V2 Retail Limited (V2RETAIL.BO) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the V2 Retail Limited Q2 and H1 FY '26 Conference Call. [Operator Instructions]. Before we begin, a brief disclaimer. The presentation which V2 Retail Limited has uploaded on the stock exchange and their website, including the discussions during this call contains or may contain forward-looking statements concerning V2 Retail Limited business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. [Operator Instructions]. I now hand the conference over to Mr. Akash Agarwal, Director and CEO, V2 Retail. Thank you, and over to you, Mr. Akash.

Thank you. Good afternoon, everyone. A very warm welcome to the V2 Retail Limited Quarter 3 and 9 Months FY '26 Earnings Conference Call. Thank you for joining us today. We trust you've had the chance to review our results. The earnings presentation and the press releases are available on the stock exchanges and also on our website. We are pleased to report a very strong quarter, reflecting continued momentum across our business. In Q3 FY '26, we delivered a 57% year-on-year revenue growth, significantly outpacing the broader market. This performance once again demonstrates the scalability, resilience and execution strength of our operating model even on a high base. Our ongoing investments in analytics-driven merchandising, supply chain responsiveness and operational discipline have further strengthened our ability to scale efficiently in India's value fashion segment. Customer traction across categories remain healthy. This reflects the continued relevance of our price value positioning and product refresh cycle. A steady flow of trend-appropriate assortments, combined with strong quality standards and competitive pricing has supported growth across our store network. On the expansion front, our focus this year has been improving our geographic coverage through a balanced mix of rural market entry and deeper penetration in Tier 2, Tier 3 cities. This approach has helped us broaden our customer reach and improve regional alignment through localized assortments and stronger store level execution. During the first 9 months of FY '26, we added 105 new stores, and our pipeline planned openings remain robust. Backed by a strong merchandising and inventory management team, we remain focused on disciplined expansion, efficient inventory deployment and sustainable operating performance. Looking ahead, we continue to stay focused on profitable growth, capital efficiency and disciplined execution, with a clear emphasis on enhancing shareholder value. Now moving on to some key updates for this quarter and the 9-month period of FY '26. First, the company successfully raised approximately INR 400 crores through a QIP with marquee investors. Second, we completed a physical verification of property, plant and equipment and reconciled this with the fixed asset register. As a result, we have written off assets with a carrying value of INR 5.06 crores, and this has resolved the earlier audit qualification. Third, we have been consistently sharing pre-Ind AS numbers to provide better transparency on our operational performance, and we will continue to do so going forward. While we fully comply with accounting standards for statutory reporting, the economics of retail operations are best understood when rent is included at the EBITDA level rather than below EBITDA. Our annual business plans, budgets, cash flows, store level metrics and incentive structures are all aligned to pre-Ind AS profit numbers. Our revenue and profitability guidance is also communicated on this basis. In line with industry practices and to better reflect the true profitability of our business, both under pre-Ind AS reporting and Ind AS 116 reporting, we reassess the lease terms for our store leases. This reassessment reflects the evolving nature of our store portfolio and our strategic plans. As a result, we reestimated lease tenures to better align with the period over which we expect to operate these stores. This led to a change in the measurement of our Right-of-Use assets and lease liabilities, resulting in an exceptional gain of INR 27.69 crores with a tax impact of INR 6.97 crores. As of October 1, 2025, ROU assets and lease liabilities were reduced by approximately INR 484 crores and INR 499 crores, respectively. Lastly, the impact of New Labour Code is not material and has already been recognized in our financial results for the quarter and 9 months ended December 31, 2025. Now moving on to the key highlights of our performance for the third quarter. Revenue in Q3 grew 57% year-on-year to INR 929 crores. EBITDA in Q3 stood at INR 174 crores compared to INR 112 crores in the corresponding quarter last year, registering a growth of 56% year-on-year. EBITDA margin stood at 18.7%. PAT for the quarter stood at INR 102 crores compared to INR 51 crores in the corresponding quarter last year, representing a growth of 99% on a Y-o-Y basis and also surpassing the record FY '25 full year PAT. We opened 35 new stores during the quarter and achieved a net addition of 105 stores in the first 9 months of FY '26, taking our total store count to 294 stores with approximately 31.9 lakh square feet of retail space. Reported SSSG for Q3 stood at 2% and normalized SSSG adjusted for the Durga Puja shift stood at 12.8%. We recorded a 48% volume growth in quarter 3 with full price sales contributing 92%, which reflects the strength of our proposition and reduced dependence on discounting. Now let me briefly cover our performance for the first 9 months of FY '26. Revenue for the 9 months grew 64% to INR 2,270 crores. EBITDA for 9 months stood at INR 346 crores compared to INR 200 crores in the corresponding 9 months of last year, registering a growth of 73% year-on-year. EBITDA margin improved to 15.3% compared to 14.4% in the same period last year. PAT stood at a record INR 144 crores compared to INR 66 crores in the corresponding 9-month period last year, registering a very strong 119% year-on-year growth. Same-store sales growth for 9 months FY '26 stood at approximately 8.6%. Our ROE continues to improve and now stands at 24.5% compared to 23.2% in FY '25 and 10.7% in FY '24, reflecting disciplined capital allocation and strong operating leverage. So now let me share our pre-Ind AS performance for the quarter and the 9 months FY '26. For Quarter 3 FY '26, on a pre-Ind AS basis, revenue was 57% up year-on-year and moved to INR 929 crores. Gross margin was at 32.4% compared to 32% last year. EBITDA was INR 126 crores, up 50% year-on-year with an EBITDA margin of 13.5%. PAT came in at INR 82 crores, up 47% year-on-year. For the first 9 months of FY '26, our pre-Ind AS performance reflects this. Revenue was INR 2,270 crores, up 64% year-on-year. Gross margin improved to 30.2% from 29.7% last year. EBITDA was INR 223 crores, up 80% year-on-year with an EBITDA margin of 9.8%. PAT stood at INR 138 crores, up 83% year-on-year. Lastly, in line with our disciplined expansion, we've already added 10 new net new stores in the current quarter, taking our total store count to 304 as of today. With that, I will now open the floor for questions.

