Vishal Mega Mart Could See 14% Jump; Why Analyst Predicts Strong Upside Ahead

Vishal Mega Mart has received a 'Buy' rating from HDFC Securities, which sees an upside potential of around 14% for the stock, driven by its cost leadership, diversified product mix and strong presence in value retail.

The brokerage has set a target price of ₹130 per share, compared to the current market price of ₹114.54, where the stock settled marginally higher on the National Stock Exchange (NSE) on Monday.

In its initiation note, HDFC Securities said the Indian value retail segment remains polarised, with apparel retailers facing uneven footfalls and grocery players dealing with structural margin pressures. Vishal Mega Mart, however, blends both segments while mitigating their weaknesses through a diversified business model.

The company's revenue mix, apparel contributing about 44%, FMCG 28% and general merchandise 28% in FY25, supports high footfalls through frequent FMCG purchases while enabling cross-selling into higher-margin categories.

A key strength highlighted by the brokerage is the company's private label ecosystem, which contributed around 75% of revenue in the first nine months of FY26. This strategy, combined with value pricing, targets consumers in tier-II and smaller cities, which account for nearly 74% of its business.

Growth Outlook, Strong Operating Metrics

HDFC Securities expects Vishal Mega Mart's revenue and EBITDA to grow at a compound annual rate of around 18% and 21%, respectively, over FY26–28. Profit after tax is projected to grow at about 26% CAGR, with return on invested capital rising to nearly 18% by FY28.

The brokerage described the company as the lowest-cost retailer among peers, benefiting from efficient operations, strong supply chain management and disciplined capital deployment. It also highlighted significant store expansion opportunities, particularly in underpenetrated markets.

When compared with value retail peers, Vishal Mega Mart stands out for its operating leverage and cost advantages. While its gross margins are structurally lower due to a higher share of FMCG, this is offset by strong throughput, private label penetration and efficient cost management, enabling industry-leading EBIT margins and return ratios.

The company has also demonstrated steady growth, clocking a revenue CAGR of 24.2% over FY22–25, supported by expansion in retail area and improved revenue per square foot.

Recent Stake Sale, Overhang Risk Remains

In February, major institutional investors including the Government of Singapore and HDFC Mutual Fund acquired promoter stakes worth ₹1,485 crore and ₹1,100 crore, respectively, through bulk deals. The Monetary Authority of Singapore also picked up shares worth ₹858 crore.

Promoter entity Samayat Services LLP offloaded a 14% stake, representing 65.25 crore shares, in deals valued at ₹7,636 crore.

While the brokerage remains positive on the company's fundamentals, it flagged a potential risk of supply overhang in the medium term, given promoters still hold around 40% stake and further stake sales by private equity investors cannot be ruled out.

Overall, HDFC Securities believes Vishal Mega Mart is well-positioned to capitalise on India's value retail opportunity, supported by its cost leadership, strong private label strategy and expanding footprint in smaller cities.