It has been 14 years since V-Mart began its operations. In 2003 the total population of India was 1.108 Bn, GDP being USD 599.6 Bn. A lot has changed since then and India is now a very different place with 1.324 Bn population & a GDP of USD 2.264 Tn. V-Mart also has grown considerably since 2003 and now employs over 5,500 people directly and indirectly supporting several more individuals and MSMEs across India.
Since my last communication through V-Mart’s Annual Report 2015-16, the economic and business backdrop has witnessed major shifts. The global economy was fragile in FY 16-17 amidst slowdown in cross-border trade, protectionism, elevated levels of uncertainty; but the Indian economy consolidated the gains achieved in restoring macroeconomic stability, becoming a preferred destination for foreign investment. The robust policy support by the Government of India resulted in structural strength, increased efficiency and a renewed confidence by all stakeholders in India. This was also demonstrated by leading multilateral institutions such as the International Monetary Fund and the World Bank which endorsed India as a ‘bright spot’ in today’s global economy amid ‘profound’ reforms. The Government of India continued its reform agenda with initiatives like the Smart Cities Mission, Digital India, Make in India, Jan Dhan Yojana and improving the Ease of Doing Business besides implementation of the Insolvency & Bankruptcy Code, creation of a Monetary Policy Committee, passage of GST, and last, but not the least, the policy thrust towards a cashless formal economy. The Government’s commitment towards reforms, implementation of Seventh Pay Commission payout by State Governments, ongoing quality fiscal consolidation, and marginal improvement in the external demand are expected to boost GDP growth to 7.3% from 7.1%. These policy measures will serve as a strong platform to ensure India asserts its position globally and also bears fruit in the domestic economy over the next year or so. At V-Mart, we note these developments and gear our internal machinery to the evolving economy of India.
V-Mart has always believed that business excellence flows from effective Corporate Governance, the importance of which goes beyond following just rules and regulations. My colleagues in the Board of Directors are accomplished professionals with a proven track record and diverse backgrounds.
The Board has maintained a strong ethical environment and always aspires to achieve best-in-class practices in the retail industry. During the period under review, the Board had various opportunities through its Board & Committee meetings to interact with our senior management to gauge their direction and to guide them towards long-term sustainable business strategies keeping the ever-evolving needs of the consumers in the center.
Each time I travel and come across people interested in the prospects of India’s retail industry in general and our company’s performance in particular, one of the questions that they ask me is how we succeeded during a challenging FY 16-17. During the course of my conversation, I do concede that when currency demonetization was done in Q3 FY 16-17; it was perhaps one of the most challenging times in India’s retail sector. It created a temporary shortage of high denomination currency notes within the economy, which cascaded into a crisis in consumption confidence; buyers backed off and retail sales declined. V-Mart introduced the ‘Smart ATM concept’ to help customers get cash, which saw us acquiring new customer streams as well, and drawing operating efficiencies by automation in our supply chain. During this Smart ATM drive at our stores, we started dispensing the collected cash to anyone who needed it by swiping cards on our stores’ credit card swipe machines irrespective of whether the person was buying or not buying from our stores. This drive saw long queues outside all our stores across the country. Our store teams took the initiative to lead these people to explore our stores, often resulting in sales and new customer formation. This, along with better supply chain management, led to robust sales during a period, which saw almost all industries, including retail, witnessing a massive downfall in demand.
This is an example of how V-Mart converted a threat into an opportunity which is a core part of the way we do business and approach our external macro environment.
V-Mart has achieved past targets with a succession of strong leaders, mature and good employees and a readiness to take up, from time to time, bold measures for growth.
THE YEAR UNDER REVIEW: FY 16-17
I have explained the above background with some detail because this is relevant to appreciate our performance. V-Mart reported a 24 per cent growth in revenue in 2016-17 and a 43 per cent increase in profit after tax during the year under review. It is a matter of pride that the company selected one of the challenging external situations in its existence to report profitable growth. We took various initiatives in across the last number of years, which began to mature and manifest during the year under review. For the sake of clarity and brevity, it would be necessary to summarize these initiatives across the following buckets:
Building people capabilities Technology investments Targeted merchandising
The interplay of these initiatives translated into superior value at our company just when it mattered during the year under review.
The company’s growth was assisted during period under review by a substantial increase in the Same Store Sales growth (apparel) to 13.3% YoY, launching 20 new stores.
V-Mart performed well in the period under review and we have strong reasons to be confident about the future.
BUILDING PEOPLE CAPABILITIES
At V-Mart, we believe that all corporate growth essentially begins with people.
During the last few years, even during periods of economic and retail sluggishness, the one investment that we continued to emphasize was our investment in human resources who are the true assets on our Balance Sheet. In addition to recruitment in line with growth in the number of retail stores, by training we enhanced the capabilities of our people to better manage consumer needs. The result is reflected in increased productivity: revenue per employee increased to RS.20.23 Lacs as on 31st March, 2017 from RS.19.05 Lacs as on 31st March, 2016. The fact that a number of our customers were willing to buy from us indicates a stronger connect between our employees and customers.
At V-Mart, we recognize that in a country marked by extensive under-consumption in organized retail, there would always be a premium on the speed to expand across Tier II, III and IV cities. There was one investment that was critical to this aggressive growth: a robust and scalable technology foundation that would make it possible to locate inventory, analyze consumer trends and measure our performance in real time. In the last few years, we made proactive investments in advanced IT tools and software for informed decision-making. I am pleased to report that each time we scaled the business, this technology foundation made it possible to amortize costs better, providing our business with the room in which to enhance our competitiveness.
