Motilal Oswal MF buys 2% in smallcap stock that is up 1,515% in 16 months
Source: Business Standard
Illustration by Binay Sinha
Till 10:31 AM, a combined 150,000 equity shares had changed hands on the counter, and there are pending buy orders for nearly 30,000 more shares on the NSE and BSE.
In two months, the stock price of V2 Retail has rallied 70 per cent, while it has zoomed over 16 times, or 1,515 per cent, from the level of Rs 79.57 on the BSE, in the past 16 months.
The mutual fund bought the shares at a price of Rs 1,160 per share via block deals on the NSE, exchange data showed.
The foreign portfolio investor (FPI) held 6.36 per cent or 2.2 million shares in V2 Retail at the end of June 2024 quarter, the company’s shareholding pattern data showed.
Currently, V2 Retail is trading under ‘T’ group on the BSE and ‘BE’ segment on the NSE. The Trade-for-Trade (T) group is a surveillance measure that requires securities to be settled on a trade-to-trade basis.
V2 Retail provides a comprehensive portfolio of product offerings addressing diverse pockets. The company offers smart, trendy and fashionable apparels across categories at affordable prices under one roof. It operates 117 stores all over India (primarily in Tier II and Tier III towns and cities) covering a total retail area of approximately 1.3 million sq. ft.
The company plans to improve its store profitability and would be looking at rationalising certain stores before accelerating growth through faster store addition. To increase its bill size, store productivity and store gross margins, V2 Retail plans to increase the share of its private labels across its stores.
In its apparel section, the company focuses on ethnic, fusion, and western wear for women; formal, sports and casual wear for men, and a variety of kids’ wear in different colours and designs.
India’s retail sector is poised for remarkable growth, projected to grow at a compound annual growth rate (CAGR) exceeding 13 per cent by the year 2027. For the year 2024, the sector is poised for growth ranging between 10-13 per cent. The Indian retail industry is a dynamic and rapidly evolving sector with immense potential for growth, V2 Retail said in its FY24 annual report.
Apart from that, entry of international players across various retail segments, supply side innovations, improved manufacturing capabilities, efficient warehousing and distribution, leveraging technology and easy and on demand availability of credit are also contributing factors.
Meanwhile, V2 Retail is targeting a 30–40 per cent sales CAGR over the next three-to-four years, which can result in margin expansion and improved store metrics. It plans to maintain RoE at 20 per cent. Drivers such as new store expansion and higher revenue per sq. ft. can lead to a healthy growth in revenue and earnings before interest, tax, depreciation and amortisation (Ebitda).
As peers such as V-Mart Retail and Zudio have over 500 stores each, the brokerage firm believes V2 Retail can achieve healthy growth rates over a longer period.
With aggressive and profitable growth, Nuvama upgraded its target multiple to 15x FY26 EV/EBITDA (from 12x earlier) and reaffirmed its ‘Buy’ rating with a revised target price of Rs 1,352 (from Rs 841 earlier), which implies a FY26 P/E ratio of 40x, the brokerage firm said in Q1FY25 result update.
First Published: Sep 24 2024 | 11:42 AM IST
