V-Mart Retail Limited — Q1 FY26 earnings call

Call held 25 Jul 2025

Management summary

V-Mart Retail delivered a strong Q1 FY26, with robust revenue growth of 13% YoY and significant EBITDA margin expansion, driven by operational efficiencies and improved inventory management. The company continued its store expansion, adding 15 new stores while closing 2, and maintained a positive normalized same-store sales growth of 5%. Management expressed optimism for future growth, focusing on rupee gross margins, product innovation, and digital integration, despite some regional challenges and competitive pressures.

Highlights

  • Revenue grew by 13% YoY, with V-Mart clocking 14% and Unlimited 12%, driven by increased footfalls and memo count.

  • EBITDA margin, excluding LimeRoad, improved by 80 bps YoY to 14.9%, reflecting operational efficiencies.

  • Total EBITDA (including LimeRoad) grew by 27%, with the margin improving by 170 bps to 14.3% due to a 56% reduction in LimeRoad's losses.

  • Inventory health improved significantly, with days of inventory reducing by 5% YoY to 93 days and aged inventory provision declining from 1.7% to 0.7%.

  • Generated INR 109 crores in free cash flow this quarter, primarily due to efficient inventory management, and maintained no long-term debt.

Concerns

  • The Eastern region, particularly around the Bangladesh border, continued to face challenges, impacting footfall and growth in those territories.

  • Normalized SSG, while positive at 5%, was lower than previous quarters (2Q and 3Q FY25), with management noting some consumer sluggishness across the market.

  • Quick commerce aggressive penetration in the food and non-food segment in certain towns led to muted growth or degrowth in those specific locations, though overall impact was not significant.

Key financials

  1. Revenue Growth (YoY) 13%
  2. V-Mart Revenue Growth (YoY) 14%
  3. Unlimited Revenue Growth (YoY) 12%
  4. Normalized SSG 5%
  5. EBITDA Margin (Excl. LimeRoad) 14.9%
  6. EBITDA Margin (Incl. LimeRoad) 14.3%
  7. Inventory ₹818 Cr
  8. Inventory Days 93 days -5%YoY
  9. Aged Inventory Provision 0.7%
  10. Manpower Costs Growth (YoY) 13%
  11. Other Expenses Growth (YoY) -2.6%
  12. YTD Capex ₹30 Cr
  13. Free Cash Flow ₹109 Cr
  14. Working Capital Utilization ₹35 Cr

What they filed

Q1 FY27: revenue up 23.1%, net profit up 38.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue661 1,027 780 885 807 +22%1,126 +10%971 +24%1,089 +23%
EBITDA39 171 68 126 72 +85%210 +23%106 +56%161 +28%
Net profit-57 72 19 34 -9 +84%88 +22%11 −42%47 +38%
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.

Capital allocation

high confidence
  • Capex Capex disclosed
    • New store openings and refurbishments ₹30 Cr
    YTD capex stood at INR30 crores, primarily towards new store openings and refurbishments.
  • Debt Debt disclosed
    There is no long-term debt as we have always maintained, and we are well positioned to fund future growth through internal accruals.
  • Liquidity Liquidity disclosed Working capital utilization, which had temporarily spiked in quarter 4, is now back to INR 35 crores. This may go up in Q2 due to seasonal stocking but is expected to remain within a comfortable range of average INR 90-100 crores for the entire year. The company generated INR 109 crores in free cash flow this quarter.
    On the liquidity side, working capital utilization, which had temporarily spiked in quarter 4 is now back to INR35 crores, while this may go up in quarter 2 due to seasonal stocking, but we expect it to remain within a comfortable range of average around INR90 crores to INR100 crores for the entire year. We generated INR109 crores in free cash flow this quarter, largely due to efficient inventory management.

Guidance & targets

Store Expansion

  • Net New Stores Store Expansion · FY26 · High confidence 65
    This year, we should see a net addition, therefore, of around at least 65 new stores.

    — Anand Agarwal

  • Net Area Addition Store Expansion · Annually · High confidence 12% to 15%
    We are targeting 12% to 15% net area addition annually, with 1% to 2% closures, which will be normal closures in any year.

    — Anand Agarwal

Same-Store Sales Growth

  • SSG Same-Store Sales Growth · Full Year · Medium confidence mid- to high single-digit
    Got it. But you will still be looking at a mid- to high single-digit SSG for the full year? Yes, I think we are looking at.

    — Lalit Agarwal

  • SSG Same-Store Sales Growth · Next 3-4 quarters · Medium confidence little higher single-digit
    So, we definitely believe there should be a little higher single-digit same-store sales growth that we should be expecting in the next 3, 4 quarters.

