Ladies and gentlemen, good day and welcome to V-Mart's Q2 FY 2025 Earnings Conference Call hosted by Anand Rathi Share and Stock Brokers. 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 signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Ms. Vaishnavi Mandhaniya from Anand Rathi Share and Stock Brokers. Thank you. And over to you, ma'am.
Thank you. Good morning everyone. On behalf of Anand Rathi Share and Stock Brokers, it's our pleasure to host the Q2 FY 2025 earnings conference call of V-Mart Retail Ltd. From the management side today we have Mr. Lalit Agarwal, Managing Director and Mr. Anand Agarwal, CFO. I'll now hand over the call to t he management for the opening remarks followed by Q&A session. Thank you.
Thank you Vaishnavi. Good morning everyone. Happy Dussehra, Happy Diwali to all our listeners and all the participants and all the. It's really busy days here at retail in India at V-Mart. People are very, very busy right now. We are towards the end of the journey. Definitely post the election there has been slight recovery in the market. We have seen some betterment in the consumer sentiment.
There are some positive signs of recovery. Both in rural as well as urban. But yes, urban has been a little bit of struggle. But some part of rural has recovered and we are seeing some increase in customer confidence. It was definitely there till now. We are seeing some pressure also coming in because of. Especially because of inflation, because of seasonality, because of rain. Somewhere it's becoming a little more extra and somewhere into cyclone. So some of those pieces are also stuff which have been causing some concerns towards the end of the month and towards the start of October.
So we have definitely seen some betterment i n the overall scenario in the consumer space, in the consumption space. There has been definitely some betterment even in the way or the income, disposable income. What we see for the consumers which w e can analyze and understand that their confidence to buy and buy more is coming up. So we should see good time coming in. We will definitely.
There are some consumers c hange, behavioral change that we are experiencing because more and more explorations are getting in. More and more fashion is kicking in especially towards the younger demography which is a youth, the teenagers. We are seeing a lot of that happening. There is definitely more and more retail also coming in the market and more and more organized retail coming. So the preference for the organized retail is. I mean we are seeing a little m ore from the consumer perspective.
Even the rural audience now wants to g o to a small, go to an organized store, go to a value retail which is bigger retailers. So there has been definitely m ore and m ore retailers' stores' doors opening up. We are seeing competition opening up more stores. We have been seeing competition is also t rying with multiple other stuff bringing i n newer merchandise, bringing in newer fashion. Bringing in the new ways of experience. Providing i n the retail sphere. Definitely more money is being chased to the retailers, so more confident they are definitely want to spend more, look--
Good, communicate well, create freshness in the store, try to integrate technology. So a lot of things are going on in the Indian retail space especially and we all know that. So those are good news which also gives a lot of goodness to the s ystem which also gives a lot of unnecessary things which goes away and people are becoming a little more profit centric as such. So that's some good news. But yeah, brands continue to have a little tough time, which is premium and a little more price sensitive, price heavy brands which seems to be struggling in the market.
But value retailers seem to be enjoying a good time. Most of the value retailers, retailers which are largely built out of East India or even Northern India have been seeing good stuff coming in. Eastern India retailers have not seen very good Puja comparing with the last year Durga Puja. So they have seen some growth coming i n, but not high growth coming in from there, but yeah, overall we are optimistic on the value retail side. I think we continue our focus on building the strength, the core strength of the good customer experience, good customer product experience.
I think that is our core area that we continue at V-Mart working on improving, largely working on product quality, product designing, integrating the sourcing, integrating the supply chain, both from the perspective of the fabric manufacturer to the product manufacturer to the logistics to the warehousing and then back to the stores and integrating the technology in between. Integrating a lot of processes in between. Bringing in an element of sustainability, bringing i n an element of compliance, bringing in a n element of taking care of even the environment. So a lot of those things are also being brought into along with our focus on improving the real quality and also working a little more on the turnaround time of design to d isplay product to the store in chain time.
Integrating more with the vendors, aligning and creating alliances with good vendors. So some of these things have really improved, and I think we've also worked a lot on the store experiences. Internal store display mechanisms, the way the p roduct should be displayed, laid out the w hole piece on the internal furniture fixtures, Internal look and feel of the store, internal reservations of the store.
Optimization of area, optimization of space, optimization of operations and enhancing the consumer experiences. So I think consumer experience enhancement is one thing that we have really worked on and that I think is very, very important to us. And I think there it's more about people, it's more about culture that ultimately delivers the experience of the consumer. So how did we at V-Mart have a lso tried to initiate lot of those c ollaborative work at a team level within the stores, within the regions, within the zones, trying to bring in good competition within the team, creating a better experience.
How do they create? We need to house the store, which took some approach and then collaborated, fostered a real positive culture at the store level and both at the back end as well as the front end integrated a lot of synergies. Lot of coordination, collaboration.
