Starting a venture, making losses and selling the business. This is not an uncommon story. But, after all this, re-starting a similar business is surely unusual.

But not for Ramchandra Agarwal. After learning from what he calls his “big mistakes at Vishal Retail”, Agarwal is back with V2 Retail. Going by the story so far, he seems to be on a better footing now than before.

“Some people run fast, fall down, but then they get back on their feet. I am one of them,” according to 49-year-old Agarwal, who says he has lived the ‘rags to riches’ story.

Back in the early 1980s, when Agarwal was still an assistant manager in a rolling-shutter company, he noticed the rising demand for readymade garments. “I started with a store for readymade clothes at Kolkata’s Lal Bazaar in 1986. But I knew the 50-sq-ft store could not accommodate all my dreams, which were much bigger.” He moved to Delhi and set up Vishal Retail in 2001.

For quick expansion, Agarwal admits to taking some rash decisions like “opening too many stores and trusting too many people”. An initial public offering in 2007 brought in Rs 110 crore, but the very next year, downturn hit and Vishal Retail, the country’s first publicly traded retail firm, went bust. With a debt of Rs 750 crore, falling sales and rising costs, Agarwal sold the business to Airplaza Retail Holdings, a Shriram Group company, and private equity firm TPG Wholesale for Rs 70 crore in March 2011.

Retail for Masses

He may have been shattered but not his belief in the India retail story. With funding from family and friends, Agarwal was back within a few months with V2. “India is just about opening up to retail. There is no difference in aspirations among consumers in metros and smaller towns. We are focusing on the mass market now.”

He opens small outlets at places that have least retail exposure but high demand. “We are in the value retail space where there is no slump.”

Currently, V2 has 15 stores in Bihar, Delhi and Odisha. “Organised retail is under-penetrated in these areas. Also, real-estate is cheaper compared with many big cities,” Agarwal says. V2 Retail stores occupy 10,000-15000 sq ft, compared with Vishal’s 40,000-sq-ft stores.

Cautious steps

So, what is it that V2 is doing differently from Vishal and others? “A key strategy this time around is to go slow and open smaller shops with only apparels. Food and grocery are totally out as margins are very thin,” Agarwal says.

After burning his fingers with debt, he is now cautious. “Cash is king. We work with cash-in-hand rather than take short-term debts. And we monitor cash flows closely.”

V2 also has a stock turnover ratio of 45 days in contrast to 60 previously. This means more efficient turning of inventory into sales.

Agarwal is constantly working on the merchandise mix with a goal “to generate maximum revenue on per-sq-ft sales.” V2 clocked revenues of Rs 800 per sq ft last fiscal and is aiming at Rs 1,500 per sq ft, largely by buying directly from manufacturers and eliminating middlemen. V2 closed the last fiscal with Rs 225-crore sales.

V2 is selling products at least 45-60 per cent cheaper than its nearest competitor. “We pay our vendors in cash in a week. So, they deliver to us in the shortest possible time,” he says.

Business prospects look better for Agarwal this time. He is now exploring funding options for expansion. “Our credibility was hit during the Vishal crisis. But, now, bankers are slowly opening up to funding. We will need to work at improving their confidence,” Agarwal adds.

Jagdeep Kapoor, CMD, Samsika Marketing Consultants, a V2 Retail watcher, notes: “There are two kinds of companies in retail — one who learns and implements, one who never learns and perishes. There are many brands in modern retail that have never learnt, and perished in the process. V2 promoters have learnt the hard way. They have not merely transplanted a western concept into India, but understood what clicks in the Indian context; in this case, it’s value retailing.”

bindu.menon@thehindu.co.in

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