V-Mart Retail which currently operates in tier II and tier III cities have plans to open 7 additional stores by end of March, says CMD, Lalit Agarwal in an interview to CNBC-TV18. The company has opened 20 stores in the last 2-3 years, and would add another 20-25 stores in the next 2-3 years.
Agarwal is very bullish on the company’s growth going forward, which basically comes from tier II and tier III cities.The company is into affordable fashion that is easy on the pocket for the youth in these cities who want to replicate their role models, he adds.
Religare which covers the stocks has a buy rating on it.Agarwal says since these cities haven’t shown tendency to shop/buy online, they do not see threat from online sales as of now at least.
V-Mart is a complete family fashion store that provides its customers true value for their money.Below is the transcript of Lalit Agarwal's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Ekta: One of the things that I was looking at was your same store sales growth which in fact has been historically at around 10 percent levels but as of 9 months it has slowed down to around 7.5-8 percent, can you tell us what you are clocking at this point in time and if you are estimating a pick up, where is it coming from?A: The kind of business model that we perceive, the kind of rate of growth in the same store we have received, we still feel there is enough more space to be covered and we are right now continuing with almost similar rate of growth which we had shown in the last 9 months.I see a lot of aspirations with the common man - the middle income group and the lower middle income group who lives in this smaller town of tier II and tier III cities and there is also a lot of youth population coming up there. So this youth population with their aspirations is bringing pushing up consumption, basically of affordable fashion retail. So that is where the growth is coming from and we are targeting a better growth rate maybe in the next year to come.We feel because the kind of stores that we open up in these district levels, there are not many opportunities available for the consumer to shop from and they do not have those big stores or malls to shop from, so these guys will look forward to certain products which are fashionable, which can help them copy their role models in the media.
Although they want to replicate their role models, their pocket size is limited. So they want go for certain fashion, which is affordable to them. That is where we are targeting to hit the consumer and provide such kind of products, which can bring in revenue for us.
Anuj: What about online competition? Because we have seen quite a bit of retail volume shift there and do you have a strategy in place for that?A: As of now, out of the 108 locations that we are operating in 92 cities, there aren’t many organised retailers in the district we operate in. There are only 150 total districts which are occupied by such retailer out of 600 total districts available in India. So, of online space I still feel in affordable fashion where the target segment is not very literate, not very technology friendly, does have those smart phones, does not have the internet banking, does not have those plastic money to buy these products from, does not have the know-how and the target segment that we have in those locations where we are trying to operate and in the segment that we are trying to operate, there is a very minimal knowledge about online retail. So as of now, I do not see an immediate threat, but yes, I see it as an opportunity going forward where we can also target such kind of online areas of business and we can develop certain strategies where we are also available online. Immediately, company does not have any plans to go within a year. But we are trying to understand the mechanisms of online retail because we are already there in brick and mortar; we have to understand the technology piece of it. And once we do it, we should be ready within next 18 months.Ekta: That point is taken but you are confident enough in order to undertake some amount of capital expenditure (capex) and if so, what is that capex? How much are you spending in terms of expansion of your stores and how exactly will it be funded? And how much growth do you expect or incremental growth do you expect from this capex?A: Basically, we have been spending almost Rs 1450-1500 a sqft for our stores. When we open a store of a size of 8,000 sqft, typical capex investment is of around Rs 1.2-1.3 crore and then over that we put the inventory as working capital. So, the working capital investment and plus the capex would total around Rs 20 million for a particular store.
We have opened around 20 stores in the last 2-3 years and we are still targeting almost similar numbers in the coming year. So, we are targeting to invest around Rs 25-30 crore for the capex amount and we are targeting an incremental sales growth of about 20 percent from the new capex that we will be investing.
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