Ladies and gentlemen, good day and welcome to the V2 Retail Limited Q2 and H1 FY 2026 conference call hosted by Marathon Capitals. 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 touchstone phone. Before we begin, a brief disclaimer: the presentation which V2 Retail Limited has uploaded on the stock exchange and their website, including the discussion during this call, contains or may contain certain forward-looking statements concerning V2 Retail Limited business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. I now hand the conference over to Mr. Akash Agarwal, Director and CEO of V2 Retail.
Thank you, and over to you, sir.
Good morning, everyone, and a very warm welcome to V2 Retail's Q2 and the first half of FY 2026 earnings conference call. We trust you've had the opportunity to review our results. The earnings presentation and press release are available on the stock exchanges and also on our company's website. We are very pleased to report a very robust performance for the Q2 of FY 2026, reflecting the strong momentum across our business. With 86% year-on-year revenue growth, we continue to substantially outpace the broader market while demonstrating the scalability, resilience, and execution strength of our operating model, even on a high comparison base. FY 2025 laid a very solid foundation, and our encouraging performance in the first half of FY 2026 further reinforces our confidence in delivering sustained growth and long-term value creation.
Innovation, flawless execution, and unwavering customer trust continue to be the heart of our strategy, and we remain deeply committed to strengthening these pillars as we scale. At the core of our success is our highly skilled and passionate team of designers, merchandisers, and inventory specialists. Their ability to anticipate trends, curate targeted assortments, and manage inventory with precision enables us to remain agile, customer-focused, and operationally strong in a rapidly evolving retail environment. We are encouraged by our strong customer response to our distinctive and competitively priced product portfolio. By consistently offering fresh, trend-aligned assortments rooted in quality and value, we are driving broad-based and sustainable growth across our expanding store network. Our strategic expansion into underserved rural markets, combined with deeper penetration in Tier I and Tier II cities, is helping us build a large and demographically diverse customer base.
Our deep understanding of regional preferences, reflected through localized assortments and personalized in-store experiences, continues to strengthen our competitive edge. Now, moving on to some key updates, let me take you to the key highlights of our performance. Revenue for the Q2 grew 86% year-on-year to INR 2,708.6 crore. We opened 43 new stores during this quarter and achieved a net addition of 70 new stores in the first half of the financial year, taking our total store count to 259 stores with 2.8 million sq ft of retail space. Additionally, we have added 16 net new stores so far in the current quarter, taking the total to 275 stores as of today. Reported SSSG for Q2 stood at 23.4%, and normalized SSSG adjusted for the Durga Puja shift from Q3 to Q2 stood at 10.3%.
The same store sales growth for the first six months of the financial year stood at 13.3%. We recorded a 58% volume growth in the Q2 of FY 2026, with full-price sales contributing 92%. Our ROE continues to show consistent improvement, standing at 22.9% in the first half of this year, reflecting disciplined capital allocation and strong operational leverage. While we fully comply with the relevant accounting standards for statutory reporting, the economics of retail operations differ significantly. Therefore, it is important to understand how we track internal performance and decision-making metrics. True store-level profitability can only be measured when rent is included at the EBITDA level and not below EBITDA. Our annual business plans, budgets, cash flows, and store operation metrics are all prepared on a pre-IND AS basis. All team productivity metrics and incentive structures are aligned to pre-IND AS numbers.
Our revenue and profitability guidance is also communicated on a pre-IND AS basis. Given this, I will now share our pre-IND AS performance for this quarter and the first six months of the year. Revenue grew 86% year-on-year to INR 2,708.6 crore. Gross margin grew from 27.2% to 28% from the corresponding quarter last year. The EBITDA grew from INR 7.9 crore to INR 44.4 crore, which is a 465% year-on-year growth in the Q2. The EBITDA margin grew from 2.1% to 6.3%, and the PAT grew from INR 7 million to INR 253 million, which is a growth of 3,561%. Now, talking about the performance of the first six months on the pre-IND AS basis, the revenue for the first six months grew 69% to INR 1,340.9 crore. Gross margin grew from 28.2% to 28.7%. The EBITDA grew from INR 40.1 crore to INR 96.9 crore, which is a growth of 142%.
The EBITDA margin grew from 5% to 7.2%. The profit after tax grew from INR 19.6 crore to INR 55.9 crore, which is a growth of 185%. We have been consistently sharing pre-IND AS numbers for improved transparency around operational performance, and we will continue to report these metrics going forward as well. With this, I now leave the floor open for questions.
Thank you very much, sir. We will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their touchstone 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 will wait for a moment while the question queue assembles. The first question is from the line of [Hajj Dube] from L.F.C. Securities. Please go ahead.
