Speaking to CNBC-TV18, Akash Agarwal of V2 Retail said that they have opened nine stores this fiscal and will be adding seven more stores.
He further said that the store count will be 35 by the end of FY17. However, capex of opening a store is Rs 950-1000 per square feet, he said.
"All our stores are leased out as of now. We do not give any franchisees as yet," Agarwal said.
Below is the verbatim transcript of Akash Agarwal’s interview to Nigel D’souza.
Q: Yesterday, you had disclosed on the exchanges that you have opened a new store in Uttar Pradesh. What is the launch pipeline? How many of new stores will you be looking to add for the current fiscal and what will it take the total number of stores to?
A: We have already opened nine more stores in this fiscal and our store count is 28 stores now. However, we are looking to take it up to 35 by the end of the year, so around seven more stores this financial year.
Q: How many of these stores that you are opening, are owned by you? How many of them are on a franchise model, how many of them are leased out? Give us a breakup of these 28 stores.
A: All of our stores are leased out as of now. We do not give any franchisees out as yet and none of the stores are owned by us.
Q: What is the average revenue per store? Could you give us some numbers? What is the cost also of opening a new store because your margins have come down to around 10.5 percent? So you are opening more amounts of stores, will that mean more compression on the margins going ahead? Give us some guidelines – how much revenue per store, what is the cost of opening and outlook on your margins going ahead.
A: The store size varies a lot. The cost of opening the stores depends on the area that we are opening in. The fixed cost, as in the fixtures, lights and the capex of opening a store is Rs 950-1,000 per sq ft. And initially, for the first couple of months, the marketing efforts are extra and there are a lot of new store opening expenses. That is why there is a pressure on the margins but it is not sustainable and it comes to the normal levels after the first two months of opening the store.
Q: The Company has not declared any dividends so far. When exactly will you be looking to declare some dividends? Second, your finance cost has gone up by around 8-8.5 percent. What is the total debt currently in your books?
A: I will have to check on that, but it should be around Rs 80 crore.
Q: And dividend. Will you be looking to pay dividend in the next couple of years?
A: As we are expanding our business currently, so I do not think we will be looking to pay out dividends as of yet because all our retained profit, we are investing it in our business to open more stores. So, I do not think we will be looking to pay dividend.
Q: What is your total targeted number of stores? You told us you are looking at 35 stores in the next couple of years. By 2020 what is the target you are looking at?
A: By 2020, that is a long forecast, I will have to look into it, but by the end of this year we will be looking to add another seven stores. So, by 2016-2017 we will close at about 35 stores. We are looking to grow at about 40-50 percent every year.
Q: You were just telling us your debt should be at around Rs 80 crore or thereabouts. You have a contingent liability of around Rs 48 crore. Have you made any provision for that and also, I wanted to ask you that tour stake is at around 61 percent-that is the promoter stake in the company and out of that, there is a large amount that is pledged, where exactly is it pledged?
A: According to the corporate debt restructuring (CDR) agreement that we had while we were operating Vishal Megamart. We had to pledge all the shares till all the liabilities were paid out by the TPG Group when they bought our brand. So, those are only pledged as a personal guarantee and according to the CDR agreement. But the shares will be free as soon as the period of 6-7 years whichever is mentioned in the agreement is over. So, that is just part of the agreement that we had with the banks.
Q: By when will the company be pledge free?
A: I will have to look at the agreement and the details for that.
Q: You could give us some guidance, maybe in the next year?
A: It should be around 2018.
Q: What about that contingent liability of around Rs 48 crore. Have you made any provisions for it?
A: We have made provisions for it, but we have already appealed in higher courts for it because all the liabilities against us is, we have won a couple of them in court because most of it coming out of the deal that we had with TPG. And it will be off our books in a couple of years as soon as the case is in our favour.
Q: Same store sales growth for this year, what could it look like?
A: We have already seen a steady same store sales growth of about 5-8 percent for the first five months of this quarter and we are looking to expect the same kind of growth for the rest of the year.
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