Thanks, Alec. Good morning, everyone.

On behalf of Motilal Financial Services, I welcome you to V-Mart's 3Q FY26 earnings call. From the management, we have Mr.

Lalit Agarwal, Managing Director, and Mr. Anand Agarwal, CFO.

Without further delays, I will now hand the call over to the management for their opening remarks. Over to you, Lalit-ji.

Lalit

Hello, good morning, everyone. Thank you all for joining us today.

Once again, we are we are in a call for the best, one of the best quarters for the year that we generally have, which is, always has been the best quarter for the industry and and is generally the best quarter because of the Diwali and the and the and the winter months, which is started. Let me start with the little bit of macro level.

I think, see, what we see, formalization continue to deepen. Government policies are supportive.

We see inflation largely in control. Per capita income or the the consumption continues to rise.

Not not not too much, but yes, there is a rise which is there. Reforms like GST have not really delivered a very immediate consumption-led benefit, but yes, they are clearly a positive sign from a long-term formalization and efficiency standpoint is concerned.

There is definitely a renewed focus on manufacturing, which is constructive for employment, and definitely will bring up the income generation or income creation over the long run. At the same time, we believe that, all these AI and the technologies which is coming in could begin to disrupt some traditional retail model or could begin to disrupt some business model or the employment which is also, which could create a little short-term noise, but also could also enhance a lot of opportunities, a lot of business opportunities, both for retailers as well as other industries.

In the near term, what we see is consumer sentiment definitely has been influenced by some global developments, not exactly in our market, but yes, we keep hearing that in the in the urban cities and in the in the bigger towns and metros, all these tech-led blues, geopolitical uncertainty, definitely there are weather-related disruptions also which is happening. These are some of the factors which are, I would say, which affect the sentiment, but not the fundamentals.

We don't see a lot of dip in the demand. We definitely see some rise there.

Tier-2, Tier-3 markets for us continues to be continues to show healthy returns, a healthy growth. Rural or semi-urban consumer markets or sentiment there has improved.

That's definitely been helped by the agriculture produce, which is the outcomes which is coming in. A large shift which is happening from unorganized to organized, both in terms of formalization of economy and in terms of retail as well.

Inflation definitely has been supported has has supported the consumption. Spending decisions definitely are more deliberate, we believe.

We see consumer sentiment, if I describe it, it is it is stable and and cautiously positive. I would not say too positive, but yes, cautiously it is positive.

It is not exuberant, definitely not fragile. We are seeing consistent footfall growth across markets.

Spending has increased largely during occasions, festivals, weddings, events, family events, rather than a lot of impulse-driven consumption. Saving could is definitely getting into pressure.

Whenever we speak to consumer, whenever I go to the market, whenever I talk to some of the customers, we see their saving rate has gone down. Consumption definitely we don't see has weakened.

This largely is getting driven also by younger consumers. They are definitely once again influencing the family purchase decision, especially in fashion and apparel.

In our market, competition has also increased, definitely giving more choices to consumers. Importantly, this is this is increasing the or expanding the awareness and the footfall for organized retail as a whole.

That's the overall piece that we see in our markets. Because of consumption, because of more stores getting opened, definitely more fashionism is also coming.

I I mean a lot of these initiatives by the government right now had not led to a meaningful impact in demand patterns, whether it is GST or the labor code and stuff. On the other side, we see good monsoons, higher MSPs, they definitely are putting more money in our farmers' hands or the supportive businesses which leads or helps the farmer, or support the or or trades with farm farmers.

There we are seeing some consumption potential. Weather definitely has been uneven for us in this Q3.

We have seen excess rainfall or activity of cyclones in during festivals in in parts of eastern India and southern markets. We have seen some some disruption on these markets and some lower growth also coming in there.

Northern north market, the northern India saw a delayed or a milder winter initially, leading to, little dispersed demand for heavy winters and all. Festive demand overall was reasonable.

Diwali, which was not a winter-led Diwali, yet the demand was good, was okay. It was not great, but it was the demand held up.

Winter demand definitely got delayed a little bit. It is not lost.

