V2 Retail Ltd (NSE: V2RETAIL) Q4 2025 Earnings Call dated May. 28, 2025
Corporate Participants:
Unidentified Speaker
Akash Agarwal — Whole Time Director
Analysts:
Unidentified Participant
Abhishek Mahalpure — Analyst
Ashish Kumar — Analyst
Niraj Mansingka — Analyst
Naitik — Analyst
Sparsh Mittal — Analyst
Rajesh Vora — Analyst
Gaurav Jogani — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the V Tool Retail Limited Q4 and 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 a conference call, please signal an operator by pressing Star then zero on a Touchstone phone. Please note that this conference is being recorded before we begin a brief disclaimer. The presentation which V2 Retail Limited has uploaded on the stock exchange and website, including the discussions during this call, contains or may contain certain forward looking statements concerning V2 Retail 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, Full Time Director, V2 Retail. Thank you. And over to you sir.
Akash Agarwal — Whole Time Director
Thank you. Good morning everyone. It’s a pleasure to welcome you all to V2EJ’s quarter four and FY25 earnings conference call. This year has not just been about growth. It’s been about transformation. FY25 has been a defining year for us. A year where our strategy, execution and agility came together to deliver the strongest performance in the company’s history. Let me walk you through the highlights and the momentum that we’re building on. Some headline numbers will speak for themselves. Revenue crossed an all time high of 1884.5 crore growing 62% from last year. Profit after tax surged to 72 crores marking a 1 59% growth from last year and it is our highest ever.
EBITDA stood at 257.8 crores growing 74% with margins of 13.7%. Same store sales growth for FY25 was 29%. Even on a high base volume growth came in at 43% reinforcing customer traction. Full price sales stood strong at 89% up from 87% in FY24. ROE improved to 23.2% a clear reflection of our capital efficiency. Some operational highlights. We added 74 stores and closed two during the year reaching 189 stores by 31st of March 2025. As of today we have already crossed the 200 store mark with 207 stores live. Our stores are profitable from the very first month with break even sales at just 500 rupees per square feet per month.
Sales per square feet for the year rose to 1017 rupees per square feet per month up from 854 rupees last year. Product and brand lend differentiation. 85% of our business is private label and we’re doubling down on it. Our own design products contributed about 35 to 40% this year and we target it to reach around 60% by the summer of 2026 and 80% by 2027. This means better margins, unique fashion, less discounting and customer loyalty. We reduced old inventory that is more than one year old inventory from 18% to just 5% ensuring freshness and relevance.
Capex per store is 2.2 crores inclusive of inventory. Our inventory is at 90 days and creditors are at 45 days. Maintaining a lean working capital cycle. What’s next in FY2627? We guide for a revenue growth of 45 to 50% driven by new stores and a same store sales growth of 8 to 10%. We guide for an EBITDA margin at Pre India’s level of 8 to 9%. We are expanding rapidly across high performing clusters like UP, Bihar, Odisha, Jharkhand and now also entering Punjab, Bengal, Rajasthan and the South. We are not in a race for store count alone but for profitability, scalability and brand dominance.
FY25 proved that V2 is no longer just a retail company. It’s a fast moving platform for aspirational India. We’ve built a brand that understands small town India, yet offers fashion with a flair that rivals any urban retailer. And this is just the beginning. With a robust model, consistent store performance, strong internal accruals and an unbeatable value proposition, we are confident that FY26 will raise the bar even higher. Thank you once again for your time and trust. We are now happy to take your 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 char and one on the touchstone telephone. If you wish to remove yourself from the question queue, you May press char and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhishek from AB Capital. Please go ahead.
Abhishek Mahalpure
Hello. Am I audible?
Akash Agarwal
Yes.
Abhishek Mahalpure
Congratulations on a great set of numbers. Every phone call I speak and every phone call you amazes with the numbers. Just wanted to ask, can we be pat positive this year in all quarters?
Akash Agarwal
Yes, that is the target. And I think even this year we were EBITDA positive in all the four quarters. But for this coming years now, even with the seasonality, we expect to be pat positive in all the four quarters.
Abhishek Mahalpure
Do we have a PAC margin number in mind that we want to achieve.
Akash Agarwal
So we target a pre India ebitda margin of 8 to 9%. So I think which translates to about 4 to 5% of that.
Abhishek Mahalpure
Okay. And in a TV interview you had guided that you will open 100 stores this year. So is that still in force?
Akash Agarwal
Yes. So We’ve already opened 17 stores this quarter. So we are on Track to open 100 stores this year. We don’t need to raise any funds for this. Mostly from internal equivalents. It will come. So to open 100 stores we do not need any funds. Our internal accruals are sufficient. But we are very excited because the performance of our new stores is giving us confidence that we can increase the store count. So we are internally making a detailed cash flow and a business plan for the same. So if we feel that we don’t want to compromise on store performance as well as return ratios. So if we increase the store opening guidance then we might raise some capital.
Abhishek Mahalpure
Okay. Okay. And this year our SSG was amazing at 29%. But did I hear you correctly, you told 8 to 9% SSG guidance for next year?
Akash Agarwal
Yes. So for the last two years, first we showed SSSG of 31% in FY24, then 29% in. In FY25. So our base is more than 1000 rupees per square feet per month now. So now we will be very happy with 8 to 10% SSSG also.
Abhishek Mahalpure
Okay. Okay. And do you think we can get operating leverage next year like this year also?
Akash Agarwal
Yes, definitely. Because the head office and warehousing cost together is about 55 to 60 rupees per square feet. Now that would be spread over a larger retail space. So we should get a leverage.
Abhishek Mahalpure
Okay. And finally I wanted to ask you have become CEO. So is this a long term thing or we are in a lookout for somebody and this is just a transient thing?
