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Fashion for Bharat, Built for Scale

* V2 Retail is a pure-play, offline-first value fashion retailer focused on India’s tier-2/3 markets, catering to aspirational yet price-sensitive households. V2’s differentiation stems from

1) a focused value-fashion retailer catering to the entire family, with selective lifestyle offerings across 400 stores in ~300+ cities

2) a product-ownership model anchored by ~90% private-label mix, with in-house design contributing ~35-40%

3) industry-leading store productivity at ~INR923 SPSF as of FY26

4) a throughput-led cost structure delivering superior margins despite structurally lower gross margins than peers.

* We believe V2’s merchandise discipline, robust store economics and deep cluster-led penetration across underpenetrated markets provide a durable competitive moat. We expect V2 to deliver revenue/pre-Ind AS EBITDA/PAT CAGR of 40%/38%/35% over FY26-29E, driven by ~450 store additions, midsingle-digit SSSG and fixed-cost dilution on a scaling network. We initiate coverage with a BUY rating and TP of INR275, premised on a DCF-implied ~15x Sep’28E pre-Ind AS EBITDA, implying ~25x Sep’28E pre-Ind AS EPS and ~27% upside

Structural opportunity in value retail provides a long runway for growth

* India's organized value fashion market remains structurally underpenetrated, with four listed players collectively operating ~2,100 stores in only ~760 cities.

* With a growing neo-middle-class population (INR10-80k/month income) and increasing aspirations, consumers are migrating from unorganized apparel toward organized affordable formats, a shift most pronounced in tier-2/3 cities where branded alternatives remain scarce.

* Competitive overlap remains limited, with ~54% of the 760 cities hosting only one retailer. Importantly, store density rises sharply with competition from 1.1 stores/city in single-player markets to 10.2 where all four retailers coexist indicating strong demand absorption and headroom for network expansion.

* V2 remains underpenetrated even within its existing footprint, with ~400 stores across ~300 cities, translating to ~1.3 stores/city vs. ~2.75 for the category.

* Only ~9% of stores are in new markets, yet V2 delivers ~INR923 SPSF, well ahead of peers, demonstrating strong execution despite operating largely in competitive clusters.

* With ~460 cities still offering whitespace, V2 has a substantial runway to reach ~770 stores by FY29 through both new-market entry and deeper penetration of existing clusters.

Disciplined merchandise model driving higher sell-through

* V2 has structurally repositioned from a trading-led model to product ownership, with private labels increasing from 2% of sales in FY16 to ~90% currently. Inhouse design now contributes ~35–40% of sales and delivers 20–25% higher throughput.

* This model combines fashion intensity with disciplined inventory management. Small-batch testing and data-led assortment planning help validate demand before scaling, while a 15-day liquidation cycle limits residual stock.

* As a result, aged inventory has declined from ~18-24% historically to 90% full-price sell-through and reducing the risk typically associated with a more fashion-led assortment.

* The outcome is a faster and more efficient merchandise cycle. SPSF has risen to ~INR923 per month in FY26, the highest in the value retail industry, achieved without reliance on markdowns or elevated inventory provisioning.

Valuation and view

* We expect V2 to deliver a CAGR of ~40%/38% in revenue/pre-Ind AS EBITDA over FY26-29E, driven by:

1) ~450 store additions

2) mid-single-digit SSSG

3) fixed-cost dilution on a rapidly scaling network.

* We initiate coverage on V2 with a BUY rating and a TP of INR275, premised on DCF-implied ~15x Sep’28E pre-Ind AS EBITDA, ~25x Sep’28E pre-Ind AS EPS and ~27% upside from the current levels.

* SSSG remains the primary earnings driver, with every 1% change in SSSG translating into a 7-11% change in EBITDA and PAT, reflecting the strong operating leverage embedded in the model.

* Key risks: Execution and site-selection risk from rapid geographic expansion, intensifying competition from national value-fashion players, and higher assortment risk as in-house design scales beyond ~35–40%, potentially impacting sell-through, margins and store returns.

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