V2 Retail Limited ($V2RETAIL)

Ladies and gentlemen, good day, and welcome to the V2 Retail Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions]. Please note that this conference has been recorded. Before we begin, a brief [indiscernible] the presentation which V2 Retail Limited as uploaded on the stock exchange and their website, including the discussion during this call contain or may not contain certain forward-looking statements considering 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. I now hand the conference over to Mr. Akash Agarwal, Director and CEO of V2 Retail Limited. Thank you, and over to you, sir.

Good afternoon, everyone, and a very warm welcome to the V2 Retail Limited Quarter 4 and FY '26 Earnings Conference Call. Thank you for joining us today. We trust you've had a chance to review our results. The earnings presentation and the press release are available on the stock exchanges and also on our website. Our quarter 4 results reflect the continued momentum across our business and the ability of our teams to execute with discipline and agility. Even on a high base, we have demonstrated that our model can scale effectively while maintaining resilience in dynamic market conditions. The 60% year-on-year revenue growth for the fourth quarter significantly outpaces the broader market, Importantly, we have consistently delivered growth in excess of 60% for 2 consecutive years, underscoring the strength and sustainability of our operating model. In addition to our strong top line performance, I want to highlight the strategic investments that are reinforcing our ability to scale efficiently in India's value fashion segment. Our ongoing focus on analytics, because in merchandising, supply chain responsiveness and operational discipline has strengthened our operating leverage and positioned us to capture growth at scale. Customer traction across categories remain healthy, reflecting the continued relevance of our price value positioning and product refresh cycle, a steady flow of strength appropriate assortments, combined with strong quality standards and competitive pricing and supported growth across our store network. This validates our approach of balancing affordability with fashion relevance, ensuring that we remain the preferred destination for value-conscious consumers. As we look ahead, we'll continue to deepen our investments in technology, expand our store footprint and enhance our customer engagement. These initiatives, together with our disciplined execution gives us confidence in sustaining momentum into the FY '27 and beyond. On the expansion front, our focus this year has been on improving geographic coverage a balanced mix of rural market entry and deeper penetration in Tier 2 and Tier 3 cities. This approach has helped us broaden our customer reach and improve regional alignment through localized [indiscernible] and strong store level execution. During FY '26, we added 136 stores and our pipeline of planned openings remains robust. Backed by our strong merchandising and inventory management team, we remain focused on disciplined expansion, efficient inventory deployment and sustainable operating performance. Importantly, our current store footprint has crossed 330 stores nationwide, marking a major milestone in our journey. Moving on to some key updates for the quarter and the cost of whole financial year. First, we completed the physical verification of property, plant and equipment and reconcile this with our fixed asset register. As a result, we have written off assets with a carrying value of INR 5. 77 crores and this has resolved the earlier audit qualification. Second, we have been consistently sharing [ pre-IND ] numbers to provide better transparency on our operational performance, and we will continue to do so going forward. Our annual business plans, budgets, cash flows, store-level metrics and incentive structures are all aligned to [ pre-Ind AS ] numbers. Our revenue and profitability guidance is also communicated on this basis. Third, we are now focusing on retail business only and has moved away from in-house manufacturing operations. As the impact of new labor code is not material and has already been recognized in our financial results. Lastly, due to geopolitical tension, we have increased our safety stock in the month of March, for seamless availability of stock, which has resulted into higher inventory levels in the month of March. Once the situation normalizes, we will reduce our safety stock. We are looking to maintain inventory at 90 to 100 days and creditors at 45 days. Now moving on to some performance highlights. Revenue for the fourth quarter grew by 60% year-on-year to INR 797 crores. The EBITDA for the quarter stood at INR 109 crores as compared to INR 57.5 crores in the corresponding quarter last year, registering a stellar growth of 89% and EBITDA margin stood at 13.7% as compared to 11.6% in the corresponding quarter last year. PAT for the quarter stood at a record INR 17.5 crores compared to INR 6.4 crores in the corresponding quarter last year. We opened 33 new stores and closed 2 during the quarter and achieved a net addition of INR 136 crores in the whole financial year, taking our store total store down to 325 stores with approximately 3.5 million square feet of retail space. The SSG for quarter 4 stood at 7.74%. There was a robust volume growth of 53% in the quarter. The full price sales contributed 89% in the fourth quarter. Now consolidated performance highlights for the whole financial year. Revenue for the year grew 63%, INR 3,067 crores. EBITdA for the year stood at INR 455 crores compared to INR 258 crores in the corresponding period last year, registering a stellar growth of 77% year-on-year. EBITDA margin improved to 14.9% compared to 13.7% in the same period last year. Profit after tax for the financial year stood at a record INR 162 crores compared to INR 72 crores in FY '25, registering a strong growth of 125% year-on-year. Same-store sales growth for the financial year stood at approximately 8.6%. Robust volume growth of 47% in the whole financial year, the full price sales contribution was 90% in FY '26. Our ROE continues to improve and now stands at 26% compared to 23.2% in FY '25 and around 10.7% in FY '24, reflecting disciplined capital allocation and strong operating leverage. Now moving on to [ pre-Ind ] reporting. For quarter 4 FY '26, revenue remains the same at INR 797, 60% up year-on-year. Gross margin was 50.3% compared to 27.6% in the corresponding quarter last year. EBITDA was INR 54 crores, up 98% year-on-year with an EBITDA margin of 6.8% in the fourth quarter. PAT came in at INR 25 crores, up 118% year-on-year. For the full financial year highlights on the [ pre-IND ] basis, gross margin improved to 30.2% from 29.2% last year. EBITDA was INR 277 crores, up 83% year-on-year with an EBITDA margin of 9%. PAT stood at INR 162 crores, up 87% year-on-year. Further, it is important to note that company has achieved a tax of INR 173 crores on a stand-alone basis. Looking forward, our priorities remain clear: profitable growth, capital efficiency and disciplined execution with sustained revenue momentum and improved inventory operating leverage every initiative is directed towards one ultimate goal enhancing long-term shareholder value. With that, I will now open the floor for questions.

