V2 Retail Ltd (NSE: V2RETAIL) Q3 2025 Earnings Call dated Jan. 24, 2025
Corporate Participants:
Akash Agarwal — Whole Time Director
Analysts:
Unidentified Participant
Varun Singh — Analyst
Gaurav Jogani — Analyst
Ankush Agrawal — Analyst
Chirag Shah — Analyst
Chintan Sheth — Analyst
Ankit Babel — Analyst
Rajesh Vora — Analyst
Devansh Dhruv — Analyst
Vignesh Iyer — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the V2 Retail Limited Q&9 months FY25 conference call. 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 the conference call, please signal an operator by pressing Star then zero on your Touchstone phone.
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 certain forward-looking statements concerning V2 Limited business prospects and profitability which are subject to several risks and uncertainties and the actual result could materially differ from those in such forward-looking statements.
I now hand the conference over to Mr. Akash Agarwal, Whole Time Director V2 Retail. Thank you and over to you, sir.
Akash Agarwal — Whole Time Director
Good morning, everyone. A very warm welcome to our third quarter and nine month FY25 earnings conference call. I hope everyone has had an opportunity to look at our results. The presentation and press release have been uploaded on the stock exchanges and our company’s website.
We are thrilled to report a stellar overall performance for the first nine months of the financial year. The company has been able to deliver industry leading performance despite higher base and overall subdued consumer sentiment. We believe the outperformance is a testament to the success of our strategic initiatives, which have driven excellence in innovative product development, enhanced store experiences and exceptional customer satisfaction. AT V2 Retail, the strategic initiatives undertaken so far and also those under implementation has a potential to further improve our overall performance positively.
Let me start with the key Updates. Revenue for 9 months ended December 2024 surpassed our historic FY24 full year revenue from operations. Companies PAT of 65.6 crores for the 9 months ended December 2024 has been at historically high level surpassing highest ever yearly pat.
The company opened 45 stores and closed two stores during these nine months taking our total store count to 160 stores. We have added another three stores during the current quarter taking the total store count in January to 163 stores. The store addition momentum will continue as we have a very healthy pipeline of upcoming stores. The growth across all our stores have been very encouraging translating into a robust same store sales growth of 31% in the nine months of this financial year.
We have been able to consistently deliver high double digit SSG for the last few quarters due to our customer centric and product first approach. The volume growth has been 43% in the nine months of this financial year.
The full price sales contributed 91% in these nine months as compared to 85% in in the nine months of the previous financial year. We believe that our sustainable and scalable business model will help us to improve our ROCE and ROE going forward.
Now some performance highlights for the third quarter. Revenue from operations stood at INR590.9 crores registering a growth of 58% YoY basis. The gross margin stood at 32.1% in the third quarter as compared to 31.4% and in the corresponding quarter last year. The EBITDA for the third quarter stood at INR111.5 crores as compared to INR60.9 crores in the third quarter of last year registering a growth of 83% on a YoY basis.
The EBITDA margin stood at 18.9% as compared to 16.3%. The PAT for the third quarter stood at a record INR51.2 crores as compared to INR23.6 crores in the corresponding quarter last year, registering a stellar growth of 117%.
Now talking about the performance highlights of the nine months. Revenue from operations stood at INR1,386 crores registering a growth of 60% on a yoy basis. Gross margin stood at 29.8% as compared to 30.3% in the corresponding nine months last year. The EBITDA for these nine months stood at INR200 crores as compared to INR116.4 crores in these nine months, registering a growth of 72% on a yoy basis.
The EBITDA margin increased from 13.4% to 14.4% in these nine months of this financial year. The PAT for the nine months stood at a record INR65.6 crores as compared to INR24 crores in the corresponding period last year, registering an amazing growth of 172% on a YOY basis.
With this, I now leave the floor open for questions.
Questions and Answers:
Operator
Thank you very much. We will now begin 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 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment, while the question queue assembles. We will take a first question from the line of Abhishek from AB Capital. Please go ahead.
Unidentified Participant
Hello. Am I audible?
Akash Agarwal
Yes sir, you’re audible.
Unidentified Participant
Yes. First of all, congratulations on great set of numbers. So first my first question was that you had guided for pat of around INR60 crore for the whole year. Now we have already achieved that in Q3. Does that mean that you expect Q4 to be like Q2 as in EBITDA positive but pat flat or can we accept — expect some pat in Q4 as well?
Akash Agarwal
So this time Eid is in March. So we are expecting a positive pat number in Q4 as well.
Unidentified Participant
Okay. Okay. My second question is at a broad level, like we have been having a great run for the last 1, 2 years. So how long do you think we can continue this kind of, you know, 50% year on year sales growth? Like how long till we hit the glass ceiling?
Akash Agarwal
The plan is to continue this growth for the next decade. This is just the beginning for us. And we want to grow at least 50% revenue for the next 10 years.
Unidentified Participant
Okay. Okay. Another thing is I saw that you have increased your average selling price to 343. Do you think this is the maximum or it can be increased more?
Akash Agarwal
So there are two things happening here. One is the change in product mix. So the contribution of apparel has increased From I think 89% to almost 93%. So the ASP in apparel is higher. And we’ve also gotten rid of a lot of entry price point ranges where we couldn’t offer a differentiated product to our customers. So it’s a combination of both. But I don’t think there’s much more scope to increase the ASP. It should be maintained at a plus 5% to 10% or minus 5% to 10% level.
Unidentified Participant
Okay. Okay. And my final question is, you had, I saw in an interview that you had told that you will open. You plan to open around 100 stores next year. So are you planning to raise some capital or it is entirely internally accrued?
Akash Agarwal
The hundred stores that we’re planning for next year will be open through internal accruals. Our cash flows enable us to do so.
Unidentified Participant
Okay. Okay. So no plans to raise any capital in the immediate future.
Akash Agarwal
It all depends on the market situation. Due to our past experiences also we have learned that it’s always when, if you’re fairly valued by the market, it’s always good to have some extra cash on the books. But it won’t be to like fund the expansion because that will be sufficient with the internal accruals. So it’ll be more to just have some war chest or just some extra cash on the books.
Unidentified Participant
Okay. Thank you. Thank you.
