About Vishal Mega Mart Limited

Vishal Mega Mart is a one stop destination for middle and lower-middle income India. They curate a diverse range of merchandize through their portfolio of own brands and third party brands tofulfil the aspirational and daily needs of consumers. They offer products across three major product categories, i.e., apparel, general merchandise and fast-moving consumer goods, through a pan-India network of 645 Vishal Mega Mart stores (as of September 30, 2024) and their Vishal Mega Mart mobile application and website. They were ranked among the three leading offline-first diversified retailers in India, based on retail space as of March 31, 2024. They are also the fastest-growing leading offline-first diversified retailers in India, based on profit after tax growth between Financial Years 2021 and 2024, and among the two leading offline-first diversified retailers in India in terms of same-store sales growth for Financial Year 2024.

They target middle and lower middle-income India. The number of middle income households in India has increased from approximately 201 million in Calendar Year 2018 to  approximately 225 million households (approximately 945 millionindividuals) in Calendar Year 2023, driven by rapid economic development, growing formalization of employment,  and a structural shift from an agrarian-based economy towards manufacturing and services. The aspirational retail market in India, driven by the consumer desire for products that offer both high-quality and affordability, will remain a significant contributor to India’s retail market. The total addressable market for aspirational retail in India is ₹68-72 trillion (US$820-870 billion) for Calendar Year 2023, and is expected to be ₹104-112 trillion (US$1,250-1,350 billion) by Calendar Year 2028, growing at a CAGR of 9%. Within  the  aspirational retail market, there has been a consistent shift towards organized retail primarily due to increasing baselines for quality, availability of wider assortment, better pricing, denser urban areas, and large whitespace for organized retailers in aspirational retail.

As of September 30, 2024, Vishal Mega Mart had 16,537 employees on their payroll. The Bankers to the Company are HDFC Bank Limited and Axis Bank Limited.

India’s retail opportunity

Between CY2016 and CY2019, the Indian retail market experienced robust growth, expanding at a CAGR of approximately 12% to reach ₹63 trillion (approximately US$ 764 billion) by CY2019. This expansion was primarily fuelled by demographic changes, government interventions, and evolving consumption patterns.

The rising middle-income segment has played a pivotal role in this growth, with their increasing disposable incomes driving greater  demand  for  branded  products,  particularly  in  Tier-2  cities  and  beyond.  This  shift  reflects  broader  economic  trends, including rapid urbanization and the nuclearization of families, which have reshaped consumption patterns and expanded the consumer base.

Government interventions have also played a crucial role in shaping the retail landscape. The implementation of the GST and the liberalization of FDI policies have helped formalizethe retail sector. These policy reforms have been complemented by technological  advancements,  particularly  in  digital  payments.  Innovations  such  UPI  have  streamlined  transactions,  making consumer  goods  more  accessible  and  boosting  retail  sales.  Additionally,  government  social  welfare  schemeshave  injected additional disposable income into the hands of consumers, further energizing the retail market by increasing purchasing powerand consumer spending.

Furthermore, a broad-based shift towards consumerism, driven by digital media influence and global trends, has continuously influenced the preferences, and purchasing behaviours of Indian consumers. This cultural transformation is integrating Indianmarkets more closely with global markets, reflecting a growing alignment with international consumption standards.

Despite  the  growth  contortions  caused  by  Covid-19,  India’s  retail  market  demonstrated  structural  resilience,  reaching approximately ₹76 trillion (approximately US$ 916 billion) by CY2023. This resilience  is attributable  to sustained positive impacts  of  demographic  trends,  supportive  government  policies,  and  significant  technological  advancements.  These foundational  elements,  coupled  with  a  revival  in  consumer  demand  and  a  robust  logistical  infrastructure,  have  not  only facilitated a rapid recovery but also set the stage for continued secular growth. 

India's retail landscape is transitioning towards a more organized direction, with Tier-2 cities and beyond at the forefront of this change. As disposable incomes rise and urbanization continues to spread, unorganized retail spaces are being progressively displaced by both organized offline brick-and-mortar stores and online platforms. These two channels are projected to grow symbiotically, not only attracting a new consumer base but also converting users from unorganized retail through enhanced service offerings and operational efficiency.

