V-Mart Retail Limited (VMART) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '21 Earnings Conference Call of V-Mart Retail Limited, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Krupal Maniar from ICICI Securities. Thank you, and over to you, sir.

Thank you, [ Rio ]. Good afternoon, everyone. On behalf of ICICI Securities, we welcome you to the fourth quarter FY '21 and FY '21 earnings call of V-Mart Retail Limited. On the call, we have with us Mr. Lalit Agarwal, Chairman and Managing Director; and Mr. Anand Agarwal, CFO of the company. At this point of time, I will hand over the floor to Mr. Lalit Agarwal for his opening remarks, which will be followed by interactive Q&A. Thank you, and over to you, sir.

Good afternoon, everyone. Thank you so much for coming on this call, and a very, very challenging time that we have and that the world has. And this is the second wave that we saw actually was very, very impactful, and wishing everyone a safe environment around. These are not the greatest time for the humanity, and we always had the similar challenges which everyone else faced, friends and relatives, people, customers, all part of the stakeholders, where somewhere (sic) [ someone ] or the other affected, their family members were affected. A lot of emotional trauma around. And -- so yes, as a team, V-Mart, we were quite -- we are quite alert and quite empathetic in trying to provide whatever support, whatever force in which we could help the community, our people, ourselves in managing both psychological as well as physical health so that we are able to get back to normalcy as soon as possible. There has been -- in the -- in this particular quarter or even now, there is definitely a lot of impact that we are able to see in the market. Almost all the markets are closed. We have seen -- we had actually seen a very good quarter in the last year. The industry actually saw -- or the economy overall saw a great fourth quarter last year, and everyone there hoping that things are back to normal and things would be -- come back to normal by the first quarter. Holy period was very good. We saw almost -- most of the customers coming back. We saw a great movement in the market, growth from the economic perspective, our industry perspective as a retail. Every retailer got back some kind of growth or some kind of almost similar number that they had in 2019. So -- but yes, towards the end of the month, we started seeing some trends. But we were very bullish and most of the market was bullish. We saw a huge growth in the commodity prices. So there was a kind of shortage in the market in terms of the availability of product at the right price. There were a lot of commitment failures which happened. So vendors and the purchasers were all aligned in a very, very dynamic manner. And people were -- or even we were anticipating or forecasting a higher growth in the coming quarters. And so we all went upbeat during the end of the month. The whole industry was upbeat. And so that is where we were at the end of the year. During the start of the year, in the next -- in April, there is definitely this news which crippled in and which moved so fast. But as industry and as our own business, we reacted very fast. We took the -- we took position which was a little more conservative. And we went down and we immediately took all the measures that we had taken in the first wave and learned in the first wave. So -- but otherwise, number -- the symptoms and the data which is coming in from the ground is good. Monsoon had been great. The agriculture income has been very good. People in the smaller town and rural side actually were earning very well. People were anticipating a lot of marriages in this particular quarter, which some happened, but some did not materialize and could not do. So they will happen over the due course of time. We are still anticipating a very good comeback. We're anticipating a better comeback compared to the last year or compared to the last pandemic, first wave that we had. We are anticipating because the government has been very good. The government's approach has been better. They will definitely not keep it so difficult because their learning will bring in better convenience to retailers and to the consumer. As soon as the regulations are liberalized and regulations are -- or the kind of opening up starts happening more and more, which we have been hearing, which has started coming in today. Uttar Pradesh started giving out some news, and other states have also started giving out some relaxation in terms of opening of retail. The business should come back to normalcy very, very soon is what we expect. But yes, definitely, first quarter has been -- is almost washed out. We should not expect too much on this. We should expect some relief in the second quarter onwards, and we could just -- we should just hope of better consumption. People do -- are anticipating that this time, the comeback may be a little slower. People are anticipating -- people have suffered more. People have gone down with their economic or their financial positions in the family because of the health issue. People may want to save for the third wave. But on the other side, I just told in the morning also on the CNBC that on the other side, people also want to live a life and life is too short that they've realized. People don't want to miss out on that opportunity. Consumption brings in happiness, and people need happiness at this moment of time. So we expect a higher consumption. We expect more spending on aspirational side. People will want to come back strongly. Consumption will come back strongly. This is what we anticipate. It may take some time, end of same quarter or the third quarter. We should expect better. Our philosophy or our fundamentals will be the same. We will definitely open up new stores because the new stores that we are opening up will be for the future. We will try to invest more in technology, as we have been doing that. We have really taken digital transformation very, very aggressively. We have worked enough on automation, analytics and bringing in new technology. We have worked on digital transformation in terms of e-commerce, omni-channel, trying to map our customer on that, attract new customer on that, bring in more attraction for our app, bring in more convenience to our online shopper, give them multiple experience of whether video shopping or whether online shopping, doing some part of home deliveries and stuff. So we have initiated a lot of these things. We are really bringing in a lot of digital transformation. We are talking a lot more on bringing further automation and further more adaptability of technology in our organization. So we will keep that very, very focused. We will keep that very, very strong. And we believe this will be the driving force in the future. There is some business, there is some share, which will definitely go on this side. So we will have to be prepared for roping in the new challenges which are going to come in, in the future in terms of the customer behavior, in terms of the human behavior and the change in the consumption pattern or the buying philosophy. So we are getting prepared for that. Anand will give you a brief about the financials of the last year and the numbers, and then we could have answer the questions. Thank you.