It did not get lost, but yes, it was it was little erratic. Some categories we actually sold off at during initial times, and then inventory was an issue at times.

Ultimately, we got a lot of these inventory. We definitely don't feel it is overstocked.

Once again, we are seeing some erratic fest- sorry, weather weather pattern in the month of January. Initial days were colder.

Last one or one and a half weeks were little lighter. Definitely it is going to come back.

Marriage calendar has also been very good in this particular quarter, and this has definitely supported some demand and post-festive demand. For us for us at V-Mart, I think we are very clear and very deliberate.

We operate in value retail where the pricing is aggressive by design. As a result, we do have lower margins than some of the peers.

If you look at the national players, Westside, Zudio, or others, we do or or maybe others and stuff, we have some average of lower gross margin. We we definitely offset this through our tight cost control operations or inventory turns.

That is what we we've been very strong in. That's definitely creates a stronger per-store profitability and a and a good payback on our new stores.

Our advantage is definitely focus and discipline in our operations. We know our core customer, our core market intimately.

This is that the strength of V-Mart is. We definitely blend both our private labels, which is almost 70% now, and and the market labels, which to suit our, regional requirement or the local taste of the consumer, which we definitely do it through leveraging our deep vendor network.

Whether we the partnership that we have with our vendors are like like a vendor or a manufacturing partner, and and we definitely believe in this partnership and leverage this partnership to keep our cost competitive and our supply responsive. In the value segment, I think the as as it is growing rapidly, and we believe our our format, the sourcing discipline that we have and the execution rigor, that definitely gives us a sustainable edge.

Equally, for us, it is also important to know that what we what we don't believe in, what we don't want to do. Because we are not pursuing growth that dilute our returns.

We don't want to do that. We are not using heavy discounting to mask our demand volatility.

We are not compromising our store economics for our headline expansion. We don't just also want to go ahead and open up stores in every territory or anything that that comes up to us.

I think the the quarter has been has been good. The performance reflects this approach.

Our our quarter-specific numbers was influenced by festive timing, weather-related, but trajectory of the business remain intact. We maintained strict expense expense control.

Operating cost definitely increased in line with with planned expansion and normal inflation. We do did not see, any any uncontrolled cost which came in.

As our volume is improving, that translate this this definitely translated into strong operating leverage. We held up our margin, underscoring the the resilience of our of our model.

Q3 definitely is not a flashy, one-off, or an aggressively markdown quarter. It is definitely about solid execution, growing revenue with healthy margin, improving revenue quality, and protecting our cash generation.

That was the key highlight of our quarter. Demand visibility definitely was uncertain, particularly in winter-led categories.

We consciously chose to protect our margin and, we did not just go for volume chase because we wanted to also deliver in good times, which is winter winter is always erratic by nature. These are there are some long-term decisions that we have taken.

We definitely have our rigor in our disciplined execution. Our stores are very, the new store openings that we do, are very clearly and very carefully selected and typically break even.

They they do break even, as as you all know, within our first or second month of operation. Our expansions have been completely funded by our internal accruals, keeping the balance sheet strong and virtually debt-free.

That's the definitely highlight. Capital, capital discipline is central to our model.

We definitely want to build efficient store, keeping our per square feet CapEx in control, meaningfully lower than the the industry averages. This definitely supports attractive store-level returns.

On the other technology and the process side, we definitely continue to upgrade our systems, our processes. The entire planning function, merchandising function, inventory management, these are increasingly becoming system-led, supported by tools, ERP enhancement, analytics.

Some early AI use cases have also been deployed or trying to deploy a lot of those. We're trying to We're definitely working a lot on refining our assortments, removing slow-moving SKU from our system faster, sharpening our focus on categories with consistent demand, you know.

We are decluttering some of those, trying to declutter a lot of those. Across merchandising, supply chain, and operations, leadership alignment around efficiency, governance, and long-term value creation is definitely strong.

This quarter, we also saw our Unlimited business coming up very well. Early signs of improvement are visible there.

Changes implemented in the last few quarters have definitely reflected some some good benefits. While a few locations are still not performing there to their potential, the opportunity remains significant.