Hello. Good morning, sir. Congratulations on the success of the number. Am I audible?
Yes, sir. You're audible.
Yeah. I just wanted to understand that we are expanding in various markets. What is your plan for the South Indian markets? Like I see that you are present in Western markets and Central India as well, but our South presence is somewhat like we can expand there as well. What is your take on that, sir? First question.
Yeah. We entered Karnataka a few years back, and now we have 18 stores in Karnataka, and it has become one of our core strong markets. Similarly, we had entered Goa. Now we have two stores in Goa. This year, we have entered Andhra Pradesh, and we are getting a very good response in that state also. South is a very big focus market for us, and a good chunk of our future expansion will come from that region.
Okay. So you are planning to enter into South Indian markets, like for example, in Tamil Nadu as well? Because it is also a good market for retail, and there are a lot of competitors that are already present.
Our aspiration is to be a national-level retailer. Our aspiration is to be in all the states of India in the next two to three years. Definitely, we will be present in Tamil Nadu as well.
Okay. Okay. The second question is that, so if I get it right, we are mostly on a bit of brick and mortar, right? What I wanted to understand, are we planning some omnichannels like e-commerce, e-commerce, just like D-Mart has for D-Mart Ready? Are we planning something in fashion and for our products, anything like that?
Yes, we are exploring different technologies where we can leverage the same store inventory and add another channel, which is online, to sell to the customers in that particular city so that it does not have any additional costs, and we can leverage the existing inventory and cater to more customers. We have not found a suitable technology partner yet, but hopefully soon we will be able to do that.
Sir, any timeline on that? Approximately how much time do you expect that would be online?
I think it would be in the next financial year.
Okay. Okay. Just one last question, if you may allow. When we talk about our stores, how is our break-even? How much time does it take for our stores to be break-even?
Our new stores start from around INR 750-800 per sq ft, and the break-even point is around INR 500 per sq ft. Our stores start from the first month itself, and it breaks even from the first month itself, and it takes about two to three years for a new store to mature. It grows faster than your mature stores, and then it comes back to company base.
Just to clarify, INR 500 per sq ft is our break-even point. Within the first month itself, we break even, and then the store becomes mature in like two, two and a half years. Is that right?
Yes.
Yeah. Perfect. Thank you so much, sir. Once again, congratulations and all the best.
Thank you.
Thank you. The next question is from the line of Aditya Bansal from Motilal Oswal. Please go ahead.
Congratulations for a very strong set of numbers, and thanks for taking my question. My first question is around the demand environment. How have been the trends in Diwali and so far in 3Q? Can you share some light on that?
I can just say that the momentum is continuing, and we are very, very happy with the kind of response we're getting both from our old stores and all the newer regions and the newer stores that we've opened. We are beating our own expectations. We are very bullish, and we have a very positive outlook for the future.
Sure. Any changes to the store addition guidance after the QIP? What are the current targets now?
Our initial target was 100 stores, 100 new stores, and we've already added 86 stores this year. We have actually increased that 100 stores number to 130 stores. I think we'll add around 130 stores this year. If our store operating and profitability metrics remain robust and as strong as it is, we will open 150 stores next year. Our objective is to achieve an ROE of more than 20%.
Okay. Lastly, can you talk about the warehouse investments and any investment in the team that you would require for meeting such an accelerated store expansion? Anything qualitatively as well as on the quantity investment?
To open 150 stores, we would need a CapEx plus inventory investment of around INR 350 crore, and additional warehousing cost would be around INR 25-30 crore.
This will include the regional warehouses that you were trying to do for the spoke model?
Yes.
Okay. Thanks, Lord. Thank you.
Thank you.
Thank you, sir. The next question is from the line of Ankit Babel from Subhkam Ventures. Please go ahead.
Yeah. Hi, Akash. Good morning, and congrats for the excellent set of numbers. My first question is the usage of QIP money which you have recently raised. How you have used it to date?
Yeah. Our aim is to be one of the best paymasters in the industry for our vendors. We have raised QIP primarily to repay the debt of INR 135 crore. We are using INR 165 crore for our working capital and INR 100 crore for general corporate purpose. Raising capital helps us achieve both in terms of supporting vendors' ecosystem by providing enough liquidity and also reduce our product cost by availing bill discounting and also because it is helping us increase our store opening targets.
Can you throw some more light on by paying your creditors early, what kind of savings you would be making, and how profitable would it be for you?
Yeah. Even today in India, access of capital for MSMEs is still a big challenge. Our vendors, as we are growing, they are growing with us. They all need working capital. We get around 1.5%-2% per month bill discount from them. That is directly added to the bottom line if we pay them their bills earlier.
