V2 Retail Ltd Management Discussions

Economic Overview Global Economy

The global economy in CY 2024 expanded at a rate of 3.3%, despite major economic events such as geo-political uncertainties, steep inflation, shifting trade dynamics and realignment of supply chains.

The growth in the global economy witnessed variations, with the US economy registering a steady growth as the corporates gained profitability and moderate employment. Europes economy, in contrast, underwent stagnation and low consumption. Moreover, China performed weaker due to the challenges in the real estate sector and declined customer confidence. According to the IMF, the growth rate in emerging markets was projected at 4.3% in CY 20241.

The global headline inflation, moreover, eased to 5.7% in 2024.2 The advanced economies demonstrated recovery, reverting to their inflation targets in contrast to the Emerging Markets and Developing Economies (EMDEs), which are experiencing rebound. Despite ongoing disinflation, there are potential risks such as persistent price inflation and supply chain disruptions.

Outlook

The global economy in CY 2025 is projected to grow at 2.8%, thereby, expanding at 3% in CY 2026. The geopolitical instability and rapid alterations in trading dynamics are hindering growth. However, the global headline inflation is expected to decrease to 4.3% in CY 2025 and further ease to 3.6% in 20263. The Central Banks worldwide are moreover, expected to improve the monetary policies in the wake of declining inflation, propelling development and growth in the regions.

Indian Economy Overview

The Indian Economy continued to exhibit a measured pace of economic growth, grew by 6.5% in FY 2024- 25, due to strong performance of Manufacturing, Services and Agriculture. With the rising production levels and escalated export orders, the Manufacturing sector demonstrated growth. Moreover, the Finance and IT divisions of the Services sector bolstered economic expansion, with the agriculture sector witnessing inconsistent outcomes due to fluctuating monsoon pattern. Moreover, the tax relief by the Union Government is expected to reinforce the discretionary expenditure of the individuals.

The retail inflation in India has shown a consistent decline in recent years, easing from 5.4% in FY 2023-24 to 4.6% in FY 2024-25.4 This sustained moderation has significantly contributed to improving the countrys economic stability and growth. Consequently, it was instrumental in augmenting household expenditure, thereby, easing policies. Moreover, the enhanced public capital expenditure, constituting 3.4% of Indias GDP5, propelled growth in the infrastructure and real estate sector through government support. Consequently, this bolstered economic opportunities in this sector. Therefore, the economic performance of the sectors primarily sustained Indias growth.

Outlook

India has now become the fourth largest economy of the world, surpassing Japan, with a $4 Trillion economy6. The countrys per capita income has also doubled since 2014. Despite global headwinds, the way forward remains optimistic, due to sustained domestic and foreign investments, robust manufacturing growth and improvement in trade and financial services.

Moreover, the Indian economy is expected to maintain its growth trajectory. The Reserve Bank of India (RBI), projected a growth rate of 6.5%.7 The repo rate declined by RBI to 6%8 aiming to control inflation and enhanced credit flow.

India, therefore, requires protectionist measures amidst the growing geo- political uncertainties, such as the reciprocal tariff policy by the US government that poses risk to the countrys growth rate, negatively impacting the export volume countrywide, thereby, widening the Current Account Deficit (CAD). The governments recent conclusion of the Free Trade Agreement (FTA) with the UK, will enhance economic and strategic ties between the countries. Thus, the outlook of the Indian economy in 2025, is interconnected with the global trade dynamics and its impact, due to the robust domestic fundamentals.

Industry Overview Indias Retail Industry

With the expanding retail industry of India, the current market size stands at 182 Trillion in 2024 from 135 Trillion in 2014, exhibiting a CAGR of 8.9% over 10 years, that is anticipated to cross 1190 Trillion by 203410. India is the fastest growing economy, with a diverse consumer base, such as, the rising middle and upper class, the price sensitive buyers, Gen Z and a large proportion of 45+ years of age cohort and a rising female workforce. Consequently, retailers are required to balance between consumer preferences and affordability.

Despite augmenting digital payments and improving online presence, the majority of stores remain offline (58%+).

The retail sector of India is witnessing a shift towards organisation. Though unorganised retail remains at the forefront, escalating from US $872 billion in 2024 to US $1375 billion in 2030, with a CAGR of 8%11. A rapid expansion in the online space, is projected to triple itself from US $103 billion in 2024 to US $325 billion by 2030, with a CAGR of 21%. The accelerators behind this growth being enhanced e-commerce adoption, digital payments and evolving consumer preferences.

