Detailed Narrative
Strong Q3 FY26 Performance and Expansion Momentum
V2 Retail delivered a robust Q3 FY26, with revenue growing 57% year-on-year to ₹929 crores and PAT increasing by 99% to ₹102 crores. The company's operational strength was further evidenced by a 56% rise in EBITDA to ₹174 crores, achieving an 18.7% margin. This performance was supported by a 48% volume growth and 92% full-price sales, reflecting strong customer traction and effective product refresh cycles. For the nine months of FY26, revenue grew 64% to ₹2,270 crores, and PAT grew 119% to ₹144 crores, with ROE improving to 24.5%.
Aggressive Store Network Expansion and Performance
The company continued its rapid expansion, adding 35 new stores in Q3 and a net of 105 stores in the first nine months of FY26, bringing the total store count to 294 with 31.9 lakh square feet of retail space. Management plans to add at least 150 new stores in FY27, focusing on a balanced mix of rural market entry and deeper penetration in Tier-II and Tier-III cities. New stores are performing well, contributing to EBITDA from the first month of operations, with sales per square foot of ₹720-₹730 compared to ₹1,200 for mature stores, and the company targets to maintain a blended sales per square foot of ₹1,000.
Strategic Capital Allocation and Working Capital Management
V2 Retail successfully raised ₹400 crores through a QIP, with proceeds allocated to new store capital expenditure (₹1.1 crores per store), additional working capital (₹1.3-₹1.4 crores inventory per store), and investments in regional warehouses. Approximately ₹300 crores of the QIP proceeds were used for vendor prepayments, securing a 1.5% monthly bill discount. This strategic move temporarily increased working capital days from 37 to 69, but is expected to normalize to 55-60 days as funds are deployed for expansion.
Lease Accounting and Financial Reporting Clarity
The company re-estimated its lease tenures to align with industry practices and better reflect true profitability, resulting in an exceptional gain📎 of ₹27.69 crores with a tax impact of ₹6.97 crores. This change primarily impacts post-IndAS numbers, with pre-IndAS figures remaining consistent. Management emphasized that standalone numbers should be the focus going forward⏳, as subsidiary manufacturing units are being shut down and inventory liquidated, with a merger planned within the next six months.
Gross Margin Strategy and Cost Efficiency Initiatives
V2 Retail maintains a deliberate gross margin strategy of 28-29% to pass benefits to consumers, prioritizing EBITDA margin through higher sales per square foot and operating leverage. The company aims to reduce head office costs per square foot from the current ₹26-₹27 to ₹15-₹16 in the future. Additionally, the blended cost of retailing (including rent and OpEx) is targeted to decrease from ₹195 in Q3 to ₹180 in the near future, demonstrating a strong focus on operational efficiency.
Omnichannel Development and Competitive Advantage
The company is developing an omnichannel strategy, leveraging store inventory as dark warehouses for local deliveries, which is expected to significantly reduce logistics costs. Management believes pure online players face higher logistic and customer acquisition costs (₹65-₹70 per item for logistics alone), making it difficult for them to match V2 Retail's value proposition. Omnichannel sales are projected to contribute around 5% of total sales when the channel matures, providing a presence without significant additional fixed costs.