[Operator Instructions]. The first question is from the line of [ Piyush Jain ] from [ Growth and Infinity ].

Congratulations on good set last 2 years have been really great for us and make it just and the whole team have contributed a lot in this. So could you -- I have few questions. First will be on the 2 sides. So like last year, the rate opened around 136 stores. How much we are planning for this year around 170 to 180?

So I think for this year, the target would be anywhere between 170 to 200 stores completely dependent on how we are performing and how the momentum continues.

Okay. And like we are able to manage like things to our internal approvals for [indiscernible] later and the cash on the balance sheet, right?

Yes. So there's at least this financial year, we are covered with internal accruals and the cash on the balance sheet.

And so for next upcoming 2 to 3 years, like we have to do another [indiscernible] for that?

No. But there are like -- our debt-to-equity ratio is very, very healthy. So we have the option of getting more debt on the books. So I think that will be a first preference even if we need some cash for future expansion.

Okay. I have another question on the SSG side as like an end because we are maintaining around 8% to 10%. So like going forward, like a drill doesn't go below 8%. So what kind of strategies we are using on our existing stores so that we can be able to achieve 8% to 10% [indiscernible] going forward?

So I think the strategy remains the same, and we are focusing on the strength and all the strategies that have previously worked over the last 3 years, it is strengthening the product. It is making the back end more robust. That includes the supply chain, that includes the world's digital merchandising that includes the customer experience at the store. So I think if you're giving a good product at the best value and it is supported by a good supply chain and good retail operation, on virtual merchandising that itself should lead to at least 8% to 10% [indiscernible]. We're just doubling down on all the strategies that have previously worked on us and now investing more in technology that can suture support this better.

Are we running any kind of a loyalty program or something that to like -- something like that?

So we don't have a loyalty program per se, but we have a database of about INR 8 crore customers. And we do reach them through WhatsApp, [ RCS ] and SMS. And we give them gift vouchers and other kinds of gifts, not loyalty points.

Okay. I do have 2 more questions. First will be on the -- as we have seen like recent political tensions the increase of commodity prices. We're capable of around 3% to 4% in part on the prices to the customers so that they won't impact the margins going forward.

Yes. So we have seen some movement in [indiscernible] prices and that would have been -- that would have to be transferred to the customer. So we will maintain our gross margins and prices might go up in the future by 3% to 4%.