V-Mart believes that there are a number of different countries within our own country, i.e. there are diverse regional markets with distinct consumer preferences that are completely different from each other at even a distance of even 100 kms. The success of any retail enterprise depends on how well we map consumption patterns and address emerging demand in these different markets. Through a combination of consumer insight and technology, we believe that we are getting better at providing just what the market needs at right prices at the right time, the result of which is visible in our improved inventory turns.
At V-Mart, we are optimistic of our prospects for a number of reasons. We have the largest presence in Uttar Pradesh with more than 60 stores, where the election of a new pro-business and investor-friendly government should translate into increased disposable incomes and consumer spending, strengthening our prospects.
We believe that farm loan waivers should translate into increased income in the hands of farmers, strengthening rural offtake and benefiting consumer-facing companies like ours. We feel that Goods & Services Tax is the most decisive initiatives for the benefit of the value retail industry, wherein apparel with a sticker price of less than RS.1000 has begun to attract the lowest tax slab of 5 per cent. This augurs well for a company like ours where we derive around 85 per cent of our revenues from products priced at RS.1000 or lower, making it possible for the market to widen on the one hand and for a company like V-Mart to widen its industry share. We believe that as incomes and media exposure increases, consumers will consume more and of a larger breadth of products. At V-Mart, we are attractively placed to capitalize on this phenomenon; our technology investments will make it possible for our supply chain efficiencies to be leveraged better, making it possible to respond to the wider and larger needs of customers.
V-MART’S GROWTH AGENDA
V-Mart intends to commission a larger number of stores in non-metro locations; widen our product categories and the merchandise within; we intend to service a larger number of customers. We will grow with speed but to the extent that our Balance Sheet permits without jeopardizing our financial integrity. We will seek synergic sectoral opportunities that make it possible to explore alternative revenues engines that sustain our corporate ambition.
I am proud to say that we have the resources to map our own journey; we know where we are headed and we have the right team of professionals in all areas of retail trade.
The theme for FY 17-18 is ‘Aligned with Customers, Prepared for Growth’ which reflects our core belief of keeping the ever evolving needs and wants of our customers in the center and then aligning all our operations and growth strategies around that. Amongst several identified areas, V-Mart will focus on fashion forecasting, fashion designing, Quality assurance, data analytics & business intelligence across the entire value chain, investments in technology & customer experience, Big Data applications in Supply chain / Merchandising / Logistics / retail operations to ensure better cohesiveness and relevance of support functions to Retail operations to ensure better and more relevant / fresh bouquet of products to offer superior value to our customers.
V-Mart will robustly focus upon enhancing the customer shopping experience - making it stand out as a distinguishing feature. Our newly launched customer loyalty program-V-Mart Value Club - is being expanded to offer even better value to our customers.
For FY 17-18, V-Mart aspires to further the improvements in per square feet sales, plan in opening new stores, launch new festival collections, target even better marketing for primary customer segments in rural as well as urban areas and enhancing fashion offerings at superior price points - all part of the company’s key drivers for growth. V-Mart will be offering a palette of colors for our customers during the upcoming wedding and festival season. We are planning to launch private labels across all divisions along with aligning and becoming stronger in basic ‘Never out-of-stock’ merchandise.
We have started to outline our strategy for omni-channel retail to future-proof our business and provide multiple modes to our customers to engage with us. Treating each day as a new avenue for more learning, we listen to our consumers, understand shifts in the market and consumer behavior, experiment and prototype to come up with new workable ideas.
In FY 17-18, V-Mart aspires to leverage its strengths, reduce internal weaknesses, mitigate the threats to business model to make the most of the opportunities in the markets that it operates in.
It gives me great pleasure and delight in sharing that among 200 fast growing companies with a clearly differentiated business model, V-Mart was chosen by Niti Aayog to be represented by me at a two-day conclave on 16th & 17th August 2017 attended by the Hon’ble Prime Minister of India, all Cabinet Ministers, Ministers of State, Secretaries to the Government of India and policy experts from the Niti Aayog. This conclave called as ‘Champions of Change’ had such private sector participants ideate and brainstorm innovative policy inputs around several thematic areas to the Government and present the same to a forum headed by the Hon’ble Prime Minister to transform India by 2022 by mitigating national challenges and meeting both social and economic goals. V-Mart being identified to give transformative policy inputs at such a high forum on matters of national interest is a matter of immense pride for all stakeholders associated directly & indirectly with the V-Mart family over the years.
During the period under review, V-Mart was awarded ‘Excellence in Retail & Customer Service’ in the Images North India Retail Awards by India Retail Forum.
India offers innumerable opportunities to develop new businesses provided one is flexible and quick to the evolving business climate. The economy is poised to get more and more formalized and digitized and we believe we possess the capability to flourish in it.
I thank all stakeholders including our investors, employees and vendors for enabling us to hit INR 1000 crore of revenue within 14 years of operations. We have a sea of opportunities ahead to propel the company for long-term growth, while staying focused on operating discipline. We shall continue to create value and make our ecosystem proud.
Please accept my heartfelt thanks for being part of this journey and look forward to even better times ahead for us all!
Chairman & Managing Director