V-mart Retail Ltd (NSE: VMART) Q3 2026 Earnings Call dated Jan. 23, 2026
Corporate Participants:
Lalit Agarwal — Managing Director
Anand Agarwal — Chief Financial Officer
Analysts:
Aditya Bansal — Analyst
Sucrit Patil — Analyst
Hitaindra Pradhan — Analyst
Kaivalya Baing — Analyst
Devanshu Bansal — Analyst
Smith Gala — Analyst
Rajiv Bharati — Analyst
Presentation:
operator
Foreign. Ladies and gentlemen, good day and welcome to the Vmart Q3 FY26 earnings conference call hosted by Motilal Oswal Financial Services. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Aditya Bansal. Thank you. And over to you sir.
Aditya Bansal — Analyst
Thanks Alaric. Good morning everyone. On behalf of Motilal Financial Services I welcome you to Vmart’s CQFY 26 earnings call. From the management we have Mr. Lalit Agarwal, Managing Director and Mr. Anand Agarwal, CFO. Without further delays I will now hand the call over to the management for their opening remarks. Over to you Lalitj.
operator
Lalit sir, please go ahead and please unmute your line in case if you are on mute.
Lalit Agarwal — Managing Director
Hello, good morning everyone and thank you all for joining us today. Once again we are doing a call for the best, one of the best quarters for the year that we generally have which is always has been the best quarter for the industry and is generally the best quarter because of the Diwali and the winter months which is starting. So let me start with the little bit of metro level. I think what we see industrialization continues to deepen, government policies are supportive. We see inflation largely in control, per capita income or the consumption continues to rise.
Not, not, not too much. But yes there is a rise which is there informs like GST has not really delivered a very immediate consumption led benefit. But as they are clearly a positive sign from a long term formalization and efficiency standpoint is concerned there is definitely a renewed focus on manufacturing which is constructive for employment and definitely will bring up the income generation or income creation over the long run. At the same time we believe that you know all these AI technologies which is coming in could begin to disrupt some traditional retail model or could begin to disrupt some industrial model or the employment pieces also which could create a little short term noise but also could also enhance a lot of productivity decision making opportunities both for retailers as well as other industries.
So in the near term what we see is consumer sentiments definitely have been influenced by some global development. Not exactly in our market. But yes we keep hearing that in the, in the urban cities and in the bigger towns and metros all these geopolitical uncertainty definitely there are weather related disruptions also which is happening so these are some of the factors which are, I would say which affect the sentiments but not the fundamentals. We don’t see a lot of weakening in the demand. We definitely see some rise there. Tier 2, Tier 3 market for us continues to be continues to show healthy returns or healthy growth.
Rural or semi urban markets or the sentiment there has improved. That’s definitely been helped by the agriculture produce which is the outcomes which is coming in large shift which is happening from unorganized to organized both in terms of formalization of economy and in terms of retail as well. Inflation definitely has been supported, has supported the consumption. Spending decisions definitely are more deliberate, we believe so. We see consumer sentiment. If I describe it, it is, it is stable and cautiously positive. And I would not say too positive, but yes, cautiously is positive. It is not exuberant, definitely not fragile.
We are seeing consistent footfall growth across markets. Spending has increased largely during occasions, festivals, weddings events, family events rather than lot of impulse driven consumption. Saving is definitely getting into pressure. Whenever we speak to consumer, when I go to the market, whenever I talk to some of the customer, we see their saving rate has gone down. Consumption definitely we don’t see has weakened. It is largely getting driven also by younger consumers customers. They are definitely once again influencing the family purchase decision, especially in fashion and apparel. In our market competition has also increased, definitely giving more choices to consumers.
Importantly this is increasing or expanding the awareness and the footfall for organized retail as a whole. That is the overall piece that we see within our markets because of consumption, because of more stores getting opened. Definitely more fashionism is also coming. I mean a lot of these initiatives by the government right now had not led to a meaningful impact in demand patterns whether it is GST or labor code and stuff. On the other side we see good monsoons, higher MSPs. They definitely are putting more money in our farmers hand or the supportive businesses which needs or helps the farmer or support or raise the farmers.
