Healthy demand and growth in underpenetrated Tier II and III cities is predicted to assist organised brick-and-mortar meals and grocery (F&G) retailers log a strong revenue growth of 14-15% in fiscal 2025 regardless of fierce competitors from fast commerce channel, credit standing company Crisil stated in a report.
“This translates to three years of strong growth on the trot — after 30% last fiscal and an expected 15% in the current one,” it added.
However, modest demand from the discretionary section — comprising basic merchandise (crockery, dwelling home equipment and utensils) and attire — owing to inflationary pressures would hold the sector’s working margin rangebound at 6-6.5% within the present and next fiscals (6.9% final fiscal), it additional stated.
For the document, meals and non-food grocery contributes 75-77% of revenue for F&G retailers, whereas the steadiness is contributed by discretionary merchandise offered at F&G retailers. Besides, the discretionary section presents comparatively increased margins to F&G retailers.
Poonam Upadhyay, Director, Crisil Ratings stated, “Healthy demand outlook and low organised penetration will ensure mid-teens revenue growth for F&G retailers this fiscal and the next. We expect area addition of Crisil Ratings-rated players to increase 20% cumulatively over fiscals 2024 and 2025 on a high base following a substantial increase of 40% in fiscals 2022 and 2023.”
“Incumbent retailers are also expanding into omnichannel platform – includes brick-and-mortar stores and online formats – to compete with quick commerce players. But then, they will ensure calibrated investments to restrict cash burn in the online format,” she stated.
Shounak Chakravarty, Associate Director, Crisil Ratings stated, “Strong cash flows and well-managed working capital will obviate any need for material debt raising, leading to continued healthy balance sheets for Crisil Ratings-rated F&G players. Capex spend is estimated at ₹5,500 crore over fiscals 2024 and 2025 compared with ₹6,000 crore over fiscals 2022 and 2023 towards online expansion, addition and refurbishment of stores.”
