JainMatrix Investments has come up with its research note on the upcoming IPO of Avenue Supermarts which is scheduled to open for subscription tomorrow. The Bengaluru-based research firm believes the company, promoted by Radhakishan Damani, is on the successful path with a respected promoter, clear vision and growth strategies. JainMatrix Investments believes the asking price is fair and it has recommended investors to BUY in its DMart IPO rating report.
The full report is quite an interesting document (it is not common to see reports talk about actual experiences such as store visits). Here are some of the points from the report and the full report is available below the text:
D-Mart is an emerging national supermarket chain, with a focus on value retailing. Total income for FY16 was Rs 8,606 cr. and net profit Rs 319 cr. Its revenues, EBITDA and PAT have grown at 40.3%, 45.5% and 51.6% resp. CAGR over 5 yrs. It has 118 stores with total retailing area of 35.9 lakh sq.ft. It has a low employee count and uses contract staff to contain costs.
Read Also: DMart IPO: Here is what you need to know
D-Mart follows a cluster based growth strategy which has allowed it to extend reach in areas where it has a presence. The store expansion strategy and cost control techniques are good. D-Mart has a professional management team, a respected promoter and clear vision and growth strategies which are likely to keep the company on the successful path. At a current P/E of 39.9, the asking price is fair, considering that DMT is the leader in its segment. DMT opens new stores using a cluster approach on the basis of adjacencies and focuses on an efficient supply chain, targeting densely-populated residential areas with middle class consumers. It operates distribution and packing centers that form the supply chain backbone to support retail stores. They have 22 distribution centers and 6 packing centers in Mah., Guj., Telangana and Kar.
DMart IPO rating is BUY and investors can invest with a 2 year perspective.
The unofficial/ grey market premium for DMart IPO is in the range of Rs. 193-196. This is a positive.
A personal visit to the store was interesting. There were discounts on most products, and on some very good discounts. The store location was good, and it was in a busy area. The parking space was ample for customers. There were a range of products under various catergories, however one section had its own private label products – housed under brand name like “D Homes” and “D Premia”. There were not many staff to help, so one had to search a little to find assistance. There were long queues, even though there were many cashier counters, indicating popularity at 9.30 pm on a weekday. Overall the DMT shopping experience was good apart from the long queues, because of the money saved and the value offered.
Read the full report on DMart IPO rating here