V2 Retail — Q4 FY25 earnings call

Call held 28 May 2025

Management summary

V2 Retail delivered a record-breaking performance in FY25, driven by robust revenue and profit growth, strong same-store sales, and aggressive yet profitable store expansion. The company emphasized its focus on private label products, inventory efficiency, and a lean working capital cycle, positioning itself for continued growth in aspirational India's retail market.

Highlights

  • Revenue for FY25 reached ₹1884.5 crores, marking a 62% year-over-year growth.

  • Profit After Tax (PAT) surged to ₹72 crores, a 159% increase from the previous year, achieving the highest ever PAT.

  • EBITDA stood at ₹257.8 crores, growing 74% with margins of 13.7%.

  • Same Store Sales Growth (SSSG) for FY25 was 29%, building on a high base.

  • The company expanded its store network, adding 74 stores and closing two, reaching 189 stores by March 31, 2025, and 207 live stores as of the call date.

  • Sales per square feet for the year increased to ₹1,017 per month, up from ₹854 last year.

  • Return on Equity (ROE) improved to 23.2%, reflecting enhanced capital efficiency.

  • Old inventory (more than 1 year old) was significantly reduced from 18% to 5%, ensuring freshness.

Key financials

  1. Revenue ₹1,884.5 Cr +62%YoY
  2. PAT ₹72 Cr +159%YoY
  3. EBITDA ₹257.8 Cr +74%YoY
  4. EBITDA Margin 13.7%
  5. Same Store Sales Growth 29%
  6. ROE 23.2%
  7. Sales per Square Feet (monthly) ₹1,017

What they filed

Q1 FY27: revenue up 58.3%, net profit up 50.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue380 591 499 630 705 +86%927 +57%798 +60%997 +58%
EBITDA31 111 57 90 86 +177%177 +59%113 +98%140 +56%
Net profit-3 51 7 28 18 +700%99 +94%18 +157%42 +50%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY26 & FY27 · High confidence 45% to 50%
    What's next in FY26 & 27, we guide for a revenue growth of 45% to 50% driven by new stores and a same store sales growth of 8% to 10%.

    — Akash Agarwal, Whole-Time Director

Same-Store Growth

  • Same Store Sales Growth (SSSG) Same-Store Growth · FY26 & FY27 · High confidence 8% to 10%
    What's next in FY26 & 27, we guide for a revenue growth of 45% to 50% driven by new stores and a same store sales growth of 8% to 10%.

    — Akash Agarwal, Whole-Time Director

Margin

  • EBITDA Margin (pre-IndAS) Margin · FY26 & FY27 · High confidence 8% to 9%
    We guide for an EBITDA margin at pre-IndAS level of 8% to 9%.

    — Akash Agarwal, Whole-Time Director

Profitability

  • PAT Positive Profitability · FY26 · High confidence All four quarters
    Yes, that is the target. And I think even this year we were EBITDA positive in all the four quarters. But for this coming years now, even with the seasonality, we expect to be PAT positive in all the four quarters.

    — Akash Agarwal, Whole-Time Director

  • PAT Margin Profitability · FY26 · High confidence 4% to 5%
    We target a pre-IndAS EBITDA margin of 8% to 9%. So, I think which translates to about 4% to 5% of PAT.

    — Akash Agarwal, Whole-Time Director

Store Count

  • New Store Openings Store Count · FY26 · High confidence 100 stores
    Yes. So, we have already opened 17 stores this quarter. So, we are on track to open 100 stores this year.

    — Akash Agarwal, Whole-Time Director

ROE

  • Return on Equity ROE · FY26 · Medium confidence 23% to 25%
    So, like I mentioned because we are growing at 40%-50% and newer stores don't perform at par with the older stores. So, I don't think there will be a huge delta and we are very happy with 23% to 25% ROE.

