Ladies and gentlemen, good day and welcome to the V2 Retail Limited Q4 and FY25 conference call. 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 the conference call, please ignore the announcement or press star and zero on your touch-on phone. Please note that this conference is being recorded. Before we begin, a brief disclaimer: the presentation which V2 Retail Limited has uploaded on the stock exchange and the website, including the discussions during this call, contains or may contain certain forward-looking statements concerning V2 Retail Limited business prospects and profitability, which is subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. I will hand the conference over to Mr. Akash Agarwal, Full-Time Director, V2 Retail.
Thank you, and over to you, sir.
Thank you. Good morning, everyone. It's a pleasure to welcome you all to V2 Retail's Q4 and FY25 earnings conference call. This year has not just been about growth; it's been about transformation. FY25 has been a defining year for us, a year where our strategy, execution, and agility came together to deliver the strongest performance in the company's history. Let me walk you through the highlights and the momentum that we're building on. Some headline numbers that speak for themselves: Revenue crossed an all-time high of 1,884.5 crore, growing 62% from last year. Profit after tax surged to 72 crore, marking a 159% growth from last year, and it is our highest ever. EBITDA stood at 257.8 crore, growing 74% with margins of 13.7%. Same-store sales growth for FY25 was 29%, even on a high base. Volume growth came in at 43%, reinforcing customer traction.
Full-price sales stood strong at 89%, up from 87% in FY24. ROE improved to 23.2%, a clear reflection of our capital efficiency. Some operational highlights: We added 74 stores and closed 2 during the year, reaching 189 stores by March 31, 2025. As of today, we have already crossed the 200-store mark, with 207 stores live. Our stores are profitable from the very first month, with break-even sales at just INR 500 per sq ft per month. Sales per sq ft for the year rose to INR 1,017 per sq ft per month, up from INR 854 last year. Product and brand lend differentiation: 85% of our business is private label, and we're doubling down on it. Our own design products contributed about 35%-40% this year, and we target it to reach around 60% by the summer of 2026 and 80% by 2027.
This means better margins, unique fashion, less discounting, and customer loyalty. We reduced old inventory—that is, more than one year's old inventory—from 18% to just 5%, ensuring freshness and relevance. CapEx per store is INR 2.2 crore, inclusive of inventory. Our inventory is at 90 days, and creditors are at 45 days, maintaining a lean working capital cycle. What is next in FY 26-27? We guide for a revenue growth of 45%-50%, driven by new stores and a same-store sales growth of 8%-10%. We guide for an EBITDA margin at pre-index level of 8%-9%. We are expanding rapidly across high-performing clusters like Uttar Pradesh, Bihar, Odisha, Jharkhand, and now also entering Punjab, Bengal, Rajasthan, and the South. We are not in a race for store count alone but for profitability, scalability, and brand dominance.
FY25 proves that V2 is no longer just a retail company. It is a fast-moving platform for aspirational India. We have built a brand that understands small-town India yet offers fashion with a flair that rivals any urban retailer, and this is just the beginning. With a robust model, consistent store performance, strong internal accruals, and an unbeatable value proposition, we are confident that FY26 will raise the bar even higher. Thank you once again for your time and trust. We are now happy to take your questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Abhishek from AB Capital. Please go ahead.
Hello. Am I audible?
Yes.
How are you? Actually, since I've just picked up numbers, every console I see and every console you've amazed us with the numbers. Just wanted to ask, can we be PAT positive this year in all quarters?
Yes. That is the target. I think even this year, we were EBITDA positive in all the four quarters. For this coming year, now, even with the seasonality, we expect to be PAT positive in all the four quarters.
Do we have a PAT margin number in mind that you want to achieve?
We target a pre-index EBITDA margin of 8%-9%, which translates to about 4%-5% of that.
Okay. In a TV interview, you had guided that you will open 100 stores this year. Is that still in force?
Yes. We have already opened 17 stores this quarter. We are on track to open 100 stores this year.
We don't need to raise any funds for this, mostly from internal accruals, it looks like?
To open 100 stores, we do not need any funds. Our internal accruals are sufficient. We are very excited because the performance of our new stores is giving us confidence that we can increase the store count. We are internally making a detailed cash flow and a business plan for the same. If we feel that we do not want to compromise on store performance as well as return ratios, if we increase the store opening guidance, then we might raise some capital.
Okay. Okay. This year, SSSG was amazing at 29%. Did I hear it correctly? You told 8%-9% SSSG guidance for next year?
Yes. For the last two years, first, we showed SSSG of 31% in FY 24, then 29% in FY 25. Our base is more than INR 1,000 per sq ft per month now. We will be very happy with 8%-10% SSSG also.
Okay. Okay. Do you think we can get operating leverage next year, like this year also?
Yes, definitely, because the head office and warehousing cost together is about INR 55-INR 60 per sq ft. Now that would be spread over a larger retail space. So we should get a leverage.
Okay. Okay. Finally, I wanted to ask, you have become CEO. Is this a long-term thing, or are you in the lookout for somebody, and this is just a transient thing?
It is a long-term thing. I have assumed all the responsibilities. Definitely, we are always in the lookout for good people because to grow at 40%-50% for the next five years, we need to build a very strong foundation.
