We recently added V mart to our model portfolio

The organized retail sector, which consists of only 5% of total retail market, is estimated to touch 15% by 2025. India has few organized players like Pantaloon Retail, Shoppers Stop, Vishal Retail, Koutons, Trent, Subhiksha, Reliance Retail, More, Spencer, V Mart

Now why V mart is different

1. V Mart is focusing only on Tier II & III  Cities, Currently they have 90+ stores in northern India.The company plans to add up atleast 25 stores for the coming few years. In these cities it pays average rent of just Rs 25 per square feet compare this to 150-200 which pantaloons is paying

2. The average sales per sq ft has increased from Rs.507 in 2011 to around 710rs now.The management is confident of increasing the same to even higher rates by meeting the aspirations of people by proving quality fashion at affordable prices.

3. 5 year sales growth 31.35% 5 Profit growth 37.61% are very impressive numbers

4.  Very impressive debt ratio of 0.25 leader in it’s industry

5. V-Mart is first organized store in most of the towns it enters, which gives it the first mover advantage.

 

For numerically inclined

Vmart valuation

The growth basis value of stock is coming out to be 1511 a 4X from our buy price, I am ignoring cash flow pricing as they are in expansion mode

Risks to watch out

– Promoters start levering firm

– Growth slows down

– They change their approach and move to big towns for new stores

We have started with a small position and will monitor it accordingly