Thank you, Lalit, and good evening, everybody. Looking back at the quarter under review, we had a good upswing in business led by fresh inventory, fresh season merchandise and a lot of pent-up demand and also near-normalcy in the consumer behavior after almost a year's time. Let me just take you through some of the key highlights from the quarter and also last year. And then as Lalit said, then we can open the house for questions. So quarter 4 traditionally is one of the smaller quarters in any year, but owing to the strong pent-up demand seen almost across all parts of the country, and in particular, the key markets of Uttar Pradesh, Bihar, Jharkhand, and also West Bengal, coupled with resurgence of consumers out on these streets to get new summer wardrobes refilled, we saw a very good recovery, which also helped us achieve even L-to-L growth in March. Definitely, the numbers of prior year were impacted by a national lockdown, but at the same time, even in the current year, it was not a fully normalized operations with footfall still trading at 77% of last year in the quarter. While the last quarter, quarter 3, was more around festive, marriages, but still significantly impacted by the pandemic, quarter 4 was towards the path of recovery and normalcy. The upbeat consumer mood in the quarter was visible across all states and all tiers of markets, although early resurgence of COVID towards the latter part of March did impact operations in Gujarat, Rajasthan, Madhya Pradesh and Jammu, where there were local restrictions put in place impacting the operations. If I look at the sales at 110% of last year, we had one of the best quarters this year despite continued lower footfalls, which were made up by a 19% higher units per transactions, and also an 8% higher average bill size. Strategically keeping in view the higher demand for leisure or comfort payer, the company had introduced new merchandise collections at more economic price points to drive up sales through volumes, which led to a slight decline in ASP by 9% for the quarter, while the full year ASP still was up by 3% on the back of a stronger product mix in Q3. As far as the online operations are concerned, we continue to build the base strongly, improve the offerings, improve the product assortments, customer interactions of guaranteed deliveries and use a lot of digital transformation tools to understand customer preferences. We also did a lot of digital marketing, increased our focus on online presence in all forms. While our numbers keep increasing at a rapid pace, we are gearing up to get the online share of the overall business mix to at least 5% in the next 2 to 3 years, if not more. In fact, I will invite you all to have a look at vmartretail.com and give us your feedback and how we can improve this even further. Coming to the margins and inventory. Gross margins improved by 130 basis points in the quarter, and while for the full year, it was a 50 bps improvement reflecting a stronger full price sales and customer confidence in the product offering. Lean, healthy, fresh inventory and customer-focused price points also helped drive lower promotions during the quarter. While we had started to stock up for the upcoming summer peak sales and the Eid season and the marriage season in a big way, but despite that, the inventory remains very healthy at 90 days as at quarter end. Still looking at the ongoing second wave-induced lockdowns, we have taken conservative measures to further aggressively provide for any possible markdowns against inventory over and above the normal provisions carried out as per policy. So therefore, overall shrinkage, which includes write-offs, losses and provisioning, climbed up to 2% of sales for the full year on a lower sale base. Despite the slight upstocking in inventory for the missed festival and marriages cycle in April and May, we remain comfortable on the overall inventory situation and the working capital cycle and are working closely with our vendor ecosystem to efficiently drive through this next wave. Coming on the cash side. The full year cash flow stand at INR 110 crores, mainly driven by optimization in inventory and working capital management. CapEx for the full year was at INR 40 crores with 20 new stores getting opened and some refurbishment of existing stores, some technology investments and also commitments made towards a new warehousing facility being set up near Gurgaon. We closed the year with a total of 279 stores, 20 new opened and closure of 7 old stores. We continue to remain optimistic on the overall growth opportunity, and we'll keep investing in new stores at a regular normalized pace in the coming year with the caveat of the pandemic disrupting movement of material and people, just like last year. During the quarter, we also raised fresh capital of INR 375 crores by way of a QIP in early February, which has further strengthened the cash reserves, and will help us fast track planned expansion projects speedily. These include setting up a new warehousing facility, expanding stores, refurbishment of stores and also fast-tracking the technology investments, particularly around online. Coming on to expenses side. The last 2 quarters have been near-normal as far as business operations, and therefore, expenditure go, with regular promotions, and whole year at the end of March, marketing was near-normal as were most of the other expenses during the quarter. As a result, the overall expenditure for the quarter were broadly in line with last year. But for the full year, the total expenses were down by 31% year-on-year, mainly due to the savings and optimizations done during the first 2 quarters of the year. As a net summary, the company closed the year with its first-ever loss at INR 6 crores for the full year. And as we base ourselves to -- for new challenges, we look forward to restart the operations with full vigor, just to -- just as soon as this next second wave subsides. On the future outlook, we will still remain cautiously optimistic as we continue to strongly support our ecosystems in handling the second wave, which has left a lot of scars in many families. While April and May was almost a complete shutdown, we should see some gradual opening up from mid of June, and then we can definitely hope for some normalcy to return in the operation cycles. We've been working tirelessly to help support our community, either by way of setting up COVID care centers or contributing in medical health across the country, apart from helping our employees through health tests and centralized resource pools. We're focused on the well-being of our employees and their families at present while strengthening the back end to capture the larger opportunity post the pandemic. With increased vaccination over the coming months, we expect consumers to bounce back towards the latter part of the year. On the business side, we will continue to optimize costs, efficiently manage cash and keep reinventing ourselves digitally as we battle the dual challenges of the pandemic and also cost inflation across our key input lines. With the gradual recovery in footfalls and consumption, I'm sure we will emerge stronger on the other side of this crisis. So that's all from my side. And I now request the moderator to open the house for questions.

