Which metrics would you look at when valuing a retailer? Kesarvi Retail runs 60 apparel stores and wants to open 25 more next year. What do the metrics say about the plan?

Value a retailer on sales per square foot, same-store sales growth, store-level EBITDA margin and the payback on a new store's capex; Kesarvi's say each store returns its Rs 1.6 crore in about 2.9 years. That makes the plan a Rs 40 crore bet that new stores trade like old ones. Because rent and staff are fixed, a new store at 85% of today's sales per square foot takes 5.2 years to pay back, and at 70% almost never does, so same-store growth holding is the evidence that matters.

A chai stall owner deciding whether to open a second stall asks three things: how much the first one sells a day, whether that is still growing, and how many months of profit it takes to pay for the cart. A retailer is valued on the same questions at scale: sales per square foot for how hard the space works, same-store sales growth for whether existing stores are still gaining customers, store-level EBITDA margin for what each rupee of sales leaves, and new-store payback for whether opening more is worth it. Behind those sit inventory turns, rent as a share of sales, and how new stores ramp in their first year. Kesarvi's numbers give the first four.

Build one store. 2,500 square feet at Rs 14,000 is Rs 3.5 crore of sales a year, and 16% of that is Rs 56 lakh of store EBITDA. Against Rs 1.6 crore of capex that is a payback of 2.9 years, a 35% annual return on the money spent to open it. Across 60 stores that is Rs 210 crore of store sales and Rs 33.6 crore of store EBITDA; with online at 20% of revenue, total revenue is about Rs 262.5 crore. Store EBITDA is before head office costs, so the company's own margin is lower.

Because most of a store's costs do not fall with its sales. With 48% of sales left after the cost of goods, a Rs 3.5 crore store keeps Rs 1.68 crore to cover rent, staff and power of about Rs 1.12 crore, and the Rs 56 lakh left is the EBITDA. Take 15% off sales and the cost of goods falls with them, but the Rs 1.12 crore does not, so EBITDA falls to Rs 31 lakh, a 10.4% margin, and payback stretches to 5.2 years. At 70% of today's sales per square foot, EBITDA is about Rs 5.6 lakh and payback is 29 years. A store breaks even at about Rs 9,333 a square foot, 67% of today's level.

The plan adds 42% to the store count for Rs 40 crore, more than a year of today's Rs 33.6 crore store EBITDA. If the new stores trade like the old ones they add Rs 14 crore of EBITDA a year and the money returns in under three years. The 8% same-store growth is what makes that believable: it shows the existing format is still pulling more customers each year, not just more stores pulling the same customers. If same-store growth slows while openings speed up, the chain is buying growth with floor space, and new stores in less proven cities are the ones most likely to land at 85% rather than 100%.

What to ask before backing the plan: sales per square foot by store age, to see how new stores ramp; same-store growth split into footfall and ticket size; how many of the 25 are in cities where Kesarvi already trades; and whether online sales cannibalise stores or bring customers into them. The limitation of the arithmetic is that it treats every store as average; the judgement is that the plan is sound at today's store economics and should be staged, with the second half of the openings tied to the first half reaching the existing stores' sales per square foot.