Avenue Supermarts Ltd. (Dmart)
- Price Band: Rs. 290 – Rs. 299
- Issue Date: 8th – 10th March
- Recommendation: Subscribe
Avenue Supermarts Ltd (ASL) is emerging as a national supermarket chain (D-Mart), with a focus on value-retailing. According to Technopak, ASL was one of the largest and most profitable F&G retailers in India in FY16. As of Dec 16, it has 117 stores with Retail Business Area of 3.57 mn sq.ft. The company plans to deepen its store network in southern and western India and gradually expand its network in other parts of India pursuant to its cluster-focused expansion strategy. It operates predominantly on an ownership model rather than on a rental model. It 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
a) Value retailing to a well-defined target customer base
b) Most profitable Retail Chain
c) Cluster based Ownership Model
d) Lean Cost Structure
Objects of the Issue:
The whole issue of Rs 1870 cr (at upper price) is fresh issue which would be utilized to repay the debt (Rs 1080cr), capex (Rs 366 cr) and for corporate purposes.
Valuation and Recommendation:
ASL’s revenue has grown at 40.4% CAGR between FY12-16 while EBIDTA grew at a CAGR of 48.1%. PAT grew faster at 51.9% during the same period. We believe Avenue Supermarts is a long term story and should be viewed from 2-3 years point of view. It is one of the most efficiently operated companies which is evident from its highest ROE in the industry. We expect ASL to continue its growth momentum as the retail opportunity in India is very big and modern trade players like ASL have ample scope to grow. We believe ASL would command premium valuations and would remain a market leader post listing. We like the business model of the company given its lean cost, customer centric focus and cluster based ownership model. At upper price band of Rs 299, the stocks looks attractive and recommend investors to subscribe the issue for listing as well as long term gains.
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About Nirmal Bang
Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.
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