We are we are definitely proceeding with proceeding with patience and rigour. LimeRoad for us continues to play as a clear omni-enabled omnichannel enablement platform.

The focus is firmly on profitability here and backend backend capability rather than scale for its just just go on scale for the business or order sake. Our marketing spend expense has been sharply curtailed.

All our omni orders that we do from our stores and all are 100% prepaid orders. The technology backbone is definitely being leveraged to support the store fulfillment and our endless aisle capabilities.

We, definitely looking ahead, we we remain cautiously optimistic and firmly long-term in our outlook. Demand definitely should continue to evolve gradually, supported by stable inflation, improving rural incomes, and ongoing shift towards organized retail.

Definitely our input costs are getting eased, which could do provide margin support. Yes, we are very vigilant on any any of these reversals or any one-time expense rise.

We are very vigilant on all of those. We definitely want to grow, building capability and resources, but not increase expenses to a larger extent.

Every investment that we do is evaluated to a multi- multi-year return lenses. We just don't work for one or two years of our sales.

We are building for scale and sustainability, definitely not short-term spikes. That is the key thing, because we we keep hearing a lot of a lot of analysts asking us questions.

We need to be very, very clear on this. We definitely are confident in the operations from our fundamentals because we have grown across markets, not in selective pockets, if you look at our growth pattern and our new store opening pattern also.

Our our strong performance is there from all the new stores that were opened up this year. We have seen a good, visible improvement in our Unlimited market, the South India market.

We have seen positive consumer response wherever our sharper product or sharper design that we have launched, or wherever that we have done a good job. Margin definitely have been improved by efficiency, not by not by price distortion or increasing the prices.

We definitely have a very strong vendor ecosystem and a very, very strong governance framework. Beyond all, I think we are riding on the India long-term consumption story.

These are the highlights. I definitely we are there on the call.

I hand over to Anand to take you through the numbers, and then we will answer your questions. Thank you.

Thank you, Lalit. Good morning, everybody.

Let me take you through some of the key highlights from this quarter, and then we can open the session for questions. As Lalit highlighted, it's been a quarter of mixed signals, but ultimately a strong financial delivery.

While we faced headwinds with the delay in winter onset in north and also continued political disturbances in the east, our focus on operation efficiencies and the strong performance from south markets helped us deliver a robust bottom-line performance. I think Lalit spoke a lot about the monsoon and the weather, I'll skip that part.

Despite a good monsoon and forecast of a good, strong early winter, weather still played spoilsport with peak winters getting delayed in entire north and west India, leading to a lull post-Diwali. Actually, overall temperatures have generally been hotter throughout the year, reflecting the increasing impact of climate change, which was also reflective in the lower peak winter days in this quarter.

We had actually, in fact, planned for a summer Diwali this year, assuming the delay in winters like previous year. However, we had not actually anticipated such a severe delay and complete lack of winters almost till 20th of December in almost entire North India.

Even actually states like Rajasthan, Gujarat, MP, they were actually the most severely impacted even till end of December. Irrespective, I think, as Lalit mentioned, efficient planning and good management on inventory did not lead to any adverse impact on inventory at all.

In fact, there was a time when we were actually short on inventory for some particular areas. At an overall level, while the festive period went off reasonably well, the winter demand did not pan out as anticipated.

We continue to execute well on our expansion strategy, adding 23 new stores during the quarter, taking the total store count to 554 stores. New stores actually are ramping up much faster and better than historical averages, delivering better than network throughput, which reinforces confidence in both site selection discipline as well as the brand relevance across Tier-2 and Tier-3 markets.

This goes equally well for the South India territory, where we have also started to expand more. Although the expansion in south in this quarter seems a little low, but the plans for south remain intact.

Coming to margins, gross margins for the quarter remained stable year on year despite a 40% decline in LimeRoad commission income, which flows directly or entirely into the gross margin, but now forms a very small share of the overall revenue. Importantly, excluding LimeRoad also, gross margins in the offline business actually expanded by 70 bps year on year, which was largely driven by better inventory health, leading to better throughput, which also necessitated lesser discounting intensity, and also a change in improved product mix coming out of the marriage season, etc.