Okay. Thank you. All the best.
Thank you.
Thank you. The next question is from the line of Balesh Kavuri from Varma Wealth. Please go ahead.
Yeah. Hello. Thank you for the opportunity. First of all, congratulations for the good set of results and being appointed as CEO, Akash. My first question is related to inventory. So it has come down, and you guided to open 100 stores. Do you expect it to go down further, or it shall remain at the same level, or there could be a rise because of the store addition, which is very aggressive for this year?
See, what happens with inventory is the capacity of the store remains constant. When you increase your per sq ft sales, the inventory number of days comes down. If you're able to continue this trend, then, of course, there is still some gap to reduce it further.
Okay. My next question on the same line again. Even if I take the same revenue per sq ft for next year and take into account 100 stores' addition, even then, the growth comes out at more than 50%. Is that the right assumption from my side, or am I missing something?
The complete assumption is based on how many stores are opened in which month. You must have taken an average. When we put it in our model where we open a lot more stores in the September-October season, it gives us this 50% growth number.
Okay. Okay. Got it. On warehouse side, how much is the warehouse space right now, and any plans to add further since you'll be adding stores at a very aggressive rate?
Yeah. The current warehouse is good to service another 70-80 stores. We have finalized another zonal warehouse in Kolkata. Definitely, with the new stores' acceleration, we will finalize more warehouses.
Okay. What is the CapEx per sq ft for warehouse?
For a 1 lakh sq ft warehouse, the CapEx is around INR 20 crore.
Okay. Okay. Last question from my side. Last year, Q1 was again very good, and you will be on a high base. I think Eid and all festive demand would not be there because it was there in Q4. Do you still expect Q1 to be very good, and how are the trends for Q1? Yeah.
Q1 has the main wedding season. Of course, the Eid was preponed, and it shifted to Q4. There will be a slight impact. We have seen very good traction, and we have seen very good performance of the new stores as well. It gives us very, very good confidence, and hopefully, it continues throughout the year.
Is it in line with the guidance of SSSG that you've given? Yeah.
Yes. It's in line with the guidance that we're giving for the future years.
Okay. Okay. Thank you. Thank you so much. That's it from my side. Thank you for your answers.
Thank you.
Thank you. The next question is from the line of Oankar from Shree Investments. Please go ahead.
Yeah. Good morning. Congrats for the great results once again. My question was regarding earlier you mentioned that you would be growing at 40%-50%. I mean, your endeavor is to grow at 40%-50% for the next four or five years. I mean, you mentioned at the beginning of the call that you would be targeting margin expansion in 2026 and 2027. Coupled with both of this, what kind of EBITDA growth are you would be targeting? Maybe a margin level can help on 40%-50% revenue growth.
Because the new stores are slightly below in terms of per sq ft sales because it takes about two to three years for them to mature, there might not be a huge expansion in EBITDA margin. Like I mentioned before, there will be a slight operating leverage. If we get a very good SSSG like the last couple of years, then there will be an EBITDA margin expansion. Otherwise, with opening 100 new stores, we will target around pre-index 8%-9% EBITDA.
Right now, what is the EBITDA pre-index?
Pre-index EBITDA is one second. It's 8% for this question. Somewhere, you are expecting the similar kind of margins for the next couple of years.
Yeah. The expansion would be within the 1% mark because the newer stores, they absorb the extra EBITDA because their per sq ft is about 20%-25% lower than the old stores, old mature stores. Okay. Do you think that your size is helping us to give you the guidance of, say, 40%-50% for the next four or five years? I mean, obviously, the market itself, the retail category is growing. I mean, can you expand a bit more on that?
I didn't understand your question. Sorry.
I mean, you're targeting 40%-50% growth. So I'm asking whether this is based on the size at which you are, the base at which you are, or else it is also because of the market growing and you are a small base in that market?
No. The total addressable market is huge. We just made a model where we open at least 100 stores every year and get an 8%-10% SSSG. We felt that this is achievable because we opened 74 stores last year. We have proved that we can grow at that level also. The scope to grow is much faster than this also. Like I said, if our performance keeps improving like it has in the last two years and the new stores keep giving encouraging results, we might accelerate the store growth. It might be 50%-60%.
Okay. So you are targeting 100 stores each year for the next four or five years. Is that correct?
Yes.
Okay. And just last question. I mean, everything looks so bullish. What can be the downside here?
I think the biggest downside can be poor execution because the addressable market is there. India is a consumption giant. You can just imagine the next 10 years is going to be what happened in China from 2000- 2010. In terms of macroeconomic factors, in terms of the sector that we are in, in terms of the total addressable market, nothing is a miss. The only thing that can go wrong is poor execution and we not sticking to our strengths and not giving the right product to the consumers.
Okay. All right. Thanks. Best of luck.
Thank you.
Thank you. The next question is from the line of Ashish from Leo Capital. Please go ahead.
Hello. Congratulations on a good setup, [Amrit]. I have two questions. My first question is, what is the rental cost on a pre-index basis for the current year and the previous year?