Opportunities

Expanding Consumption in Tier-II and Tier-III Cities

The Indian retail sector is witnessing robust growth, driven by increasing disposable incomes and urbanization, especially in Tier-II and Tier-III cities. V2 Retails core presence in these regions positions it to leverage the ongoing shift in consumption patterns, as aspirational consumers seek affordable, fashionable apparel and general merchandise.

Indias organized value retail segment remains significantly underpenetrated. The Company estimates a vast total addressable market, providing ample headroom for rapid store expansion. With plans to open at least 100 new stores annually, the Company can capture incremental market share as formal retail formats gain preference over unorganized players.

Experience-led Consumption

Investing in data analytics to infer customer preferences, purchasing patterns and regional trends, with tailored consumer needs for improved delivery. Moreover, leveraging advanced technology for better product design to offer personalisation and comfortability, fuels sales, augments customer satisfaction and enhances customer experience.

Rise of Functional Fashion

Catering to a growing consumer demand for versatility, high performance and impactful designs that offer both convenience and functionality. Anti-stain and quick- dry fabrics are therefore, gaining popularity among young consumers. Indias young population, rising middle class and increasing fashion consciousness support long-term demand for value retail. The Companys mission to democratize fashion aligns with these macro trends, enabling sustained growth in its target segments.

Threats

Intensifying Competition

The organized value retail segment is attracting increased attention from both established players and new entrants. Aggressive expansion by competitors could lead to pricing pressures, higher customer acquisition costs and margin compression.

Supply Chain Challenges

As the Company scales, complexities in supply chain management, vendor reliability, and inventory control could increase. Inefficiencies may lead to higher working capital requirements, stock obsolescence, or lost sales due to stock-outs.

Customer Experience

Maintaining consistent brand promise around value and variety is critical. Any lapses in product quality, customer service or store experience during rapid expansion could impact customer loyalty and brand equity.

Company Overview

V2 Retail Limited was established by Mr. Ram Chandra Agarwal in 2001. Being a prominent player in the Indian value retail sector, the Company provides a comprehensive portfolio of affordable apparel and non-apparel products. The Companys business model focuses on delivering quality and trend -forward merchandise at competitive prices.

At present, the Company operates an extensive retail network of 189 stores spanning 150 cities, primarily concentrated in Tier- II and Tier- III areas. This year V2 Retail opened 74 stores and closed 2 stores. The product portfolio, predominantly driven by in-house private label brands such as Godspeed, Herrlich, Glamora, Ebellia and Honey Brats, provides the Company substantial control over product design, quality and value proposition.

The Companys operational efficiency prioritises efficient Supply Chain Management (SCM), bulk procurement and localised sourcing. The offline store experiences, through a customer-centric approach, the Company aims to expand its store count and revenue generation to bolster emerging market penetration.

The Companys key focus areas are:

* Augmenting revenue generation through private label brands

* Efficient inventory management

* Offline store expansion

* Increasing Same Stores Sales Growth (SSSG)

Financial Highlights (Standalone)

Revenues: During FY 2024-25, the Company generated a revenue of 11884.5 crore, projecting a growth of 62% as compared to 11164.73 crore in the previous year.

EBITDA: EBITDA for FY 2024-25 stood at 1252.3 crore as compared to 1142 crore in FY 2023-24.

Profit after tax: The Company recorded a profit of 170.9 crore, compared to 127.29 crore in FY 2023-24.

Key Financial Highlights

Particulars	Standalone		Consolidated
	FY 2024-25	FY 2023-24	FY 2024-25	FY 2023-24
Revenue from operations	1,884.5	1,164.72	1,884.5	1,164.72
EBITDA	252.3	142.40	257.8	148.00
PBT	96.7	30.58	98.2	31.37
PAT	70.9	27.28	72.00	27.81
EPS (I)	20.50	7.89	20.83	8.04

Key Ratios (Standalone)

Particulars	FY 25	FY 24	Change(%)	Reason for Variance
Debt Equity Ratio	2.43	1.83	32.95	Due to increase total debts
Inventory Turnover	4.25	3.83	10.77	N.A
Net Profit Ratio	3.76	2.34	60.59	Due to increase in profit
Trade Payable Turnover Ratio	6.44	7.59	(15.21)	N.A
Return on Capital Employed	38.55	23.78	62.09	Due to increase in earning
Return on Equity	22.89	10.93	109.46	Due to increase in earning