I think what we understood that playing music at an individual level was not logical. It has to be in a rhythm, it has to be orchestrated well so that it doesn't come out as noise, it comes out as an orchestra and a good music that we play. I think that's the area that we are trying to center on. As your organization becomes larger and bigger, these are major challenges that start happening. People start behaving in silos, people start behaving in their own KPIs and their own domains and becoming. So how do you align on those? It's all about integration of all the elements of the organization so that it really comes out as easy. That's the opportunity that I'm sensing and that's the key thing that we are trying to work on which gives us a scalability approach, scalability platform.
For a sustainable, t hat's the area that we want to work both either from the marketing perspective, trying to focus on the consumer that the merchandise team is focusing on. And that is what the marketing team h as to focus on. T hat's how the retail store has to look like and that is how the whole consumer piece gets blended in. And that consumer comes in. For example, a Gen Z consumer, which is a younger, wants certain kind of communication, wants a certain kind of product, wants a certain kind of customer experience at the store, wants a certain kind of product and then, and then they wanted certain kind of brand and brand persona which they relate to. That's the kind of work we are trying to do. Aligning with digital preferences, aligning with an omnichannel approach, bringing the omnichannel things internally creating more better processes in the app where customer can also check out digitally and do a lot of things.
So some of those things are really working on. More and more focus is being given on customer centricity. Very, very high thought process coming in from what is the customer looking like? How do we look at the consumer persona? How do we really look at their journey? How do we look at their behavior and changing behavior? How would they behave from the same age group lives in a small town, coming from a village or a customer living in a bigger city? What is the change in their behavior, their customer, their appreciation and how do you really link it and create a digital experience and create a digital integrated technology also which is actually giving keep doing it regularly. So some of those areas have really been worked on.
The retail team has really built a good piece on digital transformation, enhancing one-click shopping, which is the self-checkout pieces, as well as the in-store experience at the store level, giving a lot of those pieces in. There's a lot of work which is happening within the planning and the inventory m anagement, because looking at the opportunity, we also took some risk. We also planned well. Seasonality is one big piece in India and especially for us because w e operate a lot in North India. So North India sees a lot of s eason change in this period of time when you are in summer and then y ou move into autumn and then suddenly y ou start moving in the winter. Winter has been showing very, very differentiated.
I mean you can't predict. Very unpredictable winter is coming in. We have seen a very very warm October. This so try to manage all of this with the inventory, with the store allocation, with the store space management and that the customer wants to. So there are those key things that the planning and inventory team really worked on and that actually working on an option level, working at an assortment level, working at a consumer customer level is something that we are trying to integrate as technology and trying to work which can become automated. And so that goes across the area. But we see a lot of opportunities. We definitely see the value retail market being going much, much more.
We see these lower middle class consumers' aspirations are moving to the middle class, trying to look different, trying to ask for differentiated products, trying to be at par with their international friends or audience, so I think that is something which is the core of our successes and the core of opportunity that we look at, and I think the young population is driving a lot of demand and that will be the driving demand or driving force for the demand till 2030. That's what we are trying to focus on, so we are seeing a lot of digital adoption also coming in. Consumers are talking about utilization, consumers are getting inspired.
S o these are some of the things. But yes, I think at all levels our strengths that we built in the past, whether it is infrastructure of warehouses, building those warehouses which is now become very, very normal, very very operational, very agile, reducing the cost, bringing in more opportunities to grow our market. We did a great job in also opening up more stores. We did a great job this time. I really congratulated the team and Unlimited for really bringing in high growth in the new store opening. We really added up a lot of stores in this particular quarter and in t he consecutive quarters also. So some of these things happen.
We are definitely attracting a lot of consumers, lot of repeat consumers as well, which is also a good thing which has been showing up. Repeat consumer or the sales from repeat consumers has almost touched 70%. So that's a big news for us because the customer confidence is very clearly coming out. We are now tracking customer NPS. R ate is also going very up. It is actually showing up better than 60% NPS so far. So some of those areas I think is giving us a lot of boost for our long term, long term growth.
Keeping the consumer happy, keeping the operations, working on the operations in the areas w hich is actually more forward-focused m ore feature focused, trying to create an environment, create a platform which can actually multiply 2x into 0.5x with [audio distortion], s o that's the kind of work that w e are trying to do at level. There are a lot to be talked about. I'll hand over this call to Anand, our CFO, who will take you into the numbers of the quarter, and then we can discuss some few questions that you have.
Thank you so much. Once again wishing Happy Diwali , everyone.
Thank you Lalit and good morning everyone. Let me take you through some of the key operational highlights from the quarter and then we can open the session for questions. Quarter two usually is a small quarter but has been overall good growth quarter this year with good new store additions as well as good like-to-like same store sales growth leading to an overall sales growth of around 20%. We opened 16 new stores and delivered an LTL of 15% with V-Mart clocking a healthy 16% and Unlimited at 11%. We had closed 12 Unlimited stores towards the end of last year, the benefit of which should start accruing in the Unlimited sales growth numbers from quarter four this year onwards.
