Hi fellow investor,
( Disclosure: I do not own shares of V-Mart Ltd. My views on the company may be biased. Everything I conclude in the article is solely my opinion, based on publicly available information. This should not be taken as financial advice. This is purely for educational purpose.)
Let’s get straight into it.
V-Mart Ltd operates in the value-for-money retail segment. The company opened its first stores in Gujarat in 2003. V-Mart sells apparels, general merchandise (non-apparels and home mart) as well as Grocery items in some of its stores. The company was founded by Mr. Lalit Agarwal (Current MD), he along with his family members hold 44.34% stake in the company (as of Sept’23). The company currently operates 437 stores across India, with 63% of the stores in Tier-III and Tier-IV cities. The company operates stores under two brands- V-Mart and Unlimited. The V-Mart stores are located in North, East and West regions, while Unlimited stores are solely in the South.
V-Mart acquired 74 ‘Unlimited’ stores from Arvind Fashion in FY22, for a total consideration of Rs 1,680 mn, including Rs 540 mn for the fixed assets, Rs 830 mn worth of inventory and Rs 320 mn for security deposits of the stores and warehouses.
V-Mart has based their store expansion strategy on a cluster based approach, with stores being located 100-150 km from one another, to improve efficiencies in brand spending, procurement, logistics, and inventory management. There are 353 ‘V-Mart’ stores, with 54% of them in Uttar Pradesh and Bihar.
The company’s target customers are those with monthly household income in the range of Rs 20,000 - Rs 50,000. There are about 160 mn households in that income bracket in India, as of 2022. The Indian retail market is still dominated by the unorganised sector, accounting for 81% of the market in 2022 (88% in 2019). The remaining is organised retail, with brick and mortar retail taking 12% and e-commerce with 7%. V-Mart’s business model is to target this large middle class population residing in tier 2, 3 and 4 cities. The lease rentals in these cities are typically lower than in tier 1 or metro locations, and this lowers the payback period for the company. V-Mart spends around Rs 1400 per sq. ft. on setting up each store, and are typically profitable after 4 months of launch. The payback period for the investment is around 2 years.