoC”), at Mumbai, Maharashtra. Pursuant to a Board resolution
dated September 10, 2009 and a special resolution of the shareholders of our Company at the
EGM held on October 1, 2009, our Company became a public limited company and the name of
our Company was changed to “Talwalkars Better Value Fitness Limited”. The fresh certificate of
incorporation to reflect the new name was issued by the RoC on November 7, 2009 with CIN
U92411MH2003PLC140134.

Registered and Corporate Office of our Company

801-813, Mahalaxmi Chambers,
22, Bhulabhai Desai Road,
Mumbai – 400 026,
Maharashtra, India.
Tel. No.: +91 – 22 – 6612 6300
Fax No.: +91 – 22 – 6612 6363
Email: ipo@talwalkars.net
Website: www.talwalkars.net
CIN: U92411MH2003PLC140134

Address of the Registrar of Companies

Our Company is registered at the Registrar of Companies, Maharashtra, located at Everest 5th Floor,
100 Marine Drive,
Mumbai – 400 002, Maharashtra, India.
• Board of Directors: Our Board of Directors as on the date of this Draft Red Herring Prospectus
is as follows:

• Banker to our Company:

Union Bank of India

Tejura Chambers, 365/367,
V.P Road, Mumbai 400 004
Tel. No.: +91 – 22 - 23825442 / 23826533
Fax No.: +91 - 22 - 23824582
E-mail: cbsoperahouse@unionbankofindia.com

• Capital Structure:
Financial Data: The financial data in this Draft Red Herring Prospectus is derived from our restated
financial statements as of and for the years ended on March 31, 2005, 2006, 2007, 2008, 2009 and for the
six months period ended September 30, 2009, prepared in accordance with generally accepted accounting
principles followed in India (‘Indian GAAP’)and the Companies Act and restated in accordance with the
SEBI Regulations, as stated in the report of our Statutory Auditors, Saraf Gurkar and Associates, Chartered
Accountants, included in this Draft Red Herring Prospectus. Our fiscal year commences on April 1 and ends
on March 31, so all references to a particular fiscal year are to the 12-month period ended March 31 of that
year. In this Draft Red Herring Prospectus, any discrepancies in any table between the total and the sums
of the amounts listed are due to rounding off.

 Currency and units of Presentation: In this Draft Red Herring Prospectus, all references to
‘Rupees’/ ‘Rs.’ / ‘INR’ are to Indian Rupees, the official currency of the Republic of India. All
references to ‘$’/ ‘US$’ / ‘USD’ / ‘U.S. Dollar(s)’ / ‘US Dollar(s)’ are to the United States Dollars, the
official currency of the United States of America. All references to ‘million’ / ‘Million’ / ‘Mn’ refer to
one million, which is equivalent to ‘ten lakhs’ or ‘ten lacs’, the word ‘Lakhs / Lacs / Lac’ means ‘one
hundred thousand’ and ‘Crore’ means ‘ten millions’ and ‘billion / bn. / Billions’ means ‘one hundred
crores’.
 Exchange Rates: This Draft Red Herring Prospectus contains translations of certain US Dollar and
other currency amounts into Indian Rupees that have been presented solely to comply with the
requirements of Item (VIII) (G) of Part A of Schedule VIII to the SEBI Regulations. These
translations should not be construed as a representation that those US Dollar or other currency
amounts could have been, or can be converted into Indian Rupees, at any particular rate. Unless,
otherwise stated, the Company has in this Draft Red Herring Prospectus used a conversion rate as
mentioned below. Such translations should not be considered as a representation that such U.S
Dollar amounts have been, could have been or could be converted into Rupees at any particular
rate, the rates stated above or at all. The US Dollar exchange rate data for the last 5 years from
Bloomberg website is as given below:

1 USD = Rs.43.75 as on March 31, 2005

1 USD = Rs.44.62 as on March 31, 2006
1 USD = Rs.43.48 as on March 30, 2007
1 USD = Rs.40.12 as on March 31, 2008
1 USD = Rs.50.73 as on March 31, 2009
1 USD = Rs.48.11 as on September 30, 2009
Throughout this Draft Red Herring Prospectus, currency figures have been expressed in ‘million /
Mn. / Millions’ except those, which have been reproduced / extracted from sources as specified at
the respective places.

Bidding / Issue period:

Bids and any revision in Bids will be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time)
during the Bid/Issue Period as mentioned above at the bidding centres mentioned in the Bid cum
Application Form except that on the Bid/Issue Closing Date, Bids shall be accepted only between 10 a.m.
and 1 p.m. (Indian Standard Time) and uploaded until:-

 4.00 p.m. in case of Bids by QIB Bidders, Non-Institutional Bidders and

 5.00 p.m. or until such time as permitted by the BSE and the NSE, in case of Bids by
Retail Individual Bidders. Due to limitation of time available for uploading the Bids on
the Bid/Issue Closing Date, the Bidders are advised to submit their Bids one day prior
to the Bid/Issue Closing Date and, in any case, no later than 1.00 p.m (Indian
Standard Time) on the Bid/Issue Closing Date.
Risk Factor:
 INTERNAL RISK FACTORS:
Risks related to our Company, our Business and our Industry.

• Contingent Liabilities could adversely affect our financial condition. Our Contingent
Liabilities as on September 30, 2009 is as follows:

• Our Company had negative cash flows in recent fiscals:

• Our Joint Ventures and an Associate Company have incurred losses and our Joint
Ventures have negative Net Worth in the past:

• 9 of our Group Companies have incurred losses and 3 of our Group Companies had
negative Net Worth in the past.

• There are 2 trademark applications pending with the Trademark office for registration,
including our new corporate logo. Our success depends on our trademarks and
proprietary rights and any failure to protect our intellectual property rights may adversely
affect our competitive position.
 • There are 47 approvals and licenses which we are yet to receive, of which 29 we have
applied for and 18 we are in the process of applying.

• There are 11 gyms operating under our registered tradename “Talwalkars” which are
owned and operated by our group companies. Any deficiency in the quality of services,
equipments, training, etc. provided by these gyms may adversely affect our brand image
and thereby our business and our results of operations / financial condition.

• The staffs in the health clubs we operate are either sourced from external agencies or
services are obtained from professionals. We may fail to attract and retain enough
sufficiently trained employees needed to support our operations and growth.

Risks related to our Shareholders and Equity Shares:

• We have issued 291,339 equity shares of Rs.10/- each at a premium of Rs. 625/- per
share on October 5, 2009 for our existing expansion plans of 20 additional health clubs
during the fiscal 2010. We also issued 15,807,463 fully paid up equity shares of the face
value of Rs.10/- each as bonus in the ratio of 7 fully paid up equity shares for every 1
fully paid up equity shares held on November 14, 2009. Besides these, we have in the
last 12 months, not issued Equity Shares at a price that could be lower than the Issue
Price.

• After the completion of this Issue, our Promoters and Promoter Group will collectively
hold approximately 59.49 % of the post Issue paid up capital of the Company.

• Our ability to pay dividends in future will depend upon future earnings, financial
conditions, cash flows, working capital requirements and capital expenditures.

 External Risk Factors:

• You may not be able to sell immediately on an Indian stock exchange any of the
Equity
Shares you purchase in the Issue until the Issue receives the appropriate trading
approvals.

• There is no existing market for our Equity Shares and we cannot assure you that such a
market will develop. The stock price may be volatile, and you may be unable to resell
your shares at or above the Issue price or at all.

•Our business and activities will be regulated by the Competition Act, 2002 as and when
it is notified. It is unclear as to how the said Competition Act and Competition
Commission of India will affect industries in India.
 Prominent Notes:

• Public Issue of 6,050,000 Equity Shares of Rs. 10/- each of our Company, for cash at a
price of Rs. [•] per Equity Share (including a share premium of Rs. [_] per Equity
Share) for cash aggregating to Rs. [•] million. The Issue will constitute 25.09 % of the
fully diluted post issue paid-up capital of our Company.

• The Net Worth of our Company, before the Issue (as per our restated financial
statements as at September 30, 2009, March 31, 2009 and March 31, 2008) was
Rs.382.64 million, Rs.170.76 million and Rs.116.51 million respectively, and the Book
Value per Equity Share was Rs.194.54, Rs. 86.82 and Rs. 59.24 per share respectively
and Rs.21.18, Rs.9.45 and Rs.6.45 respectively; pursuant to bonus of 15,807,463
equity shares issued on November 14, 2009, by our Company.
 • The following table represents average cost of acquisition of Equity Shares by our
Promoters as on date of this Draft Red Herring Prospectus.

SUMMARY OF RESTATED FINANCIAL STATEMENTS:

Statement of Profit & Loss Account, as Restated: Page 34 from PDF
BASIS FOR ISSUE PRICE:
• Qualitative Factors:
 Brand Equity
 Standardized and Quality Offering
 Market Leadership
 Pan India Presence
 Promoters’ Experience and Expertise
 Proven Track Record

• Quantitative Factors:
 Basic and Diluted Earnings Per Share (“EPS”): EPS of face value of Rs. 10
  Price Earnings Ratio (‘P/E Ratio’) in relation to the Issue Price of Rs. [_] per share
of Rs. 10 each

 Industry Price Earnings Ratio (‘P/E Ratio’): There are no comparable listed
companies with the same business as our Company and hence Industry PE is not
available.

 Return on Net Worth ( ‘RoNW’ )

 Net Asset Value (‘NAV’) per Equity Share

NAV as at March 31, 2009 : Rs. 86.82 per Equity Share
NAV after the Issue : Rs. [_] per Equity Share
Issue Price* : Rs. [_] per Equity Share
NAV per Equity Share for the years ended March 31, 2007, 2008 and 2009 is as
follows:

Shareholders Agreements:

• Shareholder’s Agreement dated July 1, 2003 (the “Agreement”), between Mr. Madhukar
Vishnu Talwalkar, Ms.Usha Madhukar Talwalkar, Madhukar Vishnu Talwalkar (HUF), Mr.
Girish Madhukar Talwalkar, Ms. NandaGirish Talwalkar, Girish Madhukar Talwalkar (HUF),
Mr. Prashant Sudhakar Talwalkar, Ms. Nalina PrashantTalwalkar, Prashant Sudhakar
Talwalkar (HUF) (the “Talwalkars”) and Mr. Vinayak Ratnakar Gawande, Ms.Madhuri
Vinayak Gawande, Vinayak Ratnakar Gawande (HUF), Mr. Anant Ratnakar Gawande, Ms.
Yamini Anant Gawande, Anant Ratnakar Gawande (HUF), Mr. Harsha Ramdas Bhatkal, Ms.
Smeeta Harsha Bhatkal, Better Value Leasing and Finance Limited, Gawande Consultants
Private Limited (the “Gawandes”) (collectively known as “Parties”).

Pursuant to the agreement, the Parties have agreed, inter alia, to the following covenants:
  Talwalkars and Gawandes shall hold 60% and 40%, respectively, in the Equity Shares
of our Company
 Talwalkars and Gawandes shall nominate three (3) directors each to the Board.
Further, Mr. Madhukar Vishnu Talwalkar shall be the chairman of the Board
succeeded by Mr. Girish Madhukar Talwalkar and then by Mr. Prashant Sudhakar
Talwalkar.
 Talwalkars can continue using the brand name for their existing gyms. However, the
Company and the existing gyms of Talwalkars will share the advertising and
marketing expenses.
 If either of the Parties transfers their shares, the continuing parties shall have the
right of first refusal.

• Share and CPS (Convertible Preference Shares) Subscription Agreement dated January
09, 2006 (the “Agreement”)executed between our Company and Mr. Shivanand Shankar
Mankekar, Mr. Kedar Shivanad Mankekar and Ms. Laxmi Shivanand Mankekar (the
“Investors”) and our Promoters.

Pursuant to the Agreement, our Company has agreed to subscribe 156,000 Optionally Convertible
Cumulative Preference Shares of Rs. 100/- each aggregating to Rs. 15,600,000/- and 12,643
Equity Shares of Rs. 100/- at a premium of Rs.1481.90/- per Equity Share aggregating to Rs.
20,000,000/-

Company made a preferential allotment of 12,643 equity shares of Rs 100 each and 1,56,000
0.1 % redeemable optionally convertible cumulative preference shares of Rs 100 to the Investor.

Further, pursuant to resolution of the Board of Direction passed in their meeting held on December
07, 2007, these 156,000 0.1% Optionally Convertible Cumulative Preference Shares of Rs. 100/-
each issued to the Investors were converted by allotment of 7,026 Equity Shares of Rs. 100/- each
at a premium of Rs. 2120.30 per share.

• OUR SUBSIDAIRY
 ASPIRE FITNESS PRIVATE LIMITED:

Board of Directors:

Shareholding Pattern:

• JOINT VENTURE AND ASSOCIATE COMPANIES:

 TALWALKARS PANTALOON FITNESS PRIVATE LIMITED (“TPFPL”)

Board of Directors:
Shareholding Pattern:

Financial Performance:

 DENOVO ENTERPRISES PRIVATE LIMITED (“DEPL”)

Board of Directors:

Shareholding Pattern:

Financial Performance:
  EQUINOX WELLNESS PRIVATE LIMITED (“EWPL”)
Board of Directors:

Shareholding Pattern:

Financial Performance:

Management Organization Structure of the Company:

Dividend Policy:
The declaration and payment of dividends will be recommended by our Board of Directors and approved
by our shareholders, at their discretion, and will depend on a number of factors, including but not
limited to our profits, capital requirements, and overall financial requirements. The amounts paid as
dividends in the past are not necessarily indicative of our dividend policy or dividend amounts, if any, in
the future.

Our Company has declared equity dividend in the last five years as detailed below:

Financial Statement: STATEMENT OF ASSETS AND LIABILITIES, AS RESTATED .

STATEMENT OF PROFIT & LOSS ACCOUNT, AS RESTATED –
STATEMENT OF CASH FLOWS, AS RESTATED:

Selling & Marketing Cost:

• Promotional Expenses: Advertising and business promotion expenses for the year ended
March 31, 2007 was Rs.10 million which as a percentage of our ‘Income from Operations’ was
5% vis-a-vis 4% that of the previous fiscal.

• Service Tax : The amount of Service Tax collected and paid for the fiscal 2007 was Rs.23
million.

• EBITDA: Our EBITDA for the year ended March 31, 2007 was Rs.61 million i.e. 27% of our
operating revenues vis-a-vis 31% for the fiscal 2006.
• Finance Cost: Our ‘Finance Cost’ was Rs.28 million i.e. 13% of our operating revenues in fiscal
2007. It comprised of interest on secured loans, unsecured loans and letter of credit, bank and
credit card charges. The corresponding figure for the previous fiscal was Rs.17 million being 17%
of that year’s operating revenues.

• Depreciation & Amortisation: Our ‘Depreciation & Amortisation’ for the year ended March 31,
2007 was Rs.15 million i.e. 7% of our operating revenues vis-a-vis 9% that of in the previous
fiscal.

• Profits After Tax: Our ‘Profits After Tax’ for the year ended March 31, 2007 was Rs.11 million.

• Net Worth: Our ‘Net Worth’ as on March 31, 2007 was Rs.72 million.

• Contingent Liabilities:

• Liquidity and Cash Flow:

Net Consolidated Cash Flows as Restated