Interestingly, meanwhile while the footfalls have also increased by almost 47%-50% but the bill but also increased by 20% with a 4% increase in ASP for apparel. The ASP increase is in line with the change in product mix versus last year due to slightly early onset of Dussehra this year we closed two V-Mart stores in the current quarter as also conveyed in the last quarter's call. Most of these store closures or corrections have already been undertaken last year barring four or five which may still happen over the course of the current year in case their performance does not improve. But we remain hopeful of reviving these stores also as part of the improvement drive already underway for the full year. We still maintain our guidance of opening around 55-60 stores in the current year.
The festive calendar has begun on a strong note with East India leading the charge with Puja. The early signs have remained positive although delayed winters in North India remains a watch out area as of now. Looking now at margins, I think the gross margin at an overall level decreased by 1% year- on- year due to the decrease in commission revenue from LimeRoad marketplace business by 53% which contributes only 1.5% to the overall sales but close to 100% into gross margins. So this is an optical correction but otherwise excluding LimeRoad commission income, the gross margin actually improved by 0.6% year- on- year for the offline business on the back of lower discounting and higher festive sales mix.
On a full year basis, the gross margins from offline business should remain similar to last year as we continue to drive giving higher value to customers and focusing on growth through volumes. While the LimeRoad commission income contribution mix would slightly reduce optically reducing gross margin versus last year on a total basis. Coming to expenses, the total expenses have decreased by 3% year- on- year largely led by a significant drop in LimeRoad marketing expenses by 74% year- on- year. The marketing expense for the offline business also continued to reduce as we continue to drive loyalty based traffic to stores through digital means.
Very interestingly, in fact, Lalit also mentioned this: the Google rating for all our stores, contributed individually by customers at store level through lakhs of reviews, has remained above 4.7, while the NPS also remains in a very healthy range of more than 50%, ensuring a repeat 70% loyal customer repeat sales. The manpower cost is up by 21% on the back of increased incentive payouts and variable component of the ESOP liability, which is in line with the sales growth. There is a higher focus on employee reward and motivation to positively influence efficiency, which should further drive our overall profitability and growth. Other expenses declined by 8% year- on -year due to decline in LimeRoad business and consequent decrease in logistics cost apart from benefits from closure of Unlimited stores in the last year.
Also there was some impact of store lease renewals which were earlier part of rental expenses and post renewal. This expense has moved to interest and depreciation lines as part of the Ind AS 116 adjustment. Moving on to EBITDA for the offline business EBITDA for the quarter was at 7.1% with Unlimited at 6.6%. Sorry, the offline business EBITDA for the quarter was total was 7.1% and Unlimited at 9.4% while V-Mart at 6.6%. At an entity level the EBITDA stood at 5.8% which included a loss of INR 7 crore from LimeRoad which is reduced by 63% year- on -year as part of our structured overall plan to make the business more sustainable in the long running.
On the CapEx side each spend was INR 35 crores majorly towards capex on new store openings and store refurbishments. The inventory increased by INR 241 crores quarter- on- quarter and INR 70 crores year- on- year as we stock up for the festive season which was slightly earlier compared to last year. Irrespective, the days of inventory have improved by 21 days year- on- year on the back of better sales and throughput. Investments in CapEx and inventory upstocking therefore led to a negative free cash flow YTD of INR 62 crores. Coming to new stores during the quarter, we opened 21 new stores, 16 in North and 5 in South under Unlimited brand, and closed two V-Mart stores. The runway for the year is still maintained at 55-60 stores. Most of the unprofitable store closures have already been completed.
Now coming to the last part on LimeRoad growth. LimeRoad growth continues its improvement journey with 63% reduction in losses year- on- year. This is the sixth straight quarter of continuous improvement in EBITDA losses for LimeRoad. The strategy on LimeRoad remains the same that is to extend LimeRoad as a fashion forward only arm of V-Mart and facilitate very easy order placement process by offline V-Mart customers through the LimeRoad app initially for missing sizes or missing color in offline stores but eventually extending it to offering a bigger catalog of products which can be offered beyond offline retail for these same very customers. So getting into more and more mix of omnichannel. This is a long term strategy and we remain committed to enhance this offering with minimal loss funding or marginal profitability in the quarters to come.
The losses in this business should continue to keep coming down quarter-on-quarter, and LimeRoad will remain an important but financially a small non-material digital business platform for V-Mart.
So that is all from my side, and I now request the moderator to open the house for 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 their touch-tone telephone. If you wish to remove yourself from the question queue, you may press Star and two. Participants are requested to only 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 Sameer Gupta from India Infoline. Please go ahead.
Hi everyone. Good morning. Congrats on a great set of results and thanks for taking my question. Firstly sir, just wanted your comments on the ASP going up 4% in fashion and 6% overall. Just wanted to make sure if it is only mix or have you also taken up pricing and in case you have, what is exactly the strategy here because we've only brought down the pricing in the last few quarters and again taking up pricing in a more or less stable cotton price environment. Just wanted your comment on that.
