Inventory is always on the books for retailer and is full financed by retailers, including the liability. Anybody who has any business experience of running a shop or retailing knows this.
One can check this in another similar electronics retailers, ELECTRONICS MART INDIA, which is coming with an IPO this month. They have got Sebiapproval also. DRHP attached.
They also have 99 stores in Andhra/Telangana, with similar revenue, but coming at a much higher valuation (price band still not announced). This can be another trigger for re rating of this stock if it happens.
Q1 and Q3 are peak quarters, so inventory just ahead of this Q is always high, eg in Q1 they did sales of 510 cr (GST is 16 %), so net revenue is 430 cr, net of GST, so having 200 cr of inventory is normal. This will keep on increasing as co scales up, but should be seen as % of sales.
Interest cost should never be calculated on closing short term debt level, as some debt may have been paid during the year as it is short term debt, but during the year at some time debt could be higher, hence higher interest cost, AR clearly says cost of borrowing is in the range of 7-8 %.
The one of the reason of high margin is low cost (rental and employee cost), but same ASP (average selling price). Low cost is an advantage, being present in smaller towns.
The other point regarding competition is as pie is growing (unorganized to organized and also market size growing @10-12%) there is space for more players. eg vijay sales is v old and is present mostly in all cities, then reliance digital came and then also vijay kept on growing, then Croma came and all 3 are still growing fast. In Aditya vision towns, there is no vijay sales or reliance or croma ( v little), so can assume competition is same or infact lesser.
Having 55 % market share in Bihar/Jharkhand is itself a big moat, it gives them bargaining power and all OEM have to go through them, so it becomes buyer ( Aditya) market, who decides the terms. OEM is also happy as they don’t have to deal with large n if small unorganized retailers.
People living is smaller towns can relate to this story better, where does the customer gets all the brands, eg at competitive prices and good service under one umbrella.
A quick comparison of other retailers margin is below
Electronic Mart India Ltd DRH for reference.