Operator
Thank you. Next question is from the line of Varun Singh from Alpha Accurate Advisors. Please go ahead.
Varun Singh
Yeah, thanks for the opportunity and many congratulations for such a great set of numbers given that consumer facing so many other companies are struggling for growth. So my August, my first question is on the key growth enablers with regards to, you know, whatever number that we are delivering and the incremental amount of hard work that you are putting up, you can, if you can highlight something on the work that you are doing which is yielding such a, such a great set of results.
Akash Agarwal
That conversation would be an hour long because you know we have almost started and implemented 50 different projects and there are 50 other projects that are being implemented right now. So it has been led by product development. Improvement in supply chain, improvement in freshness.
Varun Singh
We can reduce this entire talk to just product development itself. So incrementally if you wish to highlight, you know, anything, I mean what, what else are we doing out there? Just on product development itself.
Akash Agarwal
Yeah. So currently our product development is still only 35% of our total product offering. And as that contribution is increasing, you can see the stellar numbers and it’s been reflected in the numbers. So we are very excited about the future prospect because we want to take this number from 35% to almost 80% by next summer. So I think that will be the biggest driver and you know, working harder on sourcing, costing fabrics, fits and also…
Varun Singh
35% to 80% next year. Akash, if you can talk about, you know, any key recruitment also that we are doing to, you know, for enabling our abilities on this front.
Akash Agarwal
Yeah, so we were building the team for the last two years. Now we have almost 150 people working directly or indirectly in the buying and merchandising and product development team. So it was about building a foundation, building a base and now I think it’s time to get the productivity and build the systems and, and already the processes are set, the SOPs are set.
But we wanted to take a gradual approach because we didn’t want to undertake a lot of risk, you know, increasing the product development in one season, doubling it. So that’s why we are taking a cautious and a gradual approach and increasing it 5% to 7% every month or every two months. And we’ve got a very good response till now.
Varun Singh
Understood, understood, very fair point. And secondly, on the same store sales growth number which is 25% and very, very strong and robust number, what kind of number you think that is possible for us in Q4, I mean in the near term and of course I think in the long range you keep talking about 12% to be quite an achievable set of numbers. But I mean any, any, any view outlook that you want to share on this, on this front.
Akash Agarwal
It’s a very difficult question to answer because you know when we got an SSSG of 31% last year we thought now the base is higher so let’s only project 10% to 15% this year. But you know, I would say we delivered. Yeah, exactly. And we surprised ourselves. So again for the next year we’re taking a target of 10% because even with 10%, with a base of more than 1,000 rupees per square feet sale per month, we achieve quite good numbers. So we believe that, you know, it’s always better to understate and over deliver than setting unrealistic targets. So but we are working hard to continue this momentum. But when we talk to investors and we give growth numbers, we say even if we get a 10% SSSG, that’s very, very healthy for the business.
Varun Singh
Understood, Understood. Very helpful. And just one last question given that we are becoming so much popular and which is also well reflected, getting well reflected in revenue per square feet, number etc. So your thought on, you know, how we are dealing this, the box retail strategy with regards to the look and feel of the store, store refurbishment policy. So anything you think strategically you want to continue what we are doing, what you are doing right now, or given that we are inspired by all great retailers, globally, India, etc. You think there is a need for change on that front? That’s my last question.
Akash Agarwal
We feel there’s a need for change in each and everything. The learning process never stops and especially the store look and feel and the aesthetics. We are working on it. We have given the project to an architecture firm and we are working on the lights, we are working on the fixtures, we are working on the layout. So definitely there will be some improvement every year on that front as well.
But yes, we are working on it and maybe you know, that will increase our capex by 100 rupees per square feet, 5 to 10%. There might be an increase in capex for a new store, but the new stores that we’re rolling out will be significantly better than the ones that we’re running. And the refurbishment is also under process. So all the stores that need refurbishment are being done according to the new layout.
Varun Singh
Currently, what is the policy of refurbishment? I mean I understand it will be different for different stores, but still any rule of thumb want to call out.
Akash Agarwal
So different fixed assets have different life. So it depends. So the lights have to be changed, for example, every five years. The fixtures have to be changed every 10 years. So it’s different for a different class of fixed asset. So there’s regular refurbishment happening in all stores.
Varun Singh
Understood. Thank you very much and wish you all very best.
Akash Agarwal
Thank you.
Operator
Thank you. Next question is from the line of Palazz Kawali [Phonetic] from Nuvama Wealth. Please go ahead.
Unidentified Participant
Yes sir. Thank you for the opportunity. Hope I’m audible and congratulations for the very good set of results on such a high base. So my first question is on this expenses, operating expenses, both your employee expenses and other operating expenses on a per square feet basis have reduced year on year. So would you like to point out anything that you’re doing or have you decreased the average employee count per store?
Akash Agarwal
So the major chunk of that is the head office cost. So as we open more stores, we’re going to leverage that cost and spread it across a higher retail space area. So you’re going to see that happen because the same 450 employees in the head office that were servicing 100 stores are now servicing 163 stores.
Unidentified Participant
Okay. And sir, what is the average employee count per store for you?
Akash Agarwal
It is around 30 to 35 people in a 10,000 square feet store.
Unidentified Participant
Okay. Okay. And sir, how many stores are in pipeline for Q4?
Akash Agarwal
We would open about 20 to 25 stores in Q4.
Unidentified Participant
Okay. So around 70 stores for the full year is what you’re guiding. And sir, do you see this business momentum continuing for Q4 as well? Because again this was Q4 is also on a high base.
Akash Agarwal
Yes, we have seen the trend continue in January and hopefully it should continue throughout Q4.
Unidentified Participant
Okay. Okay. That’s it from my side. Sir, thank you for your answers and all the best for the future.
Akash Agarwal
Thank you.
Operator
Thank you. Next question is from the line of Gaurav Jogani [Phonetic] from JM Financial. Please go ahead.
Gaurav Jogani
Hi Akash, thank you for taking my question and congratulations on our industry leading performance. My first question is with regards to the store guidance that you have given of hundred stores probably in the next year. Now you know, given that the storage addition would almost be more than 50% odd, would that in any way impact the revenue per square feet? Given you know that these stores would be opened at different stages of time and probably they would be in different stages of maturity as well. So any sense on how the revenue per square feet could shift for the next year?