While Tier-2 cities and beyond are leading the charge, projected to grow at ~32% CAGR between CY2023 and CY2028, the potential  for  organized  retail  expansion  extends  beyond  these  cities.  Tier-1cities,  where  the  share  of  unorganized  retail currently  ranges  between  50-55%,  also  present  a  substantial  headroom  for  growth.  As  India's  retail  market  continues  to formalize, it will gradually move towards the market structures of more developed economies such as the United States and China with 85-90% and 50-60% share of organized retail respectively as of CY2023.

India has a large aspirational-centric retail opportunity

India's retail sector is primarily influenced by its classification as a middle-income economy, coupled with a consumer mindset that leans towards aspirational purchasing.

Firstly, being a middle-income economy means the majority of Indian population falls within this economic stratum, which dictates  spending  patterns  and  retail  preferences.  Theeconomic  bandwidth  of  these  consumers  generally  limits  their purchasing behaviour to mid-tier priced goods that are often of a lower quality and primarily serviced by unorganized players rather than luxury items. This creates a larger market for good quality products that are affordable and yet offer significant value.

Secondly, consumer behaviour in India shows a marked tendency towards Aspirational Retail which includes both mass and masstige brands and is defined by their positioning across various price points and retail categories. This behaviour is driven by the desire to improve one's lifestyle, which influences spending habits. Consumers are inclined to purchase aspirational products that offer high quality and functionality within an affordable price range. This aspirational buying is not necessarily about seeking the lowest prices, but about finding a balance between cost and perceived value, typically favouring products that blend affordability with greater functionality.

Together, these factors foster a retail environment where demand is concentrated on moderately priced products that promise high quality and functionality. Retailers that can cater to this dual demand—economical yet aspirational—are best positioned to succeed in the Indian retail market.

Although India's economy is progressively maturing, the consumer mindset favouring aspirational purchases remain deeply entrenched.  This  orientation  is  not  merely  a  response  to  economic  conditions  but  is  rooted  in  a  broader  cultural  ethos  that values both quality and perceived value.

As  of  CY2023,  Aspirational  Retail  represents  90-95%  of  the  retail  market.  This  sector appeals  to  various  income  cohorts, including higher-income households, highlighting a significant total addressable market (TAM). Middle-income India, which comprises 225 million households (approximately 945 million individuals), as of December 31, 2023, is estimated to be the largest portion of the Indian population. These households are estimated to constitute 64-69% of the total Retail market, as of CY2023, a share projected to remain unchanged by CY2028.

This indicates that while middle-income segment households account for a substantial portion of the retail market, the potential for organized retailers is even greater due to their diverse product range that attracts a broader spectrum of income groups. This trend is evident across all categories, including Apparel, Staples & FMCG, and General Merchandise.

VISHAL MEGA MART LIMITED COMPETITIVE STRENGTHS

1. Serving a Large and Growing Section of the Indian Population 

2. Consumer-Centric Approach Resulting in a Large and Loyal Consumer Base

3. Diverse and Growing Portfolio of Own Brands across Product Categories

4. Pan-India Presence with a Track Record of Successful Store Growth

5. Technology Enabled and Systems Driven Operations

6. Professional and Experienced Management Team

7. Track Record of Delivering Revenue, Profit Growth and Capital Efficiency

VISHAL MEGA MART LIMITED GROWTH STRATEGIES

1. Expand their Pan-India Store Network

2. Drive Same-Store Sales Growth through Multiple Initiatives

3. Commitment to Consumer Centricity: Aspirational, Affordable and Accessible 

4. Driving Cost Efficiencies Across their Operations

VISHAL MEGA MART LIMITED RISK FACTORS & CONCERNS
1. They do not manufacture any of the products that are sold in their stores, and they rely entirely on third party vendors for the manufacturing of all products under their own brands.

2. They derive a significant portion of their revenues from sale of products from their stores located in Uttar Pradesh, Karnataka and Assam.

3. The Company has received two directives with requests for information from the Enforcement Directorate to furnish information and documents as part of its investigation and any possible penalties/action.