Okay. And just last on the Capex rate. So as of last quarter, we have around INR 2 crores -- INR 2.2 crores sorely required. So like it's maintained right now?

It's about INR 2.6 crores and it will increase because of the price increase, so will become around INR 2.7 crores, INR 2.8 crores now. That includes CapEx and inventory. So the CapEx would be about INR 1.2 crores to INR 1.3 crores and the rest would be paid inventory.

The next question is from the line of [ Avinash Karani ] from MOSL.

Congratulations on a good set of numbers. [indiscernible] getting the gross margin. So this year, because of the higher full-price all U.S. in implementing the gross margin. So how should we see this number going forward, one in the near term and to mainly because of the [indiscernible] in the quarterlies that you have indicated?

So we started focusing a lot on inventory management and freshness of inventory, and we started doing inter-store transfers of inventory also and better product mix at stores. So that all led to a better gross margin this year. So going forward, you can look for us to maintain the gross margin anywhere between 28% to 30%. And like I mentioned earlier, all the price increases in raw materials will be passed on to the customer. And there will be an increase in MRP while maintaining the margins.

Okay. Okay. Because I'm asking is the other competitors, they said that they don't want to pass on the full increase to the customers you want to retain some patent on the margins. So how do you see that?

I don't want to comment on any competitors, but our strategy is we won't [indiscernible] in our gross margins because 3% to 4% increase is not significant. And our average selling price is INR 300, that translates to about INR 10 to INR 12 additional [indiscernible]. So I don't think it's a significant impact. So we would look to maintain our gross margin at 28% to 30%.

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

Sir, what gives you confidence that despite of all these uncertainties on the [indiscernible] you'll be like demand will be cold and you will be adding 170 to 200 stores, which is higher than what still had guided earlier?

So what we're building today is not for the near term. We are building for our 20-year vision, which is to be one of the top value fashion retailers in the country. And hopefully, what is happening around the world is temporary and India is poised to grow at 5% to 6% GDP in the next 20 years. And if you look at organized retail, it is poised to -- so we want to capture most of that market. So that's why these kind of short-term increases don't sway us from our long-term plan.

And sir, what wouldn't you put any pressure on your near-term margins?

So we have seen a little bit of sale impact in May because of the award. But I think overall, what we've seen in March, April, I think we can continue the positive momentum and it will not have a huge impact, especially in Tier 2, Tier 3 towns.

And sir, 2 more questions. One is, what is your -- what is the quantum of more than 6 months and 1 year old inventory? And will you be able to grow at 50% despite of [indiscernible].

So more than 1 year old inventory is less than 5% and more than 6 months old inventory is less than 24%. So around 76% of our inventory is in the 6 months old. And out of that, also about 50% of the inventory line 3 months old.

Okay. On growth, any comment?

We are guiding for at least 5% revenue growth over the next 2 years.

The next question is from the line of [ Raj Shah ] from [ Trident AMC ].

So this year, I was just noticing you have opened a quite stores in patented and increased total outcome Mr. [indiscernible].

Sir, could you please come in a little [indiscernible] you are just breaking, sir.

Can you hear me now?

Yes.

So we have --

Sorry, you're breaking up.

The stores require --

I can't hear you. There's a lot of disturbance on your phone.

Can you hear me now?

Yes.

Yes, I was saying that -- I mean, we have entered quite a few new states in this financial year, particularly in the Western region. So going forward, what is our strategy? I mean, are we going to go deep in these states, particularly Gujarat, [ Maharastha, Ajita]? And in terms of new store expansion. So I mean, which geographical area will be largely concentrated [indiscernible].

So our strategy remains the same. Whenever we enter a new state, we opened about 4 to 5 stores there. Just to get a lot of data points in terms of what the customer, what sizes, what colors sell there, and then we make an optimal model. And for future expansion, it all depends on the performance of each state. So we are tracking that every month and for example, we had entered [indiscernible] and now we have almost 15 change stores there. So the future expansion would completely depend on how each state stores are performing. And looking at the data now, Gujarat is performing very well for us. All the South states, [indiscernible] they have been performing well. Maharashtra also, we have opened 3 stores and 2 of them are performing phenomenal. So we are looking to open 30 to 40 new stores in the newer regions that we've entered. And of course, 50% to 60% will come from our core strong regions.

