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    V2 Retail

    V2RETAILGood
    Consumer Services·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

    8

    • 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.

    What Changed2

    vs Q1 FY26

    Guidance items16 → 15 (-1)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    07 metrics
    1. 01Revenue₹1,884.5 Cr+62%YoY
    2. 02PAT₹72 Cr+1.6%YoY
    3. 03EBITDA₹257.8 Cr+74%YoY
    4. 04EBITDA Margin13.7%
    5. 05Same Store Sales Growth29%

    Guidance & targets

    15
    CategoryTargetPriority
    Revenue
    Revenue Growth
    45% to 50%
    		High
    Same-Store Growth
    Same Store Sales Growth (SSSG)
    8% to 10%
    		High
    Margin
    EBITDA Margin (pre-IndAS)
    8% to 9%
    		High
    Profitability
    PAT Positive
    All four quarters
    		High
    Profitability
    PAT Margin
    4% to 5%
    		High
    Store Count
    New Store Openings
    100 stores
    		High
    ROE
    Return on Equity
    23% to 25%
    		Medium
    Capex
    CAPEX per new store (including inventory)
    ₹2.2 crores
    		High
    Capex
    Total CAPEX for 100 stores (including inventory)
    ₹220 crores
    		High
    Payback Period
    Payback Period for new store
    4 years
    		High
    Inventory
    Inventory Days
    75 to 80 days
    		Medium
    Sales per Square Feet
    Sales per Square Feet (monthly)
    ₹1,200
    		High
    Sales per Square Feet
    Sales per Square Feet (monthly)
    ₹1,500
    		Medium
    Product Mix
    Private Label Contribution
    60%
    		High
    Product Mix
    Private Label Contribution
    80%
    		High

    Risks & concerns

    5
    RiskSeverity

    Poor execution of growth strategy

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

    medium

    Seasonality impacting margins and sales

    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

    low

    Newer stores having lower initial sales per square feet

    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

    low

    Auditor's qualified opinion on Fixed Assets reconciliation

    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

    medium

    Areas of Evasion(1)

    • ROCE figure not immediately available

    Q&A highlights

    3

    “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

    2 min read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.