[Operator Instructions] The first question is from the line of Ankit Babel from Subhkam Ventures.

Akash, congratulations for a great set of numbers. I have a few questions. First question is, if you can explain in simple language regarding what changes you have made in your lease accounting? And how is it compared to the industry practice?

So, to answer your question, firstly, we always focused on pre-Ind AS numbers because the Ind AS should not apply to retail businesses like us, but we obviously followed the accounting policy. But it showed a very big difference because our industry peers use this lease accounting policy, that we just moved to, where our lock-in for every location is around 1 year, whereas the lease period on the lease is 9 to 12 years. So, we have an option of reassessing whether we want to continue running the store or not. So now we have linked it to store sales performance. So, every year, there will be a review of the store yearly performance, and that's how their lease period will be reassessed and updated in the accounting system. So, everyone, including Trent, Vishal Mega Mart, Style Bazaar, V-Mart, they all move to this new accounting standard. So, we wanted to be at par with our peers. And so, we took a decision along with our auditors to move to the same.

So, your pre-Ind AS numbers won't change because of this?

No, the pre-Ind AS numbers remains the same. Only the post-Ind AS numbers.

So, is it fair to assume now that from now onwards, the difference between your pre- and post-Ind AS numbers would reduce significantly?

Yes, that is correct because, especially because we are expanding and opening so many newer stores, the impact of pre-Ind AS versus post-Ind AS was much higher on our books. That should be diminished now.

Okay. Great. Okay. Second is on your working capital. What I observed was that your inventory days are stable, but there seems to be a sharp decrease in your payable days, which has resulted into a slight increase in your working capital. So, what was the reason for it? And was it by choice? Or was there any some compulsion?

So, we raised around INR 400 crores from our QIP proceeds. And the needs of those funds for capital allocation would have been over the period of the next 12 months. So, we always have a bill discounting feature available to our vendors. So, we prepaid our vendors about INR 300-odd crores because we want to be the best paymasters in the industry, and we always want to be in their #1 priority. So, we helped our vendors by giving them the bill discounting feature.

So, is it fair to assume that this line of credit from your payable will always be available to you whenever you require it?

Yes, that's correct. So as and when we start using the funds for capital allocation and opening newer stores, you'll see the credit term back to 55, 60 days.

Okay. Next question is on the difference in your numbers in your stand-alone and consolidated statements. So why is the difference? And as investors, we should focus on which numbers basically stand-alone or consolidated?

So, because now we have shut down our 3 manufacturing units, so the numbers we should focus on for the future is stand-alone, but we are still liquidating the inventory left in our subsidiary. And those inventory is being converted from fabric and accessories into finished goods. That is why we've taken an extra...

Sorry to interrupt. The line for the management has dropped. Please hold while we reconnect.

So, I was saying we're going to merge both the entities now. So going forward, we should always focus on the stand-alone numbers because we have almost liquidated and converted all the inventory. There is some left, which will be done in the next 6 months.

So basically, there is no business in the subsidiary, the whole retail business into the stand-alone numbers and the subsidiary numbers, as you said, you'll merge and then we should focus only on stand-alone numbers. Is it the conclusion?

