Value and Variety Retail Ltd (V2 Retail)- Buy

Let me tell you a story – An ambitious physically challenged, young guy who lives in a chawl like building, in a 600sqft rented flat along with his 20-22 family members decides to live his dream. He tries his hand in various businesses. He rents a small shop – first starts with xerox (Doesnt work), then starts selling cold drinks (again, doesn’t work) and finally retails ready-made garments (which becomes a big hit). Despite of great challenges (economically and physically challenged), with his hard work and desire to succeed he starts climbing the ladder of success. Soon that small shop becomes a huge shop and that one huge shop, in-turn becomes multiple shops. Then comes a huge crisis in form of union problems. The entire business has to be closed down, and debtors also start demanding their money. Inspite of all this, he does not lose hope or courage. He moves to another city. He starts with the same business, and makes money. Slowly but surely he returns all the money to his previous debtors and then starts growing again. This time the growth is ever more superlative. The man grows so big that he becomes the challenger to the biggest retail company in the country – and also become a little too ambitious in the process. In order to grow fast he tries taking expensive short term debts. But then 2008 happen and his entire empire comes crashing down (on the back of huge debts and declining demand). He has to sell out his entire business. He is down, but not out.

Now, he has started a new innings – again…..Do you think this man has the capability of building an empire again (given the past history), if yes, then read on…..

In entrepreneurship (Myself included), starting a venture, making losses and selling the business should not come as an uncommon story. But, after all this, re-starting a similar business is surely unusual. Surely, it needs a lot of guts, confidence and honesty, of having learned from past mistakes. And Mr. Aggarwal is one such gutsy and retail pioneer.

Background: Back in the early 1980s, when Agarwal was still an assistant manager in a rolling-shutter company, he noticed the rising demand for readymade garments. He started with a store for readymade clothes at Kolkata’s Lal Bazaar in 1986. After a few years, he moved to Delhi and set up Vishal Retail in 2001. Vishal Retail at one point in time was being touted as the next big thing in retail after Kishore Biyani’s Pantaloon Retail. Both grew at a frantic pace, but while Biyani prospered, growth became a liability for Agarwal. To become the biggest, Vishal decided grow the business through short-term debt. The thinking was that once Vishal expand, have the topline, they could hit capital markets again to fund expansion and retire short-term debt or convert into long-term debt. Before it could do so, (industry sources say Vishal was talking to some private equity investors, who withdrew at the last moment), the Lehman Brothers collapse happened.

Anticipating its expansion, Vishal had placed orders with suppliers (in apparels, Vishal had to place orders six months in advance) When the stores did not happen, deliveries piled up and consumption slowed.

There were many other mistakes too: When it was ramping up, it spread itself too thin, opening stores across the country. Given that it was selling over 20,000 items in its stores, this made its supply chain complex. They needed to expand, stabilize and then expand. But they wanted to be first off-the-block in every town.

Its distribution, center-led model failed as it could not build an IT network. Which meant that buying at the warehouses was not aligned to customer needs, and it ended with dead inventory. Also, Vishal tried to develop private labels in every single category, but did not have the competence (had limited scale) to support these.

As a result of all this and with a debt of Rs 750 crore, falling sales and rising costs, Agarwal sold the business to Airplaza Retail Holdings, a Shriram Group company, and private equity firm TPG Wholesale for Rs 70 crore in March 2011.

Shattered and Battered was he and his fiscal health, but, he was not done with his staunch belief in the India retail story. With funding from family and friends, Agarwal was back within a few months with V2 Retail Ltd. (Full name: Value and Variety Retail Ltd.).

Second Innings:

What is Different This Time?

A key strategy this time around is to go slow and open smaller shops in tier 2,3 and tier 4 towns mainly(rentals are less) and with go mostly with apparels. Food and grocery are totally out as margins are very thin and shelf life is extremely low.

After burning his fingers with debt, V2 is now cautious. V2 also has reduced its turnover ratio. This means more efficient turning of inventory into sales.

Earlier they were targeting people at the bottom of the pyramid, but this time they are targeting only middle-class people, so their merchandize is more upscale this time around. They pay the vendors in cash in a week. So, vendors deliver to V2 in the shortest possible time.

Agarwal has now hired TCS as IT consultant. Though he doesn’t have such high-end vendors servicing V2’s IT needs as yet, he is clear that once he reaches the Rs 1,500 per sq.ft. per month of sale milestone, he would require an outsourced IT vendor to run his retail 2.0.

One of the biggest lessons of the Vishal Retail debacle was to avoid manufacturing. Things will be done differently at V2, which currently buys merchandise. V2 will outsource manufacturing and control quality.

Depth in professional Management:V2 Retail has hired a Chief Executive Officer, who oversees day-to-day operations – Dinesh Malpani, former CEO at Jubilant Retail. Agarwal is also putting information technology, systems and processes in place, which he sees as crucial to efficiency and transparency.