So there we are seeing some consumption potential. Weather definitely has been uneven for us in this Cuban. We have seen excess rainfall or activity of cyclones during festival in parts of eastern India in southern markets. So we have seen some disruption on these markets and some lower growth also coming in here. North and north market. The north of India saw a delayed or a milder winter initially leading to little dispersed demand for heavy winters and all. So festive demand overall was reasonable. Diwali, which was not a winter led Diwali yet the demand was good, was okay.
It was not great, but it was the demand held up. Winter Demand definitely got delayed a little bit. It is not lost. It didn’t got lost. But yes, it was little erratic. Some categories we actually sold off during initial times and inventory was an issue at times. But ultimately we got a lot of these inventory. We definitely don’t see it as overstock. Once again we are seeing some erratic festive, sorry weather weather patterns in the month of January. Initial days were colder, last one or one and a half weeks were little lighter. So. So but definitely it is going to come back.
Marriage calendar has also been very good in this particular quarter and this has definitely supported some demand and post festive demand. So for us for a vmart, I think we are very clear and very deliberate. We operate in value retail where the pricing is aggressive by design. As a result we do have lower margin than some of the peers. If you look at the national players like Julio or others. Or maybe we have some average or lower gross margin. But you know, we definitely offset this to our tight cost control of operations or inventory terms.
And that is what we’ve been very strong in. That definitely creates a stronger per store profitability and a good payback on our new stores. Our advantage is definitely focus and discipline in our operations. We know our core customers, our core market intimately. I mean this is that the strength of vmart is we definitely blend both our private labels, which is almost 70% now and the market labels which to suit our, you know, the regional requirement or the local taste of the consumer. Which we definitely do it through leveraging our deep vendor network. Whether we the partnership that we have with our vendors or like a vendor or a manufacturing partner.
And we definitely believe in this partnership and leverage this partnership to keep our cost competitive and our supply responsive in the value segment. I think as it is growing rapidly and we believe our format, the sourcing discipline that we have and the execution reason that definitely gives us a sustainable edge. I mean equally for us it is also important to know that what we don’t believe in, what we don’t want to do, we are not pursuing growth that dilutes our returns. We don’t want to do that. We are not using heavy discounting to mark our demand volatility and we are not compromising our store economics for our headline expansion.
We just don’t want to go ahead and open up stores in every territory or anything that comes up to us. So I think the quarter has been good. The performance reflects this approach. Our quarter specific numbers was influenced by festive timing, weather related, the trajectory of the business remain intact. We maintained strict Expense control. Operating cost definitely increased in line with planned expansion and normal inflation. But we do did not see any uncontrolled cost which came in as our volumes improved. This definitely translated into strong operating leverage. We held up our margins underscoring the the resilience of our model.
Q3 definitely is not a flashy one off or an aggressive markdown quarter. It is definitely about solid execution, growing revenue with healthy margin, improving revenue quality and protecting our cash generation. That was a key highlight of our quarter. Demand visibility definitely was uncertain particularly in Winterland. Categories consciously chose to protect our margin and I mean we did not just go for one week because we wanted to also deliver in good times because winter winter is always erratic in nature. So there are some long term decisions that we have taken. We definitely have our rigor in our disciplined execution.
Our stores are very the new store openings that we do are very clearly and carefully selected and typically breakeven. They do break even as you all know within our first or second month of operations our expansions have been completely funded by our internal accruals keeping the balance sheet strong and virtually debt free. So that’s the key highlight. Capital discipline is central to our model. We definitely want to build efficient store keeping our first grade capex in control meaningfully lower than the industry averages. This definitely supports attractive store level trends on the technology and the process side.
We definitely continue to upgrade our systems, our processes, the entire planning function, merchandising function, inventory management. These are increasingly becoming system led supported by tools, ERP enhancements, analytics. Some early AI use cases have also been deployed or trying to deploy a lot of those. We’re trying to we’re definitely working not on refining our assortment, removing slow moving SKUs from our systems faster sharpening our focus on categories with consistent demand. We are decluttering some of those trying to declutter a lot of those across merchandising, supply chain operations leadership alignment around efficiency, governance and long term value creation is definitely strong.
This quarter we also saw our unlimited business coming up very well. Early signs of improvements are visible there changes implemented in the last few quarters have definitely reflected some good benefits. While a few locations are still not performing there to their potential opportunity remains significant. We are we are definitely proceeding with proceeding with patience and lime road for us continues to play as a clear only available meant platform. The focus is firmly on profitability here and back end capability as well as scale for its just go and scale for the business or order sake. Our marketing expense has been sharply curtailed.