Yes, that's correct.

Okay. And sir, lastly, what's your outlook on the demand side, both in the near term and medium term? And how is the response from the stores you have opened, say, in the last couple of quarters? Are the PSF of those stores in line with your expectations and, or you have any other thing to tell me?

So, the benchmark that we use for newer stores is they should be within 30% sales PSF of older stores. So, our older stores this year have already touched INR 1,200 per square feet of sales, which was the next ideal milestone for our business. And all the new stores that we opened last year as well as all the new stores we have opened this year, both cohorts are performing better than INR 720, INR 730 per square feet of sales. So, they are contributing to EBITDA from the first month of operations itself. And talking about demand, so there's a huge wedding season coming up. And hopefully, with the GST trickle-down effect and government trying to ramp up consumption because it has been a little damp for the last 2 to 3 years, we always try to have a positive outlook. And hopefully, the decisions by the government also helps boost demand. So we are taking an 8% to 10% SSSG target for next year also and adding 150 more stores next year also.

Any view on the gross margin side because your margins are way below compared to your peers. At the gross level. I understand at EBITDA levels, you might be better than them. But at the gross level, your margins are way below the, I mean the industry peers. So any thought on that? Is there a scope for improvement? Or you feel that these would remain at these levels next year also?

So our gross margin strategy is by design. We want to pass on most of the benefits to the consumer. So we like having the metric that most matter to us is EBITDA margin. So we'd rather have more EBITDA margin by higher sales per square feet than higher gross margin. So going forward also, we target a gross margin of 28%, 29%. And all the margin expansion should happen from operating leverage and from higher sales per square feet.

The next question is from the line of Palash Kawale from Nuvama Wealth.

Sir, continuing from the question of the last participant, again, I would like to shed some more color on the mature set of stores, let's say, when you started expanding like in 8 quarters, you have added around 190 stores. So how are those older stores performing on margins and PSF and how are new stores performing?

So there are 3 cohorts to talk about. So one would be the stores that we had at the end of 31st March 2024. Then there are about 72- or 74-odd stores that we opened in FY '25. And then there are the 116 stores that we've opened in FY '26. So like I already mentioned, the cohort of stores that are mature that we had at the end of 31st March 2024, they are already at a level of INR 1,200 per square feet of sale per month. And both the other cohorts, FY '25 new and FY '26 new, they are at a level of INR 730, INR 740 per square feet of sale, per month on average.

And on margin, sir, how are the margins for the mature stores who are at INR 1,200 PSF?

So the cost at company level is the same. The cost is around INR 190 per square feet and the gross margins are 28%, 29%. So you can calculate the margins, because the costs remain constant for new or old stores.

And sir, good slide on states. So going forward, expanding, where is your focus? Is it on emerging states or new states or states which are already mature like in percentage terms, how we see it?

Yes, we entered about 7 new states this year. So the whole expansion strategy depends on the performance of each geography. So to give you an example, Karnataka was a relatively new market for us, but it was performing so well. Now we have 14, 15 stores in Karnataka. The same goes for West Bengal. So 60%, 70% of our new stores will come in existing strong clusters for us where V2 is already performing well. And the rest, 30% to 40% of the stores will come in new geographies that are performing very well for us.

And sir, any difference in the geographies where you are entering, where players are already present or if you are a new player there. So any difference in the performance of the stores there?

I think out of 304 stores that we have now, there would be less than 20 stores where we don't have any organized competition because competition has become the new reality. So it's not an external variable anymore. So it's about surviving with multiple retailers around you. So it's about focusing on your strength and continuing delivering that value proposition to the consumer.

And sir, last question. Your employee expenses, if I calculate on a per square basis have come down. So any reason for that? Or is it just a seasonal?

So if you look at consolidated numbers, whatever we used to make in our subsidiaries, a lot of the manufacturing costs used to be employee expenses. So whenever you compare employee expenses, you should do it at a stand-alone level. And even at a stand-alone level, it has come down because we are adding more area. So we are getting operating leverage because the same head office is now servicing to 50%, 60% new area. And we'll continue to get this as we expand to more and more stores.

The next question is from the line of Rehan Saiyyed from Trinetra Asset Managers.

Sir, most of the questions have been answered. So I just want a clarification regarding your menswear side. So sir, you have menswear continues to contribute 41% of revenue, while kids wear remains 20%, 24%. So are you seeing faster traction in any specific subsegment like winter wear, occasion wear that could structurally alter the category mix over the next 2 to 3 years?

