V-Mart has a target to open 50-55 stores in FY22: Lalit Agarwal, CMD

Lalit Agrawal, Chairman and Managing Director, V-Mart, talks about the current situation of COVID, where cases are increasing, and the impact it can have on his business, demand and footfalls, increasing commodity prices, price rise, QIP and the raised fund among others during a joint interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: How will you define the current situation as corona cases are going up again? Do you think that this a matter of concern or this too shall pass? 

A: We have been through a very bad phase and have come out of the bad times and Indians have come out stronger. So, we know the ways to handle it, our citizens and the public know how to handle it. Now, even the business has learnt the ways to handle it. I think, it will not create a lot of problems this time. The biggest problem that we had here was lack of information, literacy, lack of understanding and hygiene and this time I feel that it has become very good, understanding of people has increased, so when the fear is visible and it is visible, people will become careful.

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Careful in terms of masks and social distancing, it is being followed. So, I feel that the only visible problem, unless the government does not pass any hard regulations, till then it seems that it will not create any big problem. Because the public, especially, the kind of customers who come to V Mart are from small cities – they are from Tier-2 & 3 towns – and they earn low. Generally, they are fearless, more immune and do not fear a lot. So, they were coming to us in the past and I think that they will continue to come even after the COVID, until and unless any severe lockdown measures are not announced by the government. At the same time, I would like to request the government to not come up with any such measure.

Q: From a business point of view, what kind of footfalls is visible and what kind of demand is coming? Also, we have seen a pent-up demand during the festive season do you think that you will be able to continue those levels as the situation is still volatile?

A: The situation was not 100% back to normal yet. It seemed that the month of March was going good and the last 21-22 days have passed well, especially if I will talk about this weekend then a good footfall was seen in the cities where we are operating. There are 190-191 cities where V-Mart is operating. We have seen more people coming to the stores this year as compared to the last year. We have also made more bills this time as compared to the last year. However, the pocket size of the customers has reduced this time, they are buying low priced items. But overall, the customer is returning because they haven’t made purchases last year during the summers. A lot of days have passed without shopping and new fashion is required at the home as well as to get out. There are a mood and atmosphere. So, a very good footfall is being seen at the stores and a good crowd is also seen at the stores. This is what I can say. 

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Q: Night curfews, partial lockdown and restrictions are being introduced in some cities of few states. Do you foresee its impact on your business or not? Also, there are reports that the old inventories are ending, and retailers are restocking themselves. Is this right, if yes, at what level restocking is happening? 

A: Definitely, whenever some impact will be there which can reduce our operational days or there is any change in the market atmosphere in which the market will be closed at any particular time, for instance, few markets were closed on in Madhya Pradesh, Maharashtra and Gujarat, will definitely have some impact. For the number of days or the time for which the markets are closed, especially on the weekend if the government closes the market, which is a shopping time, then it will have a slight impact. It can range from 5-7%. If there is a day or night curfew then there can be an impact of 5-7% but otherwise, it seems that the customers are quite bullish, and they will come back. Also, you have rightly said that our old stock has ended, and we are engaged in procuring new stocks, the demand is very high in the supply chain, manufacturing capabilities have been slightly low. There is a bit of commodity inflation, for example, yarn prices, cotton prices, metal prices have increased, this is having an impact on the costs of the products and it seems that there can be a price hike. So, this is a big stress level in which there is a crunch situation on the supply side and demand is a bit high. I think, overall, the situation is very good. Our retailers and we at V-Mart are having fresh products in the stocks and we are taking fresh inwards. So, you have correctly said that we are stocking because our stock levels are around 30% lower than the last year. 

Q: Recently Yarn prices and other raw material prices have started inching up, Since Dec Yarn prices are up around 25%. There were speculations that retailers might increase prices from April. Is it right and should we consider that there will be a price rise, if yes, what can be the quantum?

A: Overall average, the yarn prices have gone up by 25-30%, if seen in comparison to the last year. And this is the first time in the last 15 years in which such a big price rise has come, and it is a sustained price rise. So, there is no other option with the retailer, and it will have to pass on it, and we will also have to pass it on. So, approximately, it seems that 8-10% impact can be seen in the coming future in the products that we sell, i.e. the same products will be sold at 8-10% costlier than at what it is being sold today. 

Q: The company has taken an enabling resolution to raise Rs 500 crore but has raised just Rs 400 crore through QIP. What will you do with the raised funds and they will be used in organic growth opportunities or you will also look forward to some M&A opportunities?

A: There are huge opportunities in India. The market to which we cater and currently, we are already present in 190 cities and there are another 600 cities in India where V-Mart can move. And the existing cities also have the capabilities and new stores can be opened there. So, around 80% of the retailing is happening in an unorganized manner, even today. So, the residents of the small cities and the buyers of low-priced products also have aspirations and have a good fashion sense. So, there is a big opportunity to grow. The way our team has handled the COVID and the way our company maintained the feelings of the customers or employees or landlord or vendors and reduced the cost and our inventory levels were low. So, I am confident that the team can grow more, and we will accelerate this path of growth. In place of 30-35 stores, we were opening earlier, we will increase the number of stores and will consume in it. Whatever there will be a need to create a backend infrastructure for it, whether warehousing or even digital infrastructure – as it is the digital age, and we will also invest in digital business to make sure that our online sales go up – we will also invest in bringing digitalization in the business so that our capabilities and processes can improve further so that we can handle larger business. So, we have raised the fund to cater to our big business. However, we have never said no to M&A and we will look towards it only if we get some very strategic business. We don’t have any M&A deal in our hands at present, but we are very open to understand and see where the opportunities are. 

Q: How many new stores will be opened in the coming couple of quarters or FY22 overall? Also, what are your store-wise plans and how are you playing online Vs offline?

A: In the last-to-last year, i.e. the financial year 2019-20, we opened 55 stores and I think that our company has the capability of opening 50-55 stores at an ease, it may go up. So, we are trying our best, if there is no big impact of the COVID, then we are targeting opening up of 50-55 stores next year and it will happen in new cities as well as the existing cities. V-Mart is already present in 19 states and we will try to penetrate more in those states only. Maybe, we will move to the neighbouring state, but more penetration will be made only in those states – in the existing cities as well as new ones. We already have launched an online, omnichannel digital channel. We also have an app with the name vmart.com and we also have websites where we are doing retail. The app has been downloaded with more than 1 million downloads and we are doing good work over there. We are trying to add our stores in it so that the deliveries are made through the stores – which reduce the time of delivery and the cost of delivery – and make sure that our Omni model turns into a profitable model. So, our business volume is not quite big at present, but we are focusing on it because digitalization is here to stay and digitalization adoption among people is likely to increase. So, to create convenience for our customers, we will focus more on digital and gradually have a target to have a good share from it.