V-Mart Retail's Unlimited growth and store productivity underpin improving margins in 1QFY27

Investment View and Valuation

Motilal Oswal Financial Services (MOFSL), in its July 27, 2026 report, reiterates a Buy recommendation on V-Mart Retail with a target price of Rs 975, compared with the report CMP of Rs 715. The broker believes the company will benefit from the shift from unorganised to organised retail and the large value-fashion opportunity.

The investment case is supported by improving store productivity, accelerating traction at Unlimited and narrowing LimeRoad losses. V-Mart still trails value-fashion peers on profitability, leaving scope for further margin expansion if execution remains consistent.

MOFSL fine-tuned its FY27E and FY28E estimates and forecasts FY26-FY29E revenue, pre-Ind AS EBITDA and adjusted PAT CAGR of 18%, 26% and 33%, respectively. The projections assume around 14% CAGR in store additions, mid-single-digit same-store sales growth and operating leverage, taking the pre-Ind AS EBITDA margin to around 7.5% by FY29E.

The target price of Rs 975 is based on 18 times September 2028E EV/pre-Ind AS EBITDA, equivalent to around 10 times FY28E EV/reported EBITDA. At the report CMP, the stock traded at 14.5 times FY28E EV/pre-Ind AS EBITDA, versus around 29 times for VMM according to MOFSL.

Strong 1QFY27 Operating Performance

V-Mart reported a good 1QFY27, with consolidated revenue rising 23% year-on-year to Rs 10,888 million, in line with MOFSL's estimate. Growth was driven by 9% blended same-store sales growth and around 16% year-on-year store additions. Same-store sales growth was 8% at core V-Mart and 13% at Unlimited.

The company opened 15 stores during the quarter, comprising 13 core V-Mart stores and two Unlimited stores, and closed one core V-Mart store. This took the network to 591 stores.

Monthly sales per square foot rose 7% year-on-year to Rs 767. Unlimited recorded an approximately 18% increase to Rs 710, while core V-Mart increased around 4% to Rs 780.

Margins, Costs and Inventory Trends

The reported EBITDA margin expanded 50 basis points to 14.8%, while the pre-Ind AS EBITDA margin improved around 75 basis points year-on-year to 7.6%. Gross margin, however, declined around 85 basis points to 34.5%, mainly because inventory provisioning increased around 60 basis points year-on-year to 1.3% of sales.

Employee costs rose 17%, partly reflecting higher minimum wages in several states. Despite these pressures, PAT grew 41% year-on-year to Rs 472 million.

Inventory days declined 8% year-on-year to 86, while inventory per store fell 5% to Rs 1.5 million. Management attributed the improvement to fresher assortments, faster replenishment and better full-price sell-through.

Unlimited and LimeRoad Drive the Operating Improvement

Unlimited remained the key operating positive. Its revenue grew around 33% year-on-year to Rs 1.8 billion, supported by 13% same-store sales growth and volume growth of around 34%. Unlimited EBITDA increased 40% to Rs 343 million, while its margin expanded around 90 basis points to 18.6% as operating leverage outweighed the lower gross margin.

Core V-Mart revenue rose around 21% to Rs 9 billion, driven by 8% same-store sales growth and volume growth of around 20%. LimeRoad commission income increased around 28% to Rs 104 million, while its operating loss narrowed 39% to Rs 29 million.

Management Commentary and Growth Outlook

Management said demand remained healthy despite a delayed summer, a shorter wedding period and Adhik Maas. Higher footfalls, better merchandising and a 2-3% increase in average selling price, mainly due to mix, supported performance.

Management expects 2QFY27 to be muted because Durga Puja has shifted to 3QFY27, followed by demand recovery in the festive quarter. It reiterated guidance for 90 gross store openings and mid- to high-single-digit same-store sales growth.

Raw-material inflation increased 10% year-on-year but was described as manageable through sourcing efficiencies, product engineering, vendor negotiations and selective price increases.

Key Monitorables and Risks

• Inflation pressure on household budgets.
• Deficient monsoon conditions.
• Raw-material inflation linked to the West Asia conflict.
• The potential impact of these factors on demand and margins.