Previous year, it was INR 56 per sq ft per month. Current year, it's around INR 52 per sq ft per month.
Okay. For the stores greater than one year, what sort of sales per sq ft are we currently at?
It's more than INR 1,100 per sq ft.
More than INR 1,100 per sq ft. Okay. I just wanted a confirmation. I think during the, in the beginning, you mentioned that the old inventory, which is greater than one year, is around 5%. Is that correct?
Yes.
Okay. Got it. Thank you. Thank you so much.
It used to be 18%.
Right. Yeah. Thank you.
Thank you.
That's all.
Thank you. The next question is from the line of Niraj Mansingka from White Pine Investment Management Private Limited. Please go ahead.
Hi. Thank you, Akash. Just one question on the new stores that you're adding. Can you give some color because they're not a part of SSSG? Can you give a color on how they are performing? The reason I'm asking is that your store addition has increased a lot. I wanted to just know the color on how the revenue per sq ft on a blended basis would come up in, say, a year from now. A new store color would be very useful on that side.
Sure. I'll just give you a comparative number so it'll be easier for you to understand. About two years back, when the company per sq ft was around INR 650 per month, the new stores did around 40% lower than the old stores. That was the benchmark. Now, the stores that we opened in the last one year, they are doing 26% lower than our old stores. The new stores' performance has improved a lot. If my old stores are at INR 1,000, even the new stores are starting at INR 750-INR 800, which is a very, very encouraging figure.
Okay.
It takes around 2-3 years for a new store to mature because they grow at a faster rate than the mature stores. In a three-year time, they come at par with the stores that are aged more than one or two years.
Okay. The second question is on the geographical areas. Are you going to newer markets, and how is the adoption on those sites in the new states or the new regions that you're going?
Yes. We entered Punjab. We entered Andhra Pradesh. We also entered Rajasthan. We have got a good response across these new states. We are collecting more data. We're trying to gauge what kind of assortment sells in that particular market. The next stores that we open in that market will be adjusted accordingly. Wherever we are entering, because of the value proposition that we offer to the customers, we are getting an amazing response because we do not really have much competition in these new areas in the price segment that we operate in. The traction has been really good.
On the blended of these new states of Punjab, AP, Rajasthan, how would the revenue per sq ft then stay right now?
It's at par with the new stores' revenue per sq ft, so around INR 750-INR 800.
Okay. Okay. I got it very well. Do you see the cost increasing because of the new states because you can't agglomerate the cost or divide the cost because you have to send a farther distance? Any comment on that side?
No. Rajasthan and Punjab are very close to our distribution center, so logistic costs are negligible. For the south, we were already present in Karnataka, so we can leverage on the existing routes. There has not been any increase in cost. In fact, we've been able to reduce the cost because the average rental of the newer stores is lesser than the company average.
Okay. Great. Thank you. I'll come back in the queue once you are there.
Thank you.
Thank you.
Thank you. The next question is from the line of [Akash Agarwa] from AJ Wealth. Please go ahead.
Hello. I'm [ l audible].
Hello?
Yes. Just your voice is breaking.
Is it fine now?
Yeah. Much better.
Yeah. So I mean, my first question is, how is the demand trend shaping up in Q1 so far? I mean, given the recent discussions around a possible slowdown.
If you compare from period to period because Eid was prepone, and it shifted from Q1 - Q4. Otherwise, if you look period to period, we're getting a double-digit SSSG Q1, and we've seen a very good response. All the stores also that we've opened in the current quarter, we're getting very good traction.
Okay. Last one, I mean, I want to know actually what is exactly working for V2. I mean, we have already grown 40% last to last year. Then this year, we have grown around 60%. Now, we are riding for another 45%-50% growth. I mean, what is exactly driving this performance? Because when I look at other players with a similar kind of model, they are not able to actually match our level of growth. Could you give us more clarity on that?
I think our name stands for the core values that we believe in. V2 stands for value and variety. We feel we give maximum value to the customer. In a sense, that means that we are the cheapest in that quality benchmark. The second is variety. In terms of number of options, we are the leading retailer. You can benchmark us with any of our competitors. We have almost 2X the number of options offered to the consumers. These two added up with the kind of assortment that we have at the stores, I think all these three together becomes a perfect mix to have. We now hold a leadership position in this price segment, which is an ASP of about INR 300 because our per sq ft sales are at least 25%-30% higher than our nearest competition.
Okay. Okay. Okay, sir. Thank you.
Thank you.
Thank you. The next question is from the line of [Nitesh] from NV Alpha Fund. Please go ahead.
Hi, sir. Thanks for taking my question and congratulations on a very good set of numbers. My first question is, we have seen significant improvement in our working capital overall. Is the reason, the only reason, increase in sales per sq ft, that's the only reason? Or have you taken some steps consciously which has led to reduction in working capital?
We have taken a lot of steps to actually optimize inventory. We have given a lot of knowledge, did a lot of knowledge transfer and training to our vendors. Earlier, our on-time delivery used to be just 40%, and it has now increased to around 70%-75%. Before, we had to carry a 30-day safety inventory in our warehouses so that our shelves would not be empty. Now, we have been able to reduce that a further 10 days. That is why you are seeing an efficient inventory cycle also. We have focused a lot on different processes in terms of supply chain and picking process, put-away process, and the picking and put-away at the store as well. All those combined together has led to a much more efficient balance sheet. This is an ongoing process.