Understood. And secondly, on our SSG growth. So FMC growth has been close to 7%, 8%, but the sales per square foot has declined by close to 7%, 8%. So what is what explains -- is it because we are opening larger stores? That is one of the reasons?

So we opened 170 new stores, and the new stores started about 70% of all store [indiscernible] sales. So if you look at the only old store PSS, those have increased 8.5% equal to the SFG, but because we have opened so much new area this year, if it gets the overall company for service sale-down but as they matured, you will see the growth in company also.

Understood. So I mean your sales for seat improved from year on because the expansion in terms of percentage of new stores open will slightly come down. So do we see your EBITDA margins on a [indiscernible] to improve further from on a stand-alone basis, we closed at around 9.4%. So can you cross close to around 11% in the next 2 years?

Because we are, again, guiding for opening more than 50% new area. So it becomes a challenge to increase the company-level PSS and expand EBITDA margins along with the 50% growth. So you're right, the year when we add only 20% new area, then you can expect that. But next 2 years, we want to add 50% new area, have 50% revenue growth. So we are guiding for the similar margins and the similar PFS.

The next question is from the line of [indiscernible] from [indiscernible]. -- ahead. The next question is from the line of [ Arvin Arora ] of Square Capital. As there is no response from Mr. [indiscernible], the next question is from the line of [ Kushal Romero ] [indiscernible].

Congratulations on the good set of numbers. My first question is, how does the management look into limiting verticals or opening new [indiscernible] stores? I just want to expert on the trend between brand and [indiscernible]. I know you [indiscernible] because we've got a lot of scope full expand, but I wonder that if there any discussions in the Board on -- have you talked about it on [indiscernible]? And at what scale do you start thinking about it?

I think we don't want to dilute our focus until we have at least 2,500 stores. I think we've built a very strong model, and we want to get to every part of the country because still good fashion and affordable price is not available to most [indiscernible] consumers in India. So we want to capture that [ blue ocean ] first and then maybe we would think about the other strategies.

My second question is [indiscernible] looking from retail in the life of industry, [indiscernible]. My question is if tomorrow hypothetically, if you are not able to attend [indiscernible] who are in the organization with to answer to really love to know the people on the [indiscernible]?

So there would be at least 6 people who would be able to take the call, if I'm not available, and most of them have been with us for a journey of more than, I think, 10 years now. So it's just that I have been in the face of the investors and the community. But of course, all the business leaders and the senior management people we have, they have a list of the data because most of our reviews, most of our performance appraisals, everything has been done on data. And most of the decisions that we take is also govern data. So that is how we build the culture around the company.

[indiscernible], could you just include the management team and the working in the presentation also, so that if you can have a view on that?

Sure. I mean the [indiscernible].

Yes. And just the last one clarification there is a [indiscernible] creation of last year, I guess. So any --

No, that was only for reworking capital needs because like we give a lot of prepayments even the QIP proceeds we use sort of prepay you'll see that our creditor days have come down. So we want to be the best paymasters in the industry and we want to be the priority vendor for all our suppliers, and we want to move them -- help them with their working capital.

The next question is from the line of [ Aman Bansal ] from CESP.

[indiscernible]. I just have 2 questions. The first one, I think in the last one, you mentioned you want to increase the prices of [indiscernible]. And this year, we saw a volume growth of 37% [indiscernible] for that? And how many going forward?

So that's not a right insight. So it's all because of product mix. So what we have seen is products like [indiscernible], product like when [indiscernible], a product like well casual shirts, these were the highest growing category for us. So we gave them more space in our stores. So what that does is that reduces the quantity of maybe lower price point items like a -- so it's all because of product mix, the price ASP increase within the category is only inflationary. I think that would be around 4% to 5%. But everything else is attributed to a different product mix.

Okay. So industry understand [indiscernible].

Our [indiscernible] would be about 41%, 42%. Women wear is around 27%, and kids is about 25%.

Year-on-year basis in the segment?

Yes.

Okay, sir. So you mentioned that a new so [indiscernible], 70% of the [indiscernible]. So we saw one is it take to an EBITDA positive [indiscernible].

