About D-Mart IPO Issue – D-Mart IPO will open on 8 March and close on 10 March. The upcoming IPO is one of the most anticipated offers this year, primarily because the Company is promoted by Radhakishan Damani. D-Mart IPO will raise Rs. 1,870 Cr. by issuing new shares, priced in the range of Rs. 295 – 299 per share.

About Avenue Supermarts Limited (D-Mart)

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Business – Avenue Supermarts Limited (“D-Mart” or the “Company”) is one of the largest and the most profitable Food & Grocery (F&G) retailer in India. The Company classifies its products under the following categories:

  • Foods: This category includes staples, groceries, fruits & vegetables, snacks & processed foods, dairy & frozen products, beverages and confectionery. In FY 2016, this category contributed 53.06%, to total revenue.
  • Non-Foods (FMCG): This category includes home care products, personal care and toiletries and other over the counter products. In FY 2016, this category contributed 20.58% to total revenue.
  • General Merchandise & Apparel: This category includes bed & bath products, home appliances, furniture, crockery, utensils, plastic goods, garments and footwear. In FY 2016, this category contributed 26.36% to total revenue.

Market Presence – As of September 15, 2016, the Company operates with 112 stores, located across 41 cities in Maharashtra (58), Gujarat (26), Telangana (13), Karnataka (7), Andhra Pradesh (3), Madhya Pradesh (3), Chhattisgarh (1) and NCR (1). In June 2016, D’Mart opened a new store in Ghaziabad, NCR.

Distribution Network – the Company had a network of 21 distribution centers and 6 packing centers in Maharashtra, Gujarat, Telangana and Karnataka.

Strong Track Record of Growth and Profitability – D-Mart’s total revenue grew at a CAGR of 35.28% from Rs. 4,702.33 Cr. in FY 2014 to Rs. 8,606.11 Cr. in FY 2016. The Company’s net profit after tax grew at a CAGR of 41.08% from Rs. 161.37 Cr. in FY 2014 to Rs. 321.21 Cr. in FY 2016.

KEY FINANCIAL FIGURES

(In Rs. Cr.) FY2014 FY2015 FY2016
Total Income from Operations 4,686.49 6,439.43 8,588.12
Expenses 4,344.71 5,980.44 7,924.64
EBITDA 341.78 458.99 663.48
Depreciation 57.01 81.54 98.43
Finance Costs 55.676 72.361 90.824
Other income 15.83 18.25 17.98
Exceptional items 0 0
PBT 244.92 323.35 492.22
Tax 83.49 110.92 171.62
Extraordinary Item (0.05) (0.69) 0.72
PAT 161.37 211.73 321.33
Minority Interest 0.04 0.04
Share in Net Loss of Associates 0.072
Net Profit/(Loss) 161.37 211.69 321.21

 PROFITABILITY ANALYSIS

 (%) FY2014 FY2015 FY2016
Operating Profit Margin Ratio 7.29 7.13 7.73
Net Profit Margin Ratio 3.44 3.29 3.74

KEY BALANCE SHEET FIGURES

(In Rs. Cr.) FY2014 FY2015 FY2016
Share Capital 546.75 561.54 561.54
Reserves & Surplus 408.83 637.68 958.88
Net worth (shareholders funds) 955.58 1,199.22 1,520.43
Minority Interest 0.01 0.054 0.1
Long Term Borrowings 456.84 713.78 908.47
Current liabilities 356.188 395.037 614.988
Other long term liabilities and 

provisions

12.519 16.213 16.345
Deferred tax liabilities 26.511 30.513 39.865
Total Liabilities 1,807.65 2,354.81 3,100.19
(In Rs. Cr.) FY2014 FY2015 FY2016
Fixed Assets 1,260.47 1,626.20 2,175.20
Non-current Investments 15.24 14.56 27.47
Current assets 489.34 633.68 789.85
Long term advances and other noncurrent assets 42.58 80.36 107.66
Total assets 1,807.65 2,354.81 3,100.19

EFFICIENCY ANALYSIS    

  FY2014 FY2015 FY2016
ROCE 24.20 23.99 27.32
ROE / RONW 16.89 17.66 21.13

Comparison with Listed Industry Peers

Company D-Mart Future Retail Trent
Price (Rs.) [•] 258.60 245.20
P/E                                [•] 34.99 82.96
Revenue (Rs. Cr.) 8,588.12 6,860.47 2,463.51
Net Profit (Rs. Cr.) 321.33 14.55 62.94
EPS (Rs.) 5.72 0.66 19.00
ROE (%) 27.32 0.81 4.37

D-Mart– IPO Use of Proceeds

D-Mart has filed a Draft Red Herring Prospectus (DRHP) with SEBI for an initial public offering (IPO) to raise Rs. 1,870 Cr.

Use of Proceeds as per the DRHP

Expansion Plan – the Company intends to further increase its position in the retail supermarket business in Maharashtra and Gujarat by increasing its market presence and expanding its store network in Andhra Pradesh, Telangana, Madhya Pradesh, Karnataka, Chhattisgarh, Tamil Nadu and northern India.

Growth Prospects

Retail Basket and Consumer Spend Trends in India

Currently, the food and groceries (F&G) segment constitutes a majority share of the retail market (67%). According to Technopak, F&G will continue to be the largest contributor in the retail market even four years hence with a projected share of 66% in 2020.

F&G segment has grown at a CAGR of 33% from U.S. $4 billion in FY 2012 to reach U.S. $13 billion in FY 2016 and is expected to grow further at a CAGR of 26% to reach at U.S. $31 billion in FY 2020.

High level of competition – The Indian retail market has become increasingly competitive in recent years and this may increase in the future. In the Foods category including groceries and staples, the Company face competition from other organized retail supermarket chains including Big Bazaar, Reliance Retail, Spencers, HyperCity, and Star Bazaar on one hand and unorganized retail kirana shops on the other.

In relation to non-food products and other products, D-Mart faces competition from organized retail chains such as Westside and Max.

Key retailers operating in the F&G segment currently hold around 37% market share of the U.S. $14 billion organized F&G market. Future group holds the largest market share with 13% owning to the group having multiple brands followed by D‘Mart at 10% and Reliance at 8%. Together, these three retailers contribute to 31% of the overall F&G segment.