Risk Management

The Companys Risk Management framework enables the achievement of strategic targets by systematically identifying, analysing, assessing, mitigating, monitoring and governing potential threats that could impact its business operations. The Company prioritises proactive identification and mitigation of business-related risks based on their severity, likelihood and impact. The robust risk management policies are regularly updated to align with the market conditions and ensure effective mitigation strategies. A structured procedure ensures that risk ownership, management and review are embedded across all levels of the Company.

Risk	Description	Mitigation Strategy
Economic and market risk	The changing economic landscape may pose significant challenges to the Companys business model by directly impacting its financials and competitive advantage in the market.	The Company operates with a multi-format click-and-mortar model which enables it to swiftly adapt and respond to evolving customer demands while managing its product portfolio and pricing policy. It identifies growth opportunities within the existing market conditions.
Geographic concentration risk	Concentration in a specific geography can decelerate the Companys business growth in case of an economic slowdown.	The Company is expanding its geographical footprint and currently operates 189 stores spread across 20 states and around 150 cities.
Customer preference risk	Customer preferences are evolving rapidly due to social media, rising income levels, etc. The Company is subject to experience a decline in market share if it fails to adapt to evolving customer preferences.	In order to keep itself updated, the Company conducts periodical market research. It has also developed efficient monitoring processes and effective packaging to enhance cost reduction. Customer-specific designs that align with the dynamic preferences of the younger generation are regularly introduced.
Inventory risk	Retail shrinkage involves the unaccounted loss of inventory as a result of various factors such as shoplifting, employee theft and inaccuracies in record-keeping along with undetected sales transactions.	The Company regularly monitors the factors that might result in shrinkage at stores and distribution centres. Store operations and supply chain teams are involved in monthly observations to control the shrinkage percentage within a limit. The Company proactively lowers this ratio through constant vigilance by reviewing inventory management processes and systems.
Employee retention	Human capital is crucial for the Companys success. Strategic policies for the attraction, retention and development of a skilled workforce is imperative to the Companys growth.	The Company ensures adequate employee benefits that align with the ongoing market trends. It has developed an Employee Stock Ownership Plan (ESOP) to ensure employee retention through a structured on-boarding, training and development system.
Technological risk	The Companys IT systems and networks are subject to deliberate security breaches by hackers or other malicious entities seeking to steal or alter data, disrupt business operations and cause reputational damage.	The Company ensures robust IT capabilities through external partnerships with leading specialists and has developed proficient internal teams in critical technology areas.
Liquidity and cash conversion	The Companys liquidity and cash conversion can be significantly impacted by seasonal sales volume fluctuations, inventory management, credit terms and working capital requirements.	The Company follows judicious financial policies and practices including the maintenance of adequate cash reserves, inventory optimisation, efficient receivables and payables management.

Human Resource

The Company acknowledges and values its human capital as an intangible asset for development and implements fair HR practices and employee-friendly processes. The Company promotes diversity and inclusivity among its workforce to ensure long-term business growth. V2 Retail offers adequate opportunities for the employees professional growth and career development. By providing necessary training to enhance and improve their skills and capabilities, the Company empowers its people, thereby significantly improving customer value proposition.

As on 31st March 2025, the Companys total employee strength is recorded to be 6485.

Internal Control Systems and their Adequacy

The Companys internal audit system is under constant review and improvement to guarantee the protection of its assets, adherence to all relevant regulations and timely resolution of any outstanding issues. The Audit Committee regularly examines reports from the internal auditors, carefully noting their findings and implementing corrective measures as needed. The Committee also maintains an ongoing dialogue with both statutory and internal auditors to ensure the effectiveness of our internal control systems.

Cautionary Statement

This Management Discussion & Analysis report makes forward- looking statements based on certain assumptions and expectations of future events over which V2 Retail exercises no control. V2 Retail cannot guarantee their accuracy nor can it warrant that the same will be realised. Actual results could differ materially from those expressed or implied. Macroeconomic factors such as demand, supply, global economic and geopolitical developments, government regulatory and tax framework, liquidity in the market etc. could impact the operations of V2 Retail.