All our only orders that we do from our stores and all are 100% prepaid orders. The technology backbone is definitely being leveraged to support the store fulfillment and our endless I capabilities. So we definitely looking ahead, we remain cautiously optimistic and firmly long term in our outlook. Demand definitely should continue to evolve gradually supported by stable inflation, improving rural incomes and ongoing shift towards more organized details. Definitely our input costs are getting eased which do provide margin support. But yes we are very vigilant on any of these reversals or any one time expense rise. So we are very vigilant on all of those.
We definitely want to grow, bring in capability and resources but not increase the expenses to a larger extent. Every investment that we do is evaluated through a multi multi year return lenses. We just don’t work for one or two years of our sales. We are building for scale and sustainability, definitely not short term spikes. So that is the key thing because we keep hearing a lot of analysts asking us questions. We need to be very, very clear on this. We definitely are confident in the operations from our fundamentals because we have grown across markets, not in selective pockets.
If you look at our growth pattern or our new store opening pattern. Also our strong performance is there from all the new stores that we have opened up this year. We have seen a good visible improvement in our unlimited market, the South India market. We have seen positive consumer response wherever our shopper product or sharper design that we have launched or wherever that we have done good job. Margin definitely have been improved by efficiency, not by price distortion or increasing the prices. We definitely have a very strong vendor ecosystem and a very very strong governance framework.
And then beyond all I think we are riding on the India long term consumption story. So these are the highlights. I definitely are there on the call. I’ll hand over to Anand to take you through the numbers and then I’ll answer your question. Thank you.
Anand Agarwal — Chief Financial Officer
Thank you Lalit and good morning everybody. Let me take you through some of the key highlights from this quarter and then we can open the session for questions. So as Lalit highlighted, it’s been a quarter of mixed signals but ultimately a strong financial delivery. While we faced headwinds with the delay in winter onset in north and also continued political disturbances in the east, our focus on operational efficiencies and the strong performance from south markets helped us deliver a robust bottom line performance. I think Lalit spoke a lot about the monsoon and the weather so I’ll skip that part.
But despite a good monsoon and forecast of a good strong early winter weather still played spoil sport with peak winters getting delayed in entire north and west India leading to a lull post Diwali. Actually overall temperatures have generally been hotter throughout the year, reflecting the increasing impact of climate change which was also reflective in the lower peak winter days in this quarter. We had actually in fact planned for a summer Diwali this year assuming the delay in winters like previous year. However, we had not actually anticipated such a severe delay and complete lack of winters almost till 20th of December in almost entire North India.
Even actually states like Rajasthan, Gujarat, mp they were actually the most severely impacted even till end of December. Irrespective I think as mentioned, efficient planning and good management on inventory did not lead to any adverse impact on inventory at all. In fact there was a time when we were actually short on inventory for some particular areas. So at an overall level, while the festive period went off reasonably well, the winter demand did not pan out as anticipated. But we continue to execute well on our expansion strategy, adding 23 new stores during the quarter, taking the total store count to 554 stores.
New stores actually are ramping up much faster and better than historical averages, delivering better than network throughput which reinforces confidence in both site selection discipline as well as the brand relevance across Tier 2 and Tier 3 markets. And this goes equally well for the South India territory where we have also started to expand more. Although the expansion in south in this quarter seems a little low, but the plans for south remain intact. Coming to Margins Gross margins for the quarter remained stable year on year despite a 40% decline in lime road commission income which flows directly or entirely into the gross margin but now forms a very small share of the overall revenue, importantly excluding line road.
Also gross margins in the offline business actually expanded by 70bps year on year which was largely driven by better inventory health leading to better efficiency which also necessitated lesser discounting intensity and also a change in improved product mix coming out of the Maris season etc. The ongoing strategic initiatives led to improved inventory health and a better gross margin and for the full year also we expect the offline gross margin to remain broadly stable versus last year as our value proposition continues to focus on volume net growth Coming to expenses the total expenses for the quarter only increased by 1% which actually led to a good operating leverage on the bottom line.
