Vishal Mega Mart is one of India’s leading value retail chains, offering affordable fashion, home essentials, and FMCG products. With a strong presence in over 450 cities, it operates a unique mix of private label and national brands. Focused on Tier-2 and Tier-3 markets, it serves the emerging middle-class population through expansive store networks and quick commerce channels.
In this article we are going to discuss the summary of the management commentary that was delivered on Q4FY25 performance.
Store Expansion and Reach:
Added 90 new stores in FY25.
Now present in 458 cities with a retail trading area of 12.2 million sq. ft. (approx. 1.2 crore sq. ft.).
Aggressive expansion ongoing in Kerala; pilots launched in Maharashtra and Gujarat.
Expansion focused on both existing large cities and Tier-2/Tier-3 towns.
Private Label Performance:
Private brands contribute 73.1% of revenue, up 135 bps YoY.
Core brands like Brink, Home Select, and Yellow Hippo are performing well and have doubled revenue since FY22.
Vishal does not plan to reduce the price gap between private and national brands soon, focusing instead on category penetration and affordability.
Category Mix:
Clothing: 43.9%
General Merchandise: 28.2%
FMCG: 27.7%
Quick Commerce Initiative:
- Now covers 656 stores in 429 cities.
- Registered users: 8.7 million.
- Contributes 3–5% of store revenue in underserved markets and 1.5–2% in saturated ones.
- Delivery within 30 minutes, free on orders above ₹299.
Strategic Comments:
Store sizes are being optimized for smaller towns to maintain revenue per square foot.
Real estate and labor remain a challenge, especially in small towns due to compliance issues and limited trained manpower.
Use of build-to-suit properties for custom expansion.
Growth Outlook
Consistent SSSG and store additions expected; guided no formal numbers but optimism continues.
Margins expected to be stable, with sourcing benefits reinvested to support revenue growth.
Model focuses on:
- Owning the opening price point.
- Adding higher price points to cater to aspirational consumption.
- Enabling customers to shift from unorganized to organized retail.
Market and Industry View:
- Target Addressable Market (TAM): Over 1 billion, including those currently outside the consumption economy.
- High reliance on value retail and first-time consumers, especially from mom-and-pop stores.
- Strong customer engagement through return policies, trial facilities, and quality assurance.
Performance Highlights (Q4 FY25 and Full Year FY25)
Revenue:
- Q4 FY25: ₹2,548 crore, up 23% YoY.
- FY25: ₹10,716 crore with 12.3% same-store sales growth (SSSG, adjusted).
Profitability:
- Q4 FY25 Gross Profit: ₹720 crore; EBITDA: ₹357 crore; Adjusted EBITDA: ₹208 crore (pre-ESOP and IndAS 116); PAT: ₹115 crore.
- FY25 Gross Profit: ₹3,053 crore (28.5% of revenue); EBITDA: ₹1,530 crore (14.3% EBITDA margin); PAT: ₹632 crore (5.9% PAT margin).
- Adjusted PAT (pre-ESOP): ₹676 crore, up 45.5%.
| Particulars | Q4 FY25 | FY25 (Full Year) | YoY Growth |
|---|---|---|---|
| Revenue | ₹2,548 crore | ₹10,716 crore | 23% |
| Same Store Sales Growth (SSSG) | 13.7% (adjusted) | 12.3% (adjusted) | — |
| Gross Profit | ₹720 crore | ₹3,053 crore | 23.8% |
| Gross Profit Margin | — | 28.5% | — |
| EBITDA | ₹357 crore | ₹1,530 crore | 22.6% |
| EBITDA Margin | — | 14.3% | — |
| Adj. EBITDA (pre-ESOP & IndAS 116) | ₹208 crore | ₹1,033 crore | 38.7% |
| Adj. EBITDA Margin | — | 9.6% | +128 bps YoY |
| PAT (Reported) | ₹115 crore | ₹632 crore | 36.8% |
| PAT Margin | 4.5% | 5.9% | — |
| Adj. PAT (pre-ESOP) | ₹128 crore | ₹676 crore | 45.5% |
| Adj. PAT Margin | 5.0% | 6.3% | — |
| Private Brand Contribution | — | 73.1% of revenue | +135 bps YoY |
| Total Stores Opened in FY25 | — | 90 | — |
| Cities Covered | — | 458 | — |
| Retail Space | — | 12.2 million sq. ft. | — |
Question and Answer Session Highlights
Q: What led to the 80 bps YoY improvement in gross margin? Can private label discounts reduce further to improve margins?