Akash Agarwal
No, it is a long term thing. So I have assumed all the responsibilities. But definitely we are always in the lookout for good people because to grow at 40 to 50% for the next five years we need to build a very strong foundation.
Abhishek Mahalpure
Okay. Thank you. Thank you. Thank you. And all the best.
Akash Agarwal
Thank you.
operator
Thank you. The next question is from the line of Palesh Gabade from Nirvama Wealth. Please go ahead.
Unidentified Participant
Yeah. Hello. Thank you for the opportunity. First of all, congratulations for the good set of results and being appointed as a CEO. Akash, my first question is related to inventory. So it has came down and we like your guided to open 100 stores. So do you expect it to go down further or it shall remain at same level? Or there could be rise because of the store addition which is very aggressive for this year.
Akash Agarwal
So see what happens with inventory is the capacity of the store remains constant. So when you increase your per square feet sales, the inventory number of days comes down. So if you’re able to continue this trend then of course there is still some gap to reduce it further.
Unidentified Participant
Okay, and my next question on the same line again, even if I take the same revenue per square feet for next year and take into account 100 stores additions, even then the growth comes out at more than 50%. So is that the right assumption from my side or am I missing something?
Akash Agarwal
So the complete assumption is based on how many stores are open in which month. So you must have taken an average. So when we put it in our model where you know, we open a lot more stores in September, October season then it gives us this 50% growth number.
Unidentified Participant
Okay. Okay, got it. And on warehouse side, how much is the warehouse piece right now? And any plans to add further will be adding stores at a very aggressive rate.
Akash Agarwal
Yeah. So the current warehouse is good to service another 70, 80 stores. We have finalized another Zolon warehouse in Calcutta. So definitely with the new stores, you know, acceleration we will finalize more warehouses.
Unidentified Participant
Okay, and what is the capex per square foot for warehouse?
Akash Agarwal
So for a 1 lakh square feet warehouse the capex is around 20 crores.
Unidentified Participant
Okay. Okay. And the last question from my side last year Q1 Again, very good. And you will be on a high base in I think and all like festive demand would not be there because it was there in Q4. So do you still expect Q1 to. Be very good and how are you? Like how are the trends for Q1?
Akash Agarwal
Yeah, so Q1 has the main wedding season. Of course the Eid was preponed and it shifted to Q4. So there will be a slight impact. But we have seen very good traction and we have seen very good performance of the new stores as well. So it gives us very, very good confidence and hopefully it continues throughout the year.
Unidentified Participant
So is it in line with the guidance of SSLC that you’ve given?
Akash Agarwal
Yes, it’s lined with the guidance that we’re giving for the future years.
Unidentified Participant
Okay. Okay, thank you. Thank you so much. That’s it from my side. Thank you for your answers.
Akash Agarwal
Thank you.
operator
Thank you. The next question is from the line of Onkar from SRI Investments. Please go ahead.
Unidentified Participant
Good morning. Congrats for the great results. Once again, my question was recording earlier you mentioned that you’ll be growing at 40 to 50%. I mean your endeavor is to grow at 40, 50% for the next four, five years. And again you mentioned at the beginning of the call that you would be targeting margin expansion in 26 and 27. So coupled with, coupled both of this, what kind of EBITDA growth you would be targeting? Maybe a margin level can help on 40, 50% revenue growth.
Akash Agarwal
So because the new stores are slightly below in terms of per square feet sale, because it takes about two to three years for them to mature. So there might not be a huge expansion in EBITDA margin. But like I mentioned before, there will be a slight operating leverage. And if we get a very good SSSG like the last couple of years, then there will be an EBITDA margin expansion. But Otherwise, with opening 100 new stores, we will target around pre index 8. To 9% EBITDA
Unidentified Participant
right now, what is the EBITDA pre index?
Akash Agarwal
So pre index EBITDA is one second, it’s 8%.
Unidentified Participant
So somewhere you are expecting the similar kind of margins for the next couple.
Akash Agarwal
Of years, expansion would be within a 1% mark because the newer stores, you know, they absorb the extra EBITDA because their per square feet is about 20 to 25% lower than the old stores, old mature stores.
Unidentified Participant
Okay, so do you think that your size is helping us to give you the guidance of say 40, 50% for the next four, five years or. I mean, obviously the market is itself the retail category is growing, but I mean, can you expand a bit more on that?
Akash Agarwal
I didn’t understand your question, sorry.
Unidentified Participant
I mean, you’re targeting 40, 50% growth. So I’m asking whether this is based on the size at which you are the base at which you are, or else it is also because of the market growing and you are a small base in that market.
Akash Agarwal
No. So the total addressable market is huge. But we just made a model where we open at least 100 stores every year and get an 8 to 10% SSHG. And we felt that this is achievable because we opened 74 stores last year and we proved that we can grow at that level also. So the scope to grow is much faster than this also. But like I said, if our performance keeps improving like it has in the last two years and the new stores keep giving encouraging results, then we might accelerate the store growth and it might be 50 to 60%.
Unidentified Participant
Okay, so you are targeting 100 stores each year for next four five years. Is that correct?
Akash Agarwal
Yes.
Unidentified Participant
Okay, and this last question, everything looks so bullish. What can be the downside here?
Akash Agarwal
I think the biggest downside can be poor execution because the addressable market is there. India is a consumption giant. You, you, you can just imagine the next 10 years is going to be what happened in China from 2000 to 2010. So in terms of macroeconomic factors, in terms of the sector that we are in, in terms of the total addressable market, nothing is amiss. The only thing that can go wrong is poor execution and you know, we not sticking to our strengths and not giving the right product to the consumers.
Unidentified Participant
Okay. All right. Thanks. Best of luck.
Akash Agarwal
Thank you.
Akash Agarwal
Thank you. The next question is from the line of Ashish from Leo Capital. Please go ahead.
