V-Mart Retail shares have gained nearly 25 percent in the last one month in the run-up to the initial public offer of D-Mart operator Avenue Supermarts.
However, in an interview to CNBC-TV18 V-Mart Retail’s CMD Lalit Agarwal highlighted the differences in their business model.
Unlike D-Mart, V-Mart is focussed more on apparels and follows a completely leased-out model for its stores, he said.
Nearly 83-84 percent of V-Mart sales come from the apparels segment, 10 percent is from general merchandise while only 5-6 percent is from the FMCG segment. FMCG is part of only 36 of its stores.
V-Mart aspires to earn Rs 10,000 in annual revenue per square feet from its nearly 140 stores or 11.6 lakh square feet of retail area, Agarwal said. This leaves an earnings before interest, tax, depreciation and amortisation of about 15 percent, he added. The company pays average rent of Rs 30-32 per square feet, he said.
Similarly, V-Mart has an inventory cycle of around 77 days as inventory management in the fashion retail business has to be centralised and display stock is important, he said. For D-Mart, the number of days is much lower at about 25-26 days.Agarwal said demand scenario had improved and the company could post better performance in the fourth quarter both on year-on-year and quarter-on-quarter basis.
It is notable that even as D-Mart owns all the stores, and does not have any rental costs, the margins of both D-Mart and V-Mart are nearly comparable around 9-10 percent.Watch video for more.
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