A (Gunender Kapur): The improvement is driven by:
- Better sourcing leverage due to growth
- 135 bps higher private label contribution
- Product mix shifting to higher price points
No plans to reduce discounts yet, as the goal is deeper penetration and affordability.
Q: Was growth uniform across regions or were certain markets stronger?
A: Growth was broad-based across East, Northeast, South, and West. No significant divergence was observed.
Q: You added 90 stores in FY25. What’s the plan for FY26 and beyond?
A: FY26 should be in the same ballpark (around 90). Over 2–3 years, store additions may increase as opportunities allow.
Q: What’s the update on entering new territories like Kerala, Maharashtra, and Gujarat?
A: Kerala now has double-digit stores and is scaling rapidly. Pilots in Gujarat and Maharashtra will roll out in 30–60 days.
Q: Are Maharashtra and Gujarat part of the 3-year expansion roadmap?
A: Kerala is fully baked in; Gujarat and Maharashtra are in pilot stages, not fully factored in.
Q: How is quick commerce performing in Tier-2/3 cities?
A: Very encouraging uptake, especially in underserved areas:
- 3–5% of store revenue in underserved markets
- 1.5–2% in competitive urban markets
Q: Any differences in apparel demand between Tier-1 and Tier-3 towns?
A: No significant differences in SSSG across tiers; consistent growth observed.
Q: Why are new stores smaller than earlier formats?
A: Smaller stores ensure viability in Tier-3 towns where overall revenue potential is lower. Revenue per square foot remains consistent.
Q: In what tier cities are new stores being opened?
A:
- Out of 50 cities with population >1 million, Vishal is in 33
- 1,250 smaller towns exist, Vishal is in ~450
- Future expansion mostly in Tier-2/3 towns due to greater opportunity
Q: Is revenue per sq. ft. lower in smaller towns?
A: No, store size is adjusted to keep revenue per sq. ft. consistent with larger towns.
Q: Will you reinvest margin gains to stay competitive or retain them?
A: Vishal will continue to own opening price points and also offer premium options. Margins may be partially reinvested depending on category and competition.
Q: Any downtrading in FMCG or intensity in discounts? Which private label segments are strong?
A: 35–36% of FMCG revenue is from private brands (60% by volume). Larger pack sizes are preferred. Private brands remain competitive even with market discounts.
Q: What’s the difference between reported and adjusted SSSG?
A (Amit Gupta): Difference is due to cannibalization and refurbishment shutdowns. Only a 30 bps gap exists.
Q: How are smaller format stores performing?
A: Initial feedback is positive. Only 4–5 stores live now, will wait until 30–40 stores to assess viability fully.
Q: Any change in quick commerce strategy?
A: No major changes. Still delivering from store within 30 minutes. Free delivery on orders >₹299. App fine-tuned monthly.
Q: Is availability or cost of real estate and labor becoming more challenging?
A: Real estate availability in small towns is limited and compliance-heavy but no major change in difficulty. Labor remains a challenge due to low retail skill base. Vishal handles in-house training.
Q: Given property delays, do you build buffer into your store opening plan?
A: Yes, past dropout rates (e.g., 3%) are factored in to secure enough sites upfront.
Q: Will expansion into costlier markets like Kerala affect margins?
A: No. Each market is piloted first to fine-tune operations before full rollout. Margins are carefully monitored and protected.
Q: Did Kumbh Mela lead to one-time sales spike in eastern towns?
A: Allahabad, Varanasi saw a temporary boost, but stores continue to grow at double-digit even post-Kumbh.
Q: What SSSG or margin guidance can you provide for future years?
A: No specific guidance, but optimistic on both growth and margin sustainability. Historical trends are a good reference.
Q: Is it fair to assume 20–25% revenue growth with higher PAT and ROCE near 70%?
A: Management agrees the logic is sound but avoids commenting on specific forward-looking numbers.
Q: Is breakeven slower in smaller towns?
A: No. Typical payback remains ~18 months, even in small towns. Operational breakeven starts from Month 1.
Q: Are your top six private labels growing faster than others?
A (Amit Gupta): No, all brands are growing at a similar pace.
Q: Which private brands are leading?
A:
- Brink: Apparel & GM – over ₹1,000 crore
- Home Select: General Merchandise – nearly ₹1,000 crore
- Yellow Hippo: Kidswear & baby FMCG
Q: What’s the total addressable market (TAM) and role of unorganized sector?
A: TAM includes nearly entire Indian population. Unorganized sector dominates most categories. Vishal offers better value, trial, return policy, and quality—driving shift to organized retail.