Ashish Kumar
Hello. Congratulations on a good set of numbers. So I have two questions. So my first question is what is. Our rental cost on a pre index basis for the current year at the previous year.
Akash Agarwal
So previous year it was 56 rupees per square feet per month. And current year it’s around 52 rupees per square feet per month.
Ashish Kumar
Okay. And for a store greater than one year what sort of sales per square feet are we currently at?
Akash Agarwal
It’s more than 1100 rupees per square feet.
Ashish Kumar
More than 1100 rupees. And I just wanted a confirmation. I think during your. In the beginning you mentioned that the old inventory of which is greater than one year is around 5%. Is that correct?
Akash Agarwal
Yes.
Ashish Kumar
Oh, okay. Got it. Thank you. Thank you. 18%, right?
Akash Agarwal
Right.
Ashish Kumar
Yeah. Thank you. Thank you. That’s all.
operator
Thank you. The next question is from the line of Neeraj Mansinghaka from White Pine Investment Management Private Limited. Please go ahead.
Niraj Mansingka
Hi. Hi. Thank you. Akash, just one question. On the new stores that you’re adding, can you give some color because they’re. Not a part of ssg. Can you give a color on how they are performing? And so because the reason I’m asking is that your store additions has increased a lot. So why don’t you just know on the color on how the revenue per square feet on a blended basis would come up in say here some. So a new store color would be very useful on that side.
Akash Agarwal
Sure. So I’ll just give you a comparative number so it’ll be easier for you to understand. So about two years back when the company per square feet was around 650 rupees per month the new stores did around 40% lower than the old stores. That was the benchmark. But now the stores that we opened in the last one year they are doing 26% lower than our old stores. So the new store performance has improved a lot. So if my old stores are at 1000 rupees, even the new stores are starting at 750 to 800, which is a very, very encouraging figure.
And it takes about two to three. Years for a new store to mature because they grow at a faster rate than the mature stores. So in a three years time they come at par with the stores that are aged more than, you know, one or two years.
Niraj Mansingka
Okay, and the second question is on the geographical areas, are you going to new, what newer markets and how is the adoption on those sites like the new states or the new regions that you’re going?
Akash Agarwal
Yes. So we entered Punjab, we entered Andhra Pradesh, we also entered Rajasthan. And we have got good response across these new states. We are collecting more data. We are trying to gauge what kind of assortment sells in that particular market. And the next store that we open in that market will be adjusted accordingly. But wherever we are entering, because of the value proposition that we offer to the customers, we are getting an amazing response because we don’t really have much competition in these new areas in the price segment that we operate in. So the traction has been really good.
Niraj Mansingka
On the blended of these new states of Punjab. APM Bal how would the revenues per square feet right now?
Akash Agarwal
So it’s at par with the new stores revenue per square feet. So around 750 to 800.
Niraj Mansingka
Okay. Okay. And do you see the cost increasing because of the new stage? Because you know the. You can’t agglomerate the cost or divide the cost because they are the distance. Any comment on that side?
Akash Agarwal
No. So Rajasthan and Punjab is very close to our distribution center. So logistic cost is negligible. And for the south, we were already present in Karnataka so we can leverage on the existing routes. So there has not been any increase in cost. In fact, we’ve been able to reduce the cost because the average rental of the newer stores is lesser than the company average.
Niraj Mansingka
Okay, great. Thank you. I’ll come back in the queue.
Akash Agarwal
Thank you.
Niraj Mansingka
Thank you.
operator
Thank you. The next question is from the line of Akash Shah from AJ Wealth. Please go ahead.
Unidentified Participant
Hello, I’m all. Hello.
Akash Agarwal
Yes. First, your voice is breaking.
Unidentified Participant
It is fine now.
Akash Agarwal
Yeah, much better.
Unidentified Participant
So I mean my first question is how is the demand trend shaping up in Q1 so far? I mean given the different discussions around possible slowdown. So.
Akash Agarwal
So if you compare from period to period because you know, Eid was preponed and it shifted from Q1 to Q4. So otherwise if you look period to period, we’re getting a double digit SSG Q1 and we’ve seen a very good response. And all the stores also that we opened in the current quarter, we’re getting very good traction.
Unidentified Participant
Okay, and last one, I mean I want to know actually what is exactly working for V2? I mean we have already grown 40%, I mean last to last year, then this year we have grown around 60% and now you’re guiding for another 45, 50% growth. So I mean, what is exactly driving this performance? Because when I look at other players with a similar kind of model, they are not able to actually match our level of growth. So could you give us more clarity on that?
Akash Agarwal
So I think, you know, our name stands for the core values that we believe in. So we do stand for value and variety. So we feel we give maximum value to the customer. So in a sense that means that we are the cheapest in that quality benchmark. And the second is variety. So in terms of number of options, we are the leading retailer. So you can benchmark us with any of our competitors. We have almost 2x the number of options offered to the consumers. So these two added up with the kind of assortment that we have at the stores.
I think all these three together becomes the perfect mix to have. You know, we, we now hold a leadership position in this sky segment which is an ASP of about 300 because our Postgres sales are at least 25 to 30% higher than our nearest competition.
Unidentified Participant
Okay, okay, okay sir, thank you, thank you, thank you.
operator
The next question is from the line of Netics from NV Alpha Fund. Please go ahead.
Naitik
Hi sir. Thanks for taking numbers and congratulations on a very good set of numbers. So my first question is, you know, we have seen significant improvement in our working capital overall. So is the reason, the only reason increase in, you know, sales per square feet, that’s the only reason or have you taken some steps consciously which has led to reduction in working capital?
