V-Mart Retail Ltd (VMART) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (Avendus Spark): Ladies and gentlemen, good day, and welcome to the V-Mart Retail Limited 2Q FY '23 earnings conference call hosted by Avendus Spark. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ranganathan, sir, from Avendus Spark. Thank you and over to you.
Ranganathan (Avendus Spark): Thank, thank you. Hi, good evening, all. Thanks for joining today's earnings call with the management of V-Mart Retail. From the management side, we have Mr. Lalit Agarwal, Managing Director, and Mr. Anand Agarwal, CFO and COO. Without taking much time, let me hand over the call to the management for opening remarks. Over to you, sir.
Lalit Agarwal (V-Mart Retail Ltd): Good evening, everyone. Happy happy Navratri and which is a completion, but happy Diwali for everyone, which is in the coming week. so largely we are back with during those peak times, you know, these times before Diwali, four days, five days before Diwali generally a little busy time for being retail. So, but, yeah, our our our team has done a great job, we are on time this announcing our results. So we we we definitely continue to see similar opportunity and aspirations of consumers and the demand for better products in India. I think, what we have seen in the overall environment this time, the business environment or the broader business environment, certainly has been largely do- dominated by the geopolitical uncertainty. We have definitely seen lot of volatility in energy, raw material. Raw material prices have really moved up and down. The supply chain has remained very very difficult or or has been a very important consideration this time because because of the movement in raw material prices, because of the movement in overall cost there has been always challenge in the supply chain side. But, yes, for for for largely for value retailers like us these do create an impact on on our on our sourcing cost, on product availability and ultimately, also the house budget of the household or the consumers who who come to shop to us, and then for us because these customers are value-seeking customers, their average earning capabilities are very low, so the impact on them seems to be very high added by the food inflation which we have seen, which is one of the highest food inflation that we have noticed in the last month. So that is again adding much more pressure on the consumer's pocket, that is what we are we are see- seeing here. But, yes, certainly there are there are signs of consumption going down, there are signs of consumption going up, there are weather-impacted areas, there are either there is a very good monsoon in a certain part of the geography, or there are little lower monsoons monsoons where the rainfall has been more than or deficient by 20, 25, 30% also in certain belt. But, yes, large part of the large part of India, which we were fearing that the monsoon could be little bad did not get so worse monsoon it was manageable, it is better and so the so the agriculture incomes also seem to be in line. There are
Lalit Agarwal (V-Mart Retail Ltd): markets where the agriculture income is a challenge. definitely festival timing is another piece, which is which is a which is a big piece which happened in this particular year. So, every three years, we see this festival getting shifted. So, this year also, it got shifted by 19 days. And especially in our markets, festival spending or the wedding spending, which is also linked with the festival days, is very large. So, so if you if you look at the Bharat customer, we we definitely believe that they want better fashion. They are very careful on on also on how much they spend. But yes, we also have seen a very high growth of young consumer in our stores. We could see almost the the young consumer, which is what we call Gen Z or even from Gen Alpha, almost touching to greater than 45% of our total consumer set who comes to shop with us. So, so these younger customers definitely discovers trends faster. And as we are seeing a very high rise of social media, Instagram, so, so they definitely expect more nearness. The family also is becoming the Gen Zs are also having a lot of families now. Those Gen Zs are not only stag. They are also getting older. So, in our in our towns in Bihar, Uttar Pradesh, Orissa, Bengal, we see even younger couples having babies. They come with family, but are still Gen Z is what we call. So, so, so they do they do seek fashion as well as dependable quality and and very clear value. So, so that is something that we believe is our there is a responsibility for us to bring in these expectations together, especially in the at an affordable prices. So, the highlighting part of our performance, and certainly there has been lot of competitive openings which has have been happening. There's a lot of drama which is a lot of work which is happening in the competition as well. There is a lot of work with the competitive space has done. There are a lot of store openings that they are doing. And we are also seeing some competitors becoming stronger versus some competitors actually getting little more weaker and weaker. So, so these scenarios will keep on going on. But what we understood that they were almost 70 to 75 locations where we actually got impacted by or or where we saw a competitor opening up near our stores. Or in the similar territory or in the similar market where we are we are located. And and but overall, if we see, there is more than 150 stores which have been opened by competitors which we target in our market. Because there may be more than two one or two competitors which have also opened. So against that backdrop, the team has really done a fantastic job, and and we have we have been able to see some good growth coming in both from the the like-for-like stores as well as the new stores opening and then new store