Is it fair to assume that going forward, your working capital would look increased, but it is by choice?
Yes. You will see a drop in our creditors and increase in our working capital days.
It is as per your choice. This is not compulsory.
Yes. Because we are paying our vendors earlier, our average credit days would go down from about 50 days-55 days to around 30 days-35 days.
Okay. Any other benefit you get by paying your creditors early other than the discounts? Any preference from them while they supply you the material or any other soft aspects?
Yeah. V2 becomes their priority. V2 becomes their retailer of choice. We have already converted about 15-20 of our vendors as exclusive vendors to us. Hopefully, becoming even better paymasters helps us get more vendors under this umbrella who are only supplying to us and not supplying to our competitors.
Okay. Okay. My second question is on how is the traction from the new stores which you have opened, especially which you have opened outside your core markets of UP, Bihar, Assam, and Odisha? I mean, these are your core markets, so core markets. I mean, the new stores open outside these states. How is the traction there? How is the PSFs and everything there?
Very encouraging numbers here. There are two things here. First of all, our benchmark for new stores is it should be within a 70% range in terms of sales throughput of the old stores. They are currently at around 72%-73%. They are well within the range. In terms of newer regions, new stores in old regions versus new stores in new regions, the difference is only 2% in terms of per sq ft sale. Even in the newer geographies where we have entered, whether it is Maharashtra, Gujarat, Rajasthan, or Punjab, all the new stores are already performing at the level of our new stores in the core markets.
Okay. Going forward, when you are targeting 130 stores this year and around 150 next year, I mean, would the focus be again on these four, five states where you already have presence in so many years, or it will be a mix? I mean, what will be the mix? I mean, outside these states, how many stores will open, and how many would be in these core markets?
See, we are only committing to the next five months of the stores that we want to open because from the day we finalize the store to the day the store opens, it's a period of about three to four months. Everything depends on the traction that we get. For example, Karnataka was such a good market for us, and the traction that we got for every new store and old store was very encouraging. That's why now we have 18 stores in Karnataka. Similarly, now we have entered Punjab, Rajasthan, Andhra Pradesh, Chhattisgarh, Haryana. If we feel any of those markets are showing exceptional numbers, then we will focus more on those markets.
If you want to talk about prime of FSC, I think 60%-70% of the stores will be in existing core markets, and 30%-40% will be in the newer geographies which are performing well.
Okay. Interesting. Lastly, how many stores currently would be under 500 PSF on a consistent basis for two-three months?
If you take out, okay, at the company level, there is only one store that is below break-even point currently, and that is also a store that has opened in the last three to four months. We do not judge a store's performance before it has at least passed one year of sales. If you talk about stores that are at least one year old, all the stores are EBITDA positive.
Wow. Excellent. Thank you so much, Akash.
Thank you.
Thank you. The next question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead.
Hello. Yes. Thank you for the opportunity. Congratulations on very good set of numbers. My first question is on gross margin. When will we see gross margin expanding on account of bill discounting?
You should start seeing it from the Q3.
Okay. Okay. Given the aggressive growth plans that you have for next, let's say, for FY 2026 and FY 2027, would it be possible that you will be able to achieve 10% kind of pre-IND AS EBITDA margins by FY 2028?
We always guide for the same EBITDA margin because we are promising a very healthy growth number, which is more than 50%. Because new stores start at 70% of old stores and it takes time to mature, and we are adding 60%-70% new square feet area. We always guide for the same pre-IND AS EBITDA margins moving forward. Definitely, when the stores mature, when the new stores that you open become only 10%, 20%, or 25% of your area, the expansion of EBITDA margin should also happen.
Okay. Okay. Let's say for the next 18 months, is 10% kind of SSSG possible?
That is what we target. Even for mature stores, I think 8%-10% SSSG is our target. If we do our execution well, if we plan our assortment well, I think it is possible.
Okay. Okay. What kind of stores are you planning to add in states of Maharashtra and Gujarat? How are those two stores performing? Because last time you told us that those stores are doing very well. Any color on those two states and what kind of plans you have on store addition front for next, say, financial year 2027?
Whenever we enter a new geography or a new state, we open one to five stores there because we believe in collecting a lot of data. That data that we collect ensures that we build an optimized store model that fits that particular region or that state. Both Gujarat and Maharashtra store, so Gujarat store is doing more than INR 1,200 per sq ft of sale. Again, it is only one store each in both the regions. It is a very small sample size. Until we have three to five stores there to collect that data to see the performance, it is very hard to comment what will be the future expansion strategy in those states.
Okay. Okay. That's it from my side. Thank you for your answers and all the best for the upcoming quarters.
Thank you.