So it will continue to happen in the next couple of years as well.
[So], if I look at your creditors also, creditors' days have also significantly increased. Is that because we are being able to better negotiate the terms with them or what?
Credit days have increased because the share of the subsidiary goods—so we have a subsidiary, V2 Smart, which has our manufacturing units—so that contribution used to be about 18%-19%, and it has reduced to 5%. There, the credit days were zero. As the proportion of those goods are decreasing, the credit days are increasing. As per vendors, we have not increased any credit days. It has remained constant at around 50 days.
Right. Got it. Got it. My second question is, you mentioned your rent cost per sq ft which has actually declined. I also wanted to understand how is that actually declining?
It just depends on the set of stores that you finalize. Another thing that works very well for us is we don't look for locations right in the center of the market. What we prefer is a larger flow plate, a big frontage, good parking. We focus more on the customer experience because we know our brand has enough pull for the customers to come one kilometer extra from the market. Those things also work for us. It really depends on the kind of markets that we're focusing on. It's mostly tier two and tier three. We've been able to get properties at a very, very good price.
Actually, because my question was in context of other players actually sort of saying that rentals are actually increasing and they are not finding suitable places because they are also expanding tier two and tier three cities which have limited sort of properties where they can open stores.
I can't comment on what other people have been saying, but we have seen something very different because a lot of properties have been converting into commercial properties in these cities. There is a lot of scope for new commercial buildings. We always get multiple options in each city before finalizing a store.
Right. If you assume newer stores, we are going to sort of find rentals which would be at current rate or lower only, it's not going to increase in terms of per sq ft.
Yes. Correct.
Right. Got it, sir. That's it from my side. Thank you.
Thank you.
Thank you. The next question is from the line of [audio distortion] .
Good morning, sir. Congratulations for the wonderful results. I have two questions. One is a follow-up question to just the answer that you just gave. That is, the internal procurement has reduced from 19% -20% to 5%. Any specific reasons for that? That's one. Second, V2 Retail has had a history of corporate debt restructuring when it was known as Vishal Retail. The reasons for that were the increase in stores. The company increased stores from like 49- 170 from 2007- 2009 by an IPO, with the help of an IPO and borrowings to the tune of about INR 500 crore. In the current scenario as well, the company is increasing its numbers at an even kind of higher, at a more aggressive rate.
The question being, I mean, what is the company doing different in comparison to the 2009-2010 scenario wherein we were forced to go ahead for corporate debt restructuring, which kind of concluded till 2017, 2018? Only in 2018, annual report was the restructuring story kind of removed from the annual report. Those are the two questions.
Sure. I'll answer your first question first. The contribution of the subsidiary goods has reduced from 18%- 5% because the volumes are increasing and the capacity of the manufacturing units was fixed. We opened the manufacturing units just to get transparent costs of making each and every category so that we could negotiate with the vendors better. There were no plans to expand that business or open more units. As the volumes of the business will increase, that contribution will keep coming down to very insignificant levels. Now, answering the second question, the scenario that you're comparing from is totally different. If you look at the financials, if you look at the numbers, you'll understand that because during Vishal, we never were generating so much cash flow. We were never generating EBITDA at a percentage of almost 8%.
We did not have an ROE of 23%. Our per sq ft sales was less than INR 500 per sq ft. It is not an apple-to-apple comparison. Even last year, we opened stores also internal accruals. We can open 100 stores this year also with just internal accruals. I do not think it is the right comparison. Because of the learnings we had from the previous company, now we have cash flows made every week. We make store-level EBITDAs. If you look at more than one-year-old stores, we do not have a single EBITDA-level bleeding store in the company, which I think historically is the first time that has happened. There are certain checks and processes that we have built where we do not want to compromise on profitability just to chase a growth number or just to open a lot of stores.
is only because we have built a competitive advantage. We are ahead of the competition. We have built a leadership position. The last four years was a period of consolidation where we were selling our model. We were trying to make our product offering better. We were working very hard on processes. Now, I think it is the time to reap the rewards of it. When you are getting very encouraging performances and there is a huge acceptability of the products because wherever we are opening a store, we are getting very good traction. That means that our model is strong. That is why it gives us confidence to be able to open 100 stores and grow at the rate that we are talking about.
All right. All right. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Niraj Mansingka from White Pine Investment Management Private Limited. Please go ahead.
Yes. Thank you. I just wanted to know some color as far as you started V2 Smart. How much were you able to reduce the cost from the vendors? What is the proportion of peak revenue from those companies? How much is it right now? Some small color would be useful.
Again, Niraj, like I said, that contribution is very insignificant now. There is a cost saving of about 6%-7%. Now, the sales contribution from that business is less than 5%. It is a very capital-intensive business. In order to grow and procure for the big scale that we're talking about, the way to go is having vendor partners, having contract manufacturers who can give us at very similar prices. One thing beneficial out of this that came was now we've been able to negotiate better prices with our vendors by showing them the transparent costs that we are getting in our factory. I think it has served its purpose. Now, we've been able to renegotiate and get much better prices from our vendors itself.