V2 is preparing to launch an e-commerce platform to boost sales and awareness in the next 6 months. More about this here ->

‘We’ll do it right this time’ – Ram Chandra Agarwal (as quoted)

1 No enormous investments or debts in the beginning

2 The total initial investment so far is only Rs 15 crore

3 Slower expansion to keep debt in check

4 Increase management bandwidth before expansion

5 High degree of automation to reduce leakages

6 Online presence and plan to start e-commerce soon, i.e. in in next 6 months ( The company has recently started selling their merchandise on sites like ebay etc.


Revenues have grown by more than 100%  CAGR during the period FY12-14, i.e. from 40cr in FY12 to 228cr in FY14. The losses have reduced substantially from more than 34cr loss in FY12 to around 4.5cr in FY14 but more importantly there has been a couple of quarters with net profits too. V2 retails ended the FY14 being EBITA positive after quite a few years. They are targeting sales of around 550-700cr by FY16.

Yes, there are issues with the company (high promoter pledge, huge accumulated losses etc) but at the CMP of rs 14.9 and Market Cap of just 33cr, there’s very good value on the stock. The downside looks protected whereas upside could be humongous.

Technicals: Whenever the stock breaks 18rs and closes above it, that will take the stock to next territory. The stock has been consolidating between 14-17rs for quite some time now. The results could be game changer. For people with lesser risk appetite (but still, risk appetite is required to buy this stock) safe buying, buy above 18rs.

One should also watch this ->

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96 Responses to Value and Variety Retail Ltd (V2 Retail)- Buy

  1. Prabu says:

    Hi Sir,

    Please share your views on Freshtrop Fruits. Whether we can buy at current levels and its future plans.. Also suggesst your views on Kokuyo Camlin and its future

  2. Bela Pal says:

    please share about suzlon energy I have 5000 @28.20

    • i do not like large cap stocks, but still, in suzlon you will recover your money eventually, but have you thought of the opportunity cost (I hope you know what it means)?

  3. Salim Khan says:

    I wish I knew that you had posted the new investment idea today morning……I noticed it late morning by that time V2 was already on uc…request you to disclose idea publish date/time or at least on Sunday night to allow us study and prepare for buying… the way is V2 a multibagger or a value pick.

    • V2 is a value pick which will give you multi-bagger returns. Please understand I do not believe in picks that has just value. Noone, absolutely noone understands the difference between value and value-trap. My investment theory is to compound money “faster”, and value does not promise that. Furthermore, If you are convinced about the opportunity, then do not hesitate to buy 2-3 rs higher also. The circuit should not take it beyond 17-18 bucks. But, its very important that you believe in the story of V2. Have conviction and only then buy the stock.

  4. Salim Khan says:

    Thanks dear…….still if you could answer my request………request you to disclose idea publish date/time or at least on Sunday night to allow us study and prepare for buying.

    • Let me plan this out. I see your point, its valid. Not sure if these guys provide any RSS feed, but if not, then I will publish on this blog itself, the date and/or time, when I plan to publish my next idea. Thanks for bringing this point out.

  5. Hi.. I’m trying to understand V2.. Can you help me with how much of V2 do TPG & Shriram Group hold now ? Its a good thing that V2 plans to get into the e-commerce space. But I wonder if they should divest their focus from their core strength of selling in tier2/3 cities.

    • First of all congrats on doing your own research and creating your own conviction before buying a stock. V2 is completely promoted by Mr. Agarwal. V2’s core strength is retailing. They have started making money doing this offline and now they believe they can replicate the same thing online. Their new CEO has experience creating online retail store earlier. Furthermore for their e-commerce venture, they would just take the orders and re-route it to their warehouses that are present across the country, so it will be very profitable. Also, the combination of offline and online retail would mean lower order cancellations because of size issues (that Myantra etc sites are plagued with). The decision to introduce e-commerce after MIS is a strategic one.

  6. Salim Khan says:

    Hi…..want to know when there is upper circuit….lots of pending orders…..who gets the pie or not… it first come first serve basis….how to get the same executed….kindly educate.

    • its first come first serve. The second the market open hit the buy button. If you are lucky you can get ur order executed. I have seen it happens only from terminals though. Orders executed online rarely get executed if there is very less trade as online is generally slower.

  7. Salim Khan says:

    Hi……sharp has fallen from 88 to 68……what’s you call.

  8. Salim Khan says:

    I have tried putting buy request before 9am….but no luck…when we should place orders…previous day or else to get the same executed? Thanks..

  9. arun says:

    Sir – Your view on Capital First

  10. A.p. says:

    Hi, suspicious fall in kopran before results!!! Any news you get??

  11. A.p. says:

    With high % of delivery on nse!! Means what??– long bulls unloading or new bulls entering!!

  12. Salim Khan says:

    V2 I guess will cross 18…….still uc……no chance of buying

  13. Arun says:

    Sir – Your View on Ashapura Minechem and Gujarat Borosil

    • Gujarat borosil, is ok, but not a firm buy in my list. They have plans for solar energy and if they fructify it would be great. Ashapura minechem i am not tracking anymore. Infact these mining companies have a lot of cleaning up to do. There are much better opportunities in the market today.

