V-Mart's turnaround gathers pace as margins rise, stores scale up: Analysts

After years of disruption, strategic resets and margin pressure, V-Mart Retail appears to be entering a decisive phase of recovery, with improving productivity, margin expansion and steady store additions setting the stage for a meaningful re-rating, according to analysts at Motilal Oswal.

 

With basic consumption needs in rural India increasingly supported by government initiatives such as free food schemes and cash handouts for women, disposable incomes are gradually shifting towards aspirational spending. This structural trend, analysts believe, is playing directly into the hands of value fashion retailers, and V-Mart is emerging as a key beneficiary of both rising discretionary spends and the ongoing shift from unorganised to organised retail in tier-2 and smaller towns.

 

 

Motilal Oswal expects V-Mart to deliver a robust revenue CAGR of around 18 per cent over FY25-28, driven by consistent store additions of about 13 per cent annually and mid-single-digit same-store sales growth (SSSG). The brokerage believes that the company’s renewed focus on operational efficiency, along with a sharp reduction in losses at LimeRoad and improving productivity at Unlimited stores, will underpin a strong earnings recovery over the medium term.

Store expansion back on track

 

V-Mart’s growth engine continues to be store expansion. Over FY19-25, the company added stores and retail area at around a 12 per cent CAGR in its core V-Mart format, while also acquiring Unlimited to strengthen its footprint in southern and western India. Nearly 80 per cent of recent store additions have been in tier-3 markets, underlining the company’s focus on deepening its presence in core regions even as it selectively expands into new geographies.

 

After three years of store rationalisation and pricing corrections, Unlimited’s newer stores are now performing in line with core V-Mart outlets. Stronger traction in markets such as Tamil Nadu has prompted management to raise its store addition target to around 75 stores in FY26, up from the earlier guidance of 60-65.

 

With the clean-up of underperforming Unlimited stores largely complete, Motilal Oswal expects V-Mart to add 50-55 stores annually in the core format and another 20-25 stores under Unlimited. This expansion trajectory could take the total store count to around 720 by FY28, implying a 13 per cent CAGR over FY25-28.  ALSO READ | Large, mid or small caps? Here's 2026 playbook post SMIDs' underperformance

Productivity and growth recovery

 

V-Mart is emerging from a prolonged phase of operational stress. Between FY19 and FY23, margins were hit by COVID-19 disruptions, acquisition-related integration challenges and elevated cotton prices. In response, management undertook decisive corrective actions, including aggressive store closures, sharper merchandising, ASP resets at Unlimited, faster design-to-shelf cycles, a higher private-label mix and tighter cost controls.

 

These measures have begun to show results. Monthly sales per square foot rose at a 10 per cent CAGR over FY22–25 to about ₹667, although this remains below key peers. Looking ahead, Motilal Oswal expects mid-single-digit SSSG and a higher contribution from better-performing Unlimited stores to lift overall monthly productivity by around ₹100 per square foot to ₹762 by FY28.  ALSO READ | Shriram Finance shares rise 2% on ratings upgrade; up 13% in a month

Margin inflection underway

 

Margin recovery is central to the investment thesis. Pre-Ind AS Ebitda margins have rebounded to around 4.4 per cent in FY25, following the closure of unviable stores and lower LimeRoad losses. With operating leverage kicking in, Unlimited productivity improving and losses narrowing further, Motilal Oswal expects margins to expand by nearly 290 basis points to about 7.2 per cent by FY28. This margin expansion, coupled with strong revenue growth, could drive a sharp 39 per cent CAGR in earnings over FY25-28.  ALSO READ | Choice recommends these 3 stocks to have in your portfolio in 2026

Valuation and scenarios

 

Despite the improving outlook, V-Mart trades at a relatively modest valuation of around 19x FY27 pre-Ind AS EV/Ebitda, considerably lower than peers. Motilal Oswal reiterates its ‘Buy’ rating with a revised target price of ₹1,040, based on 23x Dec’27E pre-Ind AS EV/Ebitda.

 

The brokerage’s scenario analysis highlights an attractive risk-reward profile. The bull case values the stock at ₹1,250, reflecting faster margin expansion and execution, while the bear case pegs fair value at ₹685. With productivity gains, store expansion and margin recovery aligning, Motilal Oswal counts V-Mart among its top retail picks for 2026.     Disclaimer: The views or investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.