Huge opportunity to tap the kind of customers we are targetting: Lalit Agarwal

Q&A with Lalit Agarwal, chairman of retail V Mart

Lalit Agarwal, chariman of retail chain V Mart and cousin of Vishal Retail founder RC Agarwal is coming out with an initial public issue of the company. The IPO is expected to raise Rs 120 crore and hit the markets from February 1. In an interview with Raghavendra Kamath, Agarwal talks about the company plans and strategy. Edited excerpts:

What is giving you the confidence to come out with a public issue when the country has seen a number of horror stories in Indian retail?

We understand that retailers have not given returns to investors in the past as per their aspirations. We think it is right market, right time for us to enter the market, There is no problem with retail but well you manage the growth is what matters. How well you manage the mathematics is important. We understand that. The kind of customers we are targetting, there is a huge opportunity to tap.

What are you doing to avoid mistakes done by retailers who mismanaged inventory, over-expanded and went belly up?

We consciously understood what went wrong. We have correct sales mix. Eighty% of our merchandise is non-kirana which have high margins. Our operational costs are low. We have rentals of Rs 29 per sq ft which is 4.5% of our sales. Our marketing cost is also low. We have cluster based approach. We do not open stores which are beyond 150 kilometres of our existing store.

Don't you think your price band of Rs 195 to Rs 215 is on a higher side?

If you look at the price multiples of our peers, we are at half that price.

You said you will open 60 new stores with IPO money. What are the changes your are making in new stores?

There will not be much of a change. We are confident of the model. We have 39 mini hypermarkets and 23 fashion stores. Going forward we will open only fashion stores.

Analysts have always held that many retailers build the business for valuations, to sell the business later.  What is your take on that?

We can not shut mouths of everybody. There is a perception and we retailers have done wrong in the past. But private equity companies have invested with us for the last 4.5 years and exiting at good price. We have built the value. We think our market cap will grow on performance.

Are you open to any FDI if any overseas firms approach you?

As of now we are not looking at any FDI. But we will keep our doors open.