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V-Mart Retail sees significant impact of change in accounting standards on lease

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The company's EBITDA, however, will go up by around 4.5 percent, while in an initial couple of years, it will see some stress on the profit

V-Mart Retail will have a significant impact of new accounting standard on the lease as all 226 stores that the retailer operates as on date are on a lease model, said CFO Anand Agarwal. Indian Accounting Standards (Ind AS) became effective in April.
Talking about the duration of lease properties, he said, “Our leases are typically between 9 and 15 years at a combined level of all the stores, so that will increase in the balance sheet size by around Rs 300 crore odd.”
The company's EBITDA, however, will go up by around 4.5 percent, while in the first couple of years, it will see some stress on the profit because there will be higher interest outgo or the interest calculation for the balance period of the leases, he said. "At a broad level, we are looking at around 1-1.5 percent dilution on the PAT side,” he added.
On the business front, Agarwal said, “The consumption that we have seen post elections have been erratic; we saw some disturbances around the election time and even April was not very positive. However, the festival period of Eid and in the entire month of May we saw a good amount of consumption coming back but it is too early to give a trend or to establish our precedence.”
“However, for the full year, we are still targeting between 7 and 8 percent of same-store sales growth (SSSG). So far this quarter looks to be in low single digit but let’s see who June eventually shapes up,” he further added.
Speaking about revenues and margins, he said, “On the revenue side, we have been growing at a CAGR of around 21 percent for the last 5 years and that is what we would want to maintain internally.
“Our profitability margins per Ind-AS 116 impact has been at around 8-9 percent and that is what we would want to maintain,” added Agarwal.

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