Akash Agarwal
So we have taken a lot of steps to actually optimize inventory and you know, we have given a lot of knowledge, did a lot of knowledge transfer and training to our vendors. So earlier our on time delivery used to be just 40% and it has now increased to around 70 to 75%. So before we had to carry a 30 day safety inventory in our warehouses so that our shelves wouldn’t be empty. Now we’ve been able to reduce that a further 10 days. So that is why you’re seeing an Efficient inventory cycle also. And we have focused a lot on different processes in terms of supply chain and picking process, put away process and the picking and put away at the store as well.
So all those combined together has led to a much more efficient balance sheet. And this is an ongoing process. So it will continue to, you know, happen in the next couple of years as well.
Naitik
But sir, if I look at your creditors also, you know, credit days are also significantly increases that because we are being able to better negotiate, you know, the terms with them or so credit.
Akash Agarwal
Days have increased because the share of the subsidiary goods. So we have a subsidiary V2 Smart which has our manufacturing units. So that contribution used to be out 18, 19% and it is reduced to 5%. So there the credit days was zero. So as the proportion of those goods are decreasing, the credit days are increasing. As for vendors, we haven’t increased any credit days. It has remained constant at around 50 days.
Naitik
So my second question is, you know, you mentioned your rent cost per square feet, which is actually declined. So also wanted to understand, you know, how is that actually declining?
Akash Agarwal
It just depends on the set of stores that you finalize. And another thing that works very well for us is we don’t look for locations right in the center of the market. What we prefer is a larger flow plate, a big frontage, good parking. So we focus more on the customer experience because we know our brand has enough pull for the customers to come 1km extra from the market. So those things also work for us. And it really depends on the kind of markets that we’re focusing on. It’s mostly tier two and tier three. So we’ve been able to get properties at a very, very good price.
Naitik
Because my question was in context of, you know, other players actually sort of saying that rentals are actually increasing and they’re not finding, you know, suitable places because they are also expanding tier 2 and 3 cities which are, which have limited, you know, sort of properties where they can, they can open stores.
Akash Agarwal
I can’t comment on what other people have been saying, but we have seen something very different because a lot of properties have been converting into commercial properties in these cities. And there’s a lot of scope for new commercial buildings. So we always get multiple options in each city before finalizing a store.
Naitik
Right. And for safe version US tools, we are going to sort of find, you know, rentals which would be at current rate or lower only it’s not going to increase in terms of per square feet.
Akash Agarwal
Yes, correct.
Naitik
Right. So that’s it from my side. Thank you. Thank you.
operator
Thank you. The next question is from the lion of Sparsh Mittal from icit.
Sparsh Mittal
Good morning sir. Congratulations for the wonderful result. I have two questions. One is a follow up question to the. That is a scale, that is the internal procurement has reduced from 19 20% to 5%. Any specific reasons for that? That’s one. And second V2 retail has had a history of corporate debt restructuring when it was known as Vishal Retail. And the reasons for that were the increase in stores. The company increased from like 49 to 170 from 2007 to 2009 by an IPO with the help of an IPO and borrowings to the tune of about 500 crore.
So and in the current scenario as well the company is increasing numbers at an even, you know, kind of higher, at a more aggressive rate. So the question being, I mean what is the company doing different in comparison to, you know, the 200910 scenario wherein you know, we were forced to go ahead for corporate debt restructuring which kind of concluded till 2017, 2018. Only in 2018 annual report was, you know, the restructuring story kind of removed from the, you know, annual report. So those are the big questions.
Akash Agarwal
Sure, I’ll answer your first question first. So the contribution of the subsidiary goods have reduced from 18% to 5% because the volumes are increasing and the capacity of the manufacturing units was fixed. So we opened the manufacturing units just to get transparent costs of making each and every category so that we could negotiate with the vendors better. There were no plans to expand that business or open more units. So as the volumes of the business will increase, that contribution will keep coming down to very insignificant levels. Now answering the second question, the scenario that you’re comparing from is totally different.
If you look at the financials, if you look at the numbers you’ll understand that because in Vishal, during Vishal we never were generating so much cash flow. We were never generating EBITDA at a percentage of almost 8%. We did not have an ROE of 23%. Our per square feet sales was less than 500 rupees per square feet. So it is not an Apple to Apple comparison. And even last year we opened stores all through internal accruals and we can open 100 stores this year also with just internal accruals. So I don’t think it’s the right comparison.
And because of the learnings we had from the previous company, now we have cash flows made every week. We make store level Ebitdas. So if you look at more than one year old stores, we don’t have a single bleeding EBITDA level breeding store in the company, which I think historically is the first time that has happened. So there are certain checks and processes that we have built where we don’t want to compromise on profitability just to chase a growth number, just to open a lot of stores. It’s only because we have built a competitive advantage.
We are ahead of the competition, we have built a leadership position. And you know, the last four years was a period of consolidation where we were trending our model, we were trying to make our product offering better, we were working very hard on processes. So now I think it’s the time to reap the rewards of it. And when you’re getting very encouraging performances and there’s a huge acceptability of the products because wherever we are opening a store, we’re getting very good traction. So that means that our model is strong and that is why it gives us confidence to be able to open 100 stores and grow at the rate that we’re talking about.
Sparsh Mittal
All right, thank you, sir.
operator
The next question is from the line of Neeraj Mansingha from White Pine Investment Management Private Limited. Please go ahead.
Niraj Mansingka
Yeah, thank you. Just wanted to know some color attach on you started V2 smart and so how much you were able to reduce the cost from the vendors and what is the proportion of peak revenues from both companies and how much is it right now? Some small color would be useful.
Akash Agarwal
Again, Neeraj, like I said, you know, that contribution is very insignificant now. So there is a cost saving about 6 to 7%. But now the sales contribution from that business is less than 5% and it is a very capital intensive business. So it’s in order to grow and procure for the big scale that we’re talking about, the way to go is having vendor partners, having contract manufacturers who can give us at very similar prices. So one thing beneficial out of this that came was now we’ve been able to negotiate better prices with our vendors by showing them the transparent cost that we are getting in our factory.
