“Definitely there are good players coming in and I understand that good players are coming in for a good segment of the demographic where India is flourishing and that is where the large part of India’s population is and that is where the large part of India’s consumption is,” says Lalit Agarwal, CMD, V-Mart.
Help us understand because the chatter is pretty grey when it comes to what is really happening in the tier two and tier three cities. You will perhaps have a better handle on how things are on ground and where you see demand going for your business.Definitely India is coming up. We are seeing some betterment happening gradually every day and that continues. Still, there are pains and we do not know where the pain is coming from. But yes, there are small pains which are still there. But largely, I think there is a lot of improvement coming in. The confidence of the feel-good factor is improving for the consumers in the smaller towns, especially even the self-employed people. For them as well, we are seeing their confidence level is going up. Their ability to spend still is not coming, but yes, we should be getting it now. We are waiting for this Eid celebration also, which is going to happen in this particular month and which is going to also bring in some confidence index and understand how the confidence is going to be.
So I think all of those will also give us more perspective. But yes, largely it is switching up, it is bettering up and still we would need another one or two quarter’s time for the growth phase from that pre-COVID levels.
How niggling a worry is competition because while demand of course is a factor on one end, there is also competition with many large format chains which are now getting into value fashion. You have got Shoppers Stop, you have got Zudio by Trent, are you concerned about that?
Definitely there are good players coming in and I understand that good players are coming in for a good segment of the demographic where India is flourishing and that is where the large part of India’s population is and that is where the large part of India’s consumption is.
So what we have been yelling for a decade and now people are understanding that there is an element of hope there, so there are players who are trying to come in and that is good news for the industry and that is what we believe that gives us more motivation that there are enough and more consumer also and the aspiration level also which is going to go up.
It is all about this competition or all these new stores which are getting opened. These are all welcomed and they should all be welcomed by the society and by the consumers and I think it is just an injection of consumerism and an injection of the GDP growth that we require and largely at the mass level and those K-graph economy is showing us the GDP growth but it is largely coming in from the upper segment of the demographic but the lower segment of the demographic needs to grow so that all of these get benefited by and even the growth can get consumed.
So I think yes competition is coming up and that’s good news and there is definitely competition both from the offline perspective as well as the online perspective. We have seen Meesho growing, we have seen Myntra growing, we have seen Flipkart growing, we have seen the names that you said, Zudios and other retail chains which have also been growing.
So I think there is a lot of activity happening at this space especially at the value segment and that is a welcome move and we believe that life is not going to be simple, it is always going to be tough and it is always going to be challenging and that is how it should be and that is how we should also get prepared and that is what we are all doing internally in the organisation to try and look at the consumer in a different mind-set and different lenses and how do we offer them better quality, better prices and better product. So that is the overall mind-set at V-Mart that we have.
Okay that is the take on competition but what about raw material costs? How are they holding up? Are there any concerns of a sharp increase and thereby could we see that impacting your margin picture?
No, I mean raw material prices definitely have come down from the peak but still are higher by almost 40-45% than 2019-2020 numbers and so there is definitely a pressure on raw material which was there, which has come down and relatively we have also understood that there has to be a lot of work that has to be done and with all these schemes with the textile industries, lot of new innovations and lot of new machineries are also getting brought in and through which there are a lot of innovations in fabric and lot of blending of fabric which are being done.
So I think all of those blending and innovations are also bringing in some better product at a lesser price and that is also helping us to provide the consumer with similar price points and then the same price point without compromising on our profitability.
But yes there is definitely going to be a little pressure because we believe that our consumers are in pain and we need to deliver them at apt cost and not at a higher cost.
So we will definitely curb our margins and look at our margins with a degree of caution and we will not go all out but anyway I think we will definitely not play too much with our margin because we do not have too much to give out.
Okay so the margin is something that you are going to probably narrow a tad bit to pass on at least some sort of benefits to the consumer given the price pressure and the demand being a bit soft but what does this do to your expansion plans? Are you going a bit slow given the fact that there is demand slowdown and there is more focus on capital conservation and profitability?
We have always taken the view that India’s story is a long term story and it is definitely going to grow in the longer term. I think what India holds is a lot of potential and that is how we are right now banking on. So we are not compromising with our growth plan. We continue to open. We had opened up 59 stores in the last year and we will continue to open more than those number of stores in the current year as well.
Target, can you give us a number? What is the growth plan with respect to store addition and which geography specifically?
We will be growing more than 65-70 stores in this particular year and the geography should be PAN India because now we are present in PAN India with unlimited in the southern India part. We will grow that part as well because we are getting good traction and good benefits in lot of small towns in southern India because there are lot of virgin territories also in those particular areas which we never grew. So that is an area we are focusing on.
Apart from that we will continue to focus on the northern belt as well as the eastern belt. The eastern belt is coming out very good. So the east and the northeast is another market that we are focusing highly on apart from UP and Bihar which we continue.
I want to come back to the demand scenario a tad bit because the kind of commentary that we are getting suggests that the apparel demand has been really low and the growth has not been as much and even the wedding season has kicked off on a bit of a tempered note and whether there were the early festivities of Gudi Padwa etc. as well, they have not really panned out. So can you talk to us about what the volume figures will look like perhaps in FY24?
Definitely when we plan our budgets we do plan for growth and we are looking at growth and we believe that there should be growth coming in. Definitely first quarter is going to be a little dull because of the first month of the first quarter has no weddings.
In April the Indian calendar follows some muhurat and stuff and that auspicious days in April for a wedding is almost negligible, almost zero which is definitely giving us an impact in the month of April but those weddings are definitely going to happen and they are going to happen in the month of May and June. So we believe some demand should come back in the month of May and June.
There is some loss that we will have but this time we are seeing the festival of Eid coming a little before normally it gets pre by 10 days and so this time it is around 22nd of April.
So we will have a balanced view but yeah largely there will be volume growth. We are expecting a volume growth from the last year and there should be a good growth coming in especially in the third quarter. The first quarter could be a little muted because of the first month of the year which is a little bad but otherwise and then we also have Adhik Maas in the month of July. So mind you that is also another month where you cannot have any auspicious days and any festival or even any marriages coming in.