    — Lalit Agarwal

Profitability

  • Rupee Gross Margin Profitability · Ongoing · Medium confidence more robust growth
    So, while at a rupee EBITDA margin level, rupee gross margin level, we should definitely see more robust growth, but I'll not be so bullish on the percentage growth.

    — Anand Agarwal

Advertising & Promotion

  • A&P Expenses Advertising & Promotion · Q2 FY26 onwards · Medium confidence reduction
    So, there will be a reduction, but not very, very drastic.

    — Anand Agarwal

Unlimited Pricing

  • Average Selling Price (ASP) Unlimited Pricing · Overall level · High confidence not increase
    So ASP, we are not looking at any increase in the ASP, especially in Unlimited. We are committed to provide more value offering.

    — Anand Agarwal

Interest Cost

  • Actual Interest Cost Outgo Interest Cost · Per quarter · High confidence INR 3 crores to INR 5 crores
    The actual interest cost outgo shall vary as per the working capital deployment. But should remain range bound at around INR3 crores to INR5 crores per quarter.

    — Anand Agarwal

What to watch in Q2 FY26

Same-Store Sales Growth (SSG)

Next 3-4 quarters / Full Year FY26
Current 5% normalized SSG in Q1 FY26
Target Mid- to high single-digit SSG

Why it matters

SSG is a key indicator of organic growth and consumer demand in the retail sector, especially given current moderation.

So, we definitely believe there should be a little higher single-digit same-store sales growth that we should be expecting in the next 3, 4 quarters.

Risks & concerns

  • Regional conflict impacting consumer sentiment and footfall

    medium

    Indo-Pak conflict in select North India areas and Bangladesh border issues in Eastern region impacted footfall and consumption.

    Management acknowledged

  • Consumer sluggishness and moderated SSG

    medium

    Customer sentiment in Bharat market is positive but not highly bullish, leading to moderated SSG compared to previous quarters.

    Management acknowledged

  • Real estate cost inflation

    medium

    Rentals have become costly, and there is a rise in rental for existing stores upon renewal, posing a challenge for expansion.

    Management acknowledged

  • Aggressive penetration of quick commerce

    low

    Quick commerce in food and non-food segments caused muted growth/degrowth in some towns, but overall impact is not significant.

    Management downplayed

  • Reliance on large vendors

    low

    Company saw risk in relying too much on key vendors due to market shifts (e.g., tariff policies), aiming to spread out vendor base.

    Management acknowledged

Q&A highlights

4 direct
Overall demand scenario for value retail and full year SSG expectations. Partial
Very difficult to give you a number-driven answer but yes, we are positive. We are definitely building our business plan, our planning, our sourcing, our buying plan from the number that we had displayed in the last 4 quarters. So, we definitely believe there should be a little higher single-digit same-store sales growth that we should be expecting in the next 3, 4 quarters.

Analyst pushed for specific SSG guidance for the full year, and management provided a directional but positive outlook based on past performance and future expectations.

Asked by Ashish

Impact of manufacturing investments and employment opportunities in Bihar on V-Mart's business. Partial
Yes. I mean, definitely, that is one of the poorest state one of the poorest states that we are catering to right now and there per capita income of that state is very low. And we believe anything which is happening in that particular direction, which increases the per capita income of that state and brings about more prosperity in the state will definitely result into a better outcome for us, because we are almost present in all the districts in Bihar.

Analyst inquired about a potential long-term tailwind from industrialization in Bihar, a key market for V-Mart, and management acknowledged the positive impact on per capita income.

Asked by Bhargav

Lease rental inflation for new stores compared to existing ones and for renewals. Direct
I think we are signing up on almost similar average. There may be an additional maybe around 5% delta from our existing normal rate of the existing stores. So around between that -- that is the range that we are trying to focus on. So, I think as a percentage also, we are targeting similar percentage or even lower percentage because we believe the new store should be generating better revenue in the first year of operation.

Analyst sought clarity on the cost structure of new store additions and renewals, which is crucial for understanding future profitability and expansion costs.

Asked by Rahul Agarwal

Whether the reduction in advertising costs is the major margin driver. Direct
Varad, that is not the margin driver. So basically, the reason for the advertisement or the marketing cost reduction is not to increase the margins, but to increase the productivity. We are employing more efficient ways of marketing, thereby reducing the cost, which was, in our view, was not as beneficial.

Analyst probed the primary drivers of margin improvement, and management clarified that advertising cost reduction is for productivity, not directly for margin expansion, highlighting other drivers.

