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Featured IPOs – DMart-Avenue Supermarts Limited

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D-Mart is an emerging national supermarket chain, with a focus on value retailing. In fiscal 2016 D-Mart was one of the largest and the most profitable F&G retailers in India. D-Mart offers a wide range of products with a focus in the Foods, Non Foods (FMCG) and General Merchandise & Apparel product categories. D-Mart  opened  its first  store  in  Mumbai,  Maharashtra  in  2002.  As  of  September  15,  2016,  we  had  112  stores  with  Retail Business Area of 3.40 million sq.ft, located across 41 cities in Maharashtra (58), Gujarat (26), Telangana (13), Karnataka (7), Andhra Pradesh (3), Madhya Pradesh (3), Chhattisgarh (1) and NCR (1). Company plan to deepen our store network in southern and western India and gradually expand our network in other parts of India pursuant to our cluster-focused expansion strategy. 

For  Fiscal  2016,  Maharastra  contributed  a  majority  of  their  Revenue  from  Sales  (62.57%)  followed  by  Gujarat  (18.83%), Telangana (10.15%). Company direcctly operates  and  manages  all  their stores.  We  operate  predominantly  on  an  ownership  model  (including  long-term  lease arrangements, where lease period is more than 30 years and the building is owned by us) rather than on a rental model. 

D-Mart opens  new  stores  using  a  cluster  approach on  the  basis  of  adjacencies  and  focusing  on  an  efficient  supply  chain,  targeting densely-populated residential areas with a majority of lower-middle, middle and aspiring upper-middle class consumers. Also they have  21  distribution  centres  and  six  packing  centres  in  Maharashtra,  Gujarat, Telangana and Karnataka.

Below are the different categories of products they have:

Foods: This  category  includes  staples,  groceries,  fruits  &  vegetables,  snacks  &  processed  foods,  dairy  &  frozen
products,  beverages  and  confectionery.  In  Fiscals  2014,  2015  and  2016,  this  category  constituted  53.28%,  52.84% and 53.06% , respectively of our Revenue from Sales.

Non-Foods  (FMCG):  This  category  includes  home  care  products,  personal  care  and  toileteries  and  other  over  the
counter  products.  In  Fiscals  2014,  2015  and  2016,  this  category  constituted  21.49%,  21.22%  and  20.58%,
respectively of our Revenue from Sales.

General Merchandise & Apparel: This category includes bed & bath products, home appliances, furniture, crockery, utensils,plastic  goods,  garments  and  footwear.  In  Fiscals  2014,  2015  and  2016,  this  category  constituted  25.23%, 25.94% and 26.36%, respectively of our Revenue from Sales.

Issue Detail of Avenue Supermarts Limited

Issue Opens: 8 Mar 2017
Issue Closes: 10 Mar 2017
Issue Size: 6,23,93,631 Equity Shares aggregrating to approx Rs. 2000 Crores
Face Value: Rs 10 Per Equity Share
Issue Price: Rs 290 – Rs 299 Per Equity Share
Market Lot: Yet to be decided
Minimum Order Quantity: Yet to be decided
Minimun Investment Amount: Yet to be decided
Listing At: BSE, NSE

Objective of Issue

The net proceeds of the IPO are proposed to be used as set forth below:
1. Repayment or prepayment of a portion of loans and redemption or earlier redemption of NCDs availed by the Company;
2. Construction and purchase of fit outs for new stores;
3. General corporate purposes.

Key Strengths of D-Mart

1. Ability to offer our customers value-retailing and daily low prices and consequently greater daily savings. This has been possible in part due to strong supplier and vendor relationships and our pricing strategies.

2. Business model is based on the concept of offering value retailing to customers using the EDLC/EDLP strategy. The EDLC/EDLP strategy is based on offering low prices on an everyday basis by achieving low procurement and operations cost rather than as special promotion limited to certain products or to a particular day, week or any other specific period in the year.

Consistent Revenue Growth
3. Business has grown rapidly in recent years, primarily through expansion of store network from one store in 2002 to 112 stores as of September 15, 2016 across eight states in India, concentrated in western and southern India.

4. Deep knowledge and understanding of optimal product assortment and strong supplier network enabling procurement at predicable and competitive pricing, leading to an overall efficient cycle.

5. High operating efficiency and lean cost structures through stringent inventory management using IT systems.

Excellent Growth Graph

Major Risk Factor

Majority of D-Mart’s sales are from stores in Maharashtra and Gujarat and any adverse developments affecting  the  operations  in these  two  states  could  have  an  adverse  impact  on  their  revenue  and  results  of operations.

Our Verdit

Betting on its promoter, Radhakishan Damani and the team behind him!!!. Go for it for a quick gain of 20-25%!!!.

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