The ongoing strategic initiatives led to improved inventory health and a better gross margin. For the full year also, we expect the offline gross margins to remain broadly stable versus last year as our value proposition continues to focus on volume-led growth.

Coming to expenses, the total expenses for the quarter only increased by 1%, which actually led to a good operating leverage on the bottom line. This was largely led by robust cost controls in all cost lines, including manpower, also LimeRoad expenses, and also lower marketing spend as we continue to drive loyalty-based traffic to stores through digital interventions.

Our NPS and Google ratings remain at all-time high, and they give a source of confidence also for us to keep expanding more. The reductions in LimeRoad cost was strategic and sustainable as we have been focusing on breaking even this segment at the earliest.

The business has already been profitable at CM3 level since the last 1.5 years, and we continue to improve further and build on that. On the labor code impact, we recognize an exceptional cost of ₹2-₹2.1 crores arising out of the changes proposed.

While the rules are yet to be announced, but basis whatever information and the guidance available was there, we have taken a one-time hit as prescribed by law. As a net result of the sustained operational efficiencies, our pre-Ind AS EBITDA improved from 10.8% in last year to 12.2% this year, and the reported, which is the post-Ind AS EBITDA, grew 22% year on year to ₹210 crores, with margins expanding by 190 bps to 18.6%, reflecting better cost absorption and productivity gains.

The EBITDA growth translated into a 23% year-on-year increase in Q3 PAT to ₹88 crores. On a full-year basis, or rather on a YTD basis, PAT has now grown almost 3x to ₹213 crores, reflecting consistency rather than quarter-specific effects.

Coming to inventory, our days of inventory increased marginally by 1% to 95 days. This slight increase is largely due to the slight change in the FMCG inventory, as we strategically increased space for apparel offtake during winter.

This is a larger initiative where we are trying to become more focused on fashion than just FMCG. Irrespective, the FMCG and the winter inventory remains under control and healthy.

In fact, the freshness of inventory has improved year on year due to aggressive liquidation of old stocks in the earlier quarters, leading to in fact lower provisioning. CapEx for the quarter stood at ₹57 crores, primarily towards new store additions and selected refurbishments.

On a YTD basis, the business generated positive free cash flow of ₹63 crores, which was also 9.4% up year on year. Going forward, we continue to remain bullish on the market opportunity in all geographies and aspire to increase our footprint in a disciplined, profitable, and sustainable trajectory.

As communicated in last quarter's call, we are looking to end the year with 75-plus new store additions this year. That is all from my side, and I request the moderator to open the house for questions now.

Thank you.

Good morning to the team. I have two questions.

My first question is, with festive-led recovery driving 21% revenue growth this quarter, how do you see discretionary demand in Tier-2, Tier-3 cities evolving over the next 1 to 2 years, and what specific initiatives like private label expansion or omnichannel integration will be used to sustain double-digit growth beyond FY26? That's my first question.

I'll ask my second question after this. Thank you.

I am not so clear about your question, but anyway. I think, see, largely we all know that for our market, it is largely led by festivals and seasonality.

This particular quarter, we would see both big festivals coming in, Holi as well as Eid, which is both lying in this particular quarter. There is going to be a good February and March that we are expecting.

This will definitely go up. We definitely have lot of initiatives in terms of bringing our summer collection.

We've already launched our summer collection in some part of the geography in India. We have seen good Pongal festival also coming in this year, this month.

Pongal has been good in this market. As today we are speaking, this is a Vasant Panchami day in eastern part of India.

They call it Saraswati Puja. There are a lot of festive-led demand and regional festivals which is there in different parts of the geography.

That is one which will go to lead. Then definitely our own designs, our assortment, our product, whether it is created by our own design team through our private labels, or private labels through our vendors, or exclusive labels that we have asked of our vendors.

We all definitely are going to lead into the demand and will definitely keep the growth momentum up there.

My second question is to margins and capital efficiency. EBITDA margins have improved to 11.7% despite cost pressures.