[Operator Instructions] The first question is from the line of Percy Panthaki from IIFL.

I just wanted, firstly, to understand the impact of the pandemic. So would you be able to give some idea on how many stores you plan to open in FY '22? And also since FY '21 and '22 might be on the lower side due to pandemic, and assuming that the pandemic is sort of gone by end of FY '22, would FY '23 see an accelerated store opening?

Yes. So as of now, I think we still remain on the normal trajectory for FY '22. As I said earlier, unless there is some unforeseen circumstance which forces us to change course, while quarter 1 has definitely been washed away significantly, but for the rest of the year, we still maintain trajectory for opening 40-plus stores. And in the past, we have normally averaged 20%, 22% on the base of new openings, and that is what we will still hope to gun for this year. There may be small minor corrections as we move along, depending on how the broader environment behaves. But as of now, we're not changing or reducing our plan significantly for new store openings. As far as FY '23 goes, I think we will still remain on course of the normal trajectory and not go overly aggressive, but maintain the similar kind of rate of growth for the new store openings. There may be plus a small minor adjustments here or there. But at an overall level, we will maintain the same trajectory of growth.

Right. And also in terms of the second wave impact on the full year of FY '22, I understand Q1 is sort of going to be impacted very badly. But how do you look at the rest of the year in the sense that like, for example, in paints, we have seen that whatever demand destruction happened in the first half of FY '21, that was actually sort of replenished in second half, and the year as a whole really did not see much of an impact. Now in apparels, that has not happened in FY '21. But any chance you think that a similar thing can happen in FY '22? So that despite Q1 being a washout, the full year impact is negligible.

So Panthaki, I don't -- apparel business is not a paint business, I mean [Foreign Language]. It is not that way. So this is more aspirational. This is more -- the business is more to show off also. There is some part of -- which is need-based, but the other parts are more show-offs. And definitely, there is -- definitely, as the wardrobe is getting older and older, at some point of time, people will want to buy in more. But as of now, what is happening, the wardrobe may get older, but it is not getting used. So when it is not getting used and the things are lying in the wardrobe, there is a tendency to not buy. So that is how it'll not come back fully. But some part of it, definitely what we saw earlier also, last time also, there's some kind of spurt in the buying initially which happens whenever customer comes out to buy because there's a lot of -- like child clothing. So children are growing, so their older clothes may not be used. So there is opportunity where we could actually sell some of these. And those are need-based buying, which should be there. And we should see some kind of -- some percentage, which will come back.

Right. And my last question, sir, is on the competitive scenario. So out of the 279 stores, or actually, we should look at it on a city-wise basis. So let's say, you are present in 100, 150 cities, whatever that number is. How many of those cities are national competitors like Reliance Trends or Zudio also present? And a sub-question to that is if in a small town of 2 lakhs or 3 lakhs or 4 lakhs, if you are present and a Reliance Trends is also present, what is your edge over the competition in the sense that what will make the consumer come to your store versus the competitors? So I know, obviously, they will go to both stores. But I mean, I just wanted to know where you differentiate? And where you sort of think that you can win over the customer?

