2 weeks Ago By CNBCTV18
Vishal Mega Mart launched a pilot program in the quick commerce segment last year. The platform operates within an 8-10-kilometre radius of each store, allowing users to access inventory from their nearest outlet through the app. Currently active in 390 cities across India, the pilot program has shown good results, raising hopes for more growth, said Gunender Kapur, MD & CEO, of Vishal Mega Mart in an interview with CNBC-TV18.
The company’s ₹8,000 crore Initial Public Offering (IPO) is set to open for subscription on December 11. As an Offer for Sale (OFS), the company will not directly benefit from the proceeds of the issue. The IPO's price band has been set between ₹74 and ₹78 per share, with the subscription window closing on Friday, December 13.
This is the transcript of the interview. Q: This is an OFS. Why are you coming to the market? You need to raise fresh capital or is it that the market is valuing smart, well-priced retailing businesses very well, so why wouldn't you want to take advantage of that? What's the thought? A: The company has performed well.
We have absolutely no debt. We have ₹700 crore on our balance sheet. We have enough money to finance all our growth ambitions.
And therefore, this is only secondary. And, the promoter group Samayat Services is currently holding about 98% of the company, and they are diluting it to 77%. They will continue to be the promoter company, and they will be invested with us for the long term.
They are very excited about the future. Q: What is the revenue trajectory going to be like? Because, if you look at numbers, revenues nearly doubled from 2021-22 (FY22) levels to about ₹10,000 crores this year. This 24-25% kind of compounded annual growth rate (CAGR), can that continue? A: I can't make any specific, forward-looking statements, but I can only talk about the last three years.
Our revenue CAGR has been 26%. our EBITDA CAGR has been 24.6% and a profit after tax (PAT) CAGR has been 50.
9%. For the last financial year, our return on capital employed (RoCE) has been 71% and just as a matter of record, in the last three and a half years, we have generated free cash of around ₹3000 crore. Also Read | Vishal Mega Mart IPO opens for subscription on Wednesday; Check GMP and other details Q: Broadly, the answer is yes.
A: I am personally very excited about the future of the company, and remain very passionate about serving the middle and the lower middle-income group in India, which has been our mission. Q: Let's talk about profitability – you have been in that vicinity of around 13-15% in terms of EBITDA margins. Will you be happy at these levels? Or you have some levels in store that you could take margins even higher from now.
Or do you think that 13-15% is what you would like to work with? A: Broadly in that range. The conceptual approach has been that we will maintain the gross margins at the current level, and therefore we do not see EBITDA etc growing through pricing action. That is what we have done over the years.
And if we have operating leverage to that extent, it will show up in the bottom line. Q: What about the quick commerce foray? What is the bigger plan? It'll be a small part right now, but that's the buzzword as well. So tell us what plans for scaling up that business.
A: It is a pilot that we started at the beginning of last year, and it's very differentiated. It's a very capital-efficient platform. Essentially, it works within a radius of 8-10 kilometres of every store.
If you were to log into the app, you would automatically get tagged to the closest Vishal store, and then the inventory of only that store becomes visible to you. Also Read | Vishal Mega Mart IPO — Key risk factors involving the ₹8,000 crore issue And if you were to place an order, you could get - if you so choose - the order delivered within two hours. And if you were to buy more than ₹300, the delivery is free.
At less than that, you pay ₹29. The early signs have been very good. And I am quite happy to report that as we speak, we are present in about 390 cities in India, through this pilot.
And we remain very optimistic. For more details, watch the accompanying video Catch all the latest updates from the stock market here.