So it is EBITDA positive from the first month itself because the breakeven point is around INR 500 per square feet of sale and they start at about INR 700 to 750. But to mature and reach all stores level, it takes about 3 to 4 years.

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

[indiscernible] some of older shop and main stores for a --

Sorry, can you repeat that question?

[indiscernible] the sales per [indiscernible] all stores and [indiscernible].

So our old stores were at INR 1,124 per square feet for the whole year, and new stores will add INR 750 per square feet and new stores, any stores that opened after FY '24,

And we are continuing to see that stores are starting at more than 70% of the whole sort topic is why I think they continue to sort of scale up beyond [indiscernible] side?

Yes. Of course, it changes month-to-month, but it is at a very respectable level. And like I said, it's already at INR 750 per square weight of sale level, which already starts contributing to the company EBITDA from day 1. So I think we have a good amount of margin of a for the new stores. That's why we continue expanding.

Okay. And secondly, you mentioned that the JV inventory is partially because of you topping up because of geopolitical uncertainty. So is there a number of what quantum of inventory will be because of that resourcing?

So according to our closing area in March, if you look at like we look to maintain about 2,500 to 2,600 [indiscernible] of inventory. So that's around INR 900 crores of inventory that we need. And we have additional inventory of about 125 to 150 for the 60 stores that we have planned to open this quarter. And about 100 to 150 is the pre GRC that we did because we saw a lot of supply chain disruption. And because we were opening so many new stores and we had a good festival coming up in April and wedding season, we did [indiscernible] [ GRC ] and we wanted to have extra stock other than [indiscernible] at our store. So I think if you include new stores and this together, it will be about INR 300 crores of inventory.

The next question is from the line of Smit [indiscernible] from RSPN Ventures.

My first question will be while throughout the year, first 3 quarters, we have been outperforming the peers in terms of SSSG growth. In this fourth quarter, specifically the SSSG growth was a bit under par as compared to the peers. So any color on that and how we supposed to go back to normalcy outperforming our peers?

I think, again, you have to look at it from a different lens. What the base that we're talking about, so the SSSG that we're calculating is on a base of INR 1,000 per square feet sales. So growing at 8.5% on INR 1,040 per square feet of sales, we -- our old stores are now at INR 1,125, which is, I think, at least 40% to 50% more than our peers. So as the base increases, of course, the percentage growth, you cannot keep being #1. But I think if you look at the full year SSSG growth, we are still right at the top, even with a higher base. And look at the profitability numbers, look at the EBITDA numbers that for us, the ultimate aim is highest per square feet GP and highest per square feet EBITDA and highest return on equity. So I think we beat our peers on all those metrics that matters the most.

Okay. So we continue to guide to 8% to 10% SSSG for the future.

Yes.

And secondly, one bookkeeping question that depreciation has increased materially sequentially, while our stores increased sequentially by 11%, 12%. So depreciation has taken a drastic increase. So any -- is it a onetime somewhere or something like that?

Yes, it is a onetime accounting change. So a lot of small items like nuts, hard tags, hangers, what we used to capitalize earlier, now we depreciated them because we want to expense it off.

Okay. So what was the quantum of that onetime hit that we have taken this quarter?

About -- I think it would be about INR 6 crores to INR 7 crores.

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

Akash, great set of numbers. Just wanted to understand what was our marketing spend in financial year '26?

It was about 0.3%

And what is the marketing budget for the coming year, financial year '27?

It's similar numbers. So -- and most of that marketing happens for newer stores. For older stores, I think our product is the biggest marketing ambassador for us and a lot of word-of-mouth marketing has been working for us. So in fact, we've been more targeted in terms of marketing and more efficient. But going forward, it will be less than 0.5%.

Okay. Okay. And one last question. What do you do with the off-season inventory, let's say, if you are left with some winter season inventory, how do you dispose it I mean what do we do with it.

So about 15% of every season's inventory is left with us. We sell it in the next season. We don't dispose of any inventory because winter season is so short, it's only 3 months. We get it back to our warehouse. We reprocess it, we repack it and we send it in the next season.

The next question is from the line of Anupa from RatnaTraya Capital.

Yes. So I just have a question like what is the kind of expectation on the SSG growth for next year, considering the number of stores we are opening.