See, we are present in more than 192 towns as of now, and almost 70% of the towns would have one or more nationalized retailer. So that's almost 150 towns should have more than one or more nationalized retailer now. And see, there are -- obviously, if you are talking about Reliance Trends, in particular, or you're talking about maybe likes of Reliance Trends, so they are 2-notch up or 1-notch up our model in terms of pricing. So their prices are still almost 30%, 35% higher than what we said, similar products. And then, number two, we are primarily a Tier 2, Tier 3 town retailer. So we have -- our learning has really brought in a lot of kind of localization, what would they require. They may not require what -- not everyone may require everything as a metro town people who require. So there's a lot of those kind of understanding where the consumers' need is given and delivered, and in terms of both whether the store experience or product experience or the product pricing, membership, the embellishment of the product. So it's an overall experience. There may be a lot of differences, there are a lot of differences, and there may not be. So the -- both the players could exist and one customer could go to both the stores. There could be a lot of customers who only come to us. There may be some customers who'd buy some products for a particular section from our store and some other products from the other store. So there is definitely some advantage. There are some things, where the other competitor would also have an advantage. So -- but yes, largely, still, I think there's a lot that we offer. There's a lot different that we offer. These are more from the customer mindset that you have to ask, and we need to conduct a survey so that you could -- you got a -- get answered. And we do it continuously. We do get a lot of feedback on those.

Right, sir. And out of the 150 towns where there is an overlap of national players, it is mainly -- the largest would be Reliance Trends?

Let me not name that. But yes, there are -- I mean, as a national retailer if you ask, they're the largest one anyway. So they will be the largest. But other than that, there are many other retailers as well.

[Operator Instructions] We'll take the next question from the line of Avi Mehta from Macquarie.

Lalitji, Anand, I have -- my first question is essentially on the recent lockdown and your focus on tech investments. Now clearly, that suggests that the consumer is moving a lot more online. In that trend, what would be your key competition? Because the critical offline players that we are comparable with do not have an online presence. Please correct me if I'm wrong, and if you can help explain that, sir?

So I mean, your question is directing towards the competition who are omni-present or competitions who are only on online? Or competitions who are only physical?

Yes. Sir, both. Sir, basically...

There are all the 3 kind of competition, which a customer -- or we are interacting, and whether you directly face them or not, there are all the 3 kind of competition. 90% of the -- or 95% of the competition is from the players who are only present offline. There is 3% to 4% competition from people who are omni-channel present, and there may be 1% or 2% competition coming in from the online channel also, and if I speak about the customer segmentation. So there are all the kind of competition which are there, and definitely, every competition is important. People who are still not omni could become omni. People who are omni could get stronger in online. And whether our customer -- it's all about our customer. How does he prefer? Vendors he prefers? From whom does he prefer? So we will have to deliver an omni-experience, which has to be great, which has to be good. And then there is a lot long journey that we have to cover on that, which has just started. So we will, first of all, focus on our own key things, the basics that we have to deliver as an omni-retailer, and then look at what the competitor is doing and then competitor could do.

No sir, let me kind of rephrase my question and explain what I mean. My understanding is that we have a very sweet spot in terms of pricing and quality. Now typically, there is an offline retailer and there were many offline retailers who was giving -- who were giving that value experience. But they are very small in terms of size. And hence, they were -- my thought was that they will not be able to go do this omni-experience. And in that kind of environment, the consumer, if he's forced to buy online for the need-based, we would be the only choice. Is there some mistake in that thought, sir, if you can help us?

See, once people do buy online, definitely customer who knows these retailers or who knows this market will definitely want to buy from these kind of retailers, will definitely see us as a priority channel because they know us, they trust us. And when they want to buy online, they will definitely opt for someone whom they have visited. And if they have visited us as well as other competitors and we are able to offer them an omni-experience, they will definitely choose us over them. That is definitely a good piece that is available with us. But on the other lines, online, when they see a product photographed, at times to differentiate quality is a very, very difficult subject. So there, the competition immediately change and then maybe worlds of Amazon or Flipkart or Myntra could become a competitor. If they are able to give out similar specification, content or a photograph which is in similar prices, then customer may switch on -- switch down to them also. So that's also one of the threat which is there. He may experience a good product. He may not experience a good product. That only comes when the delivery is gone.

Correct, sir. But right now, that is not the case, right? Is that understanding correct, sir?

Yes.

Okay, okay. So I mean, in that sense, if we were to get the omni in place, and if there is a consumer movement to omni, we would be the first or the key beneficiary? That is the way -- if someone were to see that, that would not be completely wrong?

You are right.