This was largely led by robust cost controls amongst in all cost lines including manpower, also line road expenses and also lower marketing spends as we continue to drive loyalty based traffic to stores through digital interventions. Our NPS and Google ratings remain at all time high and they give a source of confidence also for us to keep expanding more. The reductions in line road cost was strategic and sustainable as we have been focusing on breaking even this segment at the earliest. The business has already been profitable at CM3 level since the last one and a half years and we continue to improve further and build on that.
On the Labor Code impact, we recognized an exceptional cost of 2.2.1 crores arising out of the changes proposed. While the rules are yet to be announced but basis whatever information and the guidance available was there, we have taken a one time hit as prescribed by law. As a net result of the sustained operational efficiencies, our pre India’s EBITDA improved from 10.8% in last year to 12.2% this year and the reported which is the post index EBITDA grew 22% year on year to 210 crores with margins expanding by 190bps to 18.6% reflecting better cost absorption and productivity gains.
The EBITDA growth Translated into a 23% year on increase in Q3 PAT to 88 crores on a full year basis or rather on a YTD basis. PAT has now grown almost 3×213 crores reflecting consistency rather than quarter specific effects. Coming to Inventory Our days of inventory increased marginally by 1% to 95 days. The slight increase is largely due to the slight change in the FMCG inventory as we strategically increased space for apparel offtake during winter. But this is a larger initiative where we are trying to become more focused on fashion than just fmcg. Irrespective the FMCG and the winter inventory remains under control and healthy.
In fact, the freshness of inventory has improved year on year due to aggressive liquidation of old stocks in the earlier quarters leading to in fact lower provisioning. Capex for the quarter stood at 57 crores primarily towards new store additions and selective refurbishments. On a YTD basis, the business generated positive free cash flow of 63 crores which was also 9.4% up year on year. Going forward, we continue to remain bullish on the market opportunity in all geographies and aspire to increase our footprint in a disciplined, profitable and sustainable trajectory. As communicated in last quarter’s call, we are looking to end the year with 75 plus new source additions this year.
So that is all from my side and I request the moderator to open the house for questions now.
Questions and Answers:
operator
Thank you, thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on Their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Sukret Patil from Eyesight Fintrade. Please go ahead.
Sucrit Patil
Good morning to the team. I have two questions. My first question is with festive led recovery driving 21% revenue growth this quarter, how do you see discretionary demand in tier two, tier three cities evolving over the next one to two years? And what specific initiatives like private label expansion or omnichannel integration will be used to sustain double digit growth beyond FY26? That’s my first question. I’ll ask my second question after this. Thank you.
Lalit Agarwal
I’m not still clear about your question, but anyway I think see largely we all know that for for our market it is largely led by festives and seasonality. This particular quarter we would see both big festivals coming in Holi as well as Feed which is both lying in this particular quarter there is going to be a good February and March that we are expecting. So this will definitely go up. We definitely have lot of initiatives in terms of ranging our summer collection. We have already launched our summer collection some part of the geography in India.
We have seen good pongal festival also coming in this, this year, this month. So pongal has been good in this market as as today we are speaking this is a Basan Punchmi day in eastern part of India. They call it Saswati Puja there also. So a lot of festive LED demand and regional festivals which is there in different parts of the of the geography and that is what one which we go to lead and then definitely our own designs, our assortments, our products. Whether it is created by our own design team through our private labels or private labels through our vendors, more exclusive labels that we have of our vendors.
These all definitely are going to lead into the demand and will definitely keep the growth momentum.
Sucrit Patil
My second question is to margins and capital efficiency. EBITDA margins have improved to 11.7% despite cost pressures. Looking ahead, what levers such as store rationalization, inventory efficiency or digital scale contribution do you expect to drive margin expansion in the next two to three quarters and how will this translate into improved ROC and depth reduction in the target? Thank you.
Lalit Agarwal
But anyway I think say definitely the organization is working towards increasing both the return on capital employed as well as the margins. We definitely believe that every expansion or increase in revenue will Bring in some benefit into our cost, our expenses as a percentage of sales. So we will definitely deliver better margin even going forward. That’s the thought process and that is what we are all here working and planning for. So we definitely believe a lot of digital initiative as I mentioned, lot of efficiency generation in our process or even upskilling the people. These all should be the leading guidance or guided to increasing the sales as well as creating efficiency, not reducing the cost because we don’t have too much of area to reduce our cost.