So I think it has served its purpose and now we’ve been able to renegotiate and get much better prices from our vendors itself.
Niraj Mansingka
How much is the peak revenue from V2 smart?
Akash Agarwal
Peak revenues would be about 8 lakh pieces a month. So that’s about 9, about 150 crores.
Niraj Mansingka
A year.
Akash Agarwal
Yeah.
Niraj Mansingka
Okay. Okay. And you, you, you achieved a saving of almost 6, 7% because of that compared to what it was because see.
Akash Agarwal
This saving was achieved towards the latter part of the year. Because it all depends on the efficiency of the manufacturing units. When you’re setting it up you are actually getting higher costs. So that has not yet been translated into numbers.
Niraj Mansingka
And what did you do with this machine? Are you still holding them or you sold them on?
Akash Agarwal
We are giving them to our vendor partners so that you know they can. Because we are increasing the business with certain vendor partners by almost 2x or 3x. So they needed machines so we’ve been giving it to them.
Niraj Mansingka
Okay. And any guidance for the EBITDA margin on the pre India side for FY26?
Akash Agarwal
It should be between 8 to 9%.
Niraj Mansingka
Okay. For the entire FY26, right?
Akash Agarwal
Yes.
Niraj Mansingka
Okay, great. Thank you.
Akash Agarwal
Thank you.
operator
Thank you. The next question is from the line of Rajesh Vora from Genmay Venture. Please go ahead.
Rajesh Vora
Amit Akash and the team on wonderful setup numbers. Good to know. Onash that all new stores are EBITDA positive on that line. What is the capex per store and what is the payback period on an average for a new store for your company?
Akash Agarwal
So the capex per store is 1.1 crores. And if you include the inventory it’s around 2.2 crores. That’s your investment. And if we get a thousand rupees per square feet of sale with a gross margin of 28% we get the cost structure that we have which is 190 rupees per square feet per month. We get an EBITDA of 1 crore 8 lakhs for the whole year. And if you take out net profit is around 60 to 65 lakh rupees for the whole year of an investment of 2.3 crores. So you get an ROE of about 23, 24%. So the payback period is four years.
Rajesh Vora
Got it. And another thing I noticed is that on the fourth quarter gross profit margins have come down a bit from 28% a year ago and 32% in third quarter. So obviously third quarter is the best one. But what changes with less than 100 crore delta change reduction in revenue from quarter to fourth quarter. The swing in gross profit margin is very huge. Which should be more variable cost. Could you please explain that?
Akash Agarwal
So it’s because of the end of season sales for winter and pre winter goods. So winter and pre winter season is only for three to four months. And if we do not clear out that inventory in January then we have to carry it for another nine, 10 months. So that is why always the fourth quarter has the lowest margin. And in terms of sale because it’s Cyclical. There are no weddings in the fourth quarter and January and February is the dullest months usually throughout retail for consumption. So that is why you see that.
Rajesh Vora
Dip, what this end of season sale would cost in terms of revenue. Roughly about maybe a couple of percentage points. Should we read it?
Akash Agarwal
It’s more so during the end of season sale the gross margin drops by more than 6, 7%.
Rajesh Vora
Okay, got it. Great. Apache, congrats on this set of numbers and all the very best on the next.
Akash Agarwal
Thank you.
operator
Thank you. Ladies and gentlemen. In order to ensure that the management is able to address questions from all participants in the conference please limit your questions to two per participant. The next question is from the line of Gaurav Jughani from JM Financial. Please go ahead.
Gaurav Jogani
Thank you for the opportunity and Akash, congratulations on a great set of numbers. I just wanted to understand one thing. You know, if you look at the cash flow for FY25 and you know our implied cash flow for the year comes to be flat given that you know there is also a capex of around 100 odd crores that we have incurred on the store openings. So in this light, you know, how do you expect, you know, the cash flow to emerge in FY26 27 given that you know, profitability will increase meaningfully. And I think the capex would also increase because the store openings is also increasing.
Akash Agarwal
So there are two things that you have to take into account. So one is better inventory efficiency like we have done this year. And there was about 60 to 65 crores invested in our subsidiary. And right now we’ve already been able to reduce 30 crores from that and we’ll be able to further reduce another 25 to 30 crores from that. And third, the debt that we have on our books is currently used for bill discounting features that we give to our all our vendors where they can avail their payments with a certain discount. So if any day or any month we feel, you know, we are not able to fund or we are low on cash, we can just stop the bill discounting feature and use the CC limit for our expansion.
So there are three levers that we can still use.
Gaurav Jogani
Sure, but I mean on an annualized basis what kind of capex would you be incurring for the next couple of years?
Akash Agarwal
So this year if you open 100 stores we’ll have to invest about 220 crores.
Gaurav Jogani
So. And that would be including the inventory or this is just the CapEx bit,
Akash Agarwal
including the inventory. CapEx is 110 crores and another 110 to 120 for inventory. Sure, sure.
Gaurav Jogani
Okay. And just one thing I wanted to understand from your.
operator
Sorry to interrupt. Mr. Gaurav, may we request you return to the question queue for a follow up question?
Gaurav Jogani
Sure.
operator
Thank you. The next question is from the line of Divyanshu Mahavir from Dalalan brochure Stockbroking Private Limited. Please go ahead.
Unidentified Participant
Yeah, thanks for the opportunity, sir. And congrats on the good set of numbers. I have just couple of questions. First on the cash flow side, so if you look at the EBITDA to CFO conversion for this year, it’s been on the around 90%. So it is because most of the inventory efficiency. So could you give it a highlight that what steps would we have taken on increasing our inventory efficiency from the last year? Because last year we saw the cash flow from operation being little subdued because I think it was the inventory level. So what steps we have taken on the inventory side to get our inventory more efficient or lesser inventory money blocked and the lesser inventory side?
