End of Season Sale

V-Mart promoters rake it in as stock gains over 42% during the fiscal

India’s most profitable department store chain – V-Mart Retail — with a strong presence in Tier II and Tier III cities has continued to grow at a blitzkrieg speed in FY19. From expanding its retail stores to taking its small town bet online, the company has adopted several measures to increase sales. In the nine months of FY19, sales grew by 17.75% (yoy) to ₹10.89 billion. As the company continues to clock decent numbers, investors are flocking toward the stock. Over the past one year, the stock has gained 42.24% and currently trades at ₹2,695.

And as the stock continues its good run, the promoters have decided to cash in on the momentum. Promoters Hemant Agarwal and his wife Smiti sold shares worth 390 million on March 19 and 20. After the sale, Hemant’s stake declined to 0.77% from 1.13% and his wife’s stake fell to 2% from 2.47%. Before the recent stake sale, the promoters had sold shares worth ₹100 million through the year. In the previous fiscal (FY18), the promoters had offloaded shares worth ₹14.26 billion. The overall promoter holding has come off from 55.45% in December 2016 to 53.45% in December 2018.

Analysts believe that V-Mart retail is ready for the long haul. “We believe the company is doing the right things to grow consistently at 20% on an increasing base, profitably. These include — strengthening senior and middle management; continuing to remain focused on apparel retailing with a moderately stepped-up expansion without going overboard; investment in technology and processes to cater to a larger business in the future; working on its online and omni-channel initiatives,” says a Nirmal Bang’s Institutional Equities report. 

In line with the bullish view, mutual funds have warmed up to the small town retailer. Mutual funds hold 4.65% stake, as of December 2018, compared with 2.40% in December 2017.  After picking up 1.9% stake in September last year, DSP Mutual Fund has increased its holding to 2.71% in December 2018. Similarly, Invesco Mutual Fund has also increased its stake from 0.38% in Q3FY18 to 0.44% in Q3FY19.

However, foreign institutional investors remain cautious, reducing their stake marginally from 30.75% to 30.02% over the past four quarters. Two top foreign investors in the stock FIL Investments (Mauritius) and Wasatch Micro Cap Fund have reduced their stake from 2.95% and 1.76% to 2.28% and 1.67%, respectively.


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