Thank you. The next question is from the line of Yash Kothari from KRChoksey EQ Research. Please go ahead.
Yeah. Hello. Firstly, congratulations on a set of results though. I just wanted to know the unit economics of our stores per se, what's the per store cost depending on the region, if there is a way to give me that. Also, the margin guidance after new stores open, what's the timeline for certain margins, how they increase in certain areas?
I'll answer your second question first. For margin guidance, we guide for the same margin going forward because we are growing fast. I think we did pre-IND AS EBITDA margin of 8% last year. That is our future guidance for the next two to three years because we are adding so much new area. There are levers to expand that margin as well. One is operating leverage by getting the per sq ft cost down. One is better sales mix and better economies of scale in terms of costing that improves our gross margin. The third is obviously a good SSSG number that increases the per sq ft sale at the company level. I think when we are adding almost 60%-70% new area every year, we guide for the same margins going forward.
Now answering your first question, our store economics, CapEx required for the store is around INR 1,100 per sq ft. The inventory required at the company level for that store is around INR 2,500 per sq ft, which is around 90-100 days of inventory. Half of it is paid for by us, and half is the credit term that we get from our vendors. Total investment per store is around INR 2.4-2.5 crore. The total cost at the company level is around INR 190 per sq ft.
Okay.
You can do the calculation.
Thank you. Any sort of funding that you're looking for in the future? I mean, I know obviously the QIP has just happened, but if at all, because obviously we are expanding at such a good rate. I just wanted to know if there is any sort of thought process in that area.
There are no plans currently, but again, our main objective is to get a good ROE, a healthy ROE. If we make a business plan, we make our cash flows. Currently, there is no plan, but in the future, if we feel that we need to raise money to open more stores and all the business metrics are very healthy, then we will do it.
Okay. Just to fall back on the point of the unit economics, how you said there are three levels that really affect how the cost for a store comes down. Since we have been expanding at such a good rate and beating our own estimates, is there any sort of economies of scale that we are already seeing when it comes to the cost per square foot and the things that you mentioned?
Yeah, definitely. We have already seen our costs come down by INR 6-INR 7 per sq ft if we are comparing it year-on-year. There is a lot of scope for it to further come down as we increase store area.
Okay. Thank you. That's all from my side. All the best.
Thank you.
Thank you. The next question is from the line of Pillai from Nuvama Wealth. Please go ahead.
Yes. Thank you for the opportunity again. My question was on rental. How is rental costs panning out, and what is the guidance for next year?
Our average rental per sq ft is around INR 52 per sq ft. I think we've already signed 80 stores MOUs. The average of those stores is around INR 48 per sq ft. Our average rentals are actually coming down.
Okay. Okay. So this rental cost would be a big leverage along with gross margin expansion, right? Even if you open new stores?
I don't understand what you mean by rental cost will be leverage.
Your rental cost has been continuously going down. That could mean that margin expansion could happen on account of this.
It is a very insignificant change. Our rental cost used to be INR 53, and now it is INR 52. It is a very, very insignificant change.
Okay. Okay. Yeah. That's it from my side. Thank you. Thank you.
Thank you.
Thank you. The next question is from the line of [Bhaskar from Axis Securities]. Please go ahead.
Thank you for the opportunity and congratulations to the management on excellent Q2 results. There is an article that got published in ETH, and our research also confirms that many senior positions at the organization, including Head of Merchandising, Head of HR, Retail, Planning, Production, Sourcing, and Design, are currently vacant. The attrition is also very high, and the Retail Head, Amit Gupta, left only after 15 days. The position is now vacant. The HR Head, Amit Bagga, left after two months. The position is also now vacant. The IT Head, Pankaj, has exited recently. The Inventory Planning Head, Paradeep Jajoria, also left in August. Production Head left only after two months. The Sourcing Leads, Deepak Gupta and Pawande, also left within a year. The Merchandising Category Head is serving as the current CFO.
Can the management confirm the accuracy of these details and explain why so many critical roles are remaining vacant as of now? Clarify how day-to-day operations are being managed, especially given the ongoing concerns about the governance and operational continuity?
Yeah. So except Head of HR, all the other positions are not vacant. I think there's a discrepancy in your research. Second, whenever we hire someone new, there's always a probation of six months, and we always communicate with them because a lot of times what happens is the culture with the company doesn't align with the person. We always tell any new hirings that happen that the first six months is a probation time because they are getting to know the company, the company is getting to know them. A lot of times those relationships don't work. If you talk about buying and merchandising, all our core vertical heads, even including the buying and merchandising head, they all have been with the company for more than 10 years, and they have experience in this industry for more than 20 years-25 years.