Looking ahead, what levers, such as store rationalization, inventory efficiency, or digital scale contribution, do you expect to drive a margin expansion in the next 2 to 3 quarters, and how will this translate into improved ROCE and debt reduction in the target? Thank you.

[Hindi?] Saare sawal pooch liye tumne toh?

Answer bhi de diye. [English?]

Anyway. I think, see, definitely the organization is working towards increasing both the return on capital employed as well as the margins.

We definitely believe that every expansion or increase in revenue will bring in some benefit into our cost, our expenses as a percentage of sales. We will definitely deliver a better margin even going forward.

That's the thought process, and that is what we are all here working and planning for. We definitely believe a lot of digital initiative, as I mentioned, a lot of efficiency generation in our process, or even upskilling the people.

These all should be the leading guidance or our guider to increasing the sales as well as creating efficiency, not reducing the cost because we don't have too much of area to reduce our cost. We definitely want to become more efficient and more scalable simultaneously so that we are able to deliver better returns both as for the equity or for the capital employed.

Thank you for the guidance, and I wish the team best of luck for the next quarter.

Hi, sir. Thanks for the opportunity.

My first question is in the gross margin can we improve this quarter? What was the mix of your winter assortment versus festive this quarter?

Winter assortment versus festive?

Yeah.

Okay. Our winter normally in these quarter are upwards of 40% mix, the winter, pre-winter, mostly category.

If you go towards the December, the peak winter season, it goes up to 62-63% also. At overall level, including the festive month, it was around 40-45%.

Balance definitely is something which is not purely festive, but largely India wears the basic products and autumn products also during festive. That is what contributes to almost 55%

to 58%. Those usually go a full price throughput and contributed to your gross margin, or is there something else that kind of contributed to your gross margin uptick this quarter?

The gross margin uptick is largely because of higher full price sell-through, because we generally don't discount during this quarter and we have not done any discounting in this quarter. That is definitely because of better margin and then better margin sales of the products.

I think maybe Anand can give you a little more insight into the whole shrinkage management of the provision for shrinkage.

You're absolutely right. One is obviously, as I mentioned in my opening remarks as well, the overall health of the inventory is very good, which actually did not require any significant amount of discounting.

In any case, quarter 3 has always been a very good, profitable quarter for us where we always try to drive the maximum full price sell-throughs. This quarter exceptionally has been slightly better with respect to that.

Also I think there's a lot of work that we had done around reducing our shrinkages and therefore the provision that we usually do around old age inventory and the shrinkages, that has also come down this quarter. That's already there in our investor presentation as well.

Yes, all of these has contributed to the improved margin this quarter. Because the inventory health remains very good, I think we should be able to look at healthy, stable margins going forward as well.

Okay. Sir.

The second question is related to the long term. Your sir has made comment about the value proposition staying intact, you're deliberate in the growth.

If we look at the numbers beyond after FY22, FY23, there has been a decline in terms of your SSG for the markets where already stores have matured and all, and they are not even growing above nominal GDP level growth. This year, it is below probably if we take last two, three quarters trailing, or that trend is going down.

How do you see the SSG or store level growth fanning out in next couple of years? Do you think that Tier-3, Tier-4, these places where you have already stores, they can clock more than nominal GDP level growth?

I don't know what is your intention, what are you trying to intend. We definitely believe that we are doing as a company we are performing better.

Last year also we we gave a great performance. This year also, we our our our performance on the the same-store sales growth has been good.

Definitely this quarter because the Pujo month Pujo festival was in the last quarter, you are not seeing a high or a flat or a, yes, is a flattish same-store sales growth. If I normalize, we would see a stable 5% to 6% same-store sales growth which is coming in.

See, the same-store sales growth is a is a function of all our doing. It is not about the market.

It is more about what are we delivering, how much is the market getting occupied by more competition, and how many more organized players are walking down into that particular town or city where we are operating. I think the the company and and the and your management is fully into it to try and bring in initiatives to try and definitely bring in the creativity and have very clear processes and and and great commitment so as to deliver those kind of growth.

We believe there is opportunity in the market. We believe that there is more fashionism coming in.