number of new store opening has also been very good. So we have seen some good growth coming in. We definitely have to normalize this time with the festivals, as we have already reported and you must have seen that. So, our our our as as such our growth looks little lower, but we adjust it for the festival, it definitely looks better. The highlight of this particular performance was also the biggest highlight was was the Unlimited market in South India, which did stood out both in terms of growth as well as the profitability. Our South South India business continues to fire. And, and, and we have seen multiple quarters in the past three, four, five quarters we have been seeing the South India market firing for us. There's been a lot of learning that we have implemented, a lot of good things that we are doing, and the consumers are really realizing it and we have started getting it. So, so I think the biggest news for us is that the the South India or the Unlimited market is almost matching the the sales per square feet number of V-Mart is almost or has delivered higher profitability or higher higher EBITDA. The the surge in EBITDA which I think there was a pertinent question from all the analysts continuously for the last three, four years that they have been listening, Anand and me, that when will Unlimited hit that mark that mark of that that similar profitability or even the sales per square feet. So, I think the time has come. It has come a little faster. The team has done a great job, both the the front-end team there, as well as the back-end team here. We have really been able to steer this acquisition very nicely. And it is now started throwing greater output and greater potentiality to throw much more better output in the coming days because we are now very confident. And as we all know that the South India market has a higher per capita income, has a higher spend on clothes and the propensity to consume is much higher and the larger fast fashion market as well. So with that that strength which we have achieved now in Unlimited, we think that the future of that brand is extremely positive.
Lalit Agarwal (V-Mart Retail Ltd): the ability for the consumer to buy better product is much more. The ability to buy more number of products is also very high. So we have more potential to get into South India market both in terms of Tier 2, Tier 3 as well as Tier Tier 4 towns, which are which are almost like Tier 3 in the in the rest of India. So, so that is that has been a good highlight. Other than that, we have also seen our online business doing very good. Our LimeRoad business that we also acquired, this year, we saw a very good growth in terms of in terms of our our business. We've seen a growth of almost 55% on our top line, which you which you must have seen over the last few quarters. We've reported a subtle growth or a negative growth also on the top line because we wanted to consolidate and we wanted to bring in the profitability under control or the losses under control. So if you look at the losses, in spite of 55% growth, we have seen the losses coming down by almost 32%, which is if you look at it at a percentage level, the losses which used to be almost 18% of our revenue is now stands at 8% of our revenue. And this is definitely powered by our omnichannel conversion, which is very important. Because because the the what we what we really worked on is is the is the scaling up of our endless aisle wherein we we grew our digital users by 27%. We definitely really worked on creating orders from our store customers. So 58% of our online orders actually get fulfilled from our physical V-Mart store inventory. And and this is very important because all our all our 413 stores have been fulfilling these orders and driving online sales without adding separate warehouse cost or even the inventory risk. So that is very important. That was the driver. But yes, apart from that, our our strategy is largely to also work not only for the online sales, but also to drive footfall synergy and and create more synergy or across the local catchment where our stores are. And how do we how do we drive that? So there also we have seen a great work happening because 41 lakh customers who engaged digitally in our LimeRoad platform, we saw them getting converted into our physical touch points, which is our stores, within 15 days of their browsing that in our on our channel. So so I think that is the real use case of omnichannel, and that is where, once again, we are seeing a larger potentiality because we are also seeing these customers who are dwelling into both the channels, whether online online plus offline, they seem to have a higher annual customer annual annual basket value. So their annual purchase value from our from our stores seems to be much higher. So this is another highlight, which I would want to highlight here, that these two important things that we did in our in our last five years, which is acquiring Unlimited as well as acquiring LimeRoad, both are turning out to be positive news, both are turning out to be better potential driver of our of our growth and our performance. Apart from that, I think our certainly our store productivity, in spite of opening almost how 23 new stores that we did or 15% of new store area addition that we did, we definitely also have increased our sales per square feet. If you if you look at the competitor space, people do generally report that when you open up new store, your sales per square feet seems to be lower. But in our cases, we have tried to ensure that both from our like-for-like like-for-like stores, as well as from our new stores, we deliver similar or better sales per square feet is that that's the that's the overall overall focus that we are trying to drive. So I think overall, it is definitely a lot of work internally, a lot of work where we are seeing a lot of changes in our