There wouldn't be any significant change. But what we have seen over the last 2 years is definitely our womenswear category has been growing the fastest. And that is because of the Kurti department and the Kurti category growing the fastest. But if you talk about any significant differences, I don't see any significant differences coming in the future. It will be very similar to the product mix that we have right now.

And second, on the ABV increasing to INR 964 in quarter 3 FY '26. So is this being driven more by higher basket size or premiumization with the categories either does management see scope to push ABV further without diluting the value position? Just wanted understanding regarding this.

No. So if you see historically, quarter 3 ABV is always the highest. It's because of winter garments. So the winter garments ASP is much higher than summer garments. So because we sell jackets, sweaters. So that is why you see a bump in ABV during the third quarter.

So you are seeing a seasonal effect or it's like a category which is more ABV?

Yes. Correct.

And last one more bookkeeping question from my understanding. So like you have INR 400 crore QIP. So how does management prioritize capital allocation between faster store rollout or either supply chain management or balance sheet strengthening, especially considering ROE dilution in the near-term?

No. So that is why most of the proceeds would be used for general corporate purposes. So that is a mix of new capital allocation for the new stores. That is a mix of additional working capital required. That is also some investment in the regional warehouses and the Hub-and-Spoke model that we are doing. So most of the capital is being used for expansion itself. And these are the 3 biggest areas where we need to make the investment.

[Operator Instructions] The next question is from the line of Abhishek Sengupta from AB Capital.

Yes. Just wanted to ask why has the sales per square feet reduced? Is it because of the new store rollout?

Yes. So new stores perform at about 70% of old stores throughput, and it takes about 2 to 3 years to mature. And the share of new stores in our total portfolio has increased. That is why you see a slight dip.

So what will be, can you tell guide about the trajectory of it going forward, the sales per square feet, how it will be?

So if you talk about company blended level, we are targeting it to maintain at INR 1,000 per square feet, even when we are adding 50% more area every year. So even if we achieve that, that will be a very good target.

And why was that store closed?

The one store that we closed this quarter, it was below the EBITDA mark, and we tried to revive it. And we found a better location about 2 kilometers away from it. So we, with a bigger floor plate. So we moved there.

And you stick to your earlier 8% to 10% SSSG long-term guidance for next year?

Yes.

And before I had asked, and I also just wanted to ask, like are you facing any significant competition from low-cost online players like Meesho and all, because they are also operating in your market?

So what you need to understand about pure online players is just logistic cost itself is around INR 65 to INR 70 in India if you move goods from state to state. And then you add customer acquisition, you add tech costs, head office costs. So the total cost, if you're selling a INR 250 T-shirt, it becomes almost 50%, 60%. But cost of retailing for us is around 18% to 19%. So pure online cannot deliver the same value that we're delivering just because of additional costs associated with online-only players. Whereas if we are doing omnichannel, which we will plan and which we are planning to do and we'll launch in the future, where you're using your store inventory as a dark warehouse and delivery from the store itself within a very small radius, then your logistic costs come down significantly. Only then you can sustain low ASP items selling online.

Okay. And why was the proposal to do stock split done and when it will be done?

I think now we have passed the resolution. It should be done very soon. And it has been 25 years since the company was incorporated. We started in 2001, and it's been a 25-year journey. So we wanted to have a broad base of investors also. It should be accessible to the retail investors also, and that's why we took the decision.

The next question is from the line of Ankush Agrawal from Surge Capital.

So, just a clarification. You said older stores are at INR 1,200 sales per square feet and the new stores at INR 720, INR 730. So this number is for 9 months or for the Q3?

This is for 9 months.

Nine months. Okay. And like have you changed any classification for older stores I think earlier, we had like one year old stores were older stores, but this conversation today, you have sort of mentioned older stores that are those that have been opened in March '24. So have we done some reclassification even for SSG?

No, we've always calculated SSG this way. So for example, all the SSG that we calculated this year has been on stores that were operational throughout the last financial year. And we have used the same policy throughout our company history.

So basically, for FY '27, you're saying that only stores that are open until March '25 would be considered for SSG?

Exactly. Exactly.

Okay. Technically, if we take the one-year threshold, then actual SSG would be higher, right, if we go by?

Yes, yes. Because then you have to find out the weighted average of every new store, how many days they were operational and the calculations become very complex.

The next question is from the line of Shreyansh Jain from Swan Investments.

Sir, my first question is, can you help us with the absolute inventory amount at the end of this quarter? And what was this last year?

I don't have the exact numbers with me, but I think the inventory is around INR 900 crores. But if you look at the stock turnover days, it is at a very similar level that was there last year. So, there has not been any significant increase, whereas we have increased the pace of expansion. So the inventory for the stores that we want to open in the next 2 months is already in the system.