Akash Agarwal
Yeah, so I think already mentioned this. There are two main things that happened. One is the increase in per square feet sale. So the capacity of our stores remains the same. So we keep the same amount of inventory for a higher sale. So that reduced the inventory days by 6, 7 days. The second biggest thing that happened was we reduced the safety stock that we keep in our warehouse. It used to be 30 days. But because we’ve been able to give prior planned orders and educate our vendors and get more goods on time, we’ve been able to reduce the safety stock also.
And we plan to further reduce it by six, seven days going forward.
Unidentified Participant
And what, what could be efficient in terms of operational efficiency in these stores? Since what I have understood by visiting the stores is that we have the distribution centers in their stores only. And the store guy doesn’t come out to be in this distribution center as well. So is it some kind of efficiency in this store operation is also having having an impact on inventory.
Akash Agarwal
So you asked me specifically the difference from last year versus this year. But the store distribution center that you’re talking about we’ve been using for the last four, five years now. So the delta change that has happened is happened because of the reasons I mentioned to you. But our store level inventory efficiency has always been very high because of the different virtual and physical locations that we have for inventory at the store level.
Unidentified Participant
And one last question, sir. If you look at on the store opening side, so what’s our thought process that are we going on the Cluster wise store Capex or what we going towards on the full India Pan India store wise basis from now onwards. Because our growth trajectory would be changing from now onwards.
Akash Agarwal
So because we know the fact that we want to be a national level retailer in the next five years we want to test new markets and test new waters also. So about 60, 70% of the new stores will be in existing clusters and existing markets where we are very strong in. But definitely 20 to 30% stores will be in newer markets, newer geographies and it gives us more confidence because whichever city that we have entered, whichever new state that we’ve entered till now, we’ve got a very good response.
Unidentified Participant
Okay, thank you so much sir and best of luck for the FY26.
Akash Agarwal
Thank you.
operator
Thank you. The next question is from the line of Abhishek from AB Capital. Please go ahead.
Abhishek Mahalpure
Hello. Am I audible? Yes, just wanted to ask you had told that Roe will go north of 20 and that you have achieved. So just wanted to know like how much do you think we can reach by end of 26 next year.
Akash Agarwal
So like I mentioned because we are growing at 40, 50% and newer stores don’t perform at par with the older stores. So I don’t think there will be a huge delta and we are very happy with 23 to 25% ROE. And if you look at pre index basis then the ROE is 28%. So I think even if you maintain it with such a high growth number then it’s a very very good performance.
Abhishek Mahalpure
I think. Q2 you had told about a local level E commerce you will do wherever your stores are located. So how is that line of business going?
Akash Agarwal
We are not happy with the technology that we were integrating with and we don’t want to start it half heartedly. So we are still exploring what works best for us and that can be easily integrated with our SAP systems. So only then we will start till it is not a concrete timeline. Hopefully this year. Oh okay.
Abhishek Mahalpure
Okay. I just wanted to confirm you do 4 to 5%.
Akash Agarwal
Yes.
Abhishek Mahalpure
Okay. Thank you. Thank you.
operator
Thank you. The next question is from the line of Aditya Agarwal from Finn Avenue. Please go ahead.
Unidentified Participant
Sir. Am I audible?
Akash Agarwal
Yes sir.
Unidentified Participant
Yeah. So sir, I wanted to just check with the thing like how much you know in house design team has expanded in the recent, you know from past three months and like how do we. Face, you know so basically do we. Have internal store growth team or growth officer or we are dependent on external agencies for the same.
Akash Agarwal
So we have a whole business development team. I Think there are eight to nine people just in that team for finding out new sites and visiting them, filling in the formats, benchmarking them to open 100 stores every year. Definitely we need our team and of course we take help from different agents, brokers and agencies that help us with the sites. But all the analysis and everything is done by internal team and then finalized by very management committee.
Unidentified Participant
Yes sir. And we earlier we had like three weeks policy for our inventory which was not getting cleared off. So are we sticking to the same policy or we are doing some changes over there in the policy?
Akash Agarwal
No, it is the same policy. We wait for 15 days before identifying slow movers and then putting them, putting them in the discount zone. And to answer your first question, there hasn’t been a significant increase in the product development team and we have also mentioned this earlier because we want to take a gradual approach in increasing our product development percentage. Because we want to make sure that whatever our in house designs are at the store level they’re giving us at least 15 to 20% higher gross profit per square feet and we don’t want to disrupt the business performance suddenly.
So we are taking a cautious approach and it’s given us good results.
Unidentified Participant
And sir, on the terms of PAD, can we expect like FY26 to be a blockbuster for us with like 150 or 200 odd crore rupees of final bottom line?
Akash Agarwal
Hopefully it is a good year and it’s looking like it’s going to be a good year. But we are sticking to our strengths and you know, trying to implement all the different 15 new projects that we’ve undertaken to go to the next level. So the next target for us is 1200 rupees per square feet per month. So we hope to reach there in the next two, three years.
Unidentified Participant
Thank you so much. Thank you so much.
Akash Agarwal
Thank you.
operator
Thank you. The next question is from the line of Rajiv. From Nirvama. Please go ahead.
Unidentified Participant
Good morning sir. Thanks for the opportunity. So with regard to because Roes Rocs are basically close to 23% and we have seen that several players have kind of solved the franchising bit recently. Are you open to the franchising especially the capex side of your business to expand, to release some capital. To be honest, we haven’t studied that growth path yet but I think we would be open to it in the future. Like I said, if we feel we want to accelerate the number of stores that we want to open and the business is continuing on the momentum and we keep getting amazing sssg and the newer stores traction then we would explore that route as well.
Akash Agarwal
Sure.