Akash Agarwal
So even if you look at this year, we are opening 70 stores in this financial year and I think we started the year with 106 stores. So it will be the same effect on the revenue per square feet because we are targeting an SSSG of 10% in the old stores and we project that the new stores will do 20% less per square feet sale than the old matured stores because new stores take about two to three years to mature. So you can take out calculate the blended per square feet sale. But even if you get a 10% SSSG and we add 50% new area next year we should still be above 1000 rupees per square feet revenue per month.
Gaurav Jogani
Okay, sure. And you know the next question is regard to the asp. You said you know that you are now at least your desired level esp, you are nearly there and probably you could see some correction there. So what would be leading to that double digit kind of an SSSG growth for you if you can break that up? I mean would it be largely volume led? Would — and even if it’s volume led, you know, how are you planning to drive that?
Akash Agarwal
So yes, it will be primarily volume led. As I said, the ASP would hover plus minus 5% from the levels and we expect to do the volume growth with the strategies that I already mentioned that is increasing the product development percentage, passing on the cost benefit to the consumer, more robust supply chain, we increase the number of sizes that we offer in each option and it’s all about better assortment planning and having a better design that the customer converts and does a good word of mouth marketing for your brand.
So we have seen that in the last, I would say seven, eight quarters and we hope that it continues because we are working harder and the new season that we are planning is significantly better than the season that we just finished. So that gives us the confidence in terms of designs and acceptability of the products.
Gaurav Jogani
And last question from my end Akash is with regards to the entire value fashion industry, I mean, you know, we have seen a strong rebound in the entire industry since the last one and a half to two years. And you know, if you can highlight at your end, what are you seeing if you expect this kind of growth for the industry to sustain and especially the competitive intensity, you know, given that more and more new players are also coming in seeing this attractiveness of this industry. So, so some comments from your end on the competition side and the overall industry side would be.
Akash Agarwal
So we see it as an opportunity because India still has the highest share of unorganized retail, especially in the value fashion space. So even if more players are entering, more organized players are entering at each price segment, India is a big enough consumption market to accommodate four to five big national level players at each price segment.
So we see it as an opportunity because when you consolidate you get economies of scale and it gets harder and harder for local mom and pop stores or single store brand to compete they cannot spend on product development. They cannot source at 10 to 15% lower cost and the customers, and they start seeing that visible difference. So I think the shift from unorganized to organized is accelerating this growth. So India is poised to grow at 6, 7%. And then you add value, fashion is going faster than overall apparel market. And then you add on top of that the shift from unorganized to organized. So I think the next 10 years it should grow at a CAGR of 13 to 15%.
Gaurav Jogani
Sure. And so just, you know, just to follow up here, I mean, you know, these growth is actually seen in the past two years. But you know, the opportunity has always existed. So what exactly has changed according to, you know, that is leading to this faster shift towards the organized players?
Akash Agarwal
So I think brands like, you know, Zudio have cleared a path or showed to people that what is the potential of this space. And I would say even us, you know, we started product development four years back. We could have started it 14 years back. But like they say, you know, you see the potential of a particular market and people had to innovate. They had to change their business model.
And I think people, that’s why people, you see people doing better because a lot of brands have also shut down those who couldn’t keep up with the requirements of competing in this type of a market. So the consolidation happened and the strong people who were able to innovate and who were able to, you know, execute better, they are still operating. And I think this learning process and this evolution will continue. And whoever comes out the strongest, the four, five people like those will be the top hundred valuable companies in India.
Gaurav Jogani
Sure. Akash, thank you for answering my question and all the best.
Akash Agarwal
Thank you.
Operator
Thank you. Before we take the next question, would like to remind participants to press star and one to ask a question. Next question is from the line of Ankush Agrawal from Search Capital. Please go ahead.
Ankush Agrawal
Yeah. Hi Aakash. Congrats on a great set of numbers. Just a quick data point. If you can share the gross debt and cash number as of Q3 end.
Akash Agarwal
So the total debt on the books is 75 crores. That’s a credit limit that we have from the banks. So we offer a bill discounting feature to all our vendors where any vendor can get their payment whenever they want at a particular discount rate. So we use the facility to fund that. That is the only debt on the books.
Ankush Agrawal
Okay, so this is the debt that signifies the bill discounting. There’s no other working capital debt on the books, as you say.
Akash Agarwal
It’s a mix of both, but more primarily it is used for bill discounting.
Ankush Agrawal
Okay. And cash…
Akash Agarwal
I don’t have the exact cash number but there would be like, I think, five, seven crores of cash on the books. We try to utilize the whole CC limit because we get a better benefit. So the cost of capital for us for that CC is much, significantly lower than the discount rate we charge from the vendors. So we try to utilize the whole limit.
Ankush Agrawal
That was all. Thank you.
Akash Agarwal
Thank you.
Operator
Thank you. We’ll take our next question from the line of Chirag Shah from White Pine Investment Management. Please go ahead.
Chirag Shah
Yeah, thanks for the opportunity. Akash here. One question. You spoke about premiumizing the look and feel of the, of the studio, right. So what is the thought process? Is it a natural progression or you want to attract different type of customer? If you can just share because you are clearly not looking to ramp up the pricing of the product, you know, that is the strategy you want to continue.
Akash Agarwal
So there’s a misunderstanding. We did not talk about premiumizing the store. It was just about uplifting the overall shopping experience for the customer. For example, if you are spending more on the lights, so that means the garments would look better, the colors will look more vibrant, it would be a brighter store. So we are not premiumizing the store. We are just uplifting it aesthetically and trying to make the customer experience even better.
Chirag Shah
Okay. And actually I had a follow up on this because any thoughts of trying to widen the customer profile, Someone like a Zudio type of a customer. While product quality could be similar, he may not be coming to V2 for a variety of reasons. So any, any thought process on that side, how do you look to attract that kind of customer?
Akash Agarwal
I think, you know, I mentioned this point also. That is why we have removed certain entry price points where we couldn’t differentiate our products or where we had to offer a product with a substandard fabric quality. So we are trying to focus on the value segment. So for example, earlier we used to start selling t shirts from 99 rupees and we used to go till 700, 800 rupees.