Okay. All right. And we've obviously done well on the employee cost per square feet. So I'm just trying to get some sense where does this actually stop at? INR 65 PSF, is that the threshold that we should look at? Or do you think there's some more room in this line item to go down? Because I'm just looking at V-Mart and Vishal. So V-Mart obviously is operating at INR 70, INR 72 a square feet and Vishal is obviously at INR 45 to INR 50. So I'm just trying to understand with higher store addition and you're adding at what, 45%, 50%. So is there room for this number to actually go even further down?

Yes. So our head office cost currently is around INR 26, INR 27, and that is mostly employee expenses. So I think it has the potential to come down to around INR 15, INR 16. So there's a scope of INR 10 per square feet reduction in the future.

And blended cost of retailing, you are at about INR 195 for Q3, and you were at about INR 205 last year. So overall, including rent and OpEx, what should the cost of retailing be as we gain size and scale in terms of store addition? What is this number that ideally we should look at?

I think we can target INR 180 in the near future.

Okay. And sorry, just the last participant had asked, can you just clarify again, SSSG, you're calculating, so this is for a 2-year period. Is it? Because when you're saying FY '27, you're looking at stores which were opened by the end of FY '25. So that's actually 2 years, right? So you're looking at 2 years, which have been in operation, is it?

So it's not really 2 years. So when you are in first quarter of FY '27, for example, you're in June. So those stores have been operational for only 15 months that opened in March. Are you getting my point? So it's basically all the stores that were there operational at the end of the last financial year. So some stores will be 2 years, some stores will be 18 months, some stores will be 15 months, and it works like that.

The next question is from the line of Anupama from RatnaTraya.

I think I missed the number on per square feet, revenue per square feet. Could you just repeat that? For the next year, like what is your target?

So we target to maintain it at INR 1,000 even after adding 150 more stores.

Okay. For the, that is the overall number.

Company blended level, yes, including new and old stores.

And you're saying old stores will be at around INR 1,200, INR 1,100.

So old stores are at INR 1,200 this year, and they will have an SSSG. So, they will move even higher. But the new store contribution in the total stores portfolio will be much higher. That's why it will bring the per square feet sale at the company level down.

The next question is from the line of Videesha Sheth from Ambit Capital.

I'm sorry if this question has been asked before, but what is the kind of demand momentum that you've observed now that we're 1 month already into the quarter? And what would your outlook be for the entire fourth quarter of this year?

So the momentum has been the same. We are seeing the same kind of footfalls and demand in the fourth quarter. And that is why the next year guidance is also the same. We guide for 8% to 10% SSSG for next year and at least a 50% revenue growth and adding at least 150 new stores.

The next question is from the line of Aryan Singh from Hem Securities.

Congratulations for a great set of numbers. So most of my questions are already answered. I had questions related to like what will be mature stores PSF into the future and how many mature stores we have for future quarters, sir.

Yes. So I think I've already answered that question.

The next question is from the line of Vignesh Iyer from Sequent Investments.

My first question is, sorry, I missed the point where you said 150 new store additions in FY '27. What would be the size of each new store?

Average size would be the same around 10,000 to 11,000 square feet.

Average would be 10,000 to 11,000 square feet. And sir, what are we expecting in terms of new store addition in quarter 4?

So quarter 4, I think the total addition would be around 30-odd stores, 30 to 35.

30 to 35, okay.

We have already opened 10 and we should open 20 more.

The next question is from the line of Arvind Arora from A Square Capital.

Congratulations, Akash and team. Very good numbers. So my question is on more is like an advance that we have paid INR 15 crores to BCCL in April 29. So like could you please throw some light like why we have paid? What is the nature of this advance? And how we are planning to utilize it? Because it's like been 6 years when we have paid to them.

Yes. So it was an equity barter deal where they gave us this balance to use in their various publications and various channels of marketing, and they took equity in the company. And we took it that time because we had a big focus. It was around COVID time, where there was a huge focus on e-commerce. So we thought we'll do above-the-line marketing for e-commerce, but that did not work out. But now because we are present in 25 states in India now, a lot of new states that we've entered have big Times of India prominence. So we have started utilizing about INR 50 lakhs to INR 60 lakhs of this every quarter, and the plan is to increase it to about INR 1 crore utilization per quarter. So I think it should be finished in the next 2 years.

Okay. But it says we will be utilizing in next 4 to 5 months, like the agreement is still April '26 only.