Except the Head of HR, I think all the other positions are taken care of. That is why we believe in building a very broad-based management where nothing is dependent on one person. There are always fallbacks. There are always backups. Because we knew we wanted to grow at such a high growth rate, we spent a lot of time building the foundation over the last three to four years. It is a very normal part of business. If you look at attrition at the head office level, I think it is less than 15%, which is a very, very healthy number. I do not think it is any cause of concern.
Uttaras, our second question is, while the company has recorded 23% L2L growth in Q2, the SPFS figures have shown only 3%-4% increase for Q2. There is an increase of 17% in ASP vis-à-vis 13% L2L growth in H1. The SPFS has regrown. This indicates that the new stores are performing approximately 20% lower than the existing L2L stores. We are getting benefit of price increase and not the quantity growth. Is our understanding correct?
Your understanding is not correct there also because our contribution of apparel has been increasing over the last two years. Whenever you want to see whether it's an actual price increase, you should only compare ASP of apparel from last year to ASP of apparel now. That ASP increase is only 3% because we have increased the contribution of apparel, and apparel ASP is much, much higher than general merchandise. That is why you see this ASP increase.
Okay. Thank you.
Thank you.
Thank you. Ladies and gentlemen, to ensure the management can address questions from all participants, please limit your questions to two per person. If you have a follow-up, kindly rejoin the queue. The next question is from the line of Ankush Agarwal from Surge Capital. Please go ahead.
Yeah. Hi, Ankash. Thank you for taking my question. Just one question. Can you give us a sense of what would be the sales per sq ft per month for old stores and new stores for the quarter?
I don't have that number for the quarter, but I can give you the number for last year. Last year, our old stores were at INR 1,100 per sq ft of sale. The SSSG numbers for this year that you're seeing is around that INR 1,100 base. The new stores last year was around INR 770-INR 780.
Okay. Roughly, the new stores would be doing more than 70%, which is the sort of threshold that we look for.
Yes.
Okay. Okay. That is continuing, you're saying?
Yes.
Okay. Second thing is, I think last year, we were talking about, say, increasing the share of our own design substantially this upcoming summer season. The thought was that if we are able to achieve the target, let's say, 90% sort of own design, then it would be a game changer for the company. I just wanted to know your thoughts on where we are in terms of progress on that.
We have decided, see, the model is working so well that we don't want to make a significant change where we break the model because you shouldn't tweak something too much when it's working well. What we are doing is we're trying to increase it 5% every season. Our year is broken down into four seasons because we want at least 20% higher throughput in our own design compared to our vendor design in order to increase that.
Right.
Until and unless we see that competitive advantage, we won't make a significant increase. We are only taking it a gradual increase and increasing it by 5% every season. I think we moved up from 25% to 35%, and hopefully, next year summer, it will be around 40%-45%.
Oh, got it. That was it. Thanks.
Thank you.
Thank you. The next question is from the line of Niraj Mansingka from White Pine Investment Management. Please go ahead.
Thank you for the opportunity. I just had one question. We have seen a quite early onset of monsoon. How will this impact your realization and margins for the quarter?
Historically, we have seen monsoons do not have a very big impact. What happens is if there is a.
Sorry, Ankash. I'm very sorry. I'm very sorry, Ankash. Instead of monsoon, I was talking winter. The winter onset is very sharp this year. Sorry for that.
Yes. We have seen our winter contribution increase from about 40% on the last year same day to almost 55%. That is very healthy for us because winter is, number one, you have extra margin, extra gross margin. Second, the ASP is higher. It translates into much better sales numbers. There is a delta of around 5%.
Delta of 5% in what? Like the EBITDA side or?
Sales.
How much gross margin is the differential between a winter product versus non-winter?
A winter product would have a gross margin of about 34%, and a normal product would have a gross margin of about 31%. The delta is about 3% gross margin.
Okay. Got it. You're witnessing higher sale across all these stores, right? The winter product.
Yes. Winter has been, early onset of winter has been very good for us.
Yeah. Yeah. Okay. Great. Thank you.
Thank you.
Thank you. The next question is from the line of Shivam, an individual investor. Please go ahead.
We have done a QIP of INR 400 crore, and now our payables are coming down. At least our gross margin will be going up. Why are we not increasing our EBITDA margin guidance from 8% to, say, 9%-11%? Last year, we did an 8% EBITDA margin.
Yeah. If you look at the impact, even if we prepay INR 100 crore to our vendors, that is just INR 2 crore per month. If you look at the impact, it is not a very big impact. We do not guide for an increased EBITDA margin only because we have already opened 84-85 new stores this year. We are opening 130 new stores this year, which will have a per sq ft sale, which is 70% of old stores. That EBITDA margin offsets any benefit that we are getting from the SSSG of old stores.
