V2 Retail Q3 net Fall- Margins Improve

The clothing, accessories and lifestyle product maker V2 Retail’s performance during the fiscal third quarter to December 2019 was a reflection of sagging economic activity in the country.

The company’s revenue fell 9.2% to Rs 219 crore while net profit slipped 11.9% to Rs 20.8 crore.

However, the control over costs helped the company to maintain profitability growth.

A well stitch in time, led to a 10.1% increase in earnings before interest, tax, depreciation and adjustments (Ebitda) to Rs 33.7 crore. Margin stood at 15.4% versus 12.7%.

Growing competition within the segment and mushrooming of new brands will be a major concern going ahead for V2 Retail – very closely held small-cap company.

The Rs 400 crore market capitalisation company is controlled, four investors.

As per shareholder analysis, about 53% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

Ricon Commodities Private is currently the company’s largest shareholder with 21% of shares outstanding. Unicon Marketing Pvt and Ram Agarwal as the second and third largest shareholders, holding 16% and 9.9%, of the shares outstanding, respectively.

Institutional investors own 9.2% of V2 Retail. This can indicate that the company has a certain degree of credibility in the investment community.

The general public owns 21% while private equity firms hold a 6.5% stake in V2 Retail.

The company operates 76 stores spread across 17 states and 71 cities with a total retail area in excess of 8.5 lac Sq. Ft. and has opened 1 new store during Q3 FY20

Despite challenging times, company management has stated that it has able to deliver consistent revenues and margin.

Having said this it considers the current year as a year of consolidation and course correction before taking a bigger business leap ahead

Going ahead the company has stated it intends to rationalize its store expansion strategy. This is being done for more throughput and better per square feet of sales and profitability.

Also, its focus ahead will be on better Inventory turnover and rationalising the holding levels.

Also, the company intends to focus on Private labels and Product development to further enhance the customer experience in order to ensure that it provides better products at competitive prices.

Net net we understand that V2retail’s operations could see challenges in the near term as macro headwinds continue to affect business growth although long term prospects look encouraging ahead.

Disclaimer –
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.