    — Akash Agarwal, Whole-Time Director

Capex

  • CAPEX per new store (including inventory) Capex · Ongoing · High confidence ₹2.2 crores
    So, the CAPEX per store is 1.1 crores. And if you include the inventory, it's around 2.2 crores. That's your investment.

    — Akash Agarwal, Whole-Time Director

  • Total CAPEX for 100 stores (including inventory) Capex · FY26 · High confidence ₹220 crores
    So, this year if you open 100 stores we will have to invest about 220 crores. Including the inventory. CAPEX is 110 crores and another 110 to 120 for inventory.

    — Akash Agarwal, Whole-Time Director

Payback Period

  • Payback Period for new store Payback Period · Ongoing · High confidence 4 years
    So, you get an ROE of about 23%-24%. So, the payback period is 4 years.

    — Akash Agarwal, Whole-Time Director

Inventory

  • Inventory Days Inventory · Future · Medium confidence 75 to 80 days

    Previously 90 days → 75 to 80 days

    So yes, current inventory level is around 90 days, sir. And as we are able to improve the vendor ERP integration and the supply chain from the vendor part, I think we will be able to get it down to around 75 to 80 days.

    — Akash Agarwal, Whole-Time Director

Sales per Square Feet

  • Sales per Square Feet (monthly) Sales per Square Feet · next 2-3 years · High confidence ₹1,200
    So, the next target for us is Rs. 1,200 per square feet per month. So, we hope to reach there in the next 2-3 years.

    — Akash Agarwal, Whole-Time Director

  • Sales per Square Feet (monthly) Sales per Square Feet · Future (after ₹1,200 target) · Medium confidence ₹1,500

    Previously ₹1,200 → ₹1,500

    But when you talk about the ceiling of per square feet sale I think the first target is Rs. 1,200. Then the next target would be Rs. 1,500 per square feet per month.

    — Akash Agarwal, Whole-Time Director

Product Mix

  • Private Label Contribution Product Mix · Summer 2026 · High confidence 60%

    Previously 35% to 40% → 60%

    Our own design products contributed about 35% to 40% this year and we target it to reach around 60% by the summer of 2026 and 80% by 2027.

    — Akash Agarwal, Whole-Time Director

  • Private Label Contribution Product Mix · 2027 · High confidence 80%

    Previously 60% → 80%

    — Akash Agarwal, Whole-Time Director

Risks & concerns

  • Poor execution of growth strategy

    medium

    Management stated that the biggest downside could be poor execution, despite a huge addressable market and favorable macroeconomic factors.

    Management acknowledged

  • Auditor's qualified opinion on Fixed Assets reconciliation

    medium

    A qualified opinion has been present for multiple years due to challenges in fixed assets reconciliation without an ERP module; however, management expects it to be resolved by year-end as 80% of the work is done.

    Both acknowledged

  • Seasonality impacting margins and sales

    low

    Q1 can be slightly impacted by Eid shifting to Q4, and Q4 typically has the lowest gross margins due to end-of-season sales for winter goods.

    Management acknowledged

  • Newer stores having lower initial sales per square feet

    low

    Newer stores initially perform 20-25% lower in sales per square feet compared to mature stores, absorbing some EBITDA expansion, but mature within 2-3 years.

    Management acknowledged

Areas of evasion (1)

  • ROCE figure not immediately available

Q&A highlights

3 direct
Sustainability of PAT positivity across all quarters and PAT margin targets Direct
Yes, that is the target. And I think even this year we were EBITDA positive in all the four quarters. But for this coming years now, even with the seasonality, we expect to be PAT positive in all the four quarters. We target a pre-IndAS EBITDA margin of 8% to 9%. So, I think which translates to about 4% to 5% of PAT.

This question directly addresses the company's ability to maintain profitability consistently, especially given retail seasonality, and provides specific PAT margin guidance.