So we have a word with them, like we have a verbal agreement with them. They have been extending our agreement for the last 4 years. And we've already had a word with them. And as long as we are utilizing INR 60 lakhs to INR 1 crore every quarter, they are willing to extend the agreement again.

Okay. Okay. And this is like open to all other advertisers. It's not only for e-commerce, correct?

Yes, it is. It covers all the publication, all the company assets, everything.

Okay. And sir, any threat due to this quick commerce thing in the business?

We haven't felt any impact. And if you look at the data also, apparel is a very, very marginal or a very small contribution of quick commerce. Apparel purchase is still an experience for customers, especially in Tier 2, Tier 3 towns. So I don't think there will be any impact or any significant impact.

The next question is from the line of Videesha Sheth from Ambit Capital.

Just one more question from my end. At an industry level, have you seen, in the light of competitive landscape being having intensified, have you also seen discounting inch up in this end of season sales season?

There is not a big significant change. We also sold more than 92% of goods at full price in this quarter. So, in fact, our full price sales have been increasing. But we haven't seen at the industry level also like other retailers because see, everyone has a lot of margin pressure. So, I think putting discounts would increase that pressure.

Right. So, discounting as an industry has not inched up accordingly.

No.

Got it. And just one more question is that when you're entering into newer markets where there is an existing value retailer, what is your observation as to how are they looking to gain back the lost market share, which they'll end up losing once you enter the new region?

See, that's a very, I think, difficult question to answer because every retailer has a different strategy. There is no fixed template that everyone uses when we enter a market. Somebody puts a special offer, somebody gives more incentives, somebody gives gifts items. But ultimately, we have seen no matter what marketing schemes you give, the retention of customer and the long-term performance of the store completely depends on the store's assortment. And that assortment is obviously a mix of quality, price, fabric, size, color. So in more than 95% of the locations, we are at least 30% higher in terms of SPSF than our peers, whether we entered that market first or whether we entered that market last.

The next question is from the line of Harshita Jain from Eterna Investments.

My question is regarding the net working capital days. So, we've seen a steep increase from 37 to 69. And I understand this is from the creditor payment cycle that we've given them better terms. What is the sustainable level here? And do you see a corresponding improvement in gross margins due to discounting? Or how should we look at this strategy?

Yes. So, whenever we have extra cash on our books, we always give bill discounting to our vendors, and we get a 1.5% per month bill discount from those vendors. That becomes a part of gross margin. And going forward, like I said, as we utilize this money for capital and CapEx, then you would see the sustainable level, the working capital days will go up to around 60 days.

Got it. So, the improvement in gross margin from 29% to 32% in Q3, is that because of the discounting? Or is this a sustainable level of gross profit you're expecting?

No, that is also a part of this, but you will see a gross margin improvement in the first 6 months of the year also. And we have done this bill discounting for the last 2 years. So of course, the quantum of it has changed in this quarter. And definitely, it also had an impact on the gross margin.

Okay. One more question is regarding the CapEx per store. So, what is the maintenance CapEx you need to incur on the already built out stores of the year?

That is already covered in the INR 190 per square feet cost. It differs a lot, but yes, that is already covered in the per square feet cost expenses that we talk about.

The next question is from the line of Samarth Nagpal from Suranu Family Office.

Akash, as we are expanding through newer states also [Technical Difficulty].

Sorry to interrupt.

Your voice is breaking.

Your voice is breaking. It's not clear. Sir, can you please speak using your the handset?

Yes, yes. Sir, am I audible now?

Yes, sir.

Yes. So, Akash, congratulations on a great set. So just wanted to ask with the kind of store network we have right now, what is the update on the leadership hiring? I mean, are we moving in that direction?

Yes. So, we had about, I think, 360 people in our head office just last year. And now we have more than 600 people. So, like I always mentioned, a big emphasis and focus has been given on hiring and getting good leaders because the growth that we are targeting, we need a very good foundation. So, we have a leadership team already in place, but to reduce the workload on each one of them and to make more broad-based management, we are regularly hiring and every month, good quality people are joining our organization.

On the leadership front, only just wanted to understand that do we have a CEO or something of that sort to handle the operations at the 350-odd kind of stores and 500 we would be eventually having by the end of next year. So just wanted some color on that.

So, we haven't hired a CEO. I'm the CEO currently. I'm handling that part. But we have a marketing head now. We have an HR head now. We have an IT head now. So, all those positions are covered and they are handling the department. But definitely, we are on the lookout for a new CEO also so that I can take a more strategic role. But of course, finding a good CEO is a long-term challenge. We have met certain people, but it did not work out. But definitely, like we are always on the lookout for good professionals.