Unidentified Participant
And lastly on geographical spread especially on something like Odisha and Jharkhand, how do. They stack against let’s say on the indexation front on the sales per square. Feet number versus the rest of the panel.
Akash Agarwal
So Odisha has been very very strong market for us. And I think I don’t have the exact numbers but it’s definitely higher than our national average. And same goes for Jharkhand because it also depends how many, what percentage of stores are mature stores in that particular state. So for example we have almost eight stores in Burmesworth. So it’s been a good, good market for us and that is why we are expanding more in Odisha and Jharkhand also.
Unidentified Participant
That’s all from Ajay. Thanks for us and all the best. Thank you.
operator
Thank you. The next question is from the line of Natick from NV Alpha Fund. Please go ahead.
Naitik
Hi sir, thanks for the follow up question. So my question is, you know when I look at your balance sheet your other current assets or other current financial effects have almost doubled from last year. So just trying to understand what constitutions what constitutes are sitting here in other current assets.
Akash Agarwal
I would have to check that but I think we’re checking the I gap numbers. So it’s all related to how your MTL properties are part of your assets. So because we opened a lot of stores this year they are, you know they’re added to assets and then you subtract the liability and charge interest cost on that on those rent provisions.
Naitik
No sir, I’m talking about other current assets which has gone from 50 to 109 crores other current or other financial assets. So I think this is different from current assets.
Akash Agarwal
I would have to take that number. But mostly other current assets is security deposits and just advances. I’ll have to check on that number.
Naitik
Got advantage and security deposits nature. Okay, got it. Thank you.
operator
Thank you. The next question is from the line of Anuj Dunavat from an individual investor. Please go ahead.
Unidentified Participant
Hello Akash. Am I audible?
Akash Agarwal
Yes sir. Yeah.
Unidentified Participant
So basically I wanted to ask about inventory turn. So we have seen a very good growth in same store, same store SSG of say whatever 30%. But the inventory turns has been remained stagnant around 3.3, 3.2. So like what are, what is our plan in improving here And I, I, I heard it in the last call that we have been working with the vendors in terms of improving the ERP so that we have to keep invent less inventory. So is that in that direction. And how would you. Let’s talk about the trajectory of the things.
Akash Agarwal
So yes, current inventory level is around 90 days, sir. And as we are able to improve the vendor ERP integration and the supply chain from the vendor part I think we’ll be able to get it down to around 75 to 80 days. But there’s no further scope to reduce inventory because then we might risk on loss of sales because we never want our shelves to be empty. And the added cost of 10 to 15 days inventory is much, much less than the opportunity cost of a lost sale.
Unidentified Participant
Okay. Okay. And last question was about what was the sales to repeat customers.
Akash Agarwal
So in the mature stores it’s around 70%.
Unidentified Participant
Okay, 70%. Thank you.
Akash Agarwal
Thanks.
operator
Thank you. The next question is from the line of Kapil Malhotra and individual investor. Please go ahead.
Unidentified Participant
Hi. I just wanted to ask that Q1. Will maintain the growth rates forecasted about 45, 50%. And it’s being assumed being one of the better quarters. So Q1 and Q3 are supposed to. Be the better quarter. So at margins of about 45% can. We assume that.
Akash Agarwal
For the full year? Sir, the guidance is 40 to 50%. So yes, you should see those numbers in each of the quarters. And similarly that goes for tag numbers as well.
Unidentified Participant
Thank you.
operator
Thank you. The next question is from the line of Onkar from SRI Investments. Please go ahead.
Unidentified Participant
You intend to become a national level player in next four, five years. So as of now you haven’t entered markets like Maharashtra and all. So what are your plans on that front?
Akash Agarwal
We opened our first store in Maharashtra actually five days back in JI and we got overwhelming response. So hopefully Maharashtra becomes one of our core territories in the next four, five years.
Unidentified Participant
So if I. If my calculation is correct you would be going towards say 6, 700 stores, 700 stores, say next 4, 5 years. If that calculation is correct.
Akash Agarwal
Yes. Hopefully before that also. Okay.
Unidentified Participant
Your target for say a long term target for sales per second square fit. Or you are right now targeting around 1200. But where, what level can you reach to?
Akash Agarwal
If all goes well, there’s no limit. I think we want to keep testing the ceiling for that. I don’t think anyone can give you a ceiling to that. I have seen stores that do 10,000 rupees per square feet of sale also. So I think it. It is. I think it is limited by your own capabilities. Okay. So for.
Unidentified Participant
Let’s say if my understanding is correct for sales per square foot and for margins there is only upside we can calculate, right?
Akash Agarwal
Yes.
Unidentified Participant
For Revenue I’ve already told. But for margins and same sorry sales per square width though there is only upside you are assuming.
Akash Agarwal
So see again for guiding we say 8 to 10% SSHG. But you ask me what is the limit. So those are two very different questions. So if you talk about limits, I think there’s a scope and potential for doing much much higher per square feet sale. But like I said, we haven’t implemented a lot of things yet that we want to implement. We don’t still sell 100% of what we design or make. So there is a huge, huge scope for improvement and growth. But for guidance, when we talk about making a model, making a business Plan, it is 8 to 10% SSLG with opening 100 stores at least every year and the new stores doing 25 to 30% less than old stores.
So that is how you build the business plan. But when you talk about the ceiling of per square feet sale, I think the first target is 1200 rupees. Then the next target will be 1500 rupees per square feet per month.
Unidentified Participant
And this 8 to 10% SSG growth we are talking about, this is because of last two years pace is now high. That’s the only reason or I mean is there something other you are painfully in?
Akash Agarwal
No, of course. Like now we’ve increased the average revenue of a store from 65 lakhs to more than 1 crore a month. So the percentage we’ve almost grown like you know, more than 60, 70% in two years for the same cohort of stores. So because of a higher base we’re taking a smaller number.