So, Sameer, see what's happening in the market also is the whole fashion world is moving towards a little more oversized, bigger sized layered boot cut where the consumption of the fabric increases. So, what's happening is the product in the same category even because the fashion is also going up because there are the coarser weave fabric, heavier fabrics which are in fashion. So, what's happening? The overall cost and the whole pricing also is slightly moving because of fashion elements, not all the product. But yes, 20%-25% of the products are moving almost 10% upper. So, that's how the whole fashion element is also bringing in certain price pressure. But it will. It may go up a little more northward but. But it is all because of mix changes. Assortment being changed.
Got it, got it. So you haven't taken price increases?
No, no, no. It's a change in fashion which is also bringing in pricing.
And this mix change is also accretive on margins because your gross margin is also up 60 bps . If I exclude the LimeRoad thing.
That more, I would say, that's more a lso, because of right now a preponement of fashion festival because the festival days have shifted into the September quarter by 10 days. So that also is an effect which is coming into the gross margin. So don't overestimate that for the next quarter.
Just wanted your comment on this also. If let's say there is an early festive, our sales could also get impacted positively. Can you call out or quantify this impact?
You have to understand because what happens is the days of 10 days earlier festival brings in a higher share of fresh merchandise because quarter two normally also a period where you have lot of EOSS end of season sale and discount. So your discount period goes down and your fresh inventory period comes in and fresh sales increases. So that's how your margin also.
Got it. But there should not be any major benefit to the sales growth momentum because of this.
There will be some. There is some.
Okay, got it. Second question and this is more of a strategic question. How do you read this performance now? Value fashion in general? What we are looking at is doing well in several quarters. Even your competition V2 Retail Style Baazar, they are more or less reporting pretty good set of numbers. Is this an element of down trading from the premium end? Because premium is struggling you mentioned. What happens then when premium comes back? Just your thoughts.
So Sameer, it is not about down trading. It is more about even the kind of fashion which is in the kind of consumer that you are trying to drive, who is driving consumption and the kind of pocket that they would carry a number of pieces that they would want to wear in a year. So it is all shifting because the whole consumer base is now thinking here and now. You look at this whole new generation customer. That's why you're impatient. They are so desperate. I want to plan for one year, two year, three year. I got to take a big brand. So it is, it is a change i n the consumer behavior, behavior change. So that is something which is globally being seen and that is something which is going to continue right now.
So I don't know, I mean what happens next? But yes, definitely we believe if they a re satisfied with our range and our v ariety, why would they want to buy at a premium price?
Got it. But you don't see this as also a factor that people are down trading to options which are, you know, cheaper versus what they were buying earlier?
Down trading, it is more about the kind of fashion preferences which is required and who is offering. So the brand continue to be catering to a little more elderly audience which is 35+ customer set and we trying to cater a little more to the younger audience which is. [audio distortion]
Okay, so for want of a better word, let's not call it down trading but you're taking away share from the premium and would that be a right assessment?
I don't know. I don't want to comment on that. We have, we are in no position to say that we are taking our share. But yes, we believe that there is more demand which is getting generated here and that is what we are trying to say.
Got it sir. I'll come back in the queue in case I don't wish you all a very Happy Diwali.
Thank you so much.
Thank you very much. The next question is from the line of Tejas Shah from Avendus Spark Institutional Equities. Please go ahead.
Hi Lalitji, Anand. Congrats on a good set of numbers. Thanks for giving me the opportunity. This quarter has been quite challenging for us as an analyst to spot a trend on consumption. So, at one end, broader slowdown is v isibility across, but mass and rural segment seems to be doing better even for FMCG companies and your numbers also. So, from your experience and you analyze m uch more data than we do. Do you see it as more of a base effect or you are very happy that this customer is here and this trend can continue at least for next, at least near the medium term? It is not just the base effect t hat we are playing here.
Definitely, it becomes very, very difficult for us again to predict what the consumer demand behavior is going to remain, but it seems that all the pain that got accrued right from the COVID days and then inflationary days and all of those which gave a lot of curb on consumer consumption spree that seems to be eroding, that seems to be vanishing, and that seems to be coming back, so that is something which is the original Indian and then which is the original rural consumption which used to happen, and they are coming back on those lines. Monsoons have been good in the last two, three years.
I think that is another piece which is giving more money to the consumer, and farm income is increasing. Rural income is increasing. More and more focus on the government, on their policies, which is more distribution-led policies. Government is also actually getting into more vote bank politics and getting into more distribution of money and resources. So I think all of those is giving a lot of confidence to the consumer base, and that we definitely see some betterment. And I don't see any reason in which you should get rolled back. It doesn't seem to be rolling back. We should continue seeing it more and more.
Very clear, thank you. Just the last point that you made on government lockdowns. Are you seeing that your store numbers or sort of revival is actually higher in states where this Dussehra has already happened around election versus where i t is yet to happen?