Okay, sir. Perfect. Perfect. That helps. The second, which, sir, I just wanted to understand from a near-term lens. Inflation is high and there is a consumer concern, if I may say, on when she may come back. Would it be fair on your strategy, the thought would be to look at what you did in the fourth quarter, bringing more fresh material at a lower price point at a lower promotion? Is that the thought? Or can you share what is the thought, sir?

Yes. We -- your understanding is correct. So it's not just one strategy which will play out, right? Obviously, it will be a mix of strategies. There are few inflationary pressures, and especially on the apparel raw material side, yarn prices have been increasing consistently for the last 4, 5 months. And we have taken mitigating measures in the last 3, 4, 5 months also. And that was also one of the reasons why we started to stock up on inventory, and we will continue to keep the freshness question much, much more relevant as we move along. And we've seen that dividend payout in the last season, March and February also. And yes, your understanding is correct. We will definitely keep the discounting and the promotions low to keep the value proposition intact for the lower ASP demanded by the customer.

Okay. And sir, last, if I may squeeze in. You did highlight that there is not an inventory issue despite seeing some increase, does -- if you could help explain that, is it because it is more raw material? Or what is the reason, sir, why you feel that? That's all from my side.

So we don't stock raw material. We always buy it fresh fully made inventory. But the reason why I say that the inventory remains under control is that we are still at a normal and a reasonable level of inventory at a per-store level. And looking at the pipeline of stores that we also want to open or have already in process, in pipeline, we are sitting pretty as far as the overall health of the inventory is concerned.

The next question is from the line of Shirish Pardeshi from Centrum Capital.

Lalitji and Anandji, hearty congratulations. Finally, we are seeing some routes getting implemented on the e-commerce, and I also congratulate you on the Amazon partnership. Sir, my question is on e-commerce. Though we have taken this effort and we are saying that on INR 800-plus buying, we are going to do home delivery. Within the short span of time, whatever your experience is that, how the traffic is moving? And more importantly, you alluded in the beginning that brand is very strong because of quality and trust. But I'm more interested on the traffic part, how many such deliveries are happening? Or any color on the contribution in the month of April or May?

Shirish, these are early days, and we definitely are excited, and I know you guys must also be excited. But there are definitely good traction that we see. There is a good amount of traffic that we are also seeing. But yes, there is also a lower conversion that we are seeing today because not all customers are prepared to buy online because there are a lot of -- bunch of -- a majority of them are first-timer, who would go first time on an app because we are driving more organic traffic. We are driving more traffic from our stores, from our customer database, who is -- already is our customer. There are majority of them who have not shopped online ever. So they are coming on online, they are browsing, they are looking at the product, but still not able to take so much of decision. So still, we are learning, and there are a lot of gaps that we have to also fill in terms of technology, in terms of experience, in terms of the content or the explanation of the product, in terms of their delivery TAT, in terms of the supply chain, in terms of their recall value. There are a lot of work that we have to do. Still, the numbers are not those kind of numbers which would be demonstrated and told. So we are also trying to figure that out. But yes, it did help in this particular time, and it did bring in the entire organization in that whole mode of omni-retail so that the entire organization was believing that this is something which is the way forward. And how do we really look at the process enablement, look at each in individual areas of our internal processes so that we could drive higher traffics going forward.

Lalitji, I understand. My quick follow-up on that, having worked in this market for many years very closely, likes of UP and Bihar, my only suspicion at this time is that, a, there is an internet traffic which is coming from this middle class people. And this, again, the question is that the whole website is running in English. So I really want to pick up your thoughts that is there any hesitations from the consumer side because of the nomenclature and the experience which is there?

That may be one of the case, Shirish, and that's the opportunity. And that's what we are trying to understand as an opportunity. As I told, we're just an infant. We're just born. So there is a lot of development, a lot of opportunity. There is a lot of work which is going on. There's lot of work which will result out. So not everything was great during this time because even our online people, our people who are looking at all these technologies and stuff, they were all affected by the pandemic. So not everything was really up to the mark. So there is a lot of -- and this is what our learning is, and this is what you are also saying that there is 100% a lot of work that we could do looking at the vernacular side, looking at the kind of consumer base, what would they understand? How would they understand? What are they looking at? What are they buying? So there's definitely good things which are coming out of the analytics. There's a lot of learning, which is also coming out. We are also bringing in -- are aligning the team so that we could use those analytics and grow further.

Okay. And my second and last question, on the demand side, we have also experienced a similar situation last year, while lockdown and retail was closed. In your thought, out of this 279 stores, how many stores -- I mean, you gave a very bleak commentary on CNBC also that it's completely washed out. I don't think so. So I just wanted to understand, out of 279 stores, how many stores were opened in the month of April and May for any of the period?