So SSSG has no relation to the number of stores that we're opening because SSSG will only -- that we declared for the older stores, and we guide for 8% to 10% SSSG going forward.

And you said that the new stores open at INR 750 revenue per square feet. How many months or years does it take to reach a mature revenue per square feet of INR 1,100?

Takes about 3 to 4 years.

The next question is from the line of [indiscernible] from [ Three Head ] Capital.

I have just one question on operating leverage. I think as our margin. And second, our cold store PSF around 8% to 10%, then how can we get the operating leverage going forward?

Sorry, I did not understand your question.

I have one question on operating leverage. Do you -- can you hear me?

Yes, yes, I can hear you now.

Our margin will be stable at guided level and our sales around 8% to 10%, then how can we get the operating leverage going forward?

Because we are opening so many newer stores, we are adding almost 50% to 60% new area, and they start at about 70% of old store PSF. So that's why we cannot get an operating leverage at the company level because old stores EBITDA is around 11% to 12% and new stores EBITDA is around 5% to 6%. So the blended EBITDA remains the same. But if you look at only old stores in isolation, then of course, there's an operating leverage because the per square feet costs come down and with an SSSG of 8.5%, the store level EBITDA also increases. But it's only because we are adding so much new area. At the company level, it will take a few years to see.

That means FY '27 will be [indiscernible] leverage in consolidated level?

Yes. So FY '27, you will see similar EBITDA margins and similar company PSF numbers.

[Operator Instructions] The next question is from the line of [indiscernible] Shah from CR [indiscernible]. As there's no response from [indiscernible], the next question is from the line of Arvind Arora from A Square Capital.

Akash, first of all congratulations. So Akash, is it -- in the current quarter, our sales from new stores if I compare previous year quarter 4 sales number from new stores because if I see growth in the current year is 7.7% in the current quarter. And if I compare previous year quarter it was 24% still we are able to accelerate our weekly margin to 270 bps. Is my understanding correct?

No, but GP margin is not related to new or old stores. The gross margin expansion was because we did less discounting during the winter season and a better product mix, and we did a lot of inter-store transfers.

So quarter 4 and quarter 4 are comparable, correct? And then if SSG growth was not so great if I compare with the previous year quarter 4, which was like 24%, still my margin is expanded.

Because of, again, a better product mix and more full price sales. So the gross margin across old and new stores was higher. So because the gross margin was higher, the EBITDA margin was higher.

Understood. And Akash, is there any plan where we are venturing into another segment other than this retail station? Because I have seen some advertisement where we are asking for vendor to publish a product or something like that in the media, social media or something like that?

No, we don't have any other model or no plans for any other model. We're completely focused on this model and trying to make this better and better and reach our next target of INR 1,200 per square feet at company level.

The next question is from the line of Kushal Kasilwal from Invite Research.

Akash, just wanted to understand our expansion for the next 2 years in terms of store additions. How many stores are we planning to add? And what is the strategy around store additions? Will these stores be within our existing locations? Or are we also entering into new locations? And just wanted to understand how do we evaluate when we kind of set up a store in a new place, what are some of the, let's say, top 3, top 5 points, which are most important for us to set up a store in a locality?

Yes. So we want to open 50% to 60% new area every year. So this year, we want to open at least 170, 180 new stores. And again, next year, the same, if we end the year at around 500 stores, so we would want to open 250 stores next year. But again, this is all conditional that we are not compromising on any of our profitability or operating numbers and metrics. So if the momentum continues and if we keep performing well and both old and new stores keep performing well, then we will go ahead with this expansion. And to answer your second question, so we have, I would say, a scorecard for every location, which has at least 70 to 80 different metrics. That includes how far is it from the metro station, how far is it from the train station, bus station, floor plate, parking, frontage, the access road with, how many cars are passing every 10 minutes during different times of the day. So there are different metrics that we put for a location that gives us a confidence score as to how that store will perform. And of course, it includes population density per capita income, and we do sales benchmarking from the unorganized and organized players in that particular city. And that's how we take a decision to enter a city.