I may not. I haven't maybe categorically seen this. But yes, states like Bihar has shown good growth. East India where we've seen some good money getting distributed has seen some growth. Even South India behaved well because except markets of Andhra and Telangana which we haven't seen election fever but we have seen a lot of revival coming in there. But yes, yes some part of that we can see but I think it's entire India where the distributions are acting in some other way. Every government is trying to appease the v ote bank and they are trying to r eally go all vote bank politics.
So that is happening. But those are all temporary income. Those are not long-term sustainability factors. But I see those are confidence boosting m easures for the consumer to work around on their basic expenses and basic educational expenses and all those. Stuff which used to be a pressure. So, consumption very clear. Second, could you comment on health of inventory in the pipeline because I noticed that we have taken slightly higher provision while obviously sequentially it has come down.
Any read-through on our health of inventory versus the competition also? Do you see that the aggressive d iscounting can happen in the near future?
Let me take that. So while the inventory remains quite healthy, as you might be aware, we are very consistent with our inventory provisioning policy that we've been following for more than 10 years where anything which is more than two seasons old gets provided for. So it's a very, you know, consistent and a very conservative approach and thereby there may be you know a minor change which may happen in any one particular quarter but an overall level because of the conservative inventory provisioning policy, we always ensure that the health of the inventory remains very much in shape. In fact the days of inventory, once you look at the, you know, DOI actually improved by almost 21 days versus last year.
And in fact the signs that we are seeing even now sitting in October because the throughputs are reasonably well in line with what we had planned. We're not seeing any concern as far as the overall inventory is concerned. But at the same time. There will a lways be some amount of old inventory which we will need to take care of. And that's always true in the system. But it's not something which is alarming. Or, which is not taken care of.
Thanks.
I'll try to just add on here. There is one small risk which is there and which I want to highlight here because of change in fashion which is becoming so vital and becoming so bigger. So there could be a continued obstacle for the industry as well going forward because the speed of fashion change is becoming much, much faster. So that is one risk which can get activated later on.
Yes. And last one if I may. Given the buoyant environment that we have seen, we are still holding on to o ur store expansion guidance. So, any thought on that, and any thought on, at some stage, experimenting with franchising on this format? And lastly, has our CapEx per store increased in the last six months? Because the INR 60 crore. If I divide it by number of stores, it's fine. It looks slightly higher than what we had earlier.
I think here what we have to see, there are two, three things. Number one, there is a lot of renovation which are also going in which also get into the CapEx cycle Capex piece. So that is to be accounted. There is a lot of renovation. There is lot of change in the functionality itself, the way we display at the store level. We have done a lot of work on that because I spoke in the opening comment as well. Three, you will see because. Because we were at the end of quarter two which got reported we opened a lot of stores also in October so. So some of those CapEx costs were higher, I don't know but that. But I think all of those average Cost per of the CapEx per square r ent hasn't gone up. So that's very in control. That certainly always controlled up.
We don't right now see any opportunity on franchisees. I know one of our competitor has done a great job in that they are a bigger brand their House of Tata. So something can come up there. But right now we don't see a lot of those opportunities. It definitely overall system it increases the cost of fund but we don't really believe in that. We still believe that the resources that we have and the ways in which we open is more sustainable is more good and we focus right now on this. We haven't seen that area but yes I'm hearing a lot. We'll try to understand and know about this business more this type of business.
Thanks . Best wishes and Diwali wishes to you and the team.
Thank you everyone. Thank you so much.
Thank you very much. Our next question is from the line of Nihal Mahesh Jham from Ambit Capital. Please go ahead.
Yes, good morning Lalit ji and Anand. I had two questions. The first question was, you know, in line with what earlier participants have also asked about how the business has seen a strong revival versus last year. If you just look at the number of footfalls also that has seen a significant more than 50% kind of Y-o-Y growth. I mean if you look at it on a per store basis there has been a strong uptrend just to understand versus last year to this year while we are mentioning about a favorable monsoon and all I think the benefit of that is going to be only seen from Q3 onwards. So just wanted to understand what has been this massive change maybe other than elections which has driven such a big robustness where at least customers are now convinced to come into stores to it.
Let's have a look and maybe the c onversion ratios improve going forward.
So, Nihal, I would once again call out it is not too much of change in the market. It is some amount of betterment that I commented on my opening remarks as well. But it is more led by what internally the mistakes that we have been doing in the past and certain correction of the mistakes and certain betterment of our own internal processes and internal own ways of looking at the consumer demand and behavior and the way you communicate about your brand. It is more about what we have done. But let me still say this demand is looking really difficult in October. We haven't seen the single kind of demand. There are seasonal changes that are happening. So these are very very relatable stuff and you can't take it for granted.
But yes, I believe that there is lot of work that the team did in the last season which resulted into a good environment in the store giving consumer a huge proposition on certain product lines, unique experiences at the store level. Which really t he whole perception of V-Mart brand changed a little bit and attracting certain lot of new customer as well. Because what we also saw is a higher share of increase as a percentage of customer base in the audience which is under 23-year-old. So that's something which is also unique to us and that is something also which has driven our growth and that is what we are very proud of.