So Shirish, hardly 20, 30 stores would be open and that, too, for varying amounts of time. So very, very small business. So it would be immature to say that the stores are fully open or fully operational because the situations were -- even if they were open, they were open for, let's say, from 10 a.m. to 4 p.m. or with local restrictions in place. So the amount of business transacted would have been extremely low.

The next question is from the line of Nihal Jham from Edelweiss.

Anandji and Lalitji, three questions from my side. The price hike that was required because of the spike in yarn prices, have we already taken it in this quarter? Or it will reflect in the inventory, which is on display in the current quarter?

Nihal, there is no across-the-board price hike. We always have believed in giving the best pricing to the customer. So wherever there is a price hike in the raw material or the product that we have sourced, there -- in those products, in that particular SKUs, there would have been a price hike implemented. But as we move forward, we will not hesitate in terms of making sure that we are able to fully transparently pass on the price hike, but at the same time, remaining relevant on the average selling price and keeping the value quotient very high.

So -- but most of those hikes across whichever portfolio were taken in Q4 this year still?

Yes, yes.

Sure, that's helpful. The second question I had, sir, was on our store part of it. If I notice the year as a whole of the net additions that we had, a major part of that were in Tier 1 cities compared to T3 and T4. What I wanted to understand is that, is that an incremental trend going forward also of the 40, 45 that we are expecting to add? And any possibility of bifurcating the city-wise or the tier city-wise addition that we are looking at in the coming years?

No. So the way we do the store expansion, we never budget that these are the number of stores that we need to open in Tier 1 or Tier 2 or Tier 3. We look at opportunities. And at any point of time, the business development team will be working on probably 50, 60 sites. And depending on their life stage of development and maturity in terms of talking to the landlord, doing the site surveys done and doing the other stuff done, whichever store gets to open first, we open that first. So we don't really allocate our budget that these are the -- this is the ratio that we need to maintain. But yes, you're right. In this particular quarter, we -- coincidently, there were more openings in Tier 1, but that is not a trend or a precedence that will remain for throughout the year.

And the 40 includes the new formats, Value Dial-Up, or that is something that we are still -- we've been preserving and we'll evaluate it in the coming quarter?

No. All, it includes. So any new store will be in this new count. Refurbishments can still happen, which are for old stores.

Just one last question from my side, sir. On the inventory side now, ideally, as we understand, one of the things that has differentiated V-Mart from a lot of the other value retailers is our assortment or the collection wear that we have. If on a longer-term basis, we're looking at having a lower inventory, is it a possibility that, that may impact the collection that we display, and potentially, one of our footfall drivings?

No, I don't think so. I don't think at any point of time, we will want to compromise on the value offering to the customer, whether it is by way of price point or by way of the assortment or the offering. So when we look at inventory optimization, we look at making the supply chain more efficient so that we are able to reach to the store, and thereby, to the customer faster and reduce the storage time whether in the warehouse or in the store.

[Operator Instructions] The next question is from the line of Tejash Shah from Spark Capital.

Lalitji, Anand, sir, first question pertains to the demand environment. So you just spoke in length that how fourth quarter was a reasonably normal quarter. And considering that the base that we had with 7 days of total lockdown, how should one see option -- how should one read through on consumer sentiment based on this 6% growth? Because on a 2-year CAGR also, it's just flat at 1%.

See, Tejash, definitely, what you are saying does make sense, and there is a shift, a little bit of dampening, which has been and had been created by the first wave. So -- but yes, as I said, it was coming back to normalcy, and we were expecting and people were ramping up towards that. There are definitely bad times. So initial part of the quarter, which is the January and the first part of the February, was not -- we were not able to see that kind of benefit coming in. But yes, towards the later part of the quarter, it was really coming out as very well because that's the time when the consumption once again started happening. Normally, consumption starts happening with the new season. So the new season was the summer season, which started from 15th of February until the 31st of March. So we saw a good new season coming in. We really saw a spike in the consumption, and we were approaching -- we were -- the marriage season was coming in. So we were approaching that good season when harvest money was supposed to come to the consumer pocket, and they were supposed to spend that in that time. So that's what -- that's how we gauge the consumer sentiment. Consumer sentiment at that point of time was very bullish.

Sure. And Lalitji, we all are now talking about third wave, and it seems like consensus. But hypothetically and with God's grace, let's say, if we dodge it and we come out of it way faster and demand surprises us on upside, are we prepared on supply chain side to capitalize on that surge in demand or revenge buying as in some global pockets we are seeing is happening right now?

