V-Mart Retail Ltd


(seshukumar) #141

Are we being overly optimistic and closing all possibilities of negative outcomes in this stock? I had been to this store quite a few times and didn’t anything so different that this retailer would stand out. They do have a first mover advantage in some of the markets but first mover advantage is not enough of a moat in this business.


(Naman) #142

V-Mart today announced opening of 4 new stores. Each of them are fashion stores taking the total count to 114 stores in 97 cities.

This marks the entry of V-Mart in West Bengal and Orissa (second store with first announced last week), which are big markets for VMarts growth strategy and expected to lead new store rollouts.

Overall there are 650 districts in India, and company has significant addressable market opportunity.

Disclosure : Invested from sub 275 levels


(Naman) #143

@seshukumar - retail is an extremely tough business with limited or no barriers to entry…in India real estate costs are prohibitive which have led to a fall of many retailers due to over aggressiveness.,.

The bet here is on the managements flawless execution of a differentiated strategy to focus on aspirational markets where larger players have limited presence and are unlikely to focus in near future. Even in a tough consumer demand scenario (last five years) where growth for retailers has been tepid, management has shown great perseverance and grown profitably with no debt.

There are of course multiple variables that need to be tracked such as same store sales growth, debt, inventory etc.


(jainaj) #144

To me most important thing is cash flows here. Funding opening of new stores with internal accruals is crucial otherwise same old story of debt for growth. Management is visionary and tries to anticipate problems. Though very nicely priced at these levels still more information is needed.
Disclosure: sold a while ago after remaining invested for 1.5 years. Feels MOS at these levels is ample as such entering in staggered manner.


(seshukumar) #145

What is vmart’s spread on rentals - how many stores are at 4-5% of sales, how many are at 5-8% of sales, how many are at greater than 10% of sales? How many of their stores are breaking even ? What is the working capital in terms of days of sale? How did the working capital change over the last 5 years? How is their model superior to big bazaar or reliance trends or dmart (other than lower real estate costs in small costs ) Today they are not looking at small towns because they are yet to saturate tier 2 and tier 3 cities. Once they complete the expansion in larger urban centre, they will change their focus to tier 3 and tier4 cities. What is v mart doing better which will enable them to compete against the above stores when they open in same towns?


(seshukumar) #146

Please read other than real estate costs in small costs as other than real estate costs in smaller towns?


(Kushal Masand) #147

They are in market looking to raise debt for working capital. Will try and share some details later.
Sorry but can’t share the source.

Disc: Less than 1% of PF.


(Hitesh Patel) #148

Disruption due to barrage of online retailers would be a huge headwind for vmart and other similar players.

Even if actual impact may not be there, there will always be that perceived threat in the mind of most investors and I feel that should limit any kind of PE expansion.

disc: not invested.


(JatinK) #149

Yes, that perception has been hurting the stock, it hasn’t moved at all in last 1 year, despite posting decent set of numbers.

VMart mainly operates in Tier-II & III cities where online presence is lower, company mainly sells non branded products, has lower revenue per customer visit than what people who buy branded stuff from e-com usually pay for.

Hence, I expect VMart to keep growing at 25% cagr.

How much value will it get from market, tough to say!


(Billu) #150

A major problem with online retailers in India is the pervasiveness of English on the net. People can’t use non-english languages because the font don’t show nicely - yet the customers find it difficult to buy something with english as a means of transaction.

This problem - I’d suppose - would be more pronounced in smaller towns.

Even if this was solved, do remember than internet may have hurt Barnes & Nobles, but not Walmart or Home Depot (as much), shopping is a great past-time for many.


(seshukumar) #151

Walmart USA’s sales for Quarter ending July 2015 grew by 1.5% for Like to Like stores. Amazon’s US sales for quarter ending September 2015 grew by 28% for the same period.Growth is being taken away Amazon - no doubt!

Walmart is growing only in the neighbouring stores segment (7.5%) mainly in foods where amazon is still testing its service.


(Venkatesh) #152

Ex depreciation company has show decent growth in 1HFY16.
I personally feel it is best to look at V Mart at PAT + Depreciation level. There were lots of exceptional items in depreciation level last year (Depreciation was +ve in 2Q and 3Q FY15.)

Self funding now
The company has become FCF and is self funding now. I dont know of any retail company is India which is FCF +ve. That itself is a massive achievement.

New store additions
There were concerns on new store additions. Current store count is 122 up from 109 end of 2QFY16. So company has added 13 new stores in 3Q so far.

Disclosure: Invested recently


(Venkatesh) #153

Look at growth in PAT + depreciation for actual underlying business growth. Lots of exceptional items in depreciation

Disclosure: Invested recently after reading this thread


(HG) #154

FII investment limit bumped up to 49%

http://economictimes.indiatimes.com/markets/stocks/news/rbi-allows-foreign-investors-to-buy-upto-49-per-cent-in-v-mart-retail/articleshow/50299810.cms

disc: invested


(Naman) #156

VMart has opened its 124th store. Growth in number of stores has been slower than expected with only 16 stores in last 12 months, though last 6 months has seen the company take store count from 109 to 124, i.e, 15 stores, which is a healthy growth rate.

With e-commerce growth slowing down, the perception of threat from online retail should also come down which could help the stock with PE expansion.

FII shareholding has gone up after the cap was increased with new investors including Fidelity who own close to 5%, and Wasatch close 1.75%. Westbridge continues to own ~20% stake.

Disclosure : Invested from 275 levels. Havent traded stock in the last 6 months


(VB) #157

May 18, 2016:
V-Mart Retail may remain in focus, as ace investor Ashish Dhawan and Morgan Stanley bought shares of the company. According to a bulk deal data on the NSE, the former bought nine lakh shares and the latter one lakh shares at an average price of ₹505. Kotak Mahindra International was the seller. At the end of March quarter Kotak Mahindra International held 17.09 lakh shares (or 9.46 per cent stake) in the retail major.


(VB) #158

Dear fellow members, could anyone pls share the latest concall transcript for V-mart or any notes from the call? Thanks

Varun


(Vikas Pandey) #159

Excellent point , thinking of investing in Vmart now


(Naveen Jain) #160

Dear all,
Thanks for a lot of useful information in this post. I am looking at the company for the first time. Took a while to go through the entire thread, but totally worth it.

It will be really helpful if people tracking the company closely share their views on following:

  • Last two quarters have seen the SSSG for the company declining quite significantly. Company seems to be indicating that some of the slowdown is due to increasing competition. Does it mean that the competition has finally caught up and company first mover advantage in many of the tier 2/3 towns has now started to wane? Or is it a temporary phenomenon and the growth is likely to bounce back as overall growth recovers.
    Any views / insights will be useful.

Thanks much in advance.
Naveen


(HG) #161

Well, the online guys might be a bigger threat. Quoting from the below article -
Amazon also claimed five times growth in customer acquisition with 70% of new customers coming from tier II and tier III geographies. The sale recorded 30-fold increase even in orders from Tier III and even smaller cities as compared to last year.

Read more at: http://www.moneycontrol.com/news/business/amazon-sells-15-million-units-during-great-indian-festival_7583401.html?utm_source=ref_article