About 75% of our revenue comes from higher-margin categories: Vishal Mega Mart CEO

In FY24, we achieved ₹8,900 crores in revenue with a same-store sales growth of 13.6%: Vishal Mega Mart CEO

Retail chain Vishal Mega Mart, which focuses on middle and lower-middle-income consumers, is set to launch its Rs 8,000 crore initial public offer (IPO) on December 11. In an interaction with Moneycontrol, the retail chain’s MD & CEO Gunender Kapur spoke about the company’s recent financial performance and expansion plans. Kapur articulated concerns about a slowdown in overall demand even as Vishal continues to see double-digit same-store sales growth. He also highlighted the company’s plans for the emerging distribution channel of quick-commerce. Edited excerpts:

Can you give us an overview of how Vishal Mega Mart’s business has performed in recent years and what the key growth drivers are for the company going ahead?

With internet penetration in India now reaching nearly a billion people, we’re witnessing two significant trends. First, the aspirations of those touched by the internet are growing exponentially. Second, the aspirations of more affluent and less affluent groups are starting to converge. However, affordability remains a challenge for middle- and lower-middle-income consumers. At Vishal Mega Mart, our goal is to bridge this gap and make these aspirations achievable for everyone.

A key driver of affordability for us is our robust private brand portfolio, which contributes between 72 percent and 74 percent of our revenue. In apparel, it’s a remarkable 100 percent, while it’s 70 percent for general merchandise and 30 percent for FMCG. These brands are exclusive to Vishal Mega Mart, and we’ve developed them by working backwards from consumer needs to ensure we deliver both value and quality.

Apparel is our largest category, and this year we’re on track to sell close to 25 crore garments—making us one of the largest sellers of apparel in India. Our loyalty program is one of the largest in India, with 13.6 crore registered customers contributing to nearly 92 percent of our business revenue.

We’ve had an excellent run with our new store openings. Our payback period for store capital expenditure is just 19 months—one of the shortest in the industry. This efficiency enables us to grow rapidly while maintaining strong financials.

We recently piloted a quick commerce platform to cater to evolving consumer needs. This service operates within an 8–10 km radius of our stores, fulfilling orders in as little as two hours. And with free delivery on orders above Rs 299, we’re making convenience even more affordable for our customers.

In FY24, we achieved Rs 8,900 crore in revenue with a same-store sales growth of 13.6 percent. Our EBITDA margin stood at 14 percent, with an impressive 25 percent CAGR. Our PAT for the year was Rs 460 crore, which is 5.2 percent of revenue, while our PAT CAGR reached 50.9 percent. Over the last three-and-a-half years, from FY22 to Q1 FY25, we’ve generated Rs 3,000 crore in free cash flow. With no debt on our books and ample cash reserves, we are well-equipped to fund future expansion.

Can you elaborate on your expansion plans?

Our focus remains on expanding our store network and refurbishing existing stores as they reach a certain age. Refurbishments ensure that our stores stay modern, appealing, and aligned with customer expectations. Additionally, we continuously evaluate the need for new distribution centres to enhance operational efficiency. Currently, our main distribution centre is near Gurugram, but as we grow there may be a need to establish another one in a different region of the country. This would require capital investment, and we’re ready to allocate resources to support such expansions.

We’re also investing in the rollout and consolidation of our quick commerce platform to ensure its seamless integration into our operations. Furthermore, we are committed to leveraging cutting-edge technology by consistently investing in IT infrastructure. This not only drives efficiency but also helps us remain competitive in an ever-evolving retail landscape.

How are you planning to increase your geographical presence?

Currently, we have 645 stores across 30 states, including rural territories. When we started, our presence was limited and quite patchy, primarily in the northern and eastern regions. In the initial years, we focused on deepening our footprint in these areas. Once that was achieved, we began expanding southward in a very deliberate manner.

Today, we have a significant presence in Karnataka, as well as several stores in Andhra Pradesh and Telangana. However, there’s still immense potential in these states, and we plan to continue opening new stores to capitalize on the opportunities. Most recently, we’ve started expanding into Kerala. Our strategy is simple: when we enter a state, we aim to open a large number of stores. This approach allows us to build an efficient and profitable supply chain and operational network. Once we establish a strong presence in Kerala, our focus will shift to three key states where we currently have a limited presence—Tamil Nadu, Maharashtra, and Gujarat. These states represent the next big growth opportunities for us.

There have been strong concerns of a demand slowdown especially in urban centres even as trends such as premiumisation seem to be only growing stronger. What is your view? 

We do sense, and this has now been validated by the GDP numbers, that there is some softness in overall demand—it’s becoming quite evident. That said, for our business, we’ve managed to sustain double-digit same-store sales growth across all three of our segments, even in the first half of this year.

When it comes to premiumisation, our goal is always to encourage customers to upgrade from their current price point to the next level. At the same time, we ensure that we own all the opening price points in every category we operate in. What this means is that we offer the lowest-priced articles in apparel, general merchandise, and FMCG—products that are not available in any other organised retail. This approach helps us attract new customers to Vishal, making it easier for them to start shopping with us. For our existing customers, our constant endeavour is to help them move up to higher-priced products.

This progression is evident in our numbers. If we look at the relative performance, higher-priced products now account for roughly 24-25 percent of our overall revenue pool, although this varies by category.

How do you differentiate yourself from other listed retailers in this space such as DMart?

Our business stands out because of a unique category mix—75 percent of our revenue comes from higher-margin categories like apparel and general merchandise, while 25 percent comes from FMCG. This is fundamentally different from our competitors.

Additionally, about 74 percent of our revenue is driven by private brands that are exclusive to Vishal Mega Mart. These brands are unique and differentiated from anything else available in the market, adding another layer of distinction for us.

Our loyalty program is another standout feature, with 13.6 crore customers registered, making it one of the largest in the country. Then there’s our rapid expansion strategy—we’ve been consistently opening 60 to 80 new stores every year, and we’re now looking to accelerate this further, aiming for 90 to 100 new stores annually. This expansion is supported by our highly efficient model, which has the shortest payback period in retail—just 19 months.

We are also innovating with our quick commerce platform. The pilot phase has been very encouraging, and we are in the process of rolling it out more broadly. This will add convenience for our customers and further differentiate us in the market.

What impact are you seeing on your business with the rapid rise of quick commerce?

We haven’t observed any significant impact on our business from quick commerce players. However, we understand the importance of staying vigilant in the consumer market. We are closely monitoring the growth of quick commerce, particularly how critical the '15-minute delivery' model becomes and whether the necessary infrastructure, such as delivery partners, develops in smaller towns. Right now, it’s something we are watching carefully and proactively.

Our own platform has been steadily growing. We recently rolled it out across 391 towns after completing a successful pilot. Customers can now enjoy two-hour delivery if they choose that option, or select a convenient time slot, such as four to six hours later. Additionally, they can choose to pick up their order directly from the store if they prefer. This is our first e-commerce platform, and it exclusively features Vishal’s private-label products, providing our customers with the same value and affordability they expect from our stores.

With our presence now spanning 391 towns, we are ahead of the curve in terms of expanding this platform. It’s still growing, but we’re confident that it will further strengthen our customer experience.