So now what we have done is we start from 199 and we go up till only 499. So we are focusing on that value segment where we can differentiate our products, where we don’t have to offer substandard products. And we have removed premium and super premium also. So I think as we improve the product offering the customers that you’re talking about a little, you know, high upper middle class customer who’s not currently coming to V2 would start coming to V2 as well.
Chirag Shah
Okay. And you don’t think the look and feel of the store would be a big hindrance. If they want to come for the product, they will come irrespective of the designing of the store. That is the underlying fundamental concept. Right. The product quality matters rather than the look and feel.
Akash Agarwal
So again, we are uplifting the look and feel also not necessarily premiumizing it. So if they get a basic shopping experience where there’s no hindrance and, you know, everything is smooth, I think just for the assortment and the price, they would still come. Yes.
Chirag Shah
And the last question if I can. On the designing side, if you can just share an update. Have you beefed up the designing team? If you can share your thoughts versus what it was last time last year.
Akash Agarwal
Yeah. So I would say we have added about 35% more designers. Earlier I think we had 15 designers. Now we have 24 designers. And again, it’s not the bandwidth of the team. It was our planned approach where we wanted to increase the product development gradually so that there were no risks to the business. So current team has the bandwidth good enough to do 80% product development.
Chirag Shah
Okay. And one last question if I can. Sorry for this. The newer geographies that you are trying, you know, in the sense looking to enter anything you would like to add, any success stories, any regions you have finalized, these are the areas that you want to focus apart from the traditional way of expanding that you are doing.
Akash Agarwal
Yeah. So we entered two new markets. One was Andhra Pradesh and one was Rajasthan. And both locations we’ve got a very good response. So what we do is there’s a lot of learnings to be gathered in terms of data assortment. So then we become more comfortable in opening more stores in that particular state. But 80, 70 to 80% of the stores that we are opening are in existing clusters that we already have stores in. But looking at the next three to five year horizon, we want to be a national level retailer.
So we will definitely the 20% stores, we will enter new markets and test new waters because we are catering to almost 80% of India. There are value conscious customers everywhere who are looking for affordable, good fashion and good quality products. So till now it has been very encouraging the kind of response and the customer feedback that we have got from all these new markets. So we will keep exploring new markets to get that learning so that we can expand in the future horizon.
Chirag Shah
So AP Rajesh market that you are looking. Thank you. And all the best.
Akash Agarwal
Thanks.
Operator
Thank you. Next question is from the line of Onkar [Indecipherable] from Shri Investments. Please go ahead.
Unidentified Participant
Yeah, congrats on a good set of numbers. You just talked about setting realistic target. So you are targeting around 10%, 15% kind of shield maybe 10% for the upcoming financial year, but maybe 10%, 15% for next couple of years. But you also mentioned that the industry would be growing at say 1013-15% for next decade. And earlier you mentioned that you aspire to grow 50% for the next decade. So all this match.
Akash Agarwal
So when we say we want to grow 40 to 50% revenue, that means 10% from the same stores and the rest would be inorganic growth. So that would be coming from new store additions.
Unidentified Participant
Okay, so…
Akash Agarwal
When you talk about industry CAGR of 15%, that is not same store sales growth, that is the overall size of the market. So that is all the new stores that are opening in the industry combined. So when you compare our revenue growth, that is 40% to 50% versus an industry growth of 15%.
Unidentified Participant
So what do you think this 40 to 50% kind of CAGR for the next decade, is it realistic in terms like achieving it with maintaining the EBITDA margin and being a national level player?
Akash Agarwal
It all depends on the level of execution. You know, if we keep executing our plans well, if we keep implementing these good things in terms of process product assortment and you know, the sales numbers speak a lot where the footfalls are increasing even when our advertising spends are going down. So that, that tells us that the customer is really accepting the product and, and really liking the product.
So if we keep executing our plans well, then India can have easily 5,000 stores of a similar model. It’s big enough to accommodate 5,000 stores. So there’s no looking back. But again, we aspire to grow at that number for the next 10 years. But you know, it all depends how well are we able to execute our plan?
Unidentified Participant
Okay, and what would be the sustainable level of EBITDA margin range? If you can give.
Akash Agarwal
So I think last year we had a 6.8% EBITDA pre INDEAS and this nine month it’s already I think 8%. So going forward we want to reach the number of 10% pre ind EBITDA margin. So if you’re able to establish a strong enough model and you’re able to create that brand in terms of you’re the best in value fashion, then the 10% pre IndAS EBITDA looks achievable to us in the next two years.
Unidentified Participant
Okay. And this like seasonality in Q2 and Q4, like how it will be in the upcoming years, will it still persist or it will be like normalized over a couple of years time.
Akash Agarwal
So now we have, we’ve been able to increase our base to such a level where we can say all four quarters. Now we will be EBITDA positive, but definitely Q1 and Q3 will be the highest revenue and profitability quarters. But now we would be EBITDA positive in all the four quarters if we are able to maintain this base because we’ve been able to increase our base from around 600 odd per square feet per month to almost more than 1000 rupees.
Unidentified Participant
Okay. All right, thanks for answering.
Akash Agarwal
Thank you.
Operator
Thank you. Next question is from the line of Chintan Sheth from Girik Capital. Please go ahead.
Chintan Sheth
Thanks team for taking my question. And kudos to the team for the spectacular performance so far. So on SSGR, you guys are targeting 10% kind of number. And the key point which you mentioned in your opening remarks is the product development and the projects which you have been executing over the last four years, which is the key fundamental which drove your SSGR. And you continue to improve and upgrade or improve and innovate on those lines to sustained at SSCR at 10% to 15% over all medium to long term. So my question is this product development which you mentioned, about 30%, taking 35%, taking it to 80%, does that mean is we are merchandising or designing our own product in house? That is. That is the thing, right?
Akash Agarwal
Yes, that is the thing. Because private label is already 90 to 95%, but out of those only 35% is products that were designed in house from scratch. All the other products have some input from our merchandisers, but not all the components are controlled by the V2 team. But we want at least 80% of the products to be designed in house, you know, from scratch. That includes each and every component of the product.