Is it possible to give a basis on whatever data we collect, what is the percentage of stores where we go wrong? I mean there are obviously new store openings and new store opening, there's obviously growth, but there's obviously a risk if the store opens at a wrong location. So do you have around if -- how many times do we go wrong in terms of our new store openings? And how quick are we to kind of reverse that decision or close that?

So see, I think that is a very subjective number because 4 years back, that number used to be around 10% because the company base PSF used to be INR 650 per square feet. So about 10% to 12% of the locations used to go wrong because some new stores started from INR 300 per square feet. But now because the company base level has increased to INR 950 per square feet and INR 1,000 per square feet, newer stores are starting at INR 750. So that percentage from 10% to 12% has come down to 2% to 3%. So what we have understood is not about -- usually not about location being wrong, but it's more about your product and you as a brand because I think it was just 2 years back that we had identified about 22 stores that we wanted to shut down. And all of those stores are profitable now. Like 21 of them are profitable now, and we just had to shut down one. So that tells you that more than location, it's about the product.

The next question is from the line of Nikshit KV from KVN Associates.

Sir, if there is any planning to open store in outside India, why your competitor also entering the segment.

I think India is big enough for us to feed us for the next 5 years at least because we want to have 2,500 stores. So we are not looking at any other geographies.

The next question is from the line of [indiscernible] from [ Novis ] Investment Managers.

Sir, you've given to the previous participant in terms of entering new area. But one, if you can a bit more elaborate. You did also mention that you enter first with some 4, 5 stores in a state and then you expand depending on your understanding of that area and geography. So one where -- and I did have observed that in few of the states we have 4, 5, 7 stores and we have well penetrated in terms of 35 to 50 stores each state. So one, the question is, sir, how have we expanded state by state in the last 2 years? And how do we see that in next 2 years, if you can give us some flavor of how we are approaching state state or cluster-wise and how are we presenting ourselves with some, say, the warehouses and stuff like that. That's question number one. And sir, second, I have observed that 90% of our sales, you say is normal pricing. So we are noting to discount sales and stuff like that being a value format. The question there is, sir, how do we ensure that we keep our regular customers calling back. So if you can give us some sense of what is working for us given we have a very healthy same-store sales growth. If you can give us some sense, you'll be able to appreciate the model better.

Sure. So I'll answer your first question. So we are already present in 25 states now. And earlier, we used to have one central warehouse. We already opened zonal warehouse in Calcutta, and now we are finalizing in the South. So we'll have 3 zonal warehouses, and we already have about 18 hubs especially in all the states where we are densely populated -- densely located in. So that's about supply chain. And going forward, I think I already answered this question that now it all completely depends on the performance of the stores in each state. Looking at -- giving an example, we had entered West Bengal and Karnataka a few years back with a couple of stores. And now we have 20 stores in Karnataka and we have 15 stores in West Bengal. And similarly, so we have entered, I think, 9 new states. So we have entered Andhra Pradesh, Telangana, Maharashtra, Gujarat, Rajasthan, Punjab, Haryana. So we will see the performance. We'll judge the performance. We'll make the optimal model. And we'll expand wherever we see that we are getting the best traction. And going forward, we want to be present in every state in the country. And we have seen a good response and a good performance of new stores in all the new geographies. So that gives us a tremendous amount of confidence to actually expand further in these states. And to answer your second question about why the customer keeps coming back, I think value fashion anywhere around the world, it's about creating an ecosystem where the designs that you're churning out or the assortment that you're churning out and what the customer sees at the store is something that he thinks is fashion forward, affordable and good quality in terms of fabric, in terms of colors, in terms of fits. So it's about creating that brand identity in the minds of the consumers. So once you have that trust in the minds of the consumer that, okay, if you go to V2, you'll find the latest fashion, you will find the most affordable price and you will always find availability and a good customer experience. So I think a mix of all this gets them back to the store, and we do not want to be a discount store. That's why we're selling more than 90% at full price.

The next question is from the line of Avinash from [indiscernible].

So my question is regarding the write-off and lease liabilities on the balance sheet. If I look at them, the proportionate increase was not equivalent to what the area growth looked like. So does this mean that we are setting for the shorter term? Or how should we look at it?