Definitely it has not been a lot of per capita income growth for our consumer segment. That consumer segment is still struggling somewhere.

We believe their their incomes are going to rise, and it will definitely lead into more same-store sales growth, because whatever resilience that we have demonstrated in spite of so much of competition coming in, that definitely brings in a very clear strong confidence on our fundamentals. We will definitely keep continuously delivering the same-store sales growth beyond the GDP growth.

Sir. Okay.

Thank you, sir, and all the best.

Hi, sir. Good morning.

Am I audible?

Yes.

Sir, my first question is regarding the revenue growth. If we look at 24 and 25 as well, we were generally clocking in a mid-teens growth in revenue.

A slight slow down this quarter. Could you just elaborate on what would be the factors or what was different compared to last year that there has been a slight moderation?

An addition to that question is, could you just also tell me which states had been facing a slowdown, if any?

I think as I already explained, compared to last year same quarter, last year the Pujo festival, which is celebrated largely in eastern, southern part of India, that was largely in October. A lot of sales came into the month of October, which is the Q3.

This year the Indian festival calendar moves by the lunar calendar. That got moved into September.

There is a lot of shift of sales which has happened. That is why you are not able to see that similar growth pattern, which is your teen growth that you wanted, 15%, 17% growth.

That is the actual growth which is coming in. You will see a little higher growth maybe in the coming quarter.

Quarter on quarter you will see these things happening. Overall, we believe the fundamentals are great, and we will continue growing.

If I adjust even the festive shift from Q2 to Q3, our revenue growth will fall into around 14%.

Understood. Understood.

Second question, sir, regarding the margin expansion this quarter. Considering a 9% growth, most of your margin expansion should be coming from efficiencies, correct me if I'm wrong, and not just because of leverage.

What could be the exact efficiencies that you are referring? I understand marketing spend must have been rationalized to a certain extent, but apart from that, could you just tell me what efficiencies are being realized?

I think, see, efficiency in terms of what are the what are my cost? My cost are largely rentals, my cost are employee cost, my employee cost are operational cost, my cost are logistics cost, warehousing cost, my cost are marketing cost.

I think efficiency across the area, which is controllable. Rentals I cannot reduce.

There is a growth there is a predefined growth rate which is stream in in rentals. You can't bring in an efficiency there.

You can definitely increase your sales per square feet by bringing down the rentals cost as a percentage of sales. Other than that, you have areas of efficiency which you have driven.

As an organization, we have driven the entire team has come together. There's a lot to do here.

Yes, we are trying to drive more sales out of the same number of people or less number of people. We're trying to drive more sales by reducing some processes, by integrating technology, by bringing in some some additional new ways of marketing, new digital ways of marketing, or creating a our a store-led, which is consumer-led marketing, which is the the key, which which generates the maximum impact.

We have been very, very good in terms of focusing on our on our Google ratings, focusing on our on our on our NPS scorecard of customer. We have been really working hard to give the customer those kind of experiences and those kind of pleasant shopping joy so that so that they come back again and again.

That that is it is just not not trying to drive cost reduction. It's trying to be efficient both qualitatively as well as quantitatively.

Understood.

Just a follow-up on this, sir. Do you see more ample opportunities in the same levers for further margin expansion, or would you have to rely on leverage going forward?

Same levers or leverage? I'm not sure.

Anand, would you like to answer?

I think, see, on a sustainable basis, it will always be difficult to keep reducing costs beyond a certain level. I think, as Lalit had already mentioned, we are already very, very fine-tuned on costs.

Even the cost reductions that we are able to see is actually coming in from more leverage. Right now, it is not sales leverage as much as would have been possible.

In future, what I foresee is that we should be able to get more margin advantage only out of leverage, more out of leverage than cost optimizations. Cost optimizations, we are already amongst the best as far as the P&L is concerned.

Understood, sir.

Thank you, sir. This was very helpful.

I will come back in the queue for further questions. Wishing you and your team the best of luck for future quarters.

Yes, yes. Sorry, apologies.