Chintan Sheth
Okay. And this designing part, what is the funnel or what is the — what is that drives the demand? You are obviously trying to understand the consumer pulse and the trends, right? That is, that is in build in your in house design team, which, which is, which is making and designing the product for you. But, but how is that funnel of the process happens to execute on ground? You know, because the designing is one aspect and the sourcing and making, ensuring that at the floor level or manufacturing level, you are getting the same output.
Akash Agarwal
Yeah. So that’s called the product lifecycle management. So our design to shelf currently is about 90 to 120 days depending on the product. And there are respective teams with their respective targets. So I think that is all about efficiency and execution because just getting inspirational designs is the easiest part. Converting it, adapting it to your price segment is a tough part. So I would say that’s our secret sauce and we’ve been able to do it well.
And that is why we’ve been able to get a competitive advantage. And we are at least 25% to 30% higher than our nearest competition in terms of per square feet sale in more than 80%, 90% of the locations. So I would say that’s our secret sauce and we’ve been able to have a good execution strategy in that. But the best thing about it is that it’s getting better every day.
Like I said, the product that we’re designing and executing today are significantly better than what we sold last season. So it gives us immense positive outlooks and future prospects that, you know, it’s very bright because every day the products that we’re designing today will be in our stores in the next four months. So the products that are being showcased currently for the June, July, August season is significantly better than what we were designing maybe two months back. So it means the maturity of the team is getting better, the execution is getting better, we’re getting better inspiration, we’re leveraging data a lot.
So we map almost 40 different attributes of each and every article and then we map the gross profit per square feet, data of each of those attributes, and then design in a product assortment. So to give you an example, last year 3 Button Henley Neck in T shirt sold the best. So it gave me a gross profit per square feet, almost 40% higher than men’s tees. So this year Instead of doing four options, we are doing 12 options in that. So this kind of data analysis and deep insights really helps us in getting the customer pulse.
Chintan Sheth
And do you also use third party trends in the market, which enables your designing team to get what is currently running in the market? And the way you source it, it will be a bulk buying or it will be a small batch and test it in your stores, how it is performing and then, you know, kind of betting big on those skus, which are performing really well in the market.
Akash Agarwal
Yeah. So to operate in any fashion business, you have to be up to date to the market. And there are, we use two, three different tools that also tell you what is coming in the upcoming season. It tells you what was on the runway in Milan, what was on the runway in Paris, what was on the runway in New York. So of course you have to be up to date with the new trends, upcoming trends.
And so, we divide the product assortment into three categories. So one is fashion, one is regular fashion, and one is core. So a lot of high fashion products that you know are very new trends in the market, we reduce the depth of those articles. So we, for example, if our average depth is 4 to 5,000 pieces per color in those fashion articles, we buy only 500 to 1,000 pieces just to test the acceptability of that product in our stores. And then we plan it in bulk.
Chintan Sheth
Right. And what can go wrong? Obviously you, over the four years, you must have learned a lot and reworked and retweak your strategy. But anything which can, which can impact or, you know, risk your sourcing model, because that is, I believe that is a key driver for your ssd. The assortment, the products which you are showcasing in your stores that are value is what drives the growth in your stores. Right. Any, any risk you envisage here that, that that leads to either slowing down of, of your SSDR or how should you, you know, you, you try to handle that piece, you know.
Akash Agarwal
Yeah. So we embed product in the DNA of our people because we are a product company essentially and just using our retail stores as a channel to sell those products. So I would say the only thing that can go wrong is poor execution and not sticking to our plans and again trying too many things. That is why, you know, we feel we have established a very strong, good model. We don’t want to premiumize, we don’t want to open more formats. We want to continue focusing on this format and multiplying it and making it stronger so that you know, the — our next per square feet sale target is 1200 rupees per square feet. Hopefully we can get there into two years.
Chintan Sheth
Great, great. And last question is on the store extension, the per capex you mentioned to increase a little bit by 100 square feet. What is, what is the current, you know, spend per square feet on the street extension side?
Akash Agarwal
So per store the capex required is about 1 crore. 1 crore 5 lakhs. Okay. Working capital is about 1.3 crores per store. So if we open 100 stores the capex plus working capital requirement would be about 220 crores, 230 crores.
Chintan Sheth
Sure. Great. Great. All the very best to the team. I will jump back in queue for the question.
Akash Agarwal
Thank you.
Operator
Thank you. We’ll take our next question from the line of Ankit Babel from Shubkam Ventures. Please go ahead.
Ankit Babel
Yeah. Hi Akash and congrats for great set of numbers. Just one question. You mentioned in your opening remarks that you see your return ratios improving from here on. So do you have any targets there say in FY 26 or 27? Where do you see both Roe and Rocs to be at?
Akash Agarwal
So I think this year we first target was to have an ROE of more than 20%. So I think we should be able to achieve that this year. And going forward our next target is to have an ROE of 25% that should be achieved in the next 18 to 24 months.
Ankit Babel
Okay. And on working capital, do you feel that there is some improvement possible from here on or you feel that you have already achieved the best?
Akash Agarwal
Yes. So one of our major business challenges, operation challenge was on time delivery because our vendors are still quite unorganized and a lot of them still don’t have ERPs. So there was a lot of knowledge transfer, training and consolidation that was happening in the last one to two years and we’ve been able to improve that number from around 40% to about 70% now. So we had to keep about 30 days of safety inventory at our DC just so that our shelves were not empty.
And now I think going forward we are reducing that to 15 days. So there is a scope of improvement in the working capital and inventory to a level of 10 to 15 days. We should be able to see the change from first quarter itself. And in the next 12 months we should be able to reduce it to 10 to 15 days.
Ankit Babel
Okay. And on the creditor side?
Akash Agarwal
The credit days would be the same. It’s around 45 to 50 days. It should, it should be the same because we don’t want to increase the credit term. Rather we want to take a different approach so that we can negotiate better, we can get better cost so that we can pass it on to the consumers.
