Value fashion retailer Citykart has raised Rs 538 crore in a funding round comprising both primary and secondary transactions, with participation from TPG NewQuest and A91 Partners.
The latest round is expected to value the company at around Rs 1,400 crore, people familiar with the development said.
Of the total capital raised, Rs 120 crore is fresh capital that will be used to expand Citykart’s footprint beyond its core markets of tier-II and tier-III cities in Uttar Pradesh and Bihar, its founder and managing director Sudhanshu Agarwal told ET.
As part of the Rs 418-crore secondary share sale, early backer Investcorp has made a full exit while private equity firm India SME Investments has pared its holdings by half, people cited above said.
Citykart, which currently operates 137 stores, plans to open 40–50 new outlets annually across states like Rajasthan, Assam, Odisha, and Jharkhand. It competes with listed companies such as VMart, Vishal Mega Mart and Style Baazar.
The Gurgaon-based company’s revenues have grown around 70% over the past two fiscals to over Rs 900 crore in FY25, and is expected to cross Rs 1,300 crore in the ongoing fiscal, Agarwal said, adding that it has been profitable for at least the last five years.
Returns for early investors
Bahrain’s Investcorp — one of the largest alternative asset managers from the Middle East — has clocked a fourfold return on its 2019 investment in Citykart.
Originally, IDFC Alternatives and India SME Investments had together invested Rs 100 crore in Citykart. Investcorp acquired IDFC Alternatives’ private equity and real estate investment funds in 2019.
Post the latest funding round, secondaries-focused PE fund TPG NewQuest has become the largest institutional investor in Citykart, followed by Mumbai-based investment firm A91 Partners and India SME.
Agarwal — a former executive at value retailer Vishal Mega Mart — and his family continue to hold a controlling 55–56% stake.
Citykart’s valuation multiple of about 1.5x its FY25 revenue is significantly lower than those of its listed rivals. VMart is trading at 2x FY25 revenue, while Vishal Mega Mart, which also sells groceries and general merchandise, is valued at 5.4x its FY25 topline. During the year, the apparel segment was 44% of Vishal Mega Mart’s revenue.
Agarwal acknowledged that the firm would have been able to unlock better value as a public company, but added that going public was not an immediate priority.
“IPO is on the cards but, for us, it’s not a milestone that we want to achieve immediately… We want to double down on our revenue growth and profitability before thinking about an IPO,” he said.
According to Agarwal, the incoming investors have two ways to make money — “by growing the business the way we’ve been doing in the past, or by getting multiples on their investment once we go public.”
Betting on Bharat
Citykart is trying new formats in rural parts of Delhi and Gurgaon, where the customer remains the same as its current geographies. The retailer wants to see if there’s an opportunity in bigger cities, Agarwal said.
He said the growth being witnessed by companies in this space was on account of market share shifting from unorganised to organised players in the tier-II and tier-III geographies. “With income levels increasing, we’re excited that spending on apparel will become a big business in tier-II and tier-III cities because with a 10% increase in income levels, the disposable income rises by 50%,” he said.
Agarwal said omnichannel retail will emerge as the preferred mode for apparel retail in smaller towns. “Online is still far away from becoming competition,” he said. “Our average order value is Rs 300 — and at that price, ecommerce isn’t viable in smaller towns. You need higher order values to make unit economics work.”
Citykart’s store count still lags peers Vmart, which has 497 outlets, and Vishal Mega Mart, which runs 696 stores.
SoftBank-backed ecommerce platform Meesho is another retailer betting big on smaller towns — more than 85% of its users come from tier-II towns and beyond. According to an April report by CLSA, Meesho’s market share in terms of the number of orders for calendar 2024 stood at 37% among the various ecommerce platforms.