Understood that, sir. So my second question was, you know in the past we've discussed about Zudio and maybe the impact it had and that was that format obviously operated a very different price point. We currently look at the competition at least in terms of format similar to our price point is seeing an increase. So just wanted to understand what are the steps we are taking to obviously differentiate ourselves maybe in terms of looks for inventory so that we are able to stay ahead of the competition which i s adding stores at a very aggressive pace.
That competitor friend of ours is trying to really play out a very good strategy in terms of a particular segment of consumer base, and that particular segment of consumer is certain market is driving certain consumer behavior. Acceleration is what I would say into consumption because that is driving certain fashionism a little more, and that is bringing a lot of opportunity for other retailers also. I think we are all seeing this is an international trend which is rolling out. One of the competitor is trying to do a good job on that particular segment, but what we have been doing, we have the youth consumer but we also have large amount of family consumer, and that family consumer remains our strength. That is a differentiating factor.
The kind of comfort, the kind of convenience, the kind of product line that we are able to offer to that family consumer is our differentiated strength than that competitor that we are talking about. So that is something that we will continue to do. We will continue to give customer and wider variety, wider assortment and wider ability to fulfill the needs of that family.
Just last bit we mentioned about FY 2025 store addition, let's say 50, 55. Any sense on what 2026 could look like in case you'll have a sense?
At this point, continue to add 12%-13% of sq ft area. That's our goal and that is what we should continue doing. You can calculate on the base what wherever we are, you continue to aspire for 20%-30% of both. But we will always be also cognizant of the fact that we don't want to overdo on just changing a number. But we are also seeing that the kind of property that we are getting, the kind of cost that we will be incurring and the kind of ROI that we should be expecting is very, very important in the overall expansion field that remains very important. Yes, the goal at the organization level is to at least go 27%.
Understood. Thank you so much.
Thank you.
Thank you very much. The next question is from the line of Rahul Agarwal from Ikigai Asset Management. Please go ahead.
Yeah. Hi, good morning and thank you for the opportunity. Sir, I had a very longer term q uestion and congratulations on the business execution. I think you've come out very well. Just going back into history, I think m ost of the retail since 2020 has s een a very volatile environment. Complete empathy with, you know how you g uys have been running the show. We had COVID. Then we had the recovery period, then we had the competition i ssues, then we had consumer changes, then we had some mistakes corrected, etc.
Now somewhere during this we knew problems and we worked on that w e sorted out, we have achieved and I think half of the year is gone. You've done great things going forward. Is going to be more organic in my understanding. So, Lalit ji, just from you, just some l onger term thoughts like V-Mart right now. It's INR 2.5 crores -INR 3,000 crores t op line business in this dynamic world. How do we increase confidence on longevity of this business? And you know equity investors are greedy. So I'm talking about two things. One is essentially where does V-Mart look like five years out with you know creating continuous excitement. You know this brand should actually come out as a long term winner.
So I understand you worked on a lot of things and you've got most of things correct now. But henceforth we're going to be more organic, it's going to be more long term and from here on where does V-Mart go? So it's more longer term, you know, however you want to answer please. That's my only question. Thank you.
Great question, Rahul. Give my regards to Kenneth, but I understand you guys are the guys who guide us and you always ask those relevant questions which makes us think back and that's what my board is asking me to spend at least two to three hours on answering some of these questions and people are evolving on certain strategies and certain areas of that particular area which gives us a longer stability and that is what we are all here for, and that is what at the senior level we all think about.
And that is something that we feel which will come from those leading pieces which ultimately create the sustainable scalable organization which creates a sustainable scalable technological processes, technology led processes and a great way to keep integrating the entire organization along with and creating an innovative and creative mindset in the organization which can take up or which can adopt every kind of situation which can come in the environment or any kind of fashion need or any kind of format which is a change in the format and then n ew adoption of digitalization technology.
I think that's something fundamental to our thought process, that it is not about the problems that are outside but it is more of the problem inside. It is more about the opportunity inside. It is more about building a culture, building an environment, building a process which is actually cultivating these kind of fundamental principles and these kind of fundamental pieces where it is more about learning, it is more about openness, it is more about collaboration. How do we do that, and that is what we are trying to do. Ultimately it has to be also a brand which looks into customers, which try to look into the customers, need customers and understand regularly of the customer side. Always keep checking with the consumer. How is the consumer feeling? How is the consumer understanding? That is why we initiated this process of NPS Google Ratings internal scorecard.
So all of those where we actually get rated, where we actually get feedback from the consumer, lakhs and lakhs of feedback are coming in helping us to improve our. Helping us to improve our efficiency of the store manager, efficiency of the entire processes. So all of these I think is very, very important and organic in nature. That is what we believe has to be done, which is fundamental. Nothing extraordinary can be done. There could be extraordinary kicker and tactical approach we can take which will only give a short term quarter- on- quarter benefit. And that is not what V-Mart is all about. We never intend to grow too fast. We never intend to also slow down and completely stop our growth.