Ankit Babel
So just for my understanding, if you pay your creditors on time, do you get a preference from the creditors in terms of the product? So suppose if they come out with any innovative product or something like that, they first show it to you just because you are paying on time as compared to other, I mean…
Akash Agarwal
More than getting the, you know, first offer for the product, it’s more about getting the capacity first. So basically if a vendor has a capacity of 50,000 pieces a month and he’s a very low cost, high efficient, high efficiency vendor, then if you’re the best paymaster in the industry, he would always prefer to work with you. So it’s more about, you know, having a partnership with those vendors and they preferring you over the others in terms of giving their capacity or blocking the capacity.
Ankit Babel
Okay. And last question is on the cost side, are you taking any measures to, you know, reduce your cost per store or you know, the ho cost also on a per square feet basis? I mean, are you focusing on that or you’re just focusing on the top line and you know, store expansion?
Akash Agarwal
Our cost per square feet is 190 to 195 rupees per square feet. I think, you know, now there’s not much scope to reduce costs further because that might negatively impact sales. So we are focusing more on increasing the per square feet sales, increasing the throughput of the stores, getting more footfalls, increasing the conversion, getting more retained customers, increasing the frequency of the customers. So those are the things we are focusing more on because that has maybe 25 times the scope as to, you know, if we compare it to cutting down costs.
Ankit Babel
Okay, because earlier you had a target of 180 rupees. If I’m not wrong.
Akash Agarwal
Yes, the earlier target was 180, but that time our rentals used to be about 45, 46. But now the rentals are 53. So you know, 180 is an internal target. But when we talk to people we say even if, you know, 190 also we can achieve a 10% EBITDA margin pre Ind AS if we get 1100 rupees per square feet of sale.
Ankit Babel
Okay. And on gross margins you had taken an approach of reducing your gross margins but still increasing your EBITDA margins. Now do you feel that your gross margins have bottomed out or you feel that it can even go down from here on or is there a scope for improvement?
Akash Agarwal
I think it should stay between the 27% to 30% number because there are a lot of factors that go into it. Whether it’s full price, sales, whether it’s how the winter season was. But we don’t target a higher gross margin still. The plan is to get a 1,200 rupee per square feet of sale per month even if the gross margin is 27%. But it should, it should remain at this level.
Ankit Babel
Okay, great. Thank you so much.
Akash Agarwal
Thank you.
Operator
Thank you. We have our next question from the line of Rajesh Vora from J&M Venture. Please go ahead.
Rajesh Vora
Good morning. Aakash. Congratulations on stellar show. You have mentioned about 200 rupees per square revenue per square feet target in two years. And 15 remains a long term target, I assume. So is that possible in next four years from now on?
Akash Agarwal
That’s a very big long horizon to actually comment about. We’re focusing on the next six months, next year first. And again it’s all about executing our plans and you know, keep doing the good work that we’ve been doing and establishing an even stronger model, working harder on the product, working harder on the freshness of the product.
So we’ve been able to reduce more than one year old inventory from about 17%, 18% to less than 5% now. So if we keep continuing these things then yeah, like a 1500 is the ultimate goal. So like we would aspire to reach that in the next four years. But the time horizon completely depends on our own bandwidth and our own capability. But yes, we are working very, very hard towards it.
Rajesh Vora
Sure. And could you help us understand little bit about the sensitivity of every 100 rupees? We are already at 1071, 069 [Phonetic] for first nine months, every hundred rupees and you are targeting 1200 in the next two years another 100 plus increase. So for every 100 rupees increase in revenue per square feet per month, what does it do to be in this builder margin of late.
Akash Agarwal
I would have to do the calculation. But I think if even if we get 1100 rupees per square feet of sale with a 28%, 29% margin, we get a pre index EBITDA of 10%. That is. So that is the first target.
Rajesh Vora
Okay, got it, got it. So at 1100 we should be able to get to 10% free India’s EBITDA margin.
Akash Agarwal
Yes.
Rajesh Vora
Okay, that makes interesting. And next year can we have all the 4/4 fat positive, is that possibility?
Akash Agarwal
Yes, definitely. That is possible. But the first target was EBITDA positive.
Rajesh Vora
[Technical Issues] Almost perfected the strategy and refined over the last couple of years all the learnings of Avatar 1 and Avatar 2 of V2. How far are we on the exploiting or executing the benefits of this strategy now? We are obviously doubling down with significant acceleration in new store openings. So at what stage of exploiting benefit of this strategy? Brb, we are at just the beginning of that strategy. Are we halfway done? 25% done. More if you can give that idea.
Akash Agarwal
Yeah. So I would like to disagree there. I don’t think we have perfected anything or we’re not even close to perfecting anything. As I said, this is just the beginning. The vision that we have for the product assortment and the designs we should have at the store, I think we’ve only implemented 20% of that because all the international brands, they make their products in India and sell it to us. Why not an Indian fashion brand that is accepted all over the world.
So our ultimate Vision is getting 100% of the products to such a level where even if you open a store in any country, you become one of the best value fashion retailers there. So that is the ultimate vision. So this is just the start. We have maybe implemented 15%, 20% of our plans and you see these numbers. But to perfect it, it will take a long, long time.
Rajesh Vora
That’s very interesting and encouraging. All the very best.
Akash Agarwal
Thank you.
Operator
Thank you. We’ll take our next question from the line of Netic [Phonetic] from NV Alpha Fund. Please go ahead.
Unidentified Participant
Hi, sir. Very good set of numbers. My question is, you know you mentioned that rentals are sort of up from say 47 to 54. So I just want to get a sense from you on the new stores, what sort of rentals are we, you know, signing up on? And are there any major increases that are happening?
Akash Agarwal
No. So the new stores are also around 50 to 55 rupees level. So there’s not a major increase in that. But what I was talking about is I think it was five years back when our average rentals were 44, 45. But if you look at the average inflation in the market and account for it, I think, I think that is what is reflected in the number.
Unidentified Participant
No, so the new stores are also similar levels. There are no major increases from 54, 55. Okay, got it. So that’s it from my side. Thank you.
Akash Agarwal
Thank you.
Operator
Thank you. We’ll take our next question from the line of Ruchita Maheshwari from Ace Lansdowne [Phonetic]. Please go ahead.
Unidentified Participant
Hello. Yeah, just wanted to know if you can give me a breakup of your top line in the geographical terms, if it’s possible.
Akash Agarwal
I don’t have those numbers, ma’am.