We definitely want to become more efficient and more scalable simultaneously so that we are able to deliver better returns both for the equity or for the capital employed.
Sucrit Patil
Thank you for the guidance and I wish the team best of luck for the next quarter.
operator
Thank you. The next question comes from the line of Hitendra Pradhan from Maximal Capital. Please go ahead.
Hitaindra Pradhan
Hi sir. Thanks for the opportunity. So my first question is in the gross margin kind of improved this quarter. So what was the mix of your winter assortment versus Festive this quarter?
Lalit Agarwal
Winter assortment versus Festive?
Hitaindra Pradhan
Yeah.
Lalit Agarwal
Our winter in normally in these quarter are upwards of 40% mix. The winter pre winter what we categorize if we go towards the December the peak peak winter season it goes up to 62, 63% also but an overall level including the festive month it was around 40, 45% balance. Definitely something which is not purely festive but largely India wears the basic products and autumn products also during festive. So that is what contributes to almost 55 to 58% .
Hitaindra Pradhan
And those usually go like full price throughput and contribute to your gross margin. Or is there something else that contributed to your gross margin uptick this quarter?
Lalit Agarwal
The gross margin uptick is largely because of higher full price sell through because we generally don’t discount during this quarter and we have not done any discounting in this quarter. So that is definitely because of better margin and then better margin sales of the product. This is also led due to I think maybe Arundan gives you a little more insight into the whole shrinkage management or the provision for the shrinkage.
Anand Agarwal
Yeah, so you are absolutely right. So one is obviously the as I mentioned in my opening remarks as well, the overall health of the inventory is very good which actually did not require any significant amount of discounting. So in any case quarter three has always been a very good profitable quarter for us where we always try to drive the maximum full price sell throughs and this quarter exceptionally has been slightly been better with respect to that. And also I think there’s a lot of Work that we had done around our, you know, reducing our shrinkages and therefore the provision that we usually do around, you know, old age inventory and the shrinkages that has also come down this quarter.
So that’s already there in our investor presentation as well. But yes, all of these has contributed to the improved margin this quarter. And because the inventory health remains very good, I think we should be able to look at healthy, stable margins going forward as well.
Hitaindra Pradhan
Okay. Okay, sir, and the second question is related to the long term. Like, you know, your sir has made comment about the value proposition, you know, staying intact for your value retained in the growth. But if we look at the numbers, you know, beyond after like FY22, FY23, there has been a decline in terms of your triple hd, you know, for the markets where you are like already stores have matured and all and they are not even doing, you know, about nominal GDP level growth. And this year, I mean it is below like probably if we take last two, three quarters trailing or you know, that trend is, you know, going down.
So how do you see the SSS or euro store level growth, you know, panning out in next couple of years? And do you think that, you know, tier three, tier four, these places where you have already stored, they can, you know, clock more than, you know, nominal GDP level growth?
Lalit Agarwal
So I don’t know what is your intention, what are you trying to intend? But we definitely believe that we are doing as a company, we are performing better. Last year also we gave a great performance. This year also our performance on the same store sales growth has been good definitely this quarter because the Pujo month, Pujo festival was in the last quarter. You are not seeing a high or a flat or you’re seeing a flattish same store sales growth. But if I normalize, we would see a stable 5 to 6% same store sales growth which is coming in.
See, the same store sales growth is a, is a function of all our doing. It is not about the market. It is more about what are we delivering, how much is the market getting occupied by more competition and how many more organized players are walking out down into that particular town or city where we are operating. So I think the company and then the new management is fully into it to try and bring in initiatives, to try and definitely bring in the creativity and have very clear processes and great commitment so as to deliver those kind of growth.
And we believe there is opportunity in the market. We believe that there is more fashionism coming in. Definitely it has not been a lot of per capita income growth for our consumer segment. So that consumer segment is still struggling somewhere. We believe their incomes are going to rise and it will definitely lead into more salesforce sales growth. Because whatever resilience that we have demonstrated in spite of so much of competition coming in, that definitely brings in a very clear strong confidence on our fundamentals and we will definitely keep continuously delivering the safe process growth beyond the GDP growth.
Hitaindra Pradhan
Okay, thank you sir. All the best.
operator
Thank you. We take the next question from Kaivalya bank from IIFL Capital. Please go ahead.
Kaivalya Baing
Hi sir. Good morning. Am I audible?