And in this segment, I mean, the kind of customer assortment we have, the kind of demographics we have. So just wanted to understand what is the kind of repeat purchase we have in value retail? I mean, what's the kind of retention we have for customers? I mean some color from the older stores only, I mean, new stores are very skewed towards getting new customers. So, any color on that? What's the kind of retention rate we have or repeat percentage?

Yes. So, for stores more than 2 years old, our repeat customer percentage on the total revenue is almost 68%. And this number used to be just 56%, so the retention has improved significantly over the last 3 years. Average frequency used to be every 5 months, every 5, 5.5 months, and it has also increased. Now it's every 4 months, 4.25 months.

Sure. That's very heartening to listen to. And is it also because we have any loyalty program for the customers? Or is it purely organic because of the assortment and the kind of service we have?

Our gross margin, our assortment, our product, everything is the loyalty program. Because we work on such thin margins, I think it's not feasible for us to have a loyalty program, but because we believe in true pricing. So, customers know that we give the best value proposition. So that's why they come back.

Got it. Akash, on the omnichannel piece, if I can squeeze in. I think we are fairly doing well offline. So, is it that we are taking a lot of investment into the omnichannel? Or would it be a pilot sort of a thing? Because understanding the customer only, we are doing fairly well from our stores only. So, any color on that? What is the vision about omnichannel? Is it going to be some percentage of the sale only? Or are we going to scale it very rapidly?

So the best thing about it is there is no additional fixed cost. There will be only variable cost, and there is no huge investment because now all software and technology companies give their services as Software-as-a-Service basically. So the expenses are monthly. So there will be no additional CapEx. There will be no additional investment. And in terms of sale, we are not looking at a huge or a big chunk of sales coming from that channel. It's just to have a presence. And I think even when it matures, the sales from that channel should be around 5%.

And this time, I think Eid and Holi both are in Q4. So I hope that we are able to maintain the momentum going forward also because both the festivals are falling in Q4 for V2. So am I right in assuming that?

Yes. So Q4 should be, but I think Eid, most of the sales fell in Q4 of last year also. So there won't be much difference. So yes, both the festivals were, yes.

And how has winterwear done for us this year? What's the kind of percentage sales we have done? I mean this is the last question which I had.

Sorry, can you repeat that?

How has winterwear done for us? What is the percentage of sales from winterwear in Q3 compared to last year? Any color on that? How has been the winterwear response?

I don't have that number ready, but winter was very good. There was an early onset of winter. That is why you're seeing this SSG in Q3 numbers, because bulk of the sales come from winterwear. It's a high ASP, high-margin category for us. So winter was very good for us, I think much better than last year. But I don't have the exact number of winter contribution for this quarter.

The next question is from the line of Vidhi Shah from C. R. Kothari & Sons.

Sir, can I know what is the CapEx per store that you incur?

The CapEx per store is around INR 1.1 crores and the investment in inventory for that store is around INR 1.3 crores. Total investment is INR 2.4 crores to INR 2.5 crores.

And sir, can you repeat your outlook on the working capital cycle, why it has increased in quarter 3?

We did early payments. We prepaid our vendors. We prepaid about INR 300 crores of our creditors because we had that extra cash on our books. So we get a 1.5% bill discount from them, and we wanted them, to help them with the working capital. So as and when we start using it for our CapEx for new stores, the working capital will come back to normal.

So we can expect it to go back to 60, 70 days?

Yes.

The next question is from the line of Prabal Jain from SM Holdings.

So sir, as you have classified your stores into 3 cohorts, the mature stores, right, and they are at 1,200 PSF. And the new stores that you are adding, they are starting at around 750 PSF. So sir, my question is over the next 2, 3 years, would your new stores, which are right now at 750, would they scale up to 1,200 number? And if they would like what kind of factors do you see in contribution to this? And if not, what are the risks to this thing?

So if you take out the data of FY '23, in FY '23, this old cohort of stores that are at INR 1,200, they were at INR 650 per square feet. So it's the same journey that the new stores will take, and that's the plan. Of course, if we keep doing the things right, because more and more customers come, there's word of mouth, you retain the old customers and your catchment area of each store increases. It's about maintaining the offering and the customer service and the assortment at the store. Every customer should feel that when they go to a V2 store, they will get the latest trends, latest fashion that they see their celebrities wearing or fashion influencers wearing at the best price possible. Once they get that brand positioning in their head, then the growth happens and 2 to 3 years it takes historically. So all these stores should move towards that number.

So we are reasonably confident to take this number to 1,200 PSF in the next 2, 3 years for new stores?

Yes. So we have done that for these stores also. So looking at that, the new stores should also move in the same trajectory.