Sir, good morning. First question is, the volume growth for Unlimited is pretty healthy at about 10% in 9 months versus about 1% for V-Mart.

When we see the sales per square feet, there is still room for Unlimited to continue growing faster as the sales per square feet is about 16-17% lower. Question is, now that we're seeing better trends, can we sort of expect Unlimited to continue delivering better SSG trends for us over next few years, better clarity would help?

Devanshu, I think what you are asking is also what we are trying to deliver and consistently. If you look at the last 2 years, we have been delivering better numbers on Unlimited.

Unlimited, we have actually, if we were to look at the breakup of Unlimited, we have some legacy stores and we have also almost like 50-plus stores now that we have opened, 45-plus stores that we have opened in Unlimited post-acquisition. All the new stores that we have been opening in Unlimited, most of them have been delivering much better sales per square feet and much better profitability in line with the established V-Mart model.

As the average of these new stores starts to take over the average of the legacy stores, we will see improved sales per square feet numbers also for the complete Unlimited chain. Having said that, I must also mention that the legacy stores that we have in Unlimited, they are not unprofitable.

They are just slightly bigger in size, bigger in area, and have had a established clientele, which works on a certain principle of what they want to buy and when they want to buy, etc. The newer stores, they are definitely more in Tier-2, Tier-3 towns delivering much healthier numbers.

We continue to put our faith in expanding the Unlimited business and increasing the sales per square feet to bring it in line with V-Mart numbers in the next 2 to 3 years.

Thanks for this explanation, Anand. Just from a steady-state perspective, because you have been in this region for quite some time now, do you believe that the sales per square feet for Unlimited can even be higher than V-Mart, or at best can be similar to V-Mart?

Any color there?

As of now, our first priority is to get this to at par with V-Mart at a entire Unlimited network level. For the newer stores, as I mentioned, they are already almost at par or better than even V-Mart stores.

For the complete Unlimited brand or network, the first priority is to get that to the V-Mart average, and then we will look at how we can increase it further. Obviously there is headroom and there is opportunity to improve it even further.

Fair enough. Second question is to understand the model.

I guess factored in slightly higher gross margins for Unlimited to sort of compensate for the higher rentals. Assuming we reach a similar to V-Mart throughput over time, as you indicated over next 2, 3 years, can the model deliver similar to V-Mart EBITDA margin also at that throughput level, or there are some structural reasons because of which EBITDA margins may remain lower?

No, absolutely. We have always been very, very profitability-focused, and our priority is always to make sure that the EBITDA margins are first achieved rather than just the top-line numbers.

We have never, ever chased top line just to get a headline growth. Our priority always is to get the EBITDA margins first.

Therefore, while you ask for sales per square feet or the overall productivity numbers, but we look at the Unlimited performance more from a profitability perspective. Our objective is to get the profitability in line with V-Mart at the soonest possible.

Understood. Sir, lastly, if I can squeeze in, for 9 months our SSG has been positive, right?

Rent has increased about 20-30 basis points. Is this increase broad-based across both V-Mart and Unlimited stores, or there are some specific regions which has seen higher rentals?

No, this is a normal curve, there is nothing extraordinary to read into this. This is absolutely normal.

We remain very, very cost-conscious in terms of choosing new sites and ensuring that our cost or rental per square feet remains at a certain level. The SSG, while at a overall full-year basis is around 3%, but as we grow this SSG, you will see the percentage coming down on the rental as well.

You should actually always look at the per square feet rental, and that should give you a good color on how that line is actually moving. In fact, for all the cost lines, it's the percentages will always vary depending on the performance and the operating leverage that you get in one quarter.

It's always better to look at the cost lines on a per square feet basis.

Fair enough. As a bookkeeping, for V-Mart our rental monthly rental per square feet would still be around ₹45, right, and for Unlimited it should be closer to ₹65-₹70?

Is that fairly a good understanding?

No. V-Mart should be closer to around ₹48-₹49, and for Unlimited, that would be at around ₹65.

₹65.

Fair enough. Thanks for taking my questions.

That's it from my end.

