I have never shied away from taking risks

By Ram Chandra Agarwal

Mine was a classic story of a first-generation entrepreneur with little or no money making it big in life. The type you see in movies and TV serials. The year was 2007 and Vishal Retail had reached revenues of about `400 crore on the back of its 49 stores across India. But I wanted more. I was very aggressive in my business and we needed capital to enhance our size.

It was then that I decided to take the company public to raise Rs.100 crore and managed to secure a valuation of
Rs. 2,000 crore for the business. The IPO was the high point of my entrepreneurial journey. Armed with the money, I got into a very aggressive mode and by the end of 2008, when sales were about Rs.1,100 crore, we had four factories producing garments and 150 stores
across India.

Crash and burn
My success was, however, short-lived. In late 2008, I decided to go for a follow-on public offer to reduce the pressure of the short-term loans of about Rs. 750 crore that I had taken. But destiny had other plans for me. The markets went into turmoil in 2009 and the economic downturn that followed saw Vishal Retail and me crash.

As we could not raise money, everything tumbled down and went haywire. By the end of 2008, we had really started feeling the monetary crunch—inventory had piled up as we could not open stores and even paying salaries became a problem. We were now making losses and by 2010-’11, we had to go for corporate debt restructuring (CDR) to regain some control of the company. We cut our expenses, shut the factories, reduced the number of stores and cut down on staff. We shifted our office to a smaller one and started recovering a little bit—one step at a time.

In late 2010, I was thrown a lifeline as TPG Capital showed interest in buying the company and I started the process of selling the assets and liabilities of Vishal Retail. By March, the sale to TPG was complete, barring a miniscule amount of assets that I retained and about `75 crore in debt. I received Rs.70 crore from the sale, from which I decided to invest about `10 crore in my new company-V2 Retail.

Looking back on life…
I was born in Kolkata in 1965-the year India fought the second of its wars with Pakistan. I was 21 when I got into business in 1986 from a 50 square feet store, as my father’s shop was not doing very well and we were under some financial stress. Initially, my business was to photocopy documents but that did not do well. I opted to shut it and then decided to sell soft drinks. Even that did not do well and had to be shut down. After six months of such trials, I decided to sell readymade garments from this shop. Even this business did not do well initially, but gradually sales did pick up. This was the beginning of my tryst with garments and the birth of Vishal Retail.

I was doing very well in Kolkata as I decided to keep my margins low by keeping prices reasonable. This ensured higher volume of sales. By 1996, I was doing sales of about `1 crore a year from my 50 square feet store. Business grew phenomenally in that period and I opened my first large-format store in the iconic Tiger Cinema and called it the Tiger Store.

Such was the success of this store that it did annual revenues of about Rs. 22 crore. In 1999, I set up a factory and started producing my own garments. This was a big move for my business and we soon opened four more stores in Kolkata. By 2001, we had opened another four stores in Jaipur and Indore under the aegis of Vishal.

In the year 2000, I ventured out to set up a water park which, surprisingly, did well. But by 2001, the good times were coming to an end as labor problems raised their head in the Communist-ruled state of West Bengal. It was a huge loss for me and I had to ultimately shut all my stores in Kolkata and relocate to Delhi. While I had four stores outside West Bengal, I had none in Delhi. The first store in that city came up in Rajouri Garden. The Delhi market allowed for better margins and our prices struck a cord with buyers. Our success in Delhi peaked when we set up a hypermarket on the busy NH8-which was a runaway success.

…And business
I have never shied away from taking risks. Having said that, I made innumerable mistakes in my business at Vishal Retail. The first mistake I made was that without the management bandwidth, I should have never gone for such aggressive expansion. Secondly, I should have never done such a big business on short-term finances. One should arrange finances first for growth and only then should go for expansion. It was already too late by the time I remembered the old adage of cash being the king. I relied too much on debt. After this transition, I have learnt my lessons and have not gone for any debt in my current business. Our business today is funded by internal accruals and from family and friends. Today, I know the importance of cash in a business and live according to our finances. We keep a very close eye every day on our cash flow statements and have come out wiser.

Despite my setbacks, I have gone ahead and started V2 Retail. It is a fresh start for me and I am confident. Retail is a subject that I know very well. The main change in strategy is that I will not go in for very big stores.

Vishal Retail operated stores as big as 50,000 square feet but with V2, I will limit it to 15,000-20,000 square feet ones. With Vishal Retail, the per square feet expense was high and the revenue was not ideal. Today, we ensure that the stock turnover ratio is much better from the previous 60 days to the current 45 days.

We have also changed our merchandize assortment. We are now catering to only such merchandize which is very near to the customers’ choice.

We are ensuring that all stores are within prominent market locations so that customers do not have to travel far to reach us.

V2 currently has eight stores operational across the country. Barring three stores in Delhi-NCR, all the other stores are in tier II towns, which provide excellent growth potential and very good business sense.

V2 Retail is doing a monthly turnover of `8-9 crore and, at this rate, I plan to close the current fiscal at Rs.100 crore. I am an ambitious person and setbacks happen when you are ambitious. I am happy that I could settle all debts and am confident that within three to five years, I can again be one of the largest retailers in India.

(As told to Pranbihanga Borpuzari)

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