Research report & IPO details of D-Mart’s IPO

  • D-MART’s INITIAL PUBLIC OFFER (IPO) DETAILS:
    • Equity Shares of Face Value INR 10 each.
    • Equity Shares aggregating up to 1,870 Crore INR
    • Offer Sale up to 43,22,820 Equity Shares by IDFC Private Equity Fund III
    • Book Running Lead Managers: Kotak Mahindra Capital Company Limited, Axis Capital Limited, Edelweiss Financial Services Limited, HDFC Bank Limited, ICICI Securities Limited ICICI Center,H.T. Parekh Ma, Inga Capital Private Limited, JM Financial Institutional Securities Limited, Motilal Oswal Investment Advisors Private Limited, SBI Capital Markets Limited .
    • Registrar: Link Intime India Private Limited.

 

  • D-Mart is a chain of hypermarket and supermarket in India that offers multitude of services to its customers.
  • Each of its store offers a wide variety of products that include home utility, personal care, apparel, groceries, footwear and much more available at a reasonable price that customers can afford.
  • Widely known to be a one-stop shopping destination to meet all the household needs of a family, D-Mart was started in 2000 in Mumbai by Mr. Radhakishan Damani and his family.
  • Owned and operated by its parent company – Avenue Supermarts Ltd (ASL); D-Mart today has a well-established presence in 117 locations across Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh and NCR. The company has its headquarters in Mumbai.
  • Since its initiation, D-Mart has not shut a single store and more recently, also became the first retailer to cross the billion-dollar market profitably.

BUSINESS SEGMENTS

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

BUSINESS STRATEGY

There is an unsaid rule in the market that – “one must not open any store within a 1km radius of D-Mart, simply because, no one can beat them on prices.”

  • To strengthen their market position by expanding their store network in existing clusters as well as new clusters.
  • Out of the all the stores it runs, D-Mart owns majority of the properties, which helps them to save a huge chunk of money on rent.
  • They also avoid opening stores inside malls unlike other hypermarkets to avoid high CAM (Common Area Maintenance) charges and highly inflated rents. And since rent is adds in a big way to the operations costs of a retailer, that burden goes away, and helps D-Mart to boost its profits further. This amounts for almost 6-10 % of its sales. What helps them even more is that, since most D-Mart stores are in the suburbs in the metros and in tier II & tier III cities, the operational costs remain low.
  • Another important factor that D-mart has focussed, is the pricing of the products. Every product in a store has a discount, which makes consumers keen on coming and buying from D-mart. In fact, the discounts start from a low of 2% (the minimum it claims to offer) going up to as high as 50%-60% for some items. Local kirana stores rarely give any discount on Max. Retail Price, which has given an advantage for D-mart to attract footfalls, which has led to strong top line for the company.
  • Enhance the sales volumes by continuing to prioritise customer satisfaction through optimal product assortment and offering value for money using EDLC/EDLP strategy.
  • Improve their operating efficiency and supply chain management by:

1. Continuing to refine their store operating systems based on the performance of their stores and feedback from their customers and local management teams.

2. Investing further in their IT and data management systems to improve productivity and time savings thereby increasing their operating efficiency.

3. Continuing to strengthen their relationships with their suppliers through cooperation and closer coordination.

4. Continuing to absorb best industry practices.

  • Preserve their corporate culture and values and continue to focus on training.

 

Industry Analysis:

 

 

Source: Wazir.in

 

 

Source: Wazir.in

Company Analysis:

 

 

 

 

 

 

 

 

 

 

Note:
1: Total Assets include Fixed Assets as well as Current Assets
2: Total Debts include only Loans from Banks (both, long term and short term)

 

 

  • Annualised Revenue from Sales calculated on the basis of 365 days in a year (on standalone basis) divided by Retail Business Area at the end of the Fiscal.
Parameter Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016
New stores opened in Fiscal 10 7 13 14 21
Cumulative number of stores 55 62 75 89 110
Retail Business Area at Fiscal end (in million sq. ft.) 1.55 1,76 2.14 2.66 3.33
Revenue from Sales per Retail Business Area sq. ft. (in ₹)** 15,324 20,116 23,419 26,388 28,136

COMPETITION:

SHAREHOLDING PATTERN:


 

PROMOTERS

  • Radhakishan S. Damani.
  • Gopikishan S. Damani.
  • Shrikantadevi R. Damani.
  • Kirandevi G. Damani.
  • Bright Star Investments Private Limited.
  • Royal Palm Private Beneficiary Trust.
  • Mountain Glory Private Beneficiary Trust.
  • Bottle Palm Private Beneficiary Trust.
  • Gulmohar Private Beneficiary Trust.
  • Karnikar Private Beneficiary Trust.