So Tejash, you have seen that in the last time also. And as you know, our model, which is so interlinked with our vendors and the way we have treated our vendors, even in these times, the way we have made payments to our vendors relentlessly. We have used our liquidity piece, which is an asset to us. And then that's definitely helping our vendors. And we are a very agile organization in this. We definitely have our model, which we have prepared and we are getting prepared right now also. But still, we are not anticipating 100% comeback, but we would work and forecast 70% comeback, 75% comeback today. But we will wait for the opportunity. We'll wait for the trend to spike up. The moment it does, we will not leave anything -- any stone unturned. We will definitely meet all the opportunities which are available.

And Lalitji, when you say 75%, base is FY '20 or '19?

These all, the number will be from '19.

'19. And last question from my side on cost-cutting initiatives that we all have taken in the last 4 quarters and in a big way. Hypothetically, if growth has to normalize in FY '22 and then be equal to FY '20, would our margins be higher -- substantially higher than in FY '20, or at best, equal?

As of now, very difficult to predict, Tejash. Having said that, there are inflationary pressures not only on the raw material side but also on other inputs, whether it is the transportation cost or freight cost or people cost. So -- and also, there is a lot of uncertainty around the top line. You yourself just asked that question around the third wave. So if we were to look at a full normal year, I would budget for a near-normal margin. But because we are looking at a less-than-normal year, I think we should look at a slightly lower margin in these kind of circumstances.

[Operator Instructions] The next question is from the line of Girish Pai from Nirmal Bang.

I just wanted to focus on the expansion plans. Considering that you're sitting on close to INR 400 crores of cash and equivalents, I would have probably expected you to grow a little bit more aggressively beyond the 20%, 25%, considering that the real estate environment is probably in your favor. What is the thought process as to why you're kind of sticking to that 20% to 25% number?

Girish, it's not that -- we don't want to grow more aggressively, and we will definitely do that for the right opportunities. But at the same time, we don't want to be overaggressive just because we want to open more number of stores. Retail sector in India has particularly seen a lot of downfalls, especially because of overaggression in terms of growth. I think we will remain aggressive, and we've always remained aggressive, but we'll never compromise on quality just on the question of growth.

My second and last question is to do with rentals. In the near term, have you kind of started renegotiating the rentals? And from a longer-term standpoint, do you see yourselves benefiting from any structural changes that you brought about in the rental deals that you have with your landlords?

So Girish, we already operate on one of the lowest levels of rentals in the industry. And we've always treated our landlords as very important partners in our complete ecosystem, and we had taken a lot of their help in the last one year. So we did some structural savings for more than 3 months, more than 6 months, and in some cases, also for a year, and in very, very few and rare cases also going beyond 1 year. But structurally, I would not say that we have a lot of savings earmarked for FY '22. Having said that, we are going back to our partners and requesting them for some waivers again this year. But looking back at the kind of support that we were able to get last year, I am not too optimistic that we will be able to get an equal or a very strong level of support in this year.

I wasn't referring more to FY '21. I'm looking beyond FY '21 when things come back to normal. Do you think you've restructured the contract in such a way that back-ended, you will get some benefits?

No, I don't think so, Girish.

The next question is from the line of Ankit Kedia from PhillipCapital.

Sir, my question is regarding the customer footfall. Being a family store, despite having a growth, we're seeing customer footfall still being 12% lower Y-o-Y. Are you seeing, really, the number of people in the family visiting the store being lower? And incrementally, going forward, that could impact the buying of the family? Or people who are coming out are still coming out with the families and buying and that's what we are seeing now?

Yes. Ankit, the fear was there. And definitely, these are not -- even March or February was not those kind of times when people wanted to get into the crowded areas and not everyone in the family would come and come out for shopping. Number one, there are fewer -- little lesser families also, which are still -- or which is not coming. There are some families, which have still not opted to come in. Out of -- even out of that, there are even families who have come in, not all the members, the way they used to, [Foreign Language] grandparents and parents and kids. They all used to come in. But now, definitely, it has been restricted, and there are lesser number of people coming in and taking higher number of products. And number of visits have also reduced. So what we have seen is the average bill value has gone up. The average ASP has also been constant. So the number of pieces per bill has gone up. So there are fewer number of visits, but the quantum of per visit has gone up.

Sure. That's helpful, sir. Sir, my second question is regarding the Kirana stores. We were introducing more Kirana in some of the stores, and we have seen the Kirana contribution go up in the quarter. While I can understand in quarter 1, if you see, Kirana contribution go up given that it's lockdown and Kiranas are allowed. But in quarter 4, the Kirana contribution going up, have we introduced Kiranas in more number of stores? And could that be a near double-digit going forward as well?