Okay. Understood. My second question is when I look at LinkedIn and check for the titles of management positions, I do not find them. Is it like, okay, all the management positions are held by very, very new joinees, or what is the situation?
No. Most of the management positions are, in fact, held by old people who have been promoted from within the organization. Our retail head is a person who was a floor manager in one of our stores about 13 years back. Our business development head was a store manager. All our regional managers have also been promoted from within the organization. The buying and merchandising head used to be a subdivision head. All the positions have been filled by people from within the organization. That is why other people in the organization see that if you work hard and you achieve the targets and you follow the company culture, there is such a big room for growth. That is a very good career path for all the employees here.
So who is our CTO, by the way?
The CTO's name is Anupam. There is a team. Our SAP, so there is not a CTO. There is an SAP head, there is an applications head, and there is a person who takes care of the POS. That is how we have divided the IT department.
Okay. That's why I was not able to find the CTO on LinkedIn.
Yes. It's about the structure of the department.
Okay. It will be very good if you can just show the structure in your investor presentation. Because that is creating a lot of noise around. Yeah.
Sure.
Thank you.
Thank you.
Thank you. The next question is from the line of Samarth Nagpal from Suranu Family Office. Please go ahead.
Hi. Thank you for the opportunity. Congratulations, Akash, on the day today. Akash, just wanted to go, so most of the questions have been answered. I just wanted to know that as we are scaling very rapidly, how much of an issue is finding the right manpower in tier three, tier four cities, and how much of an attrition is a problem? Just trying to understand from a point of view that in value retail, how much is front-end specific to operationally driving the store, and how much it is related to sales driving? Just wanted some color on that.
Yeah. For every new store, the additional manpower required is, of course, the manpower that we keep at the store because the head office and warehousing, they can be leveraged. The existing manpower can be leveraged for the additional stores. Because most of our store staff is at minimum wage, the attrition at store level is quite high. It's, I think, around 40%-50% because they jump ships even with a INR 500 or INR 1,000 difference. What we have done is we have completely moved away from being manpower-oriented to being process-oriented. We have automated a lot of processes at our store where even a new guy, within a day or two, he can get trained, and he can start giving an output.
We are not relying on any of our store manpower for using his intellect or using his brain to display a particular design, display a particular color. Everything is handled through technology and the picklist that we're giving at the store. For the core positions like Store Manager, Floor Manager, all of them have retention bonuses. Because our sales are good, a big chunk of our manpower's salary is variable salary. If they are achieving their targets, they get anywhere between 10% of their salary to about 35%-40% of their salary. That has also really improved attrition numbers because people are seeing that in more than 90% of the locations, our sales are at least 40%-50% higher than our closest competitors.
People are seeing that none of the other retailers, they're achieving their targets, and V2 stores are achieving their targets, so they're getting a lot of incentives also. That is really helping us.
Got it. Akash, on the second thing, I think we are all set for the next two years as we have laid down the expansion plan. I just wanted to understand, are we also looking at the prospect of a focus store kind of a thing in tier three, tier four so that we do not have any more liquidation going on in the future, or are we sticking to our stance of carrying on the focus stores only as of now?
We do not have any franchising plans because we do not have a very good experience with franchising, and it actually dilutes the store experience and the brand experience for the customers. It is very hard to standardize that when someone else is handling the store. We are not exploring that.
Got it. Got it. On the winterware part, I think with the early onset of winter this time around, I think the demand, as you have also laid down, is pretty strong. Are we covered for the season, or do we see that we have not done enough of buying, and there would be certain gaps coming up? I just wanted some color on that.
I think it's a very good problem to have. Definitely, there have been some shortages, but I think it's a very good problem to have, and we look forward to always having this kind of problem where your sales are better than your estimates, and there is a little bit of stock shortages. Our team has gone to different cities in India to find out if their ready stock is available, and we are buying a lot of inventory from our vendors, in their brands, to cover up for the shortage.
Got it. Got it. Understood. One final question, if I may squeeze in. Akash, I also saw that there was a hiring call out for a CEO as well on LinkedIn. Are we looking to beef up the organization and hire a CEO as well? What would be your role? Some color in that direction.
Yes. The kind of growth trajectory we are on, we are always on the lookout for good people. Me and my father both, we want to hire a CEO so that we can spend more time in the long-term strategy of the business because the plan is big, and we want to grow multiple times and exponentially over the next 10 years. Of course, if we find a capable person to take care of the day-to-day operations and the running of the business, then we can move on to a more, I would say, strategic role.
Understood. Understood. I think that's it from my end. All the best, Akash, to you and V2.
Thank you.
Thank you.
