Over the past decade, India’s organised retail sector has been collapsing like a house of cards.

  • 2009 – Most stores of Vishal Retail were closed down due to misallocation of capital by its management. It was eventually sold to investors in 2011.
  • 2012 – Burdened with rising debt, Future Group was forced to sell its Pantaloons chain to the Aditya Birla Group.
  • 2013 – Kishore Biyani’s Future Group had to shut 40% of its food and grocery chain of Food Bazaar stores.

And yet, D-Mart, a chain of hypermarkets and supermarkets, which has 155 stores at present, has not had to shut down a single store in 15 years. It said as much at its initial public offering (IPO).

While the rest have struggled to stay afloat, D-Mart has only grown. Phenomenally. In the last six years, the company’s revenue has grown at a compounded annual growth rate (CAGR) of 38% and its profits have grown at a rate of 54%.

D-Mart has negligible debt on its books and is profitable in one of the world’s most cut-throat markets. Its domestic competitors, such as Reliance Retail and Future Retail, are larger in size. Plus, foreign e-commerce giants such as Amazon and Alibