What Made Talwalkars So Unfit for Shareholders and Lenders
Over the past three months, Talwalkar Lifestyles Ltd (now split into two companies), once considered a steady, conservative and successful Marathi enterprise, has crashed. The shares of the demerged entities hit a 52-week low on 9th October. The shares, which traded at Rs393 in 2015, are penny stocks now, trading in single digits, as whispers of fudging of profit & loss and balance sheet do the rounds.
It is already known that the company has been defaulting on interest payments, has massive borrowing and nearly three-fourths of the promoter shareholding is pledged. But that is not the reason why statutory auditors and independent directors of its listed companies rushed for the exit, exactly when the stock price began to crash around July. Typically, rating agencies woke up in August to downgrade both demerged entities. 
We learn that the fall of the Talwalkars, India’s largest fitness group, is not about a business gone bad due to the economic slowdown. Like DS Kulkarni, and Punjab and Maharashtra Cooperative Bank (PMC Bank), this appears to be a case of brazen fudging of turnover and membership numbers and cooking up profits, to play the market-cap game, to keep raising more money and piling on debt. Some large investors are categorical that this is the case. 
The music stopped around July 2019 when investors began to ask tough questions after the demerger and wanted better returns. According to my sources, that is the time when the group admitted to massive problems and its marquee investors began to dump the stock. After that, things seem to be spiralling out of control. 
Today, its lenders are frantically trying to salvage their loans. Three weeks ago, there was a contentious meeting of lenders at which they decided to appoint a forensic auditor. The biggest exposure is to Axis Bank (which is also its debenture trustee) and Indostar Capital Finance Ltd, while others, reportedly, include Lakshmi Vilas Bank Ltd, The South Indian Bank Ltd, Hero Fincorp, Indian Bank and Andhra Bank. 
To understand the debacle, let’s go back to the beginning. Around 2002-03, the Talwalkar family, comprising 88-year old MadhukarTalwalkar and his sons Prashant and Girish, got together with Anant and Vinayak Gawande and Harsha Bhatkal (who ran Popular Prakashan, a publishing company) to set this sleepy gymnasium company on to the path of high growth and glamour. 
The moving force behind their extraordinary growth over the next decade and fund raising is understood to be Anant Gawande (to raise funds) and Harsha Bhatkal (a management graduate and marketing whiz). Mr Gawande and Mr Bhatkal were able to raise funds repeatedly from marquee investors in India and abroad as they sealed high-profile tie-ups and collaborations beyond the simple gymnasiums. Investors happily bought into the rosy projections of high growth numbers, based on the rising trend of Indians becoming fitness conscious.
These tie-ups included the 50% investment in Zorba-Renaissance Pvt Ltd, owned by the 27-year old yoga sensation Sarvesh Sashi. This joint venture boasted investments by Jennifer Lopez, David Giampaolo, Mark Mastrov, Alex Rodriguez, Malaika Arora, and even Paresh Sukthankar, then of HDFC Bank, in December 2015. 
Another tie-up was with the famous David Lloyd Leisure, a high-end, membership-based club, which resulted in a joint venture (JV) called DLL Talwalkars Club Private Limited. It just opened its first club in Pune earlier this year under the David Lloyd Leisure Clubs Talwalkars (DLT Clubs) brand. It also acquired Power World Gym, Sri Lanka’s largest chain, and signed up an exclusive master franchise with Snap Fitness Inc for six South East Asian countries. There were many more.
In 2016, they decided to demerge the business. In the 2017-18 annual report, chairman Prashant Talwalkar says, “The core gym business was spun off to Talwalkars Lifestyles Limited while the wellness business was nested in Talwalkars Better Value Fitness Limited. One share held in the erstwhile Talwalkars Better Value Fitness Limited generated one share in the gym Company and one share in the wellness Company.” In effect, the high-profile tie-ups were in Talwalkar Better Value Fitness Ltd (TBVFL), while the gymnasiums, which were the core activity, remained in Talwalkar Healthclubs Ltd (THL). 
Keeping share prices high was part of the game-plan. In 2017, the promoters even invested Rs41.38 crore at a high Rs313 per share, through a preferential offer, to demonstrate their confidence in the performance. 
When the demerger was completed in March 2018, the company was at its boastful best. In the same annual report, Mr Talwalkar claimed, “We believe that following the demerger, the enhanced transparency arising out of business segregation will attract focused investors; the growth of each of the business will unlock and enhance value for the respective shareholders across the foreseeable future.”
He added that the “gym business of the Company was always high-margin, while the wellness business was cash-intensive in its nascent business-building years.”
None of it was really true. While the forensic audit will reveal the extent of the rot, there are plenty of indicators that things were cooked up. As one investor says, “When the split happened and the balance sheets came in, things looked different. Until the companies were remained one, a lot of the money raised was explained away as having been invested in growth and expansion.” Since 2018, some investors have wanted the gym business sold and debt reduced. 
By July 2019, they had run out of options. The stock prices began to crash, large investors stampeded out and there were a spate of resignations from independent directors of both companies and statutory auditors. 
Independent directors who resigned include the high-profile advocate Mrunalini Deshmukh, MG Bhide (former chairman of Bank of India), Dinesh Afzalpurkar (former chief secretary of Maharashtra) and Raman Maroo.
At that time, Anant Gawande was on television claiming that all was well and that he was clueless about why the stock price was crashing. The public shareholding in these entities is a high 60%+ and they have taken the maximum hit in the collapse.
Lakdawala and Associates (also statutory auditor for the failed PMC Bank) had audited Talwalkar Better Value Fitness Ltd (TBVFL) in 2017-18, but resigned in February 2018. 
The story of MK Dandekar, who took over the statutory audit of TBVFL, is even more curious. The auditor’s report has this to say on the accounts for year-ending March 2018: “The Company’s operating effectiveness and internal control system for Revenue from Operations with regard to Fees and Subscription is not commensurate with the size of the Company and the same needs to be strengthened by the Management. A material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.” 
And, yet, it also says that this did not affect its audit opinion. Many auditors find this strange and think there should have been a clear qualification. But MK Dandekar resigned in August 2019 citing the company’s failure to provide satisfactory responses to their queries. 
August 2019 was also when the Talwalkar companies defaulted for the first time; this was followed by a rating downgrade by CARE and ICRA. Things have gone rapidly downhill since then. 
On 2nd October, Bloomberg Quint reported that both Talwalkar group companies had defaulted again. TBVFL failed to pay up interest of Rs94 crore; it has an outstanding debt of over Rs203 crore. THL defaulted on a mere Rs2.5 crore payment; its debt is over Rs463 crore. The net debt is a high Rs719.4 crore. As against this, it has Rs139 crore of cash and investments, according to its annual report for the year ended March 2019. Moreover, over 70% of the promoter holding is pledged. One can well imagine the panic this has caused among lenders. 
We also learn that its many JV partners have also been saddled with large borrowings and are scrambling to arrange funds, buy out the shareholding of the Talwalkars and find other ways to survive. Sources say, Sarvesh Shashi of Zorba-Renissance is now also looking at buying out the Talwalkar stake and strike out on his own, subject to lenders’ approval. 
Clearly, a lot has been going wrong. Only a forensic audit will reveal what was fudged, where the money has gone and how many people in the management knew what was going on. 
Note: I emailed a set of detailed questions to Prashant Talwalkar, Anant Gawande, Vinayak Gawande and Harsha Bhatkal seeking their comments and feedback and followed it up with text messages to all. Their response, if they come, will be added to this column. We also wrote to several lenders, including Axis Bank, but have not heard from them. Others, who have provided information, have wanted to stay anonymous.
11 months ago
I'm well aware of these people, (they're closely connected with the S. Sena), they're not business owners at all.
What was happening in their Gym, many many girls have realized.
3 years ago
I think they are shifting all their business to a new private limited company called aspire fitness private limited. Is this another redflag? Should apsire fitness also be audited for fraud ? I have money stuck in talwarkars what should I do ? Please help
Rishabh Malhotra
5 years ago
It’s very good that this corrupt company has crashed. When I was a member of their Bhubaneswar gym, a gang of men which consisted of brother of a BJP MLA and his goon friends were trying to harass a girl. They used to harass her daily. This gang was supported by the staff of the gym. When I tried to intervene and protect the girl and threatened to complain to the police, I was beaten in the gym by their manager , staff and goon members. I raised this issue with their headquarters and board of directors but no action was taken, although video evidence was available. These shameless people deserve no place in the Earth . Whole country and all the people should join hands to ban this corrupt gym.
Replied to Rishabh Malhotra comment 5 years ago
If they harassed her daily, why did she continue coming to the gym?
Rishabh Malhotra
Replied to ARTK comment 5 years ago
If someone will harass you in the school, will you stop going to the school. You have paid money for yearly membership, so its your right to go the gym and it is the duty of gym staff to ensure that you get safe environment to do exercise, instead of helping these goons.
Rishabh Malhotra
Replied to Rishabh Malhotra comment 5 years ago
And everything is recorded in their cameras. Openly these fearless goons are having good time. If a girl has refused you once she doesn't want to go out with you, you should be respecting that decision. But instead of doing so, the BJP MLA's brother was again and again going and asking her to go out with him. He was such a frustoo, one day he told , please come with me I have bought a jaguar now. I raised the issue many times but because their staff and manager were helping these goons and no action could be taken. Finally I left the gym after my yearly membership was over.
Rishabh Malhotra
Replied to Rishabh Malhotra comment 5 years ago
The name of the BJP MLA is Jagannath Pradhan and his brother who was harrasing, his name is Biswnath Pradhan
Rishabh Malhotra
Replied to Rishabh Malhotra comment 5 years ago
These people are not afraid. They just do anything they want and get away. And BJP party instead of banning these people, are happily supporting them. Recently, Union Minister Dharmendra Pradhan, other MPs of BJP Odisha were seen having good time with this person. This what gives confidence to such people.
Panditdumpac 94
Replied to ARTK comment 5 years ago
To Exercise.
Ranbir Lamba
5 years ago
One more bank down Axis bank
One more firm down due to crooks
Auditors are same as of PMC bank

Sebi stock market regulator is sleeping
RBI bank Regulator is sleeping
Finance Babus unconcerned

a case of brazen fudging of turnover and membership numbers and cooking up profits, to play the market-cap game, to keep raising more money and piling on debt.
B. Yerram Raju
5 years ago
One more that questions the role of auditors. Fudging can't take place if there is responsible audit.
Sandeep K
5 years ago
Great pointers mam. I honestly think that SEBI or someone on the market must watch this type of behavior/ fraud's and save retail investors. No one thought that they were cooking up their books so bad until the demerger happened. ..Really appreciate your explanation on the current stage of Talwakars.
Ramesh Patel
5 years ago
Pl. do a story on another Chor company "Sankhya Infotech". I am the victim of Talwalkar as well as Sankhya and suffered huge loss of capital.
Rajesh Kothari
5 years ago
It's time that CA's and Auditors are ranked based on their experience, past performance and peer ratings.
5 years ago
Game is the same i.e. to loot the public and the lenders. What has changed is the scale, style, presentation and slick promoters and their advisors. All this is possible when a businessman becomes a cheat and regulators and professionals fail in their duties.

Great job Sucheta and Debashis, but you have miles to go educating the small investors. Keep it up.
nitin arora
5 years ago
Excellent coverage. I would like to know those shareholders who have bought the share at high prices should retain their holding or sell at Rs.2 current price. I am totally confused.
Jairam S Narayan
5 years ago
I fail to understand, how these people, successfully trap high net worth individuals and get them to invest in such businesses? Greed of getting higher returns is the crux of the problem
Pankesh Betala
5 years ago
Anant gawande is the biggest culprit.he misguided people on news channel.He should be behind bars..
Kunal Kishan
5 years ago
I am very keen to understand that would have been the "Hints" to an average Retail Investor to catch such fraud ? How can Auditors made more accountable (every second company that goes bust has audit issues ?) . Since Audit reports are not trustworthy , the confidence of Retail Investor is shaken and its a matter of pure luck. Why everything cant happen by the book - these are conditions which make India not a fine destination to invest ?
Sachin Dedha
5 years ago
Few pointers when they gave hint of fudging:
1. Sucheta already mentioned one incident when the Management came on TV saying that they are unaware of reasons for big fall in share prices, and then couple of days later same management write to BSE that they are defaulting. Now how on the earth, is this possible, that no insider trading happened in this case. SEBI, PM, MOdiji etc. all who boasted of new India and honest India, where are they now!! This is a brazen case and even if this is not acted upon by SEBI then lets close that idiotic organisation if they cannot even catch this. May be by selling SEBI, we can get our money back. :)

2. While demerger happened in Mar'18. Their stock was trading at 250 and suddenly one fine day, they announced demerger and that too in some strange style. Current company named as 'A' will become 'B' and 'B' will become 'A' and 'A' will become 'C' .. NOone knows why the hell they did that. Let me tell you why.. as i was a victim of that too.

Usually whenever demerger happens, you simply take smaller part out and accordingly price adjusts for current company. In this case, company worth 250 and 30% went out so too many ppl thought current company valuation should be 70% of 250 which is 175. Lot many ppl dont go into details of what they wrote to BSE.

Now smartly, they have created a situation in which they are legally safe by writing the details to BSE and half market who were smart enuf to read those details started dumping that stock as suddenly it became overpriced a lot. Stock went into lower circuit mode for months to come. Guess, who was selling at that time?? Promoters. And who was buying, naive investors like me who thought a value buy available at cheap price. Just a click of button took away lot of money from our pockets. By the time we could realise what happened, you found yourself stuck in lower circuit like today. You become helpless.

They created Talwalkars lifestyle out of Talwalkars Better value and then renamed that as Talwalkars gym and gave Talwalkars lifestyle name to Talwalkars Better value. What the f*** was that. I hope someone is awake in this country who can take some action on these crooks. I have only one demand that bring up some laws that can scare the hell out of such guys and noone dares to do this again.