Thank you. The next question is from the line of Hitaindra Pradhan from Maximal Capital. Please go ahead.
Hi Akash. I hope I'm audible.
Yes, sir.
My first question is related to the SSSG and the normalized SSSG that you mentioned. Can you just explain why there is a big difference? Because of the festive days, but the difference seems to be a little big.
Yeah. See, it will be different because it's open to interpretation, and different people use different number of days to calculate the impact. What we have done is we have taken the 30 days before the shera, and we have shifted those 30 days and compared it to the same period last year. I think the correct number to compare all retailers would be to see the weighted average SSSG for the two quarters combined. That will give a standardized number to compare SSSGs between retailers. If you want to just look at one quarter, I think it's very hard to compare because some people might have only taken five days before the festival. That reduces the difference by quite a lot.
Got it. Is there a way that the disclosure can be made on a trailing 12-month basis, or that would be more complex because the mature and the new store mix will also change when it comes to Triple HG?
That becomes more complex because then you have to calculate the number of stores, the number of days that these stores were open in the last quarter. Then you compare only those days. We do not want to change our SSSG calculation cohort. It is always stores that were present at the end of the last financial year. We calculate SSSG on those stores.
Excellent. Excellent. My second question is related to your outlook. You mentioned that you are targeting 20%+ ROE beyond when the expansion and the growth plans are executed. Sir, on ROC basis, how do you see the mix evolving, and what are the challenges that you foresee achieving more than, say, 20% ROE, 25% ROC? Because you are expanding into tier two, tier four as well, and also you have presence in Metro Pan India. In the competition coming in the value-rated space, sir, what are the key drivers that you think that will let you achieve the ROC or ROE of more than 20% beyond, say, FY 2028?
I think it's all about the correct execution. Again, if we have built a strong model, our ROE last year was around 27% on a pre-IND AS basis. That means we have established a very, very strong model. If we continue to strengthen it, continue working on the product, continue using data to come out with the right assortment, I think there's a lot of potential in the country. We can easily have 2,000-2,500 V2 stores. Getting ROE is all about making your model strong and replicating it and giving the customer the best experience.
Got it, sir. Okay. That's all from my side.
Thank you. The next question is from the line of Ashish Soni from Family Office. Please go ahead.
Sir, in terms of just scaling the stores, the structure of the top management, so have we fulfilled everything, or is something to be fulfilled? Because you are expanding almost double store count in the next two years, right?
Last year, we were working with around 180 to 190 vendors. Now we have increased that to almost 250 vendors. We have a list of almost 500 vendors who are willing to work with us, who want to work with us, but we are waiting for our volumes to increase to use their capacity. In terms of manufacturing capacity, we have the outlook or the visibility for the next few years. In terms of availability and sourcing, we plan a season at least four to five months before that season. For example, this current winter season that is going on, we had closed the orders back in May and June. We had already planned for all the stores that we wanted to open. All the stores are very well fulfilled.
The only stock shortages that are happening are happening because the sales are better than expected.
In terms of management structure, I'm asking, is all the positions for the scale-up ready internally? Manufacturing, I understood, but internal management structure, I'm trying to understand.
What do you want to understand about the internal management structure?
Yeah. So when you're scaling, sometimes you require, right, more people to oversee certain pages or whatever, right? In terms of scaling, internal management structure-wise, are we in line with whatever growth targets we have, or are we still fulfilling some positions?
Again, see, there are two things. Because when you're expanding this fast, the most pressure that comes is on the new store opening department, the business development department. For example, our business development department used to be just four people. Now there are 18 people in that department. The new store opening team used to be just three people. Now there are 21 people in that department. Retail operations, we used to just have four regional heads. Now there are eight regional heads. Definitely, you need to keep adding more manpower because you are adding so many new stores. Again, for the next three to five years, because of the trajectory we are on and where we want to be, we are again looking for more people. Of course, every good organization needs good manpower in order to grow.
With this QIP, are we set for the growth in 2028, or do you think we'll require more fundraising?
Again, it all depends on the execution and the performance. If our performance is as strong as it has been and the growth is strong, we will increase our store opening target. Right now, looking at the cash flows, we are covered till the end of FY 2028.
Okay. One last question. What are the risks and challenges you are seeing based on your growth as well as from the competition right now, which worries you most?
There are two, three different types of risks in this business. The biggest risk is inventory risk. That is why we have a lot of checks and balances around aging of inventory, inventory management. I think no other retailer puts their slow movers on discount within two weeks of introduction. We have been able to get our more than one-year-old inventory from about 24% to less than 4% now. Inventory management is the most important, I think, tool or the area of focus for any retailer. That is one of the biggest risks where you get a complete season's assortment wrong. That is why we believe in using a lot of data. We use data to design almost 60%-70% of our new season's assortment.