How much is the peak revenue from V2 Smart one year?
Peak revenues would be about 8 lakh pieces a month. So that's about INR 150 crore.
150 crore a year.
Yeah.
Okay. Okay. You achieved a saving of almost 6%-7% because of that compared to what it was before you started?
See, this saving was achieved towards the latter part of the year because it all depends on the efficiency of the manufacturing unit. When you're setting it up, you are actually getting higher costs. That has not yet been translated into numbers.
Right. What did you do with those machines? Are you still holding them or you sold them or?
We are giving them to our vendor partners so that they can, because we are increasing the business with certain vendor partners by almost 2x or 3x. They needed machines, so we've been giving it to them.
Okay. Any guidance for the EBITDA margin on the pre-India side for FY26?
It should be between 8%-9%.
8%-9%. Okay. For the entire FY26, right?
Yes.
Okay. Great. Thank you. I understand.
Thank you.
Thank you. The next question is from the line of [ Rajesh Ora] from Janman Ventures. Please go ahead.
Yeah. Congrats, Akash, and the team on wonderful set-up numbers. It's good to know, Akash, that all new stores are EBITDA positive here. On that line, what is the CapEx per store and what is the payback period on an average for a new store for your company?
The CapEx per store is INR 1.1 crore. If you include the inventory, it is around INR 2.2 crore. That is your investment. If we get INR 1,000 per sq ft of sale with a gross margin of 28%, and the cost structure that we have, which is INR 190 per sq ft per month, we get an EBITDA of INR 1.8 lakh for the whole year. If you take out the net profit, it is around INR 60-65 lakh for the whole year on an investment of INR 2.3 crore. You get an ROE of about 23%-24%. The payback period is four years.
Okay. Got it. Another thing I noticed is that in the fourth quarter of 2025, gross profit margins have come down a bit from 28% a year ago and 32% in the third quarter. Obviously, the third quarter is the best one. What changes with less than INR 100 crore delta change, reduction in revenue from the third quarter to the fourth quarter? The swing in gross profit margin is very huge, which should be more variable cost. Could you please explain that?
It's because of the end of season sales for winter and pre-winter goods. Winter and pre-winter season is only for 3-4 months. If we do not clear out that inventory in January, then we have to carry it for another 9-10 months. That is why always the fourth quarter has the lowest margin. In terms of sale, because it is cyclical, there are no weddings in the fourth quarter. January and February are the dullest months usually throughout retail for consumption. That is why you see that dip.
What this end of season sale would cost in terms of revenue, roughly about maybe a couple of percentage points? What should we reduce?
It's more. During the end of season sale, the gross margin drops by more than 6%-7%.
Okay. Got it. Great, Akash. Congrats on good set of numbers and all the very best for the next days.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Gaurav Jogani from JM Financial. Please go ahead.
Thank you for the opportunity. Akash, congratulations on the great set of numbers. Akash, I just wanted to understand one thing. If we look at the cash flow for FY 25 and our implied cash flow for the year comes to be flat, given that there is also a CapEx of around INR 100 crore that we have incurred on the store opening. In this light, how do you expect the cash flow to emerge in FY 26-27, given that profitability will increase meaningfully? I think the CapEx would also increase because the store openings is also increasing.
There are two things that we have to take into account. One is better inventory efficiency, like we have done this year. There was about INR 60-65 crore invested in our subsidiary. Right now, we have already been able to reduce INR 30 crore from that. We will be able to further reduce another INR 25-30 crore from that. Third, the debt that we have on our books is currently used for the bill discounting feature that we give to all our vendors, where they can avail their payments with a certain discount. If any day or any month we feel we are not able to fund or we are low on cash, we can just stop the bill discounting feature and use the CC limit for our expansion. There are three levers that we can still use.
Sure. I mean, on an annualized basis, what kind of CapEx would you be incurring for the next couple of years?
This year, if we open 100 stores, we'll have to invest about INR 220 crore.
Sure.
That would be including the inventory or just the Capex?
Including the inventory.
Capex is INR 110 crore and another INR 110-120 crore for inventory.
Sure. Sure. Okay. Akash, just one thing I wanted to understand from your end.
Sorry to interrupt, Mr. Gaurav. May we request you return to the question queue for a follow-up question?
Sure.
Thank you. The next question is from the line of Devanshu Mahawar from Dalal & Broacha Stock Broking Private Limited. Please go ahead.
Yeah. Thanks for the opportunity, sir. Congrats on the good set of numbers. I have just a couple of questions. First, on the cash flow side, if you look at the EBITDA to CFO conversion for this year, it's been around 90%. It is mostly because of the inventory efficiency. Could you give us a highlight of what steps we have taken on increasing our inventory efficiency from last year? Last year, we saw the cash flow from operations being a little subdued because I think it was with the inventory level. What steps have we taken on the inventory side to get our inventory more efficient or less inventory money blocked in the inventory side?