Thank you for the opportunity. First question from my side would be, in the longer term for next 2 or 3 years, what is the square feet we are looking to add, and what is the SSG we are targeting, which we are around 3% or 4% for 9 months till now, and what will be the bridge to get to that SSG which we are looking at?

The square footage addition on a annual basis should be at around 13-14%. That is what we have targeted, and that is a long-term target that we have taken.

It's not just for 1 year or this year or the next year. I think in the medium to long term, we are building up 13% to 14% area addition every year.

The SSG aspirations always need to be mid to high single digit, 5% to 8%. That's the aspiration.

Obviously, there will be quarterly disturbances, there will be anomalies and opportunities that we will keep encountering as we move along. As a mid- to long-term average, I think 5% to 7%, 5% to 8% is something that we are definitely trying to deliver.

Okay. The 13% to 14% square feet addition which we are looking over the long term, is there enough headroom in our current markets, or we will be looking to enter some sort of new markets going forward in the same country?

See, the markets are large enough, and we have almost reached all the states of India. Within those states, definitely we will penetrate.

There will be maybe 30% of the expansion, 35% of expansion in the same town and city where we are present. Still, 60-65% of expansion will come from maybe different towns in the similar states where we are present.

We still believe in that cluster philosophy. We want to penetrate more into our existing network of India where we are already there, and there's a lot of room and there's a lot of potentiality that we are able to see in all of these markets.

Okay. Thank you.

I'll join back the queue.

Hello. Good morning, sir.

This is Rajiv here. Sir, one question on cost of retailing.

This is barring the employee cost line item and the rent. Overall cost of retailing has become ₹181 per square feet per month pre-Ind AS basis.

This ₹7 reduction on other expenses, was there a cost which you were carrying for several quarters? Because we are now getting into pre-COVID levels of cost of retailing.

Just want to get was there a one-off in the past few quarters which is shaved now?

If I am able to understand your question, what you're asking me is there any seasonal aberration in this quarter because of which the costs are coming out lower? Is that your question?

No, sir. Your cost of retailing historically pre-COVID used to be, let's say, in Q3 close to ₹180.

After that, for the last several, it was nudging towards 200. I was wondering whether from COVID till previous quarter, was there a external cost you were carrying which is not there, for example, some consultant you had those fees are not there in this quarter, and that's the leverage which we are seeing now?

Okay. While we did hire a consultant, that is right, but it is not such a significant cost, and that happened over a period of over two financial years.

It was not a very high, significant cost. I think what you need to segregate is the LimeRoad cost, because that is an extra addition which happened in '22.

Because of which, the overall cost in the P&L sort of looked inflated for almost 3 years. It's only since last year that we've started to correct that and reduce that cost base, which has now started to come into the P&L.

You need to break down the P&L while we present LimeRoad numbers as segment numbers also. If you were to isolate that and look at the offline P&L separately, you should be able to see there is no further aberration.

Sir, actually if this 181 and 194, let's say 194 was the last year's number, I have removed LimeRoad impact from the cost line item also. This ₹13 drop partly explains from employee and rent partly, but there is ₹7 still coming from other expense line item, which I'm just wondering how sticky is this?

Is this a new cost structure which we will maintain here onwards?

See, Rajiv, there are some inflationary items, there are some inflation also. Then there are some costs which you cannot segregate in a particular department.

Even maybe they are logistics cost, or they are expenses which are related to other operations, not necessarily what you are trying to say ki woh rahega ki nahi rahega. I think there is a cost which is going to be there, which will always be bucketed like that.

Yes, the cost as a number will not go down. There's no extraordinary cost which is getting incurred post-COVID.

These are either segregation or some change in accounting processes. That is how you are seeing this.

Sure. That's all from my side, sir.

Thanks a lot, and all the best.

Thank you so much. Thank you, everyone, for being there and being in this call and being with us in all of these difficult times.

Let me underscore this that this performance and our strategy are not happenstance. They definitely reflect a seasoned frugal mindset, steady growth, capital discipline, and a strong balance sheet.

We will definitely continue on all of those areas, not bringing shorter spikes. I really thank everyone for their attention.

Thank you so much. Have a good day.