Lalit Agarwal
Yes.
Kaivalya Baing
Sir, my first question is regarding the revenue growth. So if we look at 24 and 25 as well, we were generally clocking in a mid teens growth in revenue, but a slight slowdown this quarter. Could you just elaborate on what would be the factors or what was different compared to last year? That there has been a slight moderation. And in addition to that a question is, could you just also tell me which states have been facing a slowdown, if any.
Lalit Agarwal
So I think as I already explained that compared to last year, same quarter last year the Pujo festival which is celebrated largely in eastern southern part of India, that was largely October and the sales was also a lot of sales came into the month of October, which is the Q3. This year the festival, Indian festival calendar moves by the lunar process. Lunar calendar. So that got moved into September. So there is a lot of shift of sales which has happened. That is why you’re not able to see the similar growth pattern which is your team growth that you wanted.
13, 15%, 17% growth. And that is the actual growth which is coming in. So you will see a little higher growth maybe in the coming quarter. So we will the quarter on quarter you will see these things happening. But overall we believe. The fundamentals are great and we will continue growing. If I adjust even the festive shift from Q2 to Q3, we are our revenue growth will fall into around 15%.
Kaivalya Baing
Understood, understood. And second question sir, regarding the margin expansion this quarter. So considering a 9% growth, the most of your margin expansion should be coming from efficiencies. Correct me if I’m wrong and not just because of leverage. So what could be the exact efficiency that you were referring? I understand marketing spends must have been rationalized to a certain extent. But apart from that, could you just tell me what efficiencies are being realized?
Lalit Agarwal
See efficiency in terms of what are the. What are my cost? My costs are largely rentals. My costs are employee costs. My employee cost are operational cost, my cost are Logistic cost warehousing costs, my costs are marketing costs. So I think efficiency across the area which is controllable rentals I cannot reduce. There is a growth, there is a predefined growth rate which is distributed in the rentals. You can’t bring in an efficiency there. You can definitely increase your sales per square feet by bringing down the rentals cost as a percentage of sales. And other than that you have areas of efficiency which you have driven and as organization we have driven.
The entire team has come together and there’s lot to do here. But yes, we are trying to drive more sales out of the same number of people or less number of people. We’re trying to drive more sales by reducing some processes, by integrating technology, by bringing in some additional new ways of marketing, new digital ways of marketing or creating a store led, which is consumer led marketing which is the key, which generates the maximum impact. So we have been very, very good in terms of focusing on our Google ratings, focusing on our NPS scorecard customers.
So we have been really working hard to give the customer those kind of experiences and those kind of pleasant shopping joy so that they come back again and again. And that is it is just not trying to drive cost reduction, just trying to be efficient both qualitatively as well as quantitatively.
Kaivalya Baing
Just a follow up on this. Do you see more ample opportunities in the same levers for further margin expansion or would you have to rely on leverage going forward?
Lalit Agarwal
Fail levers on leverage.
Anand Agarwal
I think see on a sustainable basis it will always be difficult to keep reducing cost beyond a certain level. So I think as Lalit had already mentioned, we are already very, very fine tuned on cost. So even the cost reductions that we are able to see is actually coming in for some more leverage right now. It is not sales leverage as much as would have been possible. But in future what I foresee is that we will be, we should be able to get more margin advantage only out of leverage. More out of leverage than cost optimization.
So cost optimizations we are already amongst the, you know, the best as far as the PNL is concerned.
Kaivalya Baing
Thank you sir, this is very helpful. I will come back in the queue for further questions. Wishing you and your team the best of luck for future.
operator
Thank you. The next question comes from the line of Devanshu Bansal from MK Global Financial Services. Please go ahead. Devanshu, please go ahead and kindly unmute your line in case if you’re on mute.
Devanshu Bansal
Yes, yes, sorry. Apologies. So, good morning. First question is the volume growth for unlimited is pretty healthy. At about 10% in nine months versus about 1% for Vmart. When we see the sales per square feet, there is still room for unlimited to continue growing faster. The sales per square feet is about 16, 17% lower. So question is, now that we’re seeing better trends, can we sort of expect unlimited to continue delivering better SSD trends for us over next few years? So better clarity would help.
