HDFC Securities Initiates Coverage on Vishal Mega Mart with 'Buy' Recommendation, Sees Up to 14% Potential Upside

HDFC Securities Initiates Coverage on Vishal Mega Mart with 'Buy' Rating

Shares of Vishal Mega Mart, a leading Indian value retail player, settled marginally higher at Rs 114.59 per share on the National Stock Exchange on Monday. In a significant development, HDFC Securities has initiated coverage on the company with a 'Buy' rating, citing an upside potential of about 14 percent.

The brokerage has set a target price of Rs 130 per share for Vishal Mega Mart. In a detailed note, HDFC Securities noted that the Indian value retail segment remains polarised, with apparel players facing inconsistent footfalls and grocery retailers dealing with structural margin pressures.

However, the brokerage believes that Vishal Mega Mart combines elements of both segments while limiting their weaknesses. Its diversified mix — apparel contributing about 44 percent, FMCG 28 percent and general merchandise 28 percent in FY25 — helps drive footfalls through high-frequency FMCG sales, while enabling cross-selling into higher-margin categories.

The company's value pricing strategy, supported by a private label ecosystem contributing around 75 percent of revenue in the first nine months of FY26, is focused on value-conscious consumers in tier-II and smaller cities, which account for nearly 74 percent of its business. This strategy, coupled with its strong presence in tier-II and smaller cities, presents a significant opportunity for growth.

| Segment | Contribution to Revenue in FY25 | | --- | --- | | Apparel | 44% | | FMCG | 28% | | General Merchandise | 28% |

HDFC Securities projects revenue and EBITDA to grow at a compound annual rate of about 18 percent and 21 percent, respectively, over FY26–28. Profit after tax is seen growing at around 26 percent CAGR, with return on invested capital rising to about 18 percent by FY28.

The brokerage described Vishal Mega Mart as the lowest-cost retailer among its peers and highlighted its significant store expansion opportunity. However, it noted that with promoters holding around 40 percent stake, there remains a risk of supply overhang from potential private equity stake sales in the medium term.