Asked by Varad Patil

Whether Unlimited's ASP will decrease further to offer more value products. Direct
So ASP, we are not looking at any increase in the ASP, especially in Unlimited. We are committed to provide more value offering. And while there may be some seasonal variations because of festivals, et cetera. But at an overall level, the ASPs should not increase in Unlimited. They should only come slightly more closer towards V-Mart in the longer run.

Analyst questioned the pricing strategy for the Unlimited format, and management confirmed a commitment to value offering and stable ASPs, aiming for convergence with V-Mart's pricing.

Asked by Varad Patil

Gross margin variation between Unlimited and V-Mart on a YoY basis. Direct
Gross margin in both the formats should have remained at a very similar kind, Unlimited is a bit more. So Unlimited usually has a slightly higher gross margin, because we charge a 5% extra pricing in Unlimited for almost similar kind of products. That is because we cover the higher operating costs. So, at a V-Mart level, our gross margins this year would have been roughly around 34%, while for Unlimited, they would have been at around 39%, 40%.

Analyst sought a detailed breakdown of gross margins by format, providing insight into the profitability differences and pricing strategies between V-Mart and Unlimited.

Asked by Rajiv Bharati

Pre-IndAS EBITDA margin for V-Mart as a whole for FY26, considering LimeRoad losses. Partial
Your logic is entirely correct, but let me just try to be slightly more conservative. I don't want to give a guidance or a high guidance. We are definitely -- right now, as you rightly said in the beginning, quarter 1 has not really been a very good start in terms of the SSG. While we are hoping that quarter 2, quarter 3, we should get better results. But at the same time, we are also trying to rework our product strategy and our margin strategy, and we are looking at higher rupee margins rather than percentage margins.

Analyst attempted to project full-year EBITDA margin based on Q1 and historical trends, but management remained conservative, emphasizing a shift to rupee gross margin focus over percentage.

Asked by Sameer Gupta

Competitive advantage in vendor consolidation and its impact on sales and margins. Partial
For the sake of saying that vendor consolidation, I mean, definitely, there was a lot of work that we did. But in this particular quarter, now we are once again trying to become a little more open on this particular front because there's a lot of styling, designing, a lot of new innovations which are kicking in.

Analyst questioned the ongoing benefits of vendor consolidation, and management indicated a shift towards more openness to new vendors for innovation, suggesting a dynamic approach rather than strict consolidation.

Asked by Aditi Loharuka

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

V-Mart Retail reported a robust Q1 FY26 with overall revenue growth of 13% year-on-year. This growth was primarily driven by a 14% increase in V-Mart's revenue and a 12% increase in Unlimited's revenue, supported by higher footfalls and memo counts. The normalized same-store sales growth (SSG) for the quarter stood at 5%, with both V-Mart and Unlimited contributing equally, despite some regional challenges and consumer sluggishness.

Profitability and Margin Expansion

The company demonstrated strong profitability improvements. Excluding LimeRoad, the EBITDA margin expanded by 80 basis points year-on-year to 14.9%, driven by operational efficiencies. Including LimeRoad, total EBITDA grew by 27%, and the margin improved by 170 basis points to 14.3%, largely due to a 56% reduction in LimeRoad's losses. Management indicated a strategic shift towards focusing on rupee gross margins rather than percentage gross margins for future growth.

Inventory Management and Cost Control

V-Mart significantly improved its inventory health, with inventory days reducing by 5% year-on-year to 93 days and the provision for aged inventory declining from 1.7% to 0.7% this quarter. This was achieved through better full-price sell-throughs and liquidation of old inventory. The company also maintained tight cost control, with other expenses declining by 2.6% year-on-year, and manpower costs rising by 13% in line with new store openings.

Store Expansion and Network Strategy

In Q1 FY26, V-Mart added 15 new stores and closed 2, resulting in 13 net new stores. The company is on track to achieve its annual target of approximately 65 net new stores for FY26, aiming for 12% to 15% net area addition annually. The expansion strategy focuses on cluster-based growth in existing states, cities, and towns, with a detailed playbook for site selection in Tier 2, 3, and 4 cities.

Product Strategy and Consumer Trends

The company is actively working on making its assortment younger and more relevant, with a conscious decline of 3% in Unlimited's average selling price (ASP) to offer more value. V-Mart is focusing on product innovation, design, and integrating technology like AI to meet evolving consumer demands and fashion trends. Management noted increased consumer celebrations and reasons for buying, indicating strong underlying demand, particularly for better products during festive periods.

Digital Integration and Efficiency

V-Mart is integrating its online digital business to become more omni-channel, aiming to reduce costs and generate efficiencies. The focus is on achieving breakeven and profitability in the omni-channel business rather than solely tracking revenue growth. The company leverages technology and analytical knowledge, including AI, to support overall business growth and enhance decision-making.

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