  14. A.p. says:

    Kopran – results below my expectations!!! I can’t understand what went wrong.

  15. A.p. says:

    Yeah I will call him. Last month, when i saw company site and capacity they described , I found it very interesting. I called mr. Sunil and asked about capacity utilization. The ans was not satisfactory, he answered i was asking too much technical que. Well I can see turnover of aroud 700-800 cr/year with current capacity. Btw whats your view on results?

  16. thakral says:

    wts ur view on bilcare

  17. Salim Khan says:

    How long V2 will continue UC….I am not getting chance to buy so?

  18. thakral says:

    can I buy calenstile bio leb

  19. thakral says:

    wts ur view on nitco tiles..can it be an turnaround story..

  20. thakral says:

    meghmani organics recommended by daljeet kohli as turnaround candidate…..wts ur view

    • He is a smart investor. You take your own decision on this. Just because he is recommending you should not buy. Ditto to what I say. As far as I am concerned, at 450cr market cap, its off my radar. The question before investing is whether you have developed conviction on this one or not. If yes buy else drop the idea. Take an informed decision.

  21. Divi says:

    Water base valuations r close to avanti valuation..
    earlier i thought of adding has not given me chance to load up since results..
    i think WB UC will be broken in next week if not on monday..
    is it good idea to to switch some portion from avanti to water next week….as i am having 10% allocation in Avanti feeds..
    I have switched 4% from sharp to liberty ..
    now i am in dilema..about WB to switch from avati due to narrow valuation gap..

    • After results, waterbase had given a chance of entry at around 46rs when the circuit was broken so I am not sure why you did not get a chance for entry. Now re-rating of waterbase is done. Further appreciation would be on back of earnings growth. So its an individual’s take whether one should switch to waterbase from Avanti feeds. Both are very good

  22. Divi says:

    Regarding liberty…

    management is saying that there was deferment of instistutional order of 48cr to Q2.and they also saying that it will be compensated in this means this 48 cr will be directly added to Q2 i we take conservative 15% growth for Q2 on yoy..then it would be 120 cr (15% growth on yoy) + 48 =168 cr topline for Q2…so if we take same margins as Q1..then PAT would be 5.5 cr for Q2..translate to 80% PAT growth..
    and also guiding for 20% topline growth or fy15.To meet this they have to do 500 cr sales in remaining 3 quarters..

    are my assumptions are correct..
    Restructuring will be the major trigger..

    • see the interview of the CEO on CNBC. All your questions would be answered. And yes, the re-structuring would be a HUGE trigger. Just in one line, your analysis is in the right direction.

  23. Salim Khan says:

    In your sense is Bilcare a hold or sell though losses are reducing…

  24. Salim Khan says:

    Hi reason for asking on Bilcare is that you had said that my stocks selection list is good which also included Bilcare.

  25. dharmesh says:

    “The company is looking to open 20-30 V2 stores by next year, which is expected to clock a combined turnover of 50-60 crore a month.” Here is the link

  26. thakral says:

    sir cosmo film is good turnaround bet….I think it will rerate….wts ur view

  27. Amit Gupta says:

    Sir, Tanla Solutions is on the verge of revival. A debt free mobile solution provider. Can be a next jackpot. Pls share ur views.

  28. rajddepsandhu says:

    Please see about Saurashtra cement it is also turning around and quite cheap compare to other cement shares

  29. rajddepsandhu says:

    hi aceinvestor I am also holding shares of sharp india since your recomendations, in one of blog you have mentioned that you have talk with company secretary but one thing I want to get clarify from you they have started making ac last year which capacity about 150,000 but how they have manage to raise that capacity without dilution of equity or raising debt, there equity of about 2.6 crore is approximately same for last 18 years or more, that of capacity of addition, how they funded it would you please put some on light on it how they have raised that capacity without dilurtion or debt raising , in latest quarter they have provided for extra deperciation also. waiting for your reply

  30. V2 Retail Limited

    V2 Retail Limited has informed the Exchange that the Company has opened a new store located at Luby Circular Road, Next to SSLNT College, Hirapur, Dhanbad-826001, Jharkhand. The store is spread in an area of 8316 sq. ft. This is 6th store in the state of Jharkhand across 6 cities. With this the Company have increased the tally of the state to 6 fashion stores. The Company further informed that the it has re-launched an existing store located at H 6 B, Sonagiri, Opposite Piplani Petrol Pump, Bhopal-462023, Madhya Pradesh. The store is spread in an area of 8630 sq. ft. This takes the total number of stores to 98 in 85 cities across 12 states with a total area of 7.93 Lakhs sq.ft.

  31. Ace.. that’s what i was wondering..

    This is from V2s AR 13-14

    During the year, Company had 15 stores. 1 New Store was opened
    under the brand “V2” at AARA (Bihar) and 1 was closed during the year.
    • One more Store of the Company at Guwahati (Assam) becomes
    operational in the month of April 2014.
    • The Company’s strategy of investing in growth of its own retail business
    is being pursued steadfastly.

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