Unidentified Participant
Okay. So just wanted to know in your value detail space, lot of competition is increasing, be it Zudio or vmart or Style Bazaar. And then you how we are going to differentiate our product in terms of customer perception and how we are going to, you know, place ourselves that we can continue to have that steady performance going forward.
Akash Agarwal
So we try to focus on ourselves. And every brand or every company has their own DNA. For example, if there’s Reliance Trends, if there’s Pantaloon, there’s website. So each of them has their own DNA, have their own product offering and have their own set of customers. So we try to focus on ourselves, we try to make our own product offering better. And like I mentioned earlier, the market is big enough to have five big players, you know, with three to 5,000 stores each in the price segment that we operate in.
So, you know, competition makes us, you know, maybe work a little harder. And I think it, I think it’s very healthy competition and it makes each one of us do better. So I think every company has their own strategy and their own product offering. So there’s nothing special that we are doing in order to stand out in terms of one retailer specifically. We’re just trying to have the best assortment, best to our knowledge, in our store so that we can get the maximum market share and the maximum number of customers.
Unidentified Participant
But can you give some, like any hypothetical example or a real example where you have the V2 retail store, whereas there is a nearby, say Zudio store or maybe Vmart and how the competition have been and how you have been able to retain the customer if you can just throw some light on that front.
Akash Agarwal
So we do competitive benchmarking, ma’am. And I also mentioned this, that more than 85, 90% locations, we are at least 25, 30% higher in sales throughput than all our competitors. And you can see that reflected in the numbers as well. So I think in the last two years, if you just take the cohort of the store that we had two years back, we’ve been able to increase the sales in those stores by more than 80%. That is the SSSG of those particular stores. So you can just think what’s happening vis a vis the competition, because in that same time, the competition increased the sales in those stores by 15%. So the gap has increased. And again, that is the result of, I think, all the different executions that we have done across departments.
Unidentified Participant
Okay, in your opening remark, you mentioned that your ASP has increased only because of the higher apparel contribution. So will that be our endeavor to have more than 90% of Apple contribution going forward?
Akash Agarwal
Yes, apparel is our strength, and we would like to focus on apparel. And ASP increase has also been because we are selling more at full price. So we increased full price sales from 86% to 91%.
Unidentified Participant
Okay.
Akash Agarwal
But yes, the focus is on apparels, and it should be above 90% going forward also.
Unidentified Participant
Okay, so just hypothetical, I want to understand. Suppose there’s a dip of, say, 2% to 3% or 2% to 5% in your Apple contribution. How much impact can we witness in your asp?
Akash Agarwal
Again, I would have to calculate that number, but…
Unidentified Participant
It’s a big. But I just want to understand how much impact we can have in the ASP.
Akash Agarwal
I think the average selling price of general merchandise is almost 60% less than apparel. So then you just need to do the math. So if we reduce apparel by 5%, 6%, there’ll be a huge decrease.
Unidentified Participant
But that can pose a bit risk in going forward if, for instance, your general merchandise contribution increases going.
Akash Agarwal
I don’t understand your question, ma’am. Like, general merchandise contribution would only increase if we increase the space and we increase the options. So this was a conscious decision that we reduced the pace that we give to general merchandise and we increase the offering in apparel. And that is why you’re seeing the contributions change.
Unidentified Participant
So in the new stores, there will be no general merchandise or it will be a mix of both.
Akash Agarwal
It will always be a mix of both. Just that earlier we were giving almost 15% space to general merchandise, but now we have reduced it to only 6%, 7% because we saw that apparel was giving us a much higher return on investment and gross profit per square feet.
Unidentified Participant
Okay, got it. And in like Q4, are we seeing any end of season sale that that can impact our ASP.
Akash Agarwal
Yes. So Q4 always has an end of season sale because the winter pre winter season is not present for the next nine months. So it will be very similar. The gross margin should be similar from the corresponding Q4s of previous years. So there’s always a dip in gross margins in the, in the fourth quarter.
Unidentified Participant
Okay. And how much? It would be rough guidance if you can give.
Akash Agarwal
I cannot give the exact guidance, but it is lower historically and it should be lower than the other three quarters.
Unidentified Participant
Okay. And value detail sales market will be how much in India.
Akash Agarwal
I would have to get that number also. I think, I think nobody has been able to project that number because there’s so much unorganized retail. It’s very hard to put a number to the whole market size. But it’s, it’s, it’s quite big.
Unidentified Participant
Okay. And I understand as you play in your cluster, cluster model and just last question, just last question, if I may. Yeah, I know that you play in your cluster model space. So if one of your like assortment is not working in one store, you can easily move out. But if, suppose that assortment is getting obsolete, how you plan to like how you dispose it off and how much percentage that will be in your top line.
Akash Agarwal
So like I said, full price sale is 91%. So 9% goods are sold in discount. And we always have a discount zone at all our stores. We identify slow movers after two weeks of it being displayed at the store and we dispose it off for. We put it at a 30% discount. If it doesn’t sell then 50% discount. If it still doesn’t sell then 70% discount.
Unidentified Participant
Okay, got it. So after two weeks, you, maximum one week you dispose it off.
Akash Agarwal
Yes.
Operator
We’ll take our next question from the line of Devansh Dhruv from Equentis Wealth Advisory. Please go ahead.
Devansh Dhruv
Hi. Congratulations on a good set of numbers. So one question was what is our repeat rate currently and how is it.
Operator
Devansh. I’m sorry, can you use your handset mode? Your voice is breaking.
Devansh Dhruv
Hello? Am I audible?
Akash Agarwal
Yeah, much better.
Devansh Dhruv
Yeah. So what has been our, what is our repeat rate right now and how has it been going compared to the previous years?
Akash Agarwal
So in our mature stores we’ve seen almost 70% retention and 70% of the sale is repeat sales. And this number used to be 55, 56%.
Devansh Dhruv
Okay. And any measures that you have taken to improve it.
Akash Agarwal
The product is our best brand ambassador. The price is our best brand ambassador. That is the biggest step that you have taken that has improved this.
Devansh Dhruv
Okay.
Akash Agarwal
Quality, standards, assortment, price. All the. All these factors put together that has compelled the customer to come back to the store.