I would invite more ppl to write here so that we can create a movement out of this opportunity gave by Sucheta ji. Thanks to her. I was continuously spending important hours on a daily basis to find out what actually happnd. No one cares in this country unless you make a huge gathering and shout for justice.
S Sengupta
Replied to Sachin Dedha comment 5 years ago
Excellent review. I feel sorry when I heard that diligent investor like you , was duped by this type of company. However, greed and fraud cannot be ruled out from the market. Even the customers , like me, who have paid more than one and half lacs for the year , are a worried lot that whether the gym will remain open till August 2020 or not. Really, it is a bad situation.
rohit saraf
5 years ago
Hi I worked with Talwalkars for short duration around 6 months with a capacity of Asst. Vice President operations. I caught a number of discrepancies in various gyms where money was siphoned by senior staff with the knowledge of senior management sitting in BKC, head office and who are still working with the company. Nothing happened even after giving proof of malpractices rather I was told to leave without any reason. So you can understand how long it is going on and how many senior management staff is involved. Even then the company was in losses but they did not take any action against such senior management but instead let them work and do further damage to Talwalkars.
Tomy Anto
Replied to rohit saraf comment 5 years ago
have been working with talwalkars past 2years 7months as Asst. Vice president. After i joined, my boss - Operations head asked me to take care of 2clubs in north india. Even though i am not familiar with hindi language or people there still i agreed to go there and take care of the two stores given to me. Later i come to know that no one wants to go to this regions and work there or even incharges doest visit there. They sit in mumbai and operates only through phone and doent respect the staff.
I have taken this offer as positively and gone there. I have noticed that this stores were highly potential in terms of sales but in the past whoever sr.Managers handled this stores were not visited this clubs and operated from mumbai and do not have any idea of the stores. Instead staff is making good pocket money and their income is more than the sr.manager salary. My first day when i visited one of the store in the city outskirts found that house keeping guy is sitting on the customer area and reading the paper without bothering anyone, no managers, no front desk team member... no one found. When i went freely inside the floor noticed that customers were shouting and no staff on the gym floor and instead few of the trainers are sitting in the pantry and chit chatting. Gym floors and toilets are stincking like a public toilet. People are desperately looking for job and discussing on money making ideas. No one is interested on jobs. I am not glorifying me i stationed at this city and started entering in to club at 6am and after few months of my hard work i could able to tune both stores and make a great team. Eventhough i am from south india still I stationed in the northern city and started focussing on team and customers. Sales started to come and complaints are reduced or solved immediately. Staff started to come to the gym on time and placed on their tasks. House keeping staff changed and put a new agency and clealiness improved. Same time my boss told me to take another 2 more stores in the surrounding cities. So I have taken the incharge for total 4 clubs. I have 2 zonal managers for this 4stores. Which my boss placed and they stay in mumbai. Every month they visit the stores and up and down their airfee, hotel charges, local transportation.. etc. come around 60k for both of them. Which means 7.2L pa. End of the day the club does not get any advantages for their visits andinstead it was a monthly picnic for them . I have requested my boss to shift one of them to north and stay over there or forget it.. i dont require the zonals and i can operate them instead of spending lots money for their travel. But those my advise or requests never taken or heard instead unwanted expediture went on high and did not take any actions on it. Stores were doing good sales, but no profit. service improved, i have made good team with sales & customer service focused, Maint. Issues were addressed timely. I have terminated many people who made money from years together at this 4clubs. This made me lots risk for my life.But sales were improved in a big way. I made My visibility at the clubs always. After 1year 6months my boss shifted me to Andhra,
Tamilnadu for handling 7 stores. I started working with this 7 stores and i was sure i can do great achievement with this set team but within 5 months my boss shifted me to kerala market and the same story like north india. Pathetic stores, No sales, staff doesnt even listen to the Sr. Managers due to the unaccomplished promises, same model of head office style operating styles, big gaps between store team and Sr. managers. None of the stores are making profits. Eventhough i know malayalam languages and trying to mingle with the staff they said.... we hear this types of several gyans from mumbai managers and they never help us or support us. After my several teas and indivitual lunch with them i could able to gain the trust with them. Addressed lots of clealiness, maintenance issues, staff issues, sales, marketing ideas, customer issues.... etc. From december month to march that is 4 months out of 3 stores all 3 stores done the best ever sales from the day one the store was opened that is 6 years time. So kerala stores were highlated across the regions. My boss shifted me from kerala again and did not given any stores from april to october 2018 that is seven months ( till when i left the company) i did not operated any stores. 7months company paid me freely without giving me any responsibilities....
when ever i asked he said i am working on it..My question is that which operator does this type of cheap politics to an employee...?? There was big politics between old employees and new employees the company made 2 reporting division and after that division also the politics seen within the new employee levels. People from out side mumbai were treated like slaves and our words doesnt get any voice. I understood the fact that the head of operation was a guy who can only talk and he doesnt have any guts on execution. His secratary or the executive was a decision maker for him and she became the vice president from executive levels without knowing any ideas of the clubs or at least one club running succesful. She eassily picked up kerala market from me / My boss given her the market to safe guard her job since it was got highlated and now that maeketic is come back to the old stage with agony. During my experience at talwalkars i noticed that the company and its directors or stake holders are too good. They respect staff, they are polite but the new set management was played an advantage with them. I remember when we call for meeting at Mumbai in the early hours... people from out station come to the head office at 8am and waiting.... managers from mumbai doesnt even come at 11am. If the meeting is suppose to happen at 9am.... it starts at 2pm. It is not once or twice time happened... several times. Every meeting should have some agenda but here what i have seen was only some chit chatting and arguments or ego parade.

This type of gloomy leadership how can an organization can grow.
Super Talks, Gyans and mails can give certain time coverage. Politics and gang making doesnt get mileage and that will slowly kill the organization... that was exactly happened here.

Still this company can grow provided hire good Leader who has a good vision and respect staff and provide the promises. Create zero politics and follow one leader who in to customer, people, sales, profit front level priority.

Because of few scrap people this company lost lot many good people who are performers. I write this just because i worked for this company sincerely with result driven but due to the politics i have been thrown out like curry leaves. It should not happen to any employees in any organizations.
Udayan Bhagwat
Replied to rohit saraf comment 5 years ago
Wonder how all gyms are still working
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