in our leadership areas. Anand, who has taken over the entire operations and our retail business, so so to see here. I think Anand is now firmly settled in his role, and he's definitely brought in his commercial rigor and operational discipline in the store operation. We definitely are seeing a lot of like-for-like momentum, which is building, which is this is where we are building. And then I think we need to have this this cadence continued because because we have been reporting positive growth across last 12 12 quarters consecutively. We want that to be much, much better because there is a lot of potentiality that we have we had lost in earlier days during COVID and post-COVID scenario, but now we have really been able to do. Once again, here we have really brought in a new leadership at the at the merchandising lens also because here also, we have we have brought in Varun, who is my son, who has now taken up the charge to to to lead this particular function and where a a a refresh, you know, team is
Lalit Agarwal (V-Mart Retail Ltd): into the realignment and and trying to understand these Gen Z audience in much, much better, because what we have understood that around 50% or 45% of our customers are Gen Zs. So, this is very important to understand. And And here, once again, we re-create that Bharat is not one market. We all know about it. And fashion preference across our geographies are are very sharply differentiated, whether it is because of the culture or because of occasions or festivals or even the climatic conditions or the physical body that the consumers have. If you look at a Punjab person versus a versus a Bengal or a Bihar person, so there is a lot of sizing differences. So, we we really work started working lot on our buying methodology and and we are grouping the stores into different clusters and and identifying the differentiation differentiated needs, holistic needs, and then and then creating an algorithm, creating a technology behind that and and and ensuring that this data actually convert into great actions and great decisions. So so the team is really working hard on developing those technological models building intelligence within those models, trying to very clear clearly bring in the discipline of the the width of the the number of options or the depth in the number of options or the kind of size mix, which is required in the time of procurement and also the timing there in, how much how do we really work with the with the with the vendor to try and get a better outcome, because in this inflationary time, the efficiency once again becomes a bigger piece. And how do we really integrate with our vendor, manufacturing vendor bases to try and bring in those kind of efficiencies and reduce the turnover turnaround time in the production, so that our our our availability at the store level and the change in the fashion preferences or the seasonal pieces are are being taken care of. So, all of these integrations are very, very important, and we are really doing lot of work in the vendor partnerships, as well, so that we are we are able to give benefits to our vendor by maybe shortening our payment cycle, because we have also seen that our team has been able to manage our cash flow very nicely. And even have been able to satisfy our vendor base by paying them 9 days earlier, which is also a very, very important piece, and this is very important. It may look like that our working capital days have gone up, but for us, it depends it is really very important for us to also look at vendor strategy. And vendor becomes a critical point with a growth of so much growth of value retailer, as we have already spoken in the previous times. So So, for us, that partnership is also very, very important. And then there has been a lot of work that we have done in the supply chain and inventory management. There also, I think, the the result you can see is almost the the days of inventory has been reduced by 9 days, which is because the because there has been lot of work which has happened in the in the entire allocation model that we have built. How do we actually convert this model into faster selling models, the inventory quality, the the the timeliness timeliness of the inventory or even the the the quantity at which the inventory should be bought. And then the entire supply chain on the physical change, wherein the operation of warehouse, the operation of the entire logistic fleet, how do we actually plan all of those wherein we are able to reduce the turnaround time and the reaction time from the sales to the to the supply. Those all of those has really brought in a lot of good benefits. So, I think these are these are very critical points. I have taken lot of time. But yes, there's one more thing that we we definitely also have touched our 600-store mark this year. That brings in the the thought process and and remembrance that [foreign language] so it took almost 10.5 to or 11 years to for me to reach there. So So, but but now now we are able to do this 100 stores in next in the in the 14-month period itself in the in the past. Last year, we did it in 14 months. But I think in the coming days, Anand has taken up the challenge to maybe do it in the 12-month period. So So, so we'll definitely put it more on Anand. And let's hear from the from the horse's mouth. And maybe over to Anand, and then we'll open up the for for question and answer. Thank you.
Anand Agarwal (V-Mart Retail Ltd): Thank you,
Moderator (Avendus Spark): Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for
Moderator (Avendus Spark): Why don't the question queue assemble?
Lalit Agarwal (V-Mart Retail Ltd): Hello? Hello? We need to open We need to open the line for Anand. Anand has to speak. Are you there?
Moderator (Avendus Spark): Just a Just a moment, sir. I'll reconnect the management line.
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