Want to continue. We will always want to continue to grow with our internal accruals. That is the history as you mentioned, so most of our history has also been that, so that is what we will try to do as long as. But yes, we should also have sufficient cushion and sufficient space wherein if there are disruption and market scenarios, yes, we have possibilities coming externally. So there are also scenarios that. That has to be taken off. We should also have the risk matrices very well aligned.
There is a complete Risk and Governance Committee which is there which looks into all those risks understands how do? Where do we not fail? How do we not do. And then definitely how do you. How do you grow i n the next five years to at least 2.5x so that you continue juicing up the opportunity or getting the juices of the opportunity which is there in India and talk about, you know, becoming a $10 trillion economy in 2030. How do you really become a big part of that? That's something which is also the opportunity which we are mindful of and we continue building our expansion side of our organization and we continue looking at that opportunity with either this format or extend the possibility to expand into the digital format or any other format. We are always open and always inviting for special feedback. So these are some of the routes. There's some of the things on the top of my mind. But yes, later on we can have conversation on these areas.
Sure sir, sure. But as a Diwali gift, could you try and give me one reason at least in terms of what could be the next big thing for V-Mart in terms of whatever you can offer to the customer.
Nothing different, Rahul. Nothing different. I don't want to give any surprise. I don't have anything in my which I can give and can surprise everyone. Nothing is there and nothing should be there. It should be all as the customer needs are how well are you prepared every day, how well are you open every day? How do you integrate those things into your processes and change your certain pieces in the system which ultimately delivers what customer wants. That's the entire thing that we are all onto and we see this as an opportunity.
Still w e feel we have a very, very disciplined team seeing the kind of footfall growth versus the kind of conversion that you got. You've got lots and lots more opportunity to convert your customer. We have to become much better. So let's work on that.
Perfect sir, very happy to hear that. Thank you so much for answering t his question and wish you a very Happy Diwali. To you and Anand ji, all the best.
Thank you.
Thank you.
Thank you very much. The next question is from the line of Varun Pratap Singh from AAA PMS. Please go ahead.
Yeah, thanks for the opportunity. My question is on LimeRoad. So I mean if you can share w hat is the roadmap from here o nwards? It is very much positive to note the overall reduction in the losses in the business, which may be tracking as per our plans. But given, like, if I just look at the six-month number, 60% reduction in EBITDA is quite confusing. But when I look at the revenue, so 45%-odd decline on the revenue front, and also, I mean, in your PPT, I could see that the V-Mart share on LimeRoad has also maybe declined from the June quarter 33% to 29% now, despite 20%-25% improvement in the overall V-Mart store integration to now 90% -odd . So just wanted to check that, how, I mean, what is in your mind regarding this part of our business?
So Varun, let me take that. See, our strategy on LimeRoad is very, very simple and very clear. In fact, I stated that in my opening remarks as well. What we are building LimeRoad towards is a sustainable business model which can help the omnichannel of the entire V-Mart group while it's a journey and there will be ups and downs and there will be results where we will see that you know the top line is coming down or whatever. But we are very focused on creating something which we are all proud of and which we can all see as a sustainable part of the organization. We've been very deliberate in cutting down on the marketing expenditure and because we don't want to buy revenue.
The earlier model or the loss model in this space always has been that you spend more on acquiring customers and thereby you get revenues and then you have more loss. So we have significantly cut down on that part. We are focusing more on getting customers from V-Mart pool of customers. You're getting more organic share of customers. There is more integration which is happening on a lot of omni use cases within the V-Mart ecosystem. Some of the parts have already become functional and some of the benefits we have already started to see, our cost of operations, cost per order, cost of logistics, all have started to see very sizable improvements in the last three, four quarters consecutively.
These are all building up towards a more sustainable future. The strategy will always remain that how can we bring it to a level where we don't need to burn more cash. We are able to get more insights, more analytics and more convenience for the online as well as the offline customers through the entire ecosystem of the V-Mart network. So whether it is only online or only online or only offline or you know, a digital ecosystem, but we are building something towards the future. Now there is a marginal drop versus June in the share of V-Mart business in LimeRoad. But you also need to understand that for quarter two is a very, very small quarter both for online as well as offline. So it's a very marginal drop. So that's, you should not read too much into it.
We remain very committed towards building this towards a non loss making and a profitable venture in the long term.
All right, understood, understood. That is very helpful. And secondly, please pardon me sir if I am repeating this question because I could not, I mean I joined the call 15, 20 minutes late. So my question was on the average selling price improvement. So that is quite pleasing to note. Almost 4% or 5% improvement in both V-Mart and Unlimited. So what is the, I mean underlying reason for this improvement? Is it because of the improvement in sales mix or I mean it's because o f the price hike etc at the p roduct level.
Price hike that we have taken. We have already addressed that question earlier. So there's purely a mix change which is happening and also the merchandise change which we have deliberately done to cater to the higher fashion requirement of the customer, which is again a mixed reason. So we have not taken any price increase and we would not want to t ake any price increase.
