Alpha | Vishal Mega Mart Ltd. – Equity Research Desk

Vishal Mega Mart Ltd – Affordable Essentials for Every Indian Household

Founded in 2001 and based in Gurugram, Vishal Mega Mart Ltd. is a leading retail hypermarket chain in India, offering a broad spectrum of products including apparel, groceries, electronics, and home essentials. The company operates through a combination of its own brands and third-party brands, reaching customers via a nationwide network of 717 stores, along with an online shopping app and website. The company serves primarily middle and lower – middle income consumers and is present in 472 cities across 28 states and 2 union territories. It is recognized as a leading offline-first diversified retail chains in the country.

Products and Services

The company’s offerings can be categorized across 3 business segments:

1. Apparel – Product portfolio includes t-shirts, shirts, denim, athletic and leisure wear, night wear, innerwear, western wear, formal wear, and ethnic wear for men, women, children, and infants.

• General Merchandize – Home appliances, crockery and utensils, home products and furnishings, toys, stationery, travel products and footwear, etc.

• Fast-moving consumer goods (FMCG) – Biscuits, savoury snacks (namkeen), noodles, tea, coffee, staples such as mustard oil, soya oil, clarified butter (desi ghee) and spices, and non-food products such as baby diapers, hair oil, sanitary pads and handwash, among others.

Subsidiaries – As of FY24, the company has 2 subsidiaries and no other associate companies/joint ventures.

Investment Rationale

• Pan-India Footprint – The company has established a strong pan-India footprint with 717 stores across the country (42% in the North, 29% East, 21% South, and 8% West), and added 23 new stores along with entry into 16 new cities in Q1FY26, expanding its total trading area to 12.4 million sq. ft. The company continues to penetrate underrepresented regions, with successful expansion into Kerala and pilot store launches in Maharashtra and Gujarat aimed at strengthening its presence in Western India. It is also scaling up a cluster-based strategy through smaller-format stores, with six such outlets currently operational in Uttar Pradesh and Haryana, performing in line with revenue and profitability targets. These strategic initiatives allow the company to accelerate its presence in high-potential, underpenetrated markets while maintaining a capital-efficient growth model. The smaller-format stores offer quicker rollout and faster breakeven, making them ideal for Tier-2 and Tier-3 locations.

• Expansion strategies – The company is actively expanding its digital footprint through e-commerce and quick commerce, with 670 out of 717 stores servicing quick commerce orders across 455 cities as of June 30, 2025. This segment has already attracted ~10 million registered users and now contributes 6 – 8% to store revenues. Notably, 20% of quick commerce customers are entirely new to the brand, making this an incremental revenue channel. As one of the first retail players to introduce e-commerce in many of its operating towns, the company has successfully broadened its customer reach while maintaining strong unit economics. Additionally, it continues to serve the “first-price” value-conscious segment, while strategically working to upgrade consumers to higher price points. With 95% of revenue coming from loyal customers and a 17% YoY increase in loyalty memberships, the company enjoys strong customer retention and repeat purchase behaviour. Its focus on private labels – contributing ~60% of sales volume – further supports margin expansion and brand differentiation.

• Q1FY26 – During the quarter the company reported strong financial performance, with revenue rising 21% YoY to Rs.3,140 crore, compared to Rs.2,596 crore in Q1FY25. EBITDA grew by 26% YoY to Rs.459 crore, up from Rs.366 crore, while net profit increased 37% YoY to Rs.206 crore compared to Rs.150 crore. The company achieved a same-store sales growth (SSSG) of 11.4%, supported by a higher number of customer transactions. Gross margins remained stable in the range of 28.2% – 28.4%, while EBITDA margins improved from 14.1% to 14.6%. The margin expansion was primarily driven by operational efficiencies and improved transaction volumes, reflecting the company’s ability to drive profitability alongside revenue growth.

• FY25 – The company generated revenue of Rs.10,716 crore, an increase of 20% compared to FY24 revenue. Operating profit is at Rs.1,530 crore, up by 23% YoY. The company posted net profit of Rs.632 crore, a jump of 37% YoY.

• Financial Performance – The company has generated a revenue and net profit CAGR of 24% and 47% over the period of 3 years (FY23-25). Average 3-year ROE & ROCE is around 9% and 11% for FY23-25 period. The company has a robust capital structure with a debt-to-equity ratio of 0.27.

Industry

India’s retail and e-commerce sectors are experiencing robust growth, driven by rising incomes, urbanization, and changing consumer preferences. The e-commerce market is projected to reach USD 91.24 billion by 2029, while the organised retail sector is expected to touch USD 230 billion by 2030. Contributing over 10% to GDP and employing 35+ million people, the sector is set to create 25 million new jobs by 2030. With a growing middle class, increasing rural connectivity, and the third-largest e-retail shopper base globally, India is emerging as a key market for both offline and online retail, supported by strong economic fundamentals and digital integration.

Growth Drivers

• India’s large and expanding middle class with rising purchasing power, combined with a largely untapped retail market.
• 100% FDI permitted through the automatic route in online retail of goods and services.
• Rapid digital adoption and increasing internet penetration, especially in Tier II and Tier III cities, are enabling greater access to e-commerce platforms, expanding the consumer base and driving growth across both online and offline retail channels.

Peer Analysis

Competitors: Avenue Supermarts Ltd (DMART), V-Mart Retail Ltd, etc.

Compared to its peers, the company has delivered a stronger overall performance, with superior sales growth, margin-driven earnings expansion, and stable returns on capital employed.

Outlook

The company’s proven ability to replicate its success across diverse geographies and retail formats positions it well for scalable, sustainable growth. The company’s strategic focus on expanding its physical footprint, accelerating smaller-format store rollouts, and strengthening its digital presence through e-commerce and quick commerce enhances its operating leverage while reducing regional concentration risk. These initiatives are expected to drive consistent top-line growth, incremental customer acquisition, and margin improvement. With strong earnings visibility, cost-efficient expansion, and a defensible value positioning in India’s mass-market retail segment, the company emerges as a compelling investment opportunity in the evolving retail landscape.

Valuation

We believe Vishal Mega Mart’s extensive product portfolio and customer retention strategies places it in a strong position in the India’s retail space. We recommend a BUY rating in the stock with the target price (TP) of Rs.177, 101x FY27E EPS.

Note: We also encourage maintaining a stop-loss at 20% from the entry price to manage potential downside risk effectively.

SWOT Analysis

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