Yeah. I think I already mentioned this. There are two main things that happened. One is the increase in per sq ft sale. The capacity of our stores remains the same. We keep the same amount of inventory for a higher sale. That reduced the inventory days by 6-7 days. The second biggest thing that happened was we reduced the safety stock that we keep in our warehouse. It used to be 30 days. Because we have been able to give prior planned orders and educate our vendors and get more goods on time, we have been able to reduce the safety stock also. We plan to further reduce it by 6-7 days going forward.
What could be efficiently in terms of operational efficiency in these stores? Since what I have understood by visiting your stores is that we have these distribution centers in their stores only, and the store guard does not come out to be in this distribution center as well. Is it some kind of efficiency in this store operation is also having an impact on inventory?
You asked me specifically the difference from last year versus this year. The store distribution center that you're talking about, we've been using for the last 4-5 years now. The delta change that has happened has happened because of the reasons I mentioned to you. Our store level inventory efficiency has always been very high because of the different virtual and physical locations that we have for inventory at the store level.
Yeah. One last question, sir. If you look at on the store opening side, what are our thought process that are we going on the cluster-wise store CapEx or what are we going towards on the full India pan-India store-wise basis from now onwards? Because our growth trajectory would be changing from now onwards.
Because we know the fact that we want to be a national-level retailer in the next five years, we want to test new markets and test new waters also. About 60%-70% of the new stores will be in existing clusters and existing markets where we are very strong in. Definitely, 20%-30% of stores will be in newer markets, newer geographies. It gives us more confidence because whichever city that we have entered, whichever new state that we have entered till now, we've got a very good response.
Okay. Okay. Thank you so much, sir. And best of luck for the FY26.
Thank you.
Thank you. The next question is from the line of Abhishek from AB Capital. Please go ahead.
Hello. Am I audible?
Yes.
Just wanted to ask, you had told that ROE will go north of 20% and that you have achieved. Just wanted to know how much do you think we can reach by end of 2026 next year?
Like I mentioned, because we are growing at 40%-50%, and newer stores do not perform at par with the older stores. I do not think there will be a huge delta. We are very happy with 23%-25% ROE. If you look at pre-India basis, then the ROE is 28%. I think even if we maintain it with such a high growth number, it is a very, very good performance.
Okay. Okay. I think a few too far from what you had told about local-level e-commerce you will do with wherever your stores are located. How is that line of business going?
We are not happy with the technology that we were integrating with. We do not want to start it half-heartedly. We are still exploring what works best for us and that can be easily integrated with our SAP systems. Only then we will start. Still, it is not a concrete timeline. Hopefully, this year.
Oh. Okay. Okay. I just wanted to confirm, you told 4%-5% margin, right? You are thinking?
Yes.
Okay. Thank you. Thank you.
Thank you. The next question is from the line of Aditya [Agarwal] from Finn Avenue. Please go ahead.
Sir, am I audible?
Mr. Aditya.
Yes, sir.
Yeah. Sir, I wanted to just check with the thing like how much in-house design team has expanded in the recent past three months. How do we face store growth? Basically, do we have an internal store growth team or growth officer, or are we dependent on external agencies for the same?
We have a whole business development team. I think there are 8-9 people just in that team for finding out new sites and visiting them, filling in the formats, benchmarking them. To open 100 stores every year, definitely we need our team. Of course, we take help from different agents, brokers, and agencies that help us with the sites. All the analysis and everything is done by our internal team and then finalized by a very management committee team.
Yes, sir. Earlier, we had a three-week policy for our inventory, which was not getting cleared off. Are we sticking to the same policy, or are we doing some changes over there at the policy level?
No, it is the same policy. We wait for 15 days before identifying slow movers and then putting them in the discount zone. To answer your first question, there hasn't been a significant increase in the product development team. We have also mentioned this earlier because we want to take a gradual approach in increasing our product development percentage because we want to make sure that whatever our in-house designs are at the store level, they're giving us at least 15%-20% higher gross profit per sq ft. We don't want to disrupt the business performance suddenly. We are taking a cautious approach, and it's giving us good results.
Sir, on the terms of [SAR], can we expect FY26 to be a blockbuster for us with INR 150-200 crore of final bottom line?
Again, it depends on the institution. Hopefully, it is a good year, and it's looking like it's going to be a good year. We are sticking to our strengths and trying to implement all the different 15 new projects that we have undertaken to go to the next level. The next target for us is INR 1,200 per sq ft per month. We hope to reach there in the next 2-3 years.
Okay. Thank you so much, sir. Thank you so much. Best of luck.
Thank you.
Thank you. The next question is from the line of Rajiv Bharati from Nuvama. Please go ahead.
Yeah. Good morning, sir. Thanks for the opportunity. With regard to because our ROEs, our ROCs are basically close to 23%. We have seen that several players have kind of solved the franchising bit recently. Are you open to, let's say, franchising, especially the CapEx side of your business, to expand and to read some capital?
To be honest, we haven't studied that growth path yet. I think we would be open to it in the future. Like I said, if we feel we want to accelerate the number of stores that we want to open and the business is continuing on the momentum and we keep getting amazing SSSG and the newer stores' traction, we would explore that route as well.