Do you think geographical location of the stores or anything plays any role in this growth figure from 750 to 1,200?

See, now we have moved away from trying to open a store in the middle of the market. We used to find market proximity as the number one factor. But what we realize later is what matters more is parking space, frontage of the store, floor plate because opening in the center of the market might get you customers from the first day. But long-term sustainability matters more where customers get the best experience. So now we look for locations, even if they are 1, 2 kilometers away from the market, it should have a big frontage, good parking space and good floor plate. So that is good in terms of customer experience.

The next question is from the line of Deepak Pruthi from Wealth With Wisdom.

Congratulation to you and entire V2 retail team for posting great set of numbers. Very elementary question, Akash. Can you help me understand what is the store level economics that works? So let's say, you are setting up a new store, what are the costs involved? Like you said, you incur around INR 1 crores, INR 1.5 crores on setting up and then INR 1, INR 1-odd crores in putting inventories. And what are the costs involved in running a store?

Yes, sure. So the CapEx, like I mentioned, is INR 1.1 crores. The inventory investment is INR 1.3 crores, INR 1.4 crores. Total investment for a store is INR 2.5. And store level cost is around INR 140 square feet and head office and warehousing cost together is around INR 40 to INR 50 per square feet. That is how the costs are allocated.

So when you're saying INR 140 per square feet, what are the cost heads, just a basic overview in terms of employee costs, in terms of, what are the cost heads involved?

So rent is around INR 50, employee cost is around INR 40-odd. Power and fuel is INR 20, INR 25 and rest is marketing and other miscellaneous expenses. These are the 3 main heads.

And Akash, just on the previous question, how much saving are we incurring on reducing payables, which is we are taking less credit from our vendors. How much is the gain from that?

It depends on the number of days that we prepaid. But like I said, per month, it's around 1.5% that we gain from our vendors.

One more last question, if I can squeeze in. In terms of employee attrition, are you seeing a big challenge there? How is it vis-a-vis your competitors or peer group? Is it a challenge to retain people in a retail setup?

So see, there are 2 parts to this question. One would be the floor level staff. So their retention is a challenge for every retailer in the country because most of the staff is at minimum wage, they jump ship even for a INR 500 raise. But when you talk about the crucial manpower at the head office, then our attrition is well under control. Most of them have retention bonuses, and they've been with us for a long, long time.

And in terms of definition of store, new store, you said any new store will become an old store when you consider it for a full financial year, it has been in operation, right? Is it the same for all, is this definition the same for all retail players, all your competition? Or is it something which varies from player to player?

It's very hard for me to comment. I don't know how other people do this, but we have always done this historically. If a store is old only if it has run for a whole financial year.

The next question is from the line of Shreyansh Jain from Swan Investments.

Yes, Akash, just one follow-up. So when you're talking about 8% to 10% SSSG, typically mature stores and the newer stores, what is the SSSG that you kind of experience or you build in when you're talking about 8% to 10%?

So see, even mature stores need to be broken down into different cohorts then. There is a cohort that is stores more than 10 years old, 7 to 10 years old, 5 to 7 years old and so on. So of course, the newer stores, the newer cohorts perform at a higher SSSG. So you can say that the newer cohorts will be at a 12%, older cohorts will be at 5% to 6%. So the blended will be at 8% to 10%. That's how it works.

And in your experience, stores which are more than 5 years, 7 years old, SSSG typically gets saturated at 5%, 6%. That's how we should look at it?

If you look at last 2 years, even the stores that were more than 5 years old, they grew at more than 20% SSSG for us. So there is no cap or there is no limit that I can tell you, okay, this is what happens. Again, if we are able to do the things that we have done in the last 2 to 3 years, we might get a double-digit SSSG on those mature stores also.

And can you just break that down, how have the older stores done 20%? Is it largely because of the value that you're offering at those price points or there is something more to it?

So it's a combination of everything. And most of the growth was volume growth. There were more bill cuts. So more and more customers were coming. So I think it's a mix of better supply chain, a bit of assortment, with a pricing strategy, fabric, color and robust back end, like it's a combination of everything.

And how big would our design team be?

If you talk about complete buying and merchandising, including design, there are about 180 people. And just pure design is about 45 to 50 people.

Thank you. Ladies and gentlemen, due to time constraints, that will be the last question. And now I hand the conference over to Mr. Akash for closing comments.

Thank you all for joining us today. We hope we've been able to address your questions and give you a clear view of our performance and outlook. If you need any further information, please feel free to reach out to Marathon Capital, our Investor Relations advisers. We sincerely appreciate your continued interest and support. Thank you, and have a nice day.

On behalf of V2 Retail Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.