V-Mart plans 7 stores till Mar, no capital raising plan: MD

Lalit Agarwal, managing director, V-Mart Retail, says that the company plans to add seven new stores by March and take the total tally to 94 by 2014. Currently, V-Mart Retail operates 62 stores. The return on net worth currently stands at 26 percent, he adds.

The retail chain debuted on the bourses today on a positive note but failed to sustain those gains for long due to heavy sell-off. The proceeds from the IPO will be used to open 60 stores in next 2.5 years. The company plans to keep its debt at low levels and don't plan to raise any more funds from banks for next two years.

 Below is the edited transcript of his interview to CNBC-TV18.

Q: What does V-Mart hopes to do in terms of sales and profits through the course of this year?

A: Right now we have 62 stores; by March the company plans to open seven stores and add another 25 stores to take the total tally to 94 stores. At the profit after tax (PAT) level, we expect above 40 percent hike in the top-line and 50 percent hike in bottom-line. Our return on networth was around 26-27 percent pre-initial public offering (IPO) capital and around 18 percent post capital infusion.

We will keep our gross margin at good levels, as 80 percent of our sales come from gross margin which currently stands above 34 percent. We have a low inventory at about 3.5-4 times, we like to continue with the same and keep our investors happy. We will use the IPO proceeds to open 60 new stores in next two and half years.

Q: What kind of cash flows do you expect in 2013 versus the leverage that you have because the examples from the sector have been of very difficult balance sheets and poor cash flows, is your situation different?

A: We have built up a very strong and basic model where our inventory cycle is very low and our gross margins are very good. We conserve cash and generate cash. We also have very limited debt. We have a working capital limit of Rs 45 crore. After IPO, our net cash stands around Rs 45 crore on our books. Right now we do not require much debt. 

We have internal policies that do not go beyond 0.7 times at any point of time which we have never done. We would keep our debt level very low and we don't think any fund from either of the banks for next two years.