Anand Agarwal
Yeah, Devanshu, I think what you’re asking is also what we are trying to deliver. And consistently, if you look at the last two years, we have been delivering better numbers on unlimited. So unlimited we have actually if we were to look at the breakup of unlimited, we have some legacy stores and we have also almost like 50 plus stores now that we have opened 45 plus stores that we have opened in unlimited post acquisition. So all the new stores that we have been opening in unlimited, most of them have been delivering much better sales per square feet and much better profitability in line with the established Vmart model.
And as the average of these new stores starts to take over the average of the legacy stores, we will see improved sales per square feet numbers also for the complete unlimited chain. Having said that, I must also mention that the legacy stores that we have in unlimited, they are not unprofitable, they are just slightly bigger in size, bigger in area, and have had a established clientele which works on a certain principle of what they want to buy, when they want to buy, etc. But the newer stores, they are definitely more in tier 2, tier 3 towns delivering much healthier numbers.
And we continue to put our faith in expanding the unlimited business and increasing the sales per square feet to bring it in line with Vmart numbers in the next two to three years.
Devanshu Bansal
Thanks for this explanation Anand. So just from a steady state perspective, because we have been in this region for quite some time now, do you believe that the sales per square feet for unlimited can even be higher than vmart or at best can be similar to Vmart So any color there.
Anand Agarwal
So as of now, our first priority is to get to get this to at par with Vmart at a entire unlimited network level. So for the newer stores, as I mentioned, they are already almost at par or better than even Vmart stores. But for the complete unlimited brand or network, the first priority is to get that to the Vmart average and then we will look at how we can increase it further. Obviously there is headroom and there is opportunity to improve it even further.
Devanshu Bansal
Fair enough. And second question is to understand the model, I guess factor in slightly higher gross margins for unlimited to sort of compensate for the higher rentals. Assuming we reach a similar to VMAT throughput over time, as you indicated, over next two, three years, can the model deliver similar to VMAT EBITDA margin also at that throughput level? Or there are some structural reasons because of which EBITDA margins may remain lower?
Anand Agarwal
No, absolutely. We have always been very, very profitability focused and our priority is always to make sure that the EBITDA margins are first achieved rather than just the top line numbers. We have never ever chased top line just to get a headline growth. Our priority always is to get the EBITDA margins first. And therefore, while you ask for sales per square feet or the overall productivity numbers, but we look at the unlimited performance more from the profitability perspective. So our objective is to get the profitability in line with vmart at the soonest possible.
Devanshu Bansal
Understood. So lastly, if I can squeeze in for nine months, our SSD has been positive, right? So, but rent has increased about 20, 30 basis points. So is this increase broad based across both vmart and unlimited stores or there are some specific regions which are seeing higher rentals?
Anand Agarwal
This is a normal curve. So there is nothing extraordinary to read into this. This is absolutely normal. We remain very, very cost conscious in terms of choosing new sites and ensuring that our cost or rental per square feet remains at a certain level. So the SSG while at a overall full year basis is around 3%. But as we grow this SSG you will see the percentage, you know, coming down on the rental as well. You should actually always look at the per square feet rental and that should give you a good color on how that line is actually moving.
In fact, for all the cost lines, the percentages will always vary depending on the performance and the operating leverage that you get in any one quarter. So it’s always better to look at the cost lines on a per square feet basis.
Devanshu Bansal
Fair enough. So as a bookkeeping, for VMAT, our rental monthly rental per square feet would still be around 45 rupees, right? And for unlimited it should be closer to 65, 70 odd rupees. Is that fairly a good understanding?
Anand Agarwal
No. VMART should be closer to around 48, 49 and for unlimited that would be at around 65.
Devanshu Bansal
65. Fair enough. Thanks for taking my questions. That’s it from.
operator
Thank you. We take the next question from Smithagala from RSPN Ventures. Please go ahead.
Smith Gala
Yeah, thank you for the opportunity. First question from my side would be in the longer term for next two or three years, what is the square. Feet we are looking to add. And what is the SSSG which we are targeting, which we are around 3. Or 4% for nine months till now. And what will be the bridge to get to that SSSG which we are looking at?
Anand Agarwal
So the square footage addition on an annual basis should be at around 13, 14%. That is what we have targeted and that is a long term target that we have taken. It’s not just for one year or this year or the next year. I think in the medium to long term we are building up 13 to 14% area addition every year. The SSG aspirations always need to be mid to high, single digit 5 to 8%. So that’s the aspiration. Obviously there will be quarterly disturbances, there will be, you know, anomalies and opportunities that we will keep, you know, encountering as we move along.