Sure. Lastly, on geographical space, especially on something like Odisha and Jharkhand, how do they stack against, let's say, on the indexation front, on the sales per sq ft number versus, let's say, the rest of the band?
Odisha has been a very, very strong market for us. I think I do not have the exact numbers, but it is definitely higher than our national average. The same goes for Jharkhand because it also depends what percentage of stores are mature stores in that particular state. For example, we have almost eight stores in Bhubaneswar. It has been a good market for us. That is why we are expanding more in Odisha and Jharkhand also.
Sure. That's all from my side. Thanks for the help and all the best.
Thank you.
Thank you. The next question is from the line of [Netflix] from NV Alpha Fund. Please go ahead.
Hi, sir. Thanks for the follow-up question. My question is, when I look at your balance sheet, your other current assets or other current financial assets have almost doubled from last year. I just wanted to understand what constitutes or is sitting here in other current assets?
I would have to check that, but I think you're checking the IGAP numbers. It is all related to how your rental properties are part of your assets. Because we opened a lot of stores this year, they are added to assets, and then you subtract the liability and charge interest cost on those rent provisions.
No, sir. I'm talking about other current assets. It goes from 50-1 09 crore, other current or other financial assets. I think this is different from the ROE assets.
I would have to check that number. It's mostly other current assets, security deposits, and just advances. I'll have to check on that number.
Got it. Advances and security deposits. Okay. Got it. Thank you.
Thank you. The next question is from the line of Anuj Lunawat from Individual Investor. Please go ahead.
Hello. Akash, am I audible?
Yes, sir.
Yeah.
Basically, I wanted to ask about inventory terms. We have seen a very good growth in same-store SSSG of, say, whatever, 30%. The inventory terms have remained stagnant around 3.3-3.2. What is our plan in improving here? I heard in the last call that we have been working with the vendors in terms of improving the ERP so that we have to keep less inventory. Is that in that direction? How would you talk about the trajectory of this year?
Yes, current inventory level is around 90 days, sir. As we are able to improve the vendor ERP integration and the supply chain from the vendor part, I think we'll be able to get it down to around 75-80 days. There is no further scope to reduce inventory because then we might risk on loss of sales because we never want our shelves to be empty. The added cost of 10-15 days inventory is much, much less than the opportunity cost of a lost sale.
Okay. Okay. My last question was about what was the sales to repeat customer?
In the mature stores, it's around 70%.
Okay. 70%. Okay. Thank you.
Thanks.
Thank you. The next question is from the line of Kapil Malhotra, individual investor. Please go ahead.
Hi. I just wanted to ask that hope the Q1 will maintain the growth rates forecasted, about 25%, 50%. It is being assumed being one of the better quarters. Q1 and Q3 are supposed to be the better quarters. A PAT margin of about 45%. Can we assume that?
For the full year, sir, the guidance is 40%-50%. Yes, you should see those numbers in each of the quarters. Similarly, that goes for PAT numbers as well.
Yeah. Thank you. That's it.
Thank you. The next question is from the line of Oankar from Shree Investments. Please go ahead.
You intend to become a national-level player in the next four, five years. As of now, you haven't entered markets like Maharashtra and all. What are your plans on that front?
We opened our first store in Maharashtra, actually, five days back in Ichalkaranji. And we got an overwhelming response. So hopefully, Maharashtra becomes one of our core territories in the next four, five years.
If my calculation is correct, you would be going towards, say, 600-700 stores say next four, five years. Is that calculation correct?
Yes. Hopefully, before that also.
Okay. And your target for, say, a long-term target for sales per sq ft, you are right now targeting around 1,200. What level can you reach to if all goes well?
There's no limit. I think we want to keep testing the ceiling for that. I don't think anyone can give you a ceiling to that. I have seen stores that do INR 10,000 per sq ft of sale also. I think it is limited by your own capabilities.
Okay. So let's say, if my understanding is correct, for, say, sales per sq ft and for margins, there is only upside we can calculate, right?
Yes.
For revenue, I have already told. For margins and, sorry, sales per sq ft, there is only upside you are assuming.
See, again, for guiding, we say 8%-10% SSSG. You asked me what is the limit. Those are two very different questions. If you talk about limits, I think there is a scope and potential for doing much, much higher per sq ft sale. Like I said, we have not implemented a lot of things yet that we want to implement. We do not still sell 100% of what we design or make. There is a huge, huge scope for improvement and growth. For guidance, when you talk about making a model, making a business plan, it is 8%-10% SSSG with opening at least 100 stores every year, and the new stores doing 25%-30% less than old stores. That is how you build the business plan.
When you talk about the ceiling of per sq ft sale, I think the first target is INR 1,200, then the next target would be INR 1,500 per sq ft per month.
This 8%-10% SSSG growth you are talking about, this is because last two years' base is now high. That's the only reason? I mean, is there something other you are penciling in?
No, of course. Now we've increased the average revenue of a store from INR 6.5 million to more than INR 10 million a month. So the percentage, we've almost grown more than 60%-70% in two years for the same cohort of stores. Because of a higher base, we're taking a smaller number.
For the next four, five years, if you want to grow at this pace, 40%-50%, you are saying, I mean, would your internal cash flow be enough, or at some point of time, you will have to tap the market, or that would be the strategy?