Asked by Abhishek, AB Capital

Comparison of current aggressive store expansion to past corporate debt restructuring (Vishal Retail) Direct
The scenario that you are comparing from is totally different. If you look at the financials, if you look at the numbers, you will understand that because during Vishal we never we were generating so much cash flow. We were never generating EBITDA at a percentage of almost 8%. We did not have an ROE of 23%. Our per square feet sales was less than Rs. 500 per square feet. So, it is not an Apple-to-Apple comparison.

This question challenges management on a historical red flag (debt-fueled expansion leading to restructuring) and allows them to articulate how their current strategy and financial health differ.

Asked by Sparsh Mittal, ICICI Bank

Auditor's qualified opinion on PPE for the last 3 years Direct
The main qualified opinion that has been there for multiple years has been the fixed assets reconciliation. So, because we did not have the fixed assets module in our ERP, it has been a challenge... But now we have hired a newer one and because almost 80% done so this year, all the qualified comments would be removed by the year end.

This addresses a persistent audit concern, providing transparency on the issue's nature and a clear timeline for its resolution, which is crucial for investor confidence.

Asked by Nitesh Kumar, Individual Investor

2 min read 6 chapters

Detailed narrative

Record-Breaking FY25 Performance

V2 Retail achieved its strongest performance in company history for FY25, with revenue reaching ₹1884.5 crores, a 62% year-over-year increase. Profit After Tax (PAT) surged by 159% to ₹72 crores, while EBITDA grew 74% to ₹257.8 crores, with margins of 13.7%. The company also reported a robust Same Store Sales Growth (SSSG) of 29% and a Return on Equity (ROE) of 23.2%, demonstrating strong operational efficiency and capital utilization.

Aggressive Store Expansion and Unit Economics

The company expanded its footprint significantly, adding 74 stores and closing two, to reach 189 stores by March 31, 2025, and 207 live stores as of the call date. Management targets opening 100 new stores in FY26, with a CAPEX (including inventory) of ₹2.2 crores per store, totaling ₹220 crores for the year. New stores are profitable from the first month, with a breakeven sales target of ₹500 per square foot per month and an average payback period of 4 years.

Strategic Focus on Private Label and Inventory Efficiency

V2 Retail is doubling down on its private label business, which currently contributes 35-40% of sales, with targets to reach 60% by summer 2026 and 80% by 2027. This strategy aims for better margins, unique fashion, and reduced discounting. The company has also significantly improved inventory efficiency, reducing old inventory (over 1 year) from 18% to 5% and aiming to further reduce inventory days from 90 to 75-80 days through improved vendor integration and supply chain processes.

Geographical Expansion and Market Traction

The company is rapidly expanding across high-performing clusters in UP, Bihar, Odisha, and Jharkhand, and has successfully entered new states like Punjab, Andhra Pradesh, and Rajasthan. Management noted strong customer response in these new markets, with new stores achieving sales per square feet of ₹750-800, which is 26% lower than old stores but still very encouraging. The average rental cost per square foot has also declined from ₹56 to ₹52 per month, aiding expansion.

Financial Health and Future Outlook

V2 Retail guides for a revenue growth of 45-50% and SSSG of 8-10% for FY26 and FY27, with a pre-IndAS EBITDA margin target of 8-9% and PAT positivity across all four quarters. The company aims to increase sales per square feet to ₹1,200 per month in the next 2-3 years, and subsequently to ₹1,500. Management confirmed that internal accruals are sufficient to fund the planned 100 store openings for FY26, with a debt-to-equity ratio of approximately 1:3.

Addressing Past Challenges and Operational Improvements

Management directly addressed concerns regarding past corporate debt restructuring (from Vishal Retail days), emphasizing that the current model is fundamentally different, characterized by strong cash flow generation and store-level EBITDA profitability. They also provided an update on the auditor's qualified opinion regarding fixed assets reconciliation, stating that 80% of the work is complete, and they expect the qualification to be removed by year-end through a new external agency.

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