Yes. Ankit, so definitely, there is little initiative that we had done in the last year lockdown. And post that, we had definitely increased some store with Kirana offering. And we had also brought in some impulse category in the fashion store that we had spoken about. So some of those impulse categories which are operating only in the fashion store are also doing great. We categorize that as Kirana. And even some of the new addition of stores where we did not have Kirana earlier, some space has been devoted or given to them wherever the sales per square feet was a little low. So there have been some changes, which we have done. So that we are able to give a little better -- draw a better outcome from the space and sell what people want when they are in the tilt or the cash counter, which is a convenience to them.

The next question is from the line of Binoy Jariwala from Sunidhi Securities. The next question is from Binoy Jariwala from Sunidhi Securities.

Lalitji, this question is specifically for you, just your thoughts on. In the previous year, you would have done a lot of changes in terms of cost structure as well as in terms of working capital management and CapEx. So just wanted to understand from a structural perspective, when I look at the balance sheet numbers, the inventory is still roughly about INR 1,800 a square foot, the creditors are roughly about INR 800, INR 900 a square foot. So from a structural perspective, have you made any changes to the working capital of the business? How we are going to maybe reduce inventory or something like that? Or did we not see any reason to do that? And second point was related to the CapEx. We were earlier looking to open stores in a model where the CapEx is borne by the landlord. So something on that, are we looking now as that to be a more -- to be a -- as a way to open more stores on that model?

So Mr. Jariwala, this is Anand this side. Let me take the second question first. So as far as the CapEx model is concerned, we've always -- we've never relied on the landlord to do bulk of the investments. There are some basic civil structure that the landlord is supposed to do and that -- and the -- all the fills and all the fit-out structure has always been done by us. And there is no change in the model. We remain on the same model. In the structure that we follow and the kind of cities that we get into, it is, in any case, largely difficult to get the good size of stores, first of all, in the market areas. And in that, to expect the landlord to fit out also is always -- is going to be a bigger challenge than to ease out the pressure on the investment. So that model is -- remains where it is. Second, on the inventory side, if you look back at the full year, we have definitely made improvements in the inventory cycles. It's only in the quarter 4 and where we have slightly bumped up the inventory, and the inventory bump up was more because of the preparation for the upcoming festive period and the large summer season pent-up demand, which we were already witnessing in the market. So thereby, as I said earlier in my opening remarks also, we are not at all worried on the health of the inventory. It is pretty much in line with what we wanted to carry, maybe INR 5 crores, INR 10 crores here or there. But otherwise, pretty much, it is very much there. And we have taken a lot of efficiency measures, which are also reflected in the kind of inventory liquidation that we did in quarter 2, also in quarter 3 and continued in quarter 4 also.

So Anand, essentially, what you're saying is that our business model that was there in COVID in terms of inventory management and CapEx remains the same, right?

No. They are 2 different things. CapEx, it definitely remains the same. On the inventory side, we have made optimizations, which have resulted in efficiency improvement. It may not be visible as at year-end because of the anticipated demand. But otherwise, we have made improvements.

The next question is from the line of Arun Baid from BOB Capital Markets.

Sir, you just mentioned that the new warehouse is going to come up. So what's the total CapEx for it? Is it planned for this year, next year, when it's going to be operational?

So Arun, the total CapEx plan for this new warehouse will be roughly around INR 100 crores in this year. The first phase, we are trying to operationalize by the end of FY '22. This will be in phases. The development will be in phases. But the first phase, we are trying to operationalize by the end of FY '22 itself.

And sir, anything -- again, any adjustment we are planning again on the employee front, which we did last year, which -- because of whatever situation we are seeing right now, is that something again going to happen?

No, nothing right now. Absolutely, nothing. We remain fairly employee-centric, and we will want to support the community and the employees at this difficult juncture.

So sir, just to reiterate, this year, our guidance would be that 20% to 25% store area addition would be there. And virtually, nothing big on the cost front, either from the rental side or from the employee side. Am I correct, sir?

As of now, yes. But as the environment and the broader situation improves or deteriorates, we will need to take appropriate calls going forward.

Thank you. We'll take that as the last question. I would now like to hand the conference back to Mr. Lalit Agarwal for closing comments.

Indeed, a lot of good questions, a lot of good questions for us to think back and understand. But believe and understand and trust that this -- we are not into a short-term game. We are here for a long-term game. We have developed and we have built a lot of trust in the last year. We definitely have done a lot of work with our people, with our community, with the customers, with the vendors, which will once again build better trust and more trust so that we could work in a better environment going forward. We are not here to just cut the corners and cut our costs. But we will not leave anything unturned. We will not leave anything which is possible. But those are mostly driven through relationship. These are mostly driven through efficiency-driving mechanisms. So that's where we are. We definitely feel we are here building the organization structure, the processes. Our values are here for future growth and sustainable growth. That's what we will target for. Thank you so much. Thank you for being there.

Thank you very much. On behalf of ICICI Securities Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.