That also I mentioned before that to grow at 40%-50%, we do not need additional capital. Because we have been getting such good response of our new stores, we are working on increasing, accelerating the store growth. Then we might think about raising capital. Not debt, it will be equity infusion.
Okay. Can you tell me what is the current debt-to-equity ratio and what is the ROC, return on capital?
I don't have the ROC figure, but debt is around INR 125 crore and equity is around INR 360 crore. So it's 1:3.
Okay. Any ballpark number for ROE?
No. I won't be able to give you. ROE is 23.2%. We'll have to check for the ROCA.
Okay. Just a final question is on the interest from the institutional side. I mean, we see very few institutional investors from your shareholding pattern. I mean, what's stopping them? I mean, it's for them to answer, but just asking you, since you are growing so much and at a profitable pace, I mean, are you meeting some institutional guys, or what's your comment on that?
There is regular conversation, and it's a mystery to us also. I think we'll have to post even more stellar results to convince them. Hopefully, we're able to do so.
Okay. All right. Thank you.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Rohit Jain, an individual investor. Please go ahead.
Mr. Rohit, your line has been unmuted. Please go ahead with your question.
Hello?
Yes, sir.
Hello. I just want to know one question. Do you have any future plans regarding to get an upper category market like the best-selling brand? There are best-selling studios. Do you have any future plans regarding that?
No, sir. We don't have any plans for that. We want to focus on this model. This model has a big enough market potential, so at least not for the next few years.
Okay. Okay. Thank you. Congratulations for the setup. Thank you.
Thank you.
Thank you. The next question is from the line of Devanshu Mahawar from Dalal & Brocha Stockbroking Private Limited. Please go ahead.
Yes, sir. Thanks for the opportunity. First of all, I just wanted to understand this hard process. Suppose, for example, if we go to open the next 100 stores in one year, in next FY 26. If by any chance my 100 stores do not get the same revenue, say, same-store sales growth, or you can say that what we wanted to get the revenue from these 100 stores is we do not get the EBITDA breakeven or EBITDA positive. What is the thought process that first we will focus on making profitable that 100 stores and then we expand it? Yes, definitely. What happens is the whole expansion that we are talking about is going to happen in multiple legs.
If we open a next batch of 50 stores and we see that all the new stores are doing less than 50% of our old stores, then of course, we'll revisit our growth plan. We would not open 100 stores or 50 stores, and we'll try to figure out what went wrong and try to consolidate and correct that before growing. I already mentioned that this time, it's not just about number of stores or revenue growth numbers. This time, a big, big focus is on profitability, on return ratios, because profitability is the priority.
Okay. Sir, last one thing, I just wanted to understand that what you mentioned in the call, that our target is to get into 1,500 sq ft. From 1,200, post that, we will reach it to be 1,500 sq ft per month. What gives you the confidence, or what gives you the motivation that we can do 1,500? What steps would we be taking to reach that kind of sq ft sales, 1,500 sq ft per month sales? Any steps you would be taking out that could make you better than the competitors? If you can tell us abroad.
It is focusing on the same things that we've been focusing on. Again, it's all about product. Working on product even more, having 100% of our own designs, making the quality better, fabric better, fits better, colors better. It's about processes. It's about demand forecasting, doing it better. I think it's a combination of 100 different factors that make the secret sauce that has helped us get from 650 to 1,000. That is how we plan to get from 1,000 to 1,200 and then 1,200 to 1,500. There is no white or black answer or a one-word answer to that. If we knew that, we would have done it already. It's a lot of trial and errors. It's a lot of innovation, and it's a lot of improvement.
Okay. Understood. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Nitesh Kumar, an Individual Investor. Please go ahead.
Yeah. [My article to you?]
Yes, sir.
Yeah. Congratulations on the good setup numbers. Yeah, Mr. Agarwal, it would be great if you bring some light on the qualified opinion given by auditors for PPE, even from the last three years. It is a basic comment, I guess. Please bring some light on it.
Which point are you specifically talking about? Can you mention it?
Yes. The qualified opinion for [PPE] from the last three years, like some machinery or something like that.
The main qualified opinion that has been there for multiple years has been the fixed assets reconciliation. Because we did not have the fixed assets module in our ERP, it has been a challenge because we have so many multiple sites, and there are more than 15,000 different articles for fixed assets. We did not want to do an accurate reconciliation. We had hired an external agency who worked on it for more than one year, but we were not satisfied with the results. Now we've hired a newer one, and it's almost 80% done. This year, all the qualified comments would be removed by the year end.
Okay. Thanks.
Thank you.
The next question is from the line of Akash Shah from AJ Wealth. Please go ahead.
No, my question is already being answered. Thank you.
Thank you. Ladies and gentlemen, we'll take this as the last question. I now hand the conference over to Mr. Akash Agarwal for closing comments.
Thank you, everyone, for joining the call. We hope we've been able to answer your queries. For any other further communication, we request you to get in touch with Marathon Capital, our investor relation team. Thank you.
Thank you. On behalf of V2 Retail Limited, that concludes this conference. Thank you for joining us, and you may now disconnect at the end.