If my data is telling me that cream color is the hottest selling color, then we will introduce more designs in cream color. Similarly, this is done at all article attribute level. The third risk is you finalize the wrong location where there is no footfall, and it is in a locality where the sales potential is not that much. Again, we have four to five layers of checks where the area manager goes and checks first, then the regional manager, then the retail head signs off on the project, the business development head signs on the project. Then we have a core business committee that signs on each and every site that we finalize.
These are the main risks, but again, we've learned from our mistakes before, and that is why we build checks and balances around these risks so that we don't repeat them.
Okay. Thanks and all the best for the future.
Thank you.
Thank you. The next question is from the line of Rajesh from JNMA Venture. Please go ahead.
Good afternoon, gentlemen. Akash, congratulations on a very strong second-quarter number. First, profitable Q2. The growth construct seems to be pretty much in place given the perfected business strategy that you have worked on over the last many years. 10%, 8%-10% SSG, and close to 35%-40% store sq ft. Is that the right way to look at the growth construct for the next few years?
No. If you want to grow revenue by 50%, 8%-10% will come from SSSG, and 40% revenue will come from new stores. To get 40% revenue from new stores, you need to add 60%-70% new area because new stores do about 70% of old stores PSF.
Right. Yeah. Okay. I got it. You are right. Absolutely. Given this massive, significant expansion in the growth, one part of the equation is that would you continue to keep gross margin at the level where you are as a strategic design? Given the benefits of the operating leverage and the growth, you will continue to invest in new stores and keep the margins intact, or would you pass it on to the customers?
Our target gross margin is always 28%-29%. We want to pass on everything to the consumer because we feel it is the time to get the maximum market share and the maximum per sq ft sales. We would always prefer having a higher per sq ft sale to get more EBITDA margin rather than a higher gross margin. When you have a higher sales per sq ft, then your inventory freshness is better. You just have a lot more margin to play with.
Okay. Okay. The point is, what is the biggest challenge to you and your dad in this journey of you? In the beginning of the opening remarks, you mentioned that design team is core and the other team is also core. When you run at such a high speed, obviously, the software aspect, building culture, maintaining culture becomes the biggest challenge, and there are no set formulas for this. How are you handling this maniacal pace of growth? What are the changes you are looking to sort of, if there are any, if you can give some color, would be very useful.
I would say the biggest challenge is keeping that motivation level up. We never want our employees or us to rest on our laurels because the most important thing is to keep innovating and to keep trying to improve ourselves every day. To have that passion, to have that motivation, and to make sure that the team has the motivation is the biggest challenge. We are doing that because you can see we worked on 50 different projects in the last two to three years to come from INR 650 to INR 1,000 per sq ft of sale. Now we are working on the next 50 projects because it's about building an ecosystem where product is at the DNA of the organization. It's about churning out the best products every day. It's about understanding data. It's about using that data.
It's about understanding what the customer wants. At the end of the day, what matters the most is the 3,000 designs that are displayed to the consumers at the store. It's all about building that ecosystem where whatever you're churning out, the 300-350 designs that we send to our stores every week, they have to be of the best quality. They have to be fashion-forward. They have to be trendy. Of course, nobody can beat us in cost because our markup is only 55%. It's all about creating that ecosystem.
Great. I think you have got great vision of sharing costs and economies with customers. All the very best, Akash, for the next decade.
Thank you.
Thank you. The next question is from the line of Abhijit Bishna from PI Asset. Please go ahead.
Thanks for the opportunity. Sir, I have one question. There is a change in GST rate in the value chain in fabric and other raw materials. Do you think the company could retain that benefit?
We have not seen any benefit till now because whatever GST benefit was there, the price has increased that much of the yarns. People are saying we should start seeing the benefit from around March onwards. It is all speculative, but we have not seen that benefit yet. Whatever GST got reduced in our MRPs, we have already reduced the MRPs. There is no benefit there also.
Any benefit if that incurred? Can the company retain that benefit going forward from March onwards, or will you be passing on that benefit to the customers?
No. I told you, we've already reduced all the prices. We've already passed on all the benefit to consumers.
Understood. What percentage of revenue comes from customers tied above 1,000?
About 6%.
Okay. Thank you. That's all from my side.
Thank you.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Akash for the closing comments.
Thank you all for joining us for today's call. We hope we have been able to address your questions and provide a clear view of our performance and outlook. Should you require any additional information, please feel free to reach out to Marathon Capitals, our investor relations advisor. They will be glad to assist you. We sincerely appreciate your continued interest and support. Thank you and have a nice day.
On behalf of V2 Retail Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.