Devansh Dhruv
Okay. And any light on where will be our new. So. So the guidance of 100 store that we have given. Where are we, which states particularly, particularly are we targeting? And any best performing. So the top two best performing stores for this nine months.
Akash Agarwal
So we are targeting all the existing states that we already present in. So we are opening more stores in same cities also where we are already strong and that city has potential in the same states that we already present in. And we will enter new markets also. And the best stores in the nine months. Again, it’s not something that we disclose.
Devansh Dhruv
Okay. Okay. That was it. From my side. Thank you.
Akash Agarwal
Thank you.
Operator
Thank you. We’ll take our next question from the line of Kapil Malhotra, an Independent Investor. Please go ahead.
Unidentified Participant
Yeah. Hi Akash. Excellent set of numbers. V2 is firing on all cylinders. I just in one of the media interviews you said you plan to grow by 50% in the coming year. That assuming and in your presentation you’ve talked about 8.6% PAT margins this quarter and overall 4.7% PAT margins. May I understand what kind of pat margins you foresee in the coming financial year and what would be your finance cost for the full financial year? These are my two questions.
Akash Agarwal
Yeah. So the finance cost should be around 8 to 9 crores for the full year and the packed margin should be similar to the nine months figure.
Unidentified Participant
Okay. So about 5%. 4.75%.
Akash Agarwal
Yes.
Unidentified Participant
Okay. That’s it from my side.
Akash Agarwal
Thank you.
Operator
Thank you. Next question is from the line of Vignesh Iyer from Sequent Investments. Please go ahead.
Vignesh Iyer
Yeah. Thank you for the opportunity and excellent setup. Number. So two questions on my side. The first question is understanding more from the discounting part of it. That is how far should do you discount your inventory and sell it because it’s a mix of, you know, that is related to festivity and there is something which is not related to festivity. So because I remember interacting with you earlier where you said we, we are not, I mean on gross margin side you are okay to take a hit a bit if working capital improves. So I wanted to understand how fast the discounting happens.
Should I share my second question or do you want me to wait till you answer?
Akash Agarwal
I’ll answer this question first. So what you’re talking about particular assortment being related to a festival. So that is taken care of on the purchase frequency. So for example, if something is relevant more for Eid, then we buy it in the month of Eid or one month before Eid. So any old age inventory, we always put it on discount whether it’s, you know, bought for a festival or not. For example, if we bought something for Durga Puja and if it’s not selling now, we’ll put it on a discount rather than wait for another Durga Puja.
So earlier our strategy used to be to wait for three months to identify slow movers. But now because you know, our throughput has also increased and the overall aging is much, much fresher at our stores. So now we only wait two to three weeks to identify slow movers and put it on a discount. Because what we found was the opportunity cost of that slow mover taking the space of a potential fast mover was almost three to four times higher than the gross margin loss that we do. Putting that, you know, design on this.
Vignesh Iyer
Okay, okay, got it. A second question is more on if I understood it right, like 20% of the stores that you, that you will be opening, you’re going to expand to a newer market. Wanted to understand the strategy behind expanding in a newer market. Would it be more of a cluster approach where you identify a market and expand many stores or would it be city wise, smaller stores, one at a time and probably expand it later?
Operator
[Technical Issues] Welcome to Chorus. Call, please hold for an operator. Ladies and gentlemen. Please stay connected. Ladies and gentlemen, we have Mr. Agarwal back on the call. Vignesh?
Vignesh Iyer
Yeah, yeah, yeah. Okay. So my second question was on the store expansion. If I got it right, you were planning to have 20% of the new stores that you will be opening in a newer market. So understand I wanted to understand the strategy. Would it be more of a cluster approach where you identify cluster and have many stores in that place or would it be identifying a smaller micro market and opening one month store in each of the market that way? And could you give some idea of, you know, which part of the country are you targeting? I mean for the newer stores in FY26.
Akash Agarwal
So I’ll give you an example. We opened one store in Goa. So we entered that new market. We got a. We learned, we got the learnings in terms of data and assortment. For one or two years we opened the second store and now we are opening three more stores in Goa. Similar thing happened in Karnataka. So we had only one store. We got the learning, we used the data and now we have seven stores in Karnataka. So similarly we have entered Andhra Pradesh and Rajasthan. And so whenever we are entering new market, we’ll open one or two stores there, get the learnings and then in that cluster, expand more.
Vignesh Iyer
Right. Okay. Okay. Okay. Got it. Got it. That’s all from my side and all the best.
Akash Agarwal
Thank you.
Operator
Thank you. We’ll take a next question from the line of Krutika Prabhudeshai [Phonetic] from Mirae Asset Sharekhan. Please go ahead.
Unidentified Participant
So just one, you know, clarification. With respect to the EBITDA margin, you mentioned that you target around 10% free index EBITDA margin. I would like to, you know what, know what would be the post index target for EBITDA margin And also what would be the margin drivers for the next two to three years. If I’m speaking for the next two to three years, like ’27. If you could guide us on that. Thank you.
Akash Agarwal
Ma’am. We always just calculate pre index EBITDA margins because that is the relevant figure for our business model. So that is all the internal targets and that is the targets we give to our investors also. So the pre index numbers I have, post index I would have to calculate and tell you.
What was the second question?
Unidentified Participant
The margin drivers. As in what would be the drivers for the margin?
Akash Agarwal
Yeah. So the first driver of course would be the 10% SSSG that we’re targeting. Minimum 10% SSSG would be the, you know, the biggest margin driver. And second, of course when we open more stores we would be able to leverage the warehouse and head office cost a little further. So there might be a 4,5 rupees reduction in per square feet cost. So it will be primarily led by per square feet sale increase.
Unidentified Participant
Okay, that’s it. Thank you.
Operator
Thank you, ladies and gentlemen. We’ll take that as the last question for today. I now hand the conference over to Mr. Akash Agarwal for closing comments. Over to you, sir.
Akash Agarwal
Thank you everyone for joining this call. We hope we’ve been able to answer your queries. For any further information, we request you to get in touch with Marathon Capital, our investor relations advisor. Thank you and have a nice day.
Operator
Thank you. On behalf of V2 Retail Limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.