We changed the policy last quarter. So what we decided was we look at at least 2 to 3 years of performance of a new store before deciding whether we want to continue operating it or not because our lock-ins and all the leases are about 1 year and the vendor lock-in is 11 years. So we changed that accounting policy last year in line with all the retailers in the country because that also helps us reduce the gap between pre-Ind AS and Ind AS.

[Operator Instructions] The next question is from the line of Omkar [indiscernible] from Shree Investment.

My question is regarding the cash flow. So in the current year, we will be opening around 175 to 200 stores that you just stated. So is it -- can you give us like is it possible to be cash flow positive even after being -- even after opening around 175 to 200 stores? That's the first question.

If I talk to you about operating cash flow, of course, that can be positive. But when we reinvest it, so the net cash from operating activities can be positive even after opening 175 stores, yes. And you saw that last year also when we had opened 74 stores. This year, because we had prepaid a lot of vendors, if you look at the credit, it has come down by almost 10 days. So that shows an increase and a little bit of working capital. But as and when we need the money for opening the newer stores, we can stop the prepayment program.

So you are saying that wouldn't be the case this year. So you will be cash flow operating positive this year?

Yes.

Okay. So another question is like you mentioned that maybe in a couple of years or maybe 5, 7 years, you plan to open around -- like total store count should be 2,500 and your aim is to have a INR 1,200 square feet. So like how does this both align in your long-term vision?

So both periods are different again. Like I already mentioned, till we keep adding 50% new area, we won't be able to increase the company per square feet sales. But there will be a time when we reach 2,000 stores, then we will only happen to open 500 new stores. So that year, we'll be able to expand operating leverage, EBITDA per square feet sale of the company as well. So again, we're talking about 2 different time lines.

Correct. But this 2,000 store count of 2,000, like what is the time line for that? And after that -- so this is like a 5-year time period or what you are talking about?

It is completely conditional to performance, and it's just about building a model. We are looking to grow at least 50% if we keep performing well. So you can just build the model and see like what year we reach 2,500 if we keep growing at 50%.

Correct. Because you had earlier said that you would want to grow at least 50% for the next 10 years. So that's why this question arises.

So again, the capacity of number of stores of V2 in India, today, we think it's 2,500. So we can only grow at 50% till we reach that number. Beyond that, to grow at 50%, we would need a different model or to enter a different country.

Okay. But till 2,500, you still feel confident that even after the base keeps increasing, you can still deliver 50% growth?

That's the idea, and that's what we want to target, conditional to good performance and continued momentum.

Okay. Another question is like on the EBITDA margin front, like for FY '27, you have said that we will be maintaining the margins. But like what can be the margin level? Can it go to like pre-Ind AS double -- early double digit or low double-digit margins in the next 2, 3 years?

So there are 3 levels to this. One is, of course, consolidating and purchasing fabrics because still we are only nominating about 20% of our purchases and vendors are buying those raw materials in silos. So we have the potential to save at least 3% to 5% there by centralizing and nominating fabrics. The second operating leverage is, of course, per square feet expenses. So we've already been able to reduce it from around INR 200 per square feet of sale to around INR 190. And going forward, it should go down to, I think, INR 175. So 1.5% comes from there. And the third one is, of course, SSSG that increases your per square feet sales. But because we are adding 50%, 60% new area, it offsets all these 3 levers. So that is why you're able to maintain such a high EBITDA percentage even after adding so much new area.

Okay. So basically, for near term, like a similar growth on the top line and a similar growth on the bottom line, correct, at least for the...

Yes.

Okay. Just the last thing. Just wanted to know after all this long-term question, just wanted to know like almost 2 months of this current quarter has gone. You have said that May has been a little bit slow as compared to like what you are guiding or what you have delivered. So what can we expect because like only a month is remaining for this current quarter. So it should...

So again, I think it's too early to say. Like I said, April was very good for us and May has been a little slow, and June is supposed to be one of the biggest months for us. So that will define the quarter going forward. But it all looks good. And whatever is happening around the world, like I said, it's, I think, hopefully short term, and we can end those adversities and have fees.

Yes. Even if there is a little bit here and there for the quarter, so for the year as well as for the next 2, years, you are guiding for 50%, right?

Yes.

Due to time constraint, we take this as a last question. I now hand the conference over to Mr. Akash Agarwal for closing comments.

Thank you 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.

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