Vishal Mega Mart bets on differentiated strategy to sustain growth ahead of ₹8,000-crore IPO
Vishal Mega Mart, whose ₹8000-crore IPO will be open for subscription next week, is betting on its differentiated, aspirational product strategy to ride out and sustain it in the current climate of soft consumer demand.
“Even in difficult situations, we typically would continue to enjoy growth because firstly, our brands, our private brands are very differentiated as compared to anything which is available in the market. And secondly, they provide great value with absolutely no compromise on quality. So they do become very attractive for the customers at large,” Managing Director and CEO, Gunender Kapoor told businessline.
Apparel accounts for half of the retailer’s portfolio, while general merchandise and FMCG are equally split in the remaining half. “Clothing and general merchandise are relatively higher margin categories, they fetch about 35 per cent or so gross margin and commoditised food and grocery is a relatively lower gross margin business at about 14 to 15 per cent,” Kapoor said.
All the three segments were growing at double digits with an overall growth of 12.6 per cent in the first half, he said. Its own brands currently contribute around 73 per cent to total revenue with a growth of over 27 per cent. Due to this strategy its FMCG business also reported 19 per cent gross margin.
Its average revenue per square feet is ₹8000, which is on a rising trend, Kapoor said.
Vishal Mega Mart, which is consciously geared towards consumers in tier 2 cities, targets middle and lower middle income customers. Of its 645 stores as on September-end, around 70 per cent are located in Tier 2 cities. The store footprint map shows a concentration towards the north, east and central regions of the country.
Talking about the store brands, Kapoor said, “These brands are very differentiated, they have been specifically developed for the middle and the lower middle income group in India and the goal is to make the aspirations affordable across clothing, general merchandise and FMCG.”
The vendors for the retailer’s own brands are top of the line manufacturers, he added.
Despite the increasing penetration of larger retailers such as Reliance Retail and Trent into tier 2 cities, Kapoor said that his company had not been affected by the competitive intensity, due to its differentiated and unique business model.
The company has also started rolling out its online commerce strategy, which was piloted last year. Customers can shop on the app and get delivery within two hours, if they are located within an 8-10 km radius of a store, but this is still in the early stages of being rolled out.
The Offer
The retailer’s IPO, which is entirely through an offer for sale by the promoter, will be open December 11-13 with a price band of ₹74-78 a share. The minimum lot size is 190 shares.
The promoter stake will reduce to 77 per cent from 98-odd per cent now, post the stake sale.
In the six months to September 30, 2024, the company reported net profit of ₹254 crore on revenue of ₹5032.5 crore.