But as a mid to long term average I think 5 to 7%, 5 to 8% is something that we are definitely trying to deliver.
Lalit Agarwal
Okay. The 13 to 14 square feet. Addition which we are looking over the long term. So is there enough headroom in our current markets or we will be looking to enter some sort of new markets. Going forward in the same, in the same country.
Lalit Agarwal
The markets are large enough and we have almost reached all the states of India. So within those states definitely we will penetrate. There will be maybe 30% of the expansion, 35% of the expansion in the same town and city where we are present. But still 60, 65% of the expansion will come from maybe different towns in the similar states where we are present. We definitely believe in, still believe in that cluster philosophy. We would want to penetrate more into our existing network of India where we are already there and there’s a lot of room and there’s a lot of potentiality that we are able to see in all of these markets.
Smith Gala
Okay, thank you. I’ll join back the team.
operator
Thank you. The next question comes from the line of Anshul Achal from Nuvama Wealth Management. Please go ahead.
Rajiv Bharati
Hello, Good afternoon. Good morning sir. Rajiv here. Sir, one question on cost of retailing. This is barring the employee cost line item and the rent and overall cost of retailing has become 181 rupees per square feet per month pre in days basis. So this 7, 7 rupees reduction on other expenses. Was there a cost which you are carrying for several quarters because this, this, this we are now getting into pre Covid levels of cost of retailing. Just want to get was there a one off in the past few quarters which is shaved now.
Anand Agarwal
If I am able to understand your question, what you’re asking me is is there any seasonal aberration in this quarter because obviously costs are coming out low. Is that your question?
Rajiv Bharati
No, sir. So your cost of retailing historically pre Covid used to be, let’s say in Q3 close to 180 rupees. And after that for the last several years it was nudging towards 200. I was wondering whether from COVID till today, till previous quarter, was there a, was there an external cost you were carrying which is, which is not there. For example some consultant you hire which, which is not. Those fees are not there in this quarter and that’s the leverage which we are seeing.
Anand Agarwal
So while we did hire a consultant. That is right. But it is not such a significant cost and that happened over a period of. Over two financial years. So it was not a very high significant cost. I think what you need to segregate is the lime road cost because that is an extra addition which happened in 22 and because of which you know, the, the overall cost in the P and L sort of looked inflated for almost three years. It’s only since last year that we’ve started to correct that and reduce that cost base which has now started to come into the P and L.
So you need to break down the P and L while we present line road numbers as segment numbers also. So if you were to isolate that and look at the offline P and L separately you should be able to see there is no further aberration.
Rajiv Bharati
So actually this, this 181 and 194, let’s say 194 was the last year’s number. I have removed lime road impact from, from the, from the cost line item also. So this, this 13 rupees drop partly explains from employee and rent partly but there is seven rupees still coming from other expense line and of which I am. I’m just wondering whether how sticky is this? Is this a new cost structure which we will maintain here onwards?
Lalit Agarwal
See, I mean there are, there are some inflationary items. There are some inflation also and then there are some, some cost which you cannot segregate in a particular department even. Maybe there are logistic cost or there are expenses which are related to other, other operations. Not necessarily what you are trying to say. I think, I think there is a cost which is going to be there. It will always be bucketed like that. So. But, but yes, the cost as a number will not go down. There’s no extraordinary cost which is getting post Covid so these are either a segregation or some some change in the accounting processes that is how you are seeing it.
Rajiv Bharati
Sure. That’s all my session. Thanks a lot and all the best.
operator
Thank you ladies and gentlemen. We take that as the last question for today. I would now like to hand the conference over to Mr. Lalit Agarwal for the closing remarks.
Lalit Agarwal
Yeah. Thank you so much. Thank you everyone for being there and being in this call and being with us in all of these difficult times. But let me underscore this that this performance and strategy are not happenstance. They definitely reflect a seasoned promoters mindset. Steady growth, capital discipline and a strong balance sheet. We will definitely continue on all of those areas not bring in shorter spikes. I really thank everyone for their attention. Thank you so much. Have a good day.
Anand Agarwal
Thank you.
operator
Thank you sir. Thank you sir. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.