That's it from my side, sir. Thank you very much and wish you and the entire team a very Happy Diwali.
Thank you.
Thank you.
Thank you very much. The next question is from the line of Aliasgar Shakir from Motilal Oswal AMC. Please go ahead.
Yeah, thanks a lot for the opportunity and congratulations for very good set of numbers. I have a couple of questions. One is on LimeRoad. You have provided a lot of details. One specific that I just wanted to know is last year we had this, you know, roadmap to achieve breakeven in LimeRoad. Of course we have reduced it quite significantly. So if you can just share some color in terms of whether it may achieve break even or given the fact that you will obviously run the omnichannel, there may be some losses in LimeRoad that we will have to continue. That is point number one.
Second question a little more broader is pre- COVID, our profitability matrix was around close to 8% EBITDA margin in a pre-Ind AS scenario and maybe you will take about 5% PAT margin. I just want to understand from a three-year point of view, given the fact that now our SSG has been very strong, our revenue per square feet has been recovering. Should we expect, in the clear opinion that you should give, or take, reach that level of profitability or you think there is further scope of improvement that you want to do or you want to just kind of pass it on to the customer and make sure that you don't have a higher margin so that you continue to provide value to the customer? Over to you, sir.
So great question. Thank you. So basically at a LimeRoad level. As Anand mentioned, this is a business which is helping the offline retail as well. So right now we are reporting LimeRoad business separately. I don't think we should do it because ultimately it is an omnichannel approach and it is something where online is helping offline. A lot of technology integration is happening, a lot of teams are working together, consumers are looking, discovering online, reaching an end and buying offline. So ordering online business is getting to offline. So all of those things are happening. But we definitely believe that there is a cost to be the digital platform looking at the environment and the market. It is very difficult for one to right now sell at profitability at our kind of average selling price.
So, the average selling price being low and the technology piece has to be there, and this discovery and the technology availability consumer discovery should be there in the market. There is a cost to operate. So we will definitely want to reduce the losses. Right. But I don't guarantee that we will reach to break even. Yes, we aspire we want to reach out to there. Maybe it may take another one and a half to two years where we will almost minimize and make it negligible for the losses at the LimeRoad level.
On the second point on the EBITDA I think it's more about efficiency building more about those leading indicators which works into and then works at a per square feet level which is resulting into Same Store Sales Growth . The moment your Same Store Sales Growth continues to be a higher single digit number or a double digit number it definitely leads into a better profitability at the bottom line.
There are enough pressures on the gross profit. There will be a lot of more pressure in the gross profit made coming in from the fashion, maybe coming in from the retailers who want to pump in money and want to reduce the margins and bring down the market. So there will be some pressure which w ill also come in, but still our endeavor are numbers which are stacking up and the kind of operations that we are doing, closing down all the loss-making stores or non-profitable stores, so all of those included, whatever you are expecting, the pre-COVID number we should be somewhere there in the next three years and we do believe and we have the confidence that we will be able to reach that number.
Got it. One can pencil in like a stable state number of about 8% or EBITDA margin is probably about 5% margin o n a three-year basis. Right.
I don't know because the PAT is getting impacted by the Ind AS also. So there is some Ind AS adjustment which also decreases the pie, but those things can be taken up.
Yeah, I'm actually talking on a pre- Ind AS basis given the fact that you p rovide a lot of for a detailed disclosure. So of course we can, you know, a lways work that out. Yeah, just one quick follow up on t hat, sir, is, would you say, any of the new things that you may have to continue to incubate, for example like LimeRoad, that there should be some additional cost that you will bear and therefore this margin should be slightly lower or you know you will make sure that you know any new incubations will.
Let me just tell you there is no new things which are getting involved. There is nothing that we are doing separately and whatever that we are doing we are doing under the budget. And so nothing is there which is yet to be done which increase our margins.
Understood. What you said. This is very useful. Thank you so much and wish you a Happy Diwali.
Thank you. Have a good time.
Thank you very much. The next question is from the line of Anuj from Manas. Please go ahead. Mr. Anuj, your line is unmuted. Please go ahead with your question.
Yeah. Thank you. My questions have been answered. Thank you very much.
Thank you.
Thank you. And Happy Diwali to all.
Happy Diwali.
Thank you very much. I now hand the conference over to the management for closing comments.
Thank you everyone. Lots of questions. Thank you so much for asking such relevant questions, which makes us more aware, which makes us more long-term focused, which don't throw us into those chasing the quarter-on-quarter numbers. We definitely believe in sustainability, scalability. We believe in fundamental values of the organization. We definitely believe in taking along the shareholders and even the community along with us. So we will definitely try to do and bring our best efforts to try and see that we ensure a sustainable and secure future. Thank you so much. Thank you and wishing everyone a very, very Happy Diwali. Thank you.
Happy Diwali everyone. Thank you. Bye.
Thank you very much on behalf of V-Mart Retail Limited and Anand Rathi Share and Stock Brokers. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.