KEY MANAGERIAL PERSONNEL

  • RADHAKISHAN DAMANI- Founder

He is the founder of D-Mart. He is also a legendary stock market investor & very popular on the “Dalal Street”. Ace investor Rakesh Jhunjhunwala calls him his guru and best friend. He prefers to stay away from media.

  • IGNATIUS NAVIL NORONHA-Managing Director

. He has over 20 years of experience in the consumer goods industry. Prior to joining their Company, he has worked with Hindustan Unilever Limited for eight years

  • RAMAKANT BAHETI – Chief Financial Officer and Executive Director

He is a chartered accountant and a member of the ICAI. He has 19 years of experience in finance. Prior to joining their Company, he was the Manager Finance of Bright Star. He was also a director of Damani Share and Stock Brokers Private Limited, a stock broking company. He has been a Director since January 2, 2006.

  • ELVIN MACHADO – Executive Director

He has over 28 years of experience in the sales and marketing. Prior to joining their Company, he has worked with Hindustan Unilever Limited for approximately 18 years and at the time of leaving the organization, he was designated as the Branch Operations Manager – East (Rural) and he has also worked with Mayo Health Care Private Limited. He is responsible for real estate acquisitions made by their Company.

SUBSIDIARIES

In addition to their retail operations through their stores, their Company has the following subsidiaries:

  • Avenue Food Plaza Private Limited (AFPPL):

Corporate Information:

AFPPL was incorporated on June 8, 2004 under the Companies Act, 1956 at Mumbai, Maharashtra. AFPPL is involved in the business of, among others, operating food stalls in their stores. AFPPL recorded a profit after tax of INR 14.80 million in Fiscal 2016.

Capital Structure:

No of equity share of ₹ 10 each
Authorised equity share capital 10,000
Issued, subscribed and paid-up equity share capital 10,000

Shareholding Pattern:

The shareholding pattern of AFPPL is as follows:

Sr. No. Name of the shareholder No. of equity shares of ₹ 10 each Percentage of total equity holding (%)
1. Avenue Supermarts Limited 9,999 99.99
2. Avenue Supermarts Limited and Prakash Pachisia 1 Negligible
Total 10,000 100
  • Align Retail Trades Private Limited (ARTPL):

Corporate Information:

ARTPL was incorporated on September 22, 2006 under the Companies Act, 1956 at Mumbai, Maharashtra. ARTPL is involved in the business of, among others, inspecting and packing of their private label goods including staples and groceries. ARTPL recorded a profit after tax of INR 4.99 million in Fiscal 2016.

Capital Structure:

No of equity share of ₹ 10 each
Authorised equity share capital 2,000,000
Issued, subscribed and paid-up equity share capital 2,000,000

 

Shareholding Pattern:

The shareholding pattern of ARTPL is as follows:

Sr. No. Name of the shareholder No. of equity shares of ₹ 10 each Percentage of total equity holding (%)
1. Avenue Supermarts Limited 1,999,999 99.99
2. Avenue Supermarts Limited and Prakash Pachisia 1 Negligible
Total 2,000,000 100
  • Nahar Seth & Jogani Developers Private Limited (NSJDPL):

Corporate Information:

NSJDPL was incorporated on February 21, 2014 under the Companies Act, 1956 at Mumbai, Maharashtra. NSJDPL was originally constituted as a partnership firm, Nahar Seth & Jogani Developers (“NSJD”) in January 24, 1980 under the provisions of the Indian Partnership Act, 1932. Pursuant to a meeting of the partners of NSJD on October 4, 2013, for the purpose of smooth working, better and effective management and improvement and advancement of business, NSJD was converted into a private company in the name of NSJDPL. NSJDPL is involved in the business of, among others, development of land and construction. NSJDPL owns the real estate underlying their store in Versova, Mumbai. NSJDPL recorded a profit after tax of INR 4.52 million in Fiscal 2016.

Capital Structure:

No of equity share of ₹ 10 each
Authorised equity share capital 1,000,000
Issued, subscribed and paid-up equity share capital 1,000,000

Shareholding Pattern:

The shareholding pattern of NSJDPL is as follows:

Sr. No. Name of the shareholder No. of equity shares of ₹ 10 each Percentage of total equity holding (%)
1 Avenue Supermarts Limited 90,000 90
2 Gopikishan S. Damani 5,000 5
3 Radhakishan S. Damani 1,000 1
4 Shrikantadevi R. Damani 1,000 1
5 Kirandevi G. Damani 1,000 1
6 Madhu Chandak 1,000 1
7 Manjri Chandak 1,000 1
Total 1,00,000 100

 



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