Vishal Mega Mart is a buy for Target Price of ₹165
Posted: Wed Jul 16, 2025 8:08 pm
Vishal Mega Mart (VMM) is one of India’s largest offline-first value retailers, catering to a population of ~1b across the middle- and low-income segments. VMM is a unique Indian retailer with: 1) a strong presence in tier 2+ cities (696 stores in 458 cities); 2) well-diversified exposure to key consumption baskets—Apparel (44%), General Merchandise (GM) & Fast-Moving Consumer Goods (FMCG; both ~28%); 3) a strong and affordable private brands portfolio (73% revenue share); and 4) one of the lowest cost structures in the industry. We believe VMM’s uniqueness provides it with a strong moat against intense competition from both offline and online value retailers. We expect VMM to clock a revenue/EBITDA CAGR of 19%/20%, driven by: 1) ~13% CAGR in store additions, 2) consistent double-digit SSSG, and 3) modest operating leverage benefits. Given VMM’s debt-free balance sheet and robust cost controls, we expect ~24% PAT CAGR and cumulative pre-IND-AS OCF/FCF generation of ~INR32b/INR23b over FY25-28. We initiate coverage on VMM with a BUY rating and a TP of INR165, premised on DCF-implied ~45x Sep’27E pre-IND AS 116 EV/EBITDA (implying ~31x Sep’27E reported EBITDA and ~69x Sep’27E P/E).
One-of-a-kind retailer catering to the ~INR70t opportunity
VMM is one of India’slargest offline-first value retailers, catering to a population of ~1b acrossthe middle- and low-income segments. It serves a substantial market valued at ~INR70t, which is likely to reach ~INR100t+ by CY28.
It has a strong footprint of 696 stores across 458 cities spanning 30 states and UT, with ~72% of its stores located in tier 2 cities and beyond.
VMM is a unique retailer with well-diversified exposure across key consumption baskets—Apparel (44%) and GM & FMCG (both ~28%), that provides an opportunity to increase its share of customers’ wallets.
VMM has a strong and affordable portfolio of its private brands, which contributes ~73% of its revenue. Its private-labels in FMCG are sourced from reputed vendors such as Indo Nissin, Bikanerwala, and CCL Products and are priced at a significant discount to branded competitors.
The company has one of the leanest cost structures among Indian retailers, with a cost of retailing (CoR; including rentals) of ~INR1,800/sq ft (at least 20% lower than its nearest competitor). This enables VMM to offer the most competitive opening price points across several categories.
Long runway for growth in the INR70t aspirational retail industry
The tier 2+ towns account for ~74% of India’s retail spends (~INR56t), which remains largely dominated by unorganized retail (~90% share).
However, rising brand awareness, store expansion by organized retailers, and greater focus on better-quality products have led to a marked shift toward organized, one-stop shopping destinations, even in semi-urban and rural India.
VMM is a play on rising consumption and aspirations in Tier 2 and beyond India. Its well-diversified category mix and the lowest opening price points enable it to serve ~1b middle- and low-income consumers, representing ~INR70t aspirational retail market (as of CY23).
One-of-a-kind retailer catering to the ~INR70t opportunity
VMM is one of India’slargest offline-first value retailers, catering to a population of ~1b acrossthe middle- and low-income segments. It serves a substantial market valued at ~INR70t, which is likely to reach ~INR100t+ by CY28.
It has a strong footprint of 696 stores across 458 cities spanning 30 states and UT, with ~72% of its stores located in tier 2 cities and beyond.
VMM is a unique retailer with well-diversified exposure across key consumption baskets—Apparel (44%) and GM & FMCG (both ~28%), that provides an opportunity to increase its share of customers’ wallets.
VMM has a strong and affordable portfolio of its private brands, which contributes ~73% of its revenue. Its private-labels in FMCG are sourced from reputed vendors such as Indo Nissin, Bikanerwala, and CCL Products and are priced at a significant discount to branded competitors.
The company has one of the leanest cost structures among Indian retailers, with a cost of retailing (CoR; including rentals) of ~INR1,800/sq ft (at least 20% lower than its nearest competitor). This enables VMM to offer the most competitive opening price points across several categories.
Long runway for growth in the INR70t aspirational retail industry
The tier 2+ towns account for ~74% of India’s retail spends (~INR56t), which remains largely dominated by unorganized retail (~90% share).
However, rising brand awareness, store expansion by organized retailers, and greater focus on better-quality products have led to a marked shift toward organized, one-stop shopping destinations, even in semi-urban and rural India.
VMM is a play on rising consumption and aspirations in Tier 2 and beyond India. Its well-diversified category mix and the lowest opening price points enable it to serve ~1b middle- and low-income consumers, representing ~INR70t aspirational retail market (as of CY23).