Unidentified Participant
For the next four, five years. If you want to grow at this pace. 40, 50% you are saying? I mean would your internal cash flows be enough or like at some point of time you will have to tap the market or debt would be the strategy.
Akash Agarwal
So that also I mentioned before that to grow at 40 50% we don’t need additional capital. But because we’ve been getting such good response of our new stores, we are working on increasing accelerating the store growth. So then we might think about raising capital but not debt. It will be equity infusion. Okay.
Unidentified Participant
And can you tell me what is the current debt to equity ratio and what is the ROCE return on capital employed?
Akash Agarwal
I don’t have the ROCE figure but debt is around 125 crores and equity is around 360 crores. So it’s one is to three.
Unidentified Participant
Okay. Any ballpark number for Roce?
Akash Agarwal
No, I won’t be able to RoE is 23.2%. Will have to check for the RoC.
Unidentified Participant
Just the final question is on the interest on from the institutional side. Like I mean we see very less institutional investors from a shareholding pattern. I mean, I mean what’s stopping them? I mean it’s from. It’s for them to them to answer. But just asking you like since we are growing so much and at a profitable way, I mean are you meeting some institutional guys or like what’s your comment on that?
Akash Agarwal
There is regular conversation and it’s a mystery to us also. I think we’d have to post even more stellar results to convince them and hopefully we’re able to do so. Okay.
Unidentified Participant
All right. Thank you.
Akash Agarwal
Thank you.
operator
Thank you. Ladies and gentlemen. In order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Rohit Jain and individual investor. Please go ahead. Mr. Rohit, your line has been unmuted. Please go ahead with your question.
Unidentified Participant
Hello.
Akash Agarwal
Yes sir.
Unidentified Participant
Hello. I just want to know one question that do you have any future plan regarding to better upper category market? Like you have any plan, any future plan regarding that?
Akash Agarwal
No sir, we don’t have any plans for that. We want to focus on this model. This model has big enough market potential so at least not for the next few years.
Unidentified Participant
Thank you and congratulations.
Akash Agarwal
Thank you.
operator
Thank you. The next question is from the line of Divyanshu Mahaval from the Lalan brochure shop Broking Private limited. Please go ahead.
Unidentified Participant
Yes sir. Thanks for the opportunity. So just wanted to understand the thought process. So suppose for example if you go to. We go to open the next 100 stores in one year, next FY26. So if by in chance my 100 stores don’t get the sales revenue say same store sales growth or you can say that the what, what we wanted to get the revenue from this 100 store is big. Don’t get the EBITDA break even or EBITDA positive. So what is the thought process that first we will focus on making profitable at Hyundai store and then we expand it.
Akash Agarwal
Yes, definitely. So what happens is the whole expansion that we’re talking about is going to happen in multiple legs. So if we open our next batch of 50 stores and we see that you know all the new stores are doing less than 50% of our old stores then of course we revisit our growth plan and we would not open 100 stores or 50 stores and we’ll try to figure out what went wrong and try to figure, consolidate and correct that before growing. Because I already mentioned that this time it’s not just about number of stores or revenue growth numbers.
This time a big, big focus is on profitability, on return ratios because, you know, profitability is the priority.
Unidentified Participant
Okay. And so last one thing just wanted to understand that. What if you just, you mentioned in the call that our target is to get into 1500 square feet or from 1200 for that it could be 1500 square feet per month. So what gives you the confidence here? What gives you the motivation that we can do 1500. Yeah. What steps we would be taking to reach that kind of square feet? Sales. 1500 square feet per month. Sales. Any steps you would be taking out that, that could make you a better than the competitors, if you can tell us abroad.
Akash Agarwal
So it is, you know, focusing on the same things that we’ve been focusing on. Again, it’s all about product. So working on product Even more, having 100% of our own designs, making the quality better, fabric better, fits better, colors better. It’s about processes, it’s about demand forecasting, doing it better. So I think it’s a combination of 100 different factors that makes a secret sauce that has helped us get from 650 to 1000 and that is how we plan to get from thousand to twelve hundred and then twelve hundred to fifteen hundred. There is no white or black answer or a one word answer to that.
If we knew that, we would have done it already. It’s a lot of trial and error. It’s a lot of innovation and it’s a lot of improvement.
Unidentified Participant
Okay, understood. Thank you, sir.
Akash Agarwal
Thank you.
operator
Thank you. The next question is from the line of Nitesh Kumar, an individual investor. Please go ahead.
Unidentified Participant
Yeah, am I audible to you?
Akash Agarwal
Yes, sir.
Unidentified Participant
Yeah. Congratulations on a good set of numbers. And yeah, Mr. It would be great if you bring some light on the qualified opinion given by auditors from the last three years. Please bring some light on it.
Akash Agarwal
So which point are you specifically talking about? Can you mention it?
Unidentified Participant
Qualified opinion for CP from the last three years.
Akash Agarwal
So the main qualified opinion that has been there for multiple years has been the fixed assets reconciliation. So because we did not have the fixed assets module in our erp, it has been a challenge because we have so many multiple sites and there are more than 15,000 different articles for fixed assets. And we did not want to do an inaccurate reconciliation. So we had hired an external agency who worked on it for more than one year. But we were not satisfied with the results. But now we’ve hired a newer one and it’s almost 80% done.
So this year all the qualified comments will be removed by the year end. Thank you.
operator
The next question is from the line of Akash Shah from AJ Wealth. Please go ahead.
Unidentified Participant
No, my question is already being answered. Thank you.
operator
Thank you, ladies and gentlemen. We take this as the last questions. And I now hand the conference over to Mr. Akash Agarwal for closing comments.
Akash Agarwal
Thank you everyone for joining the call. We hope we’ve been able to answer your queries. For any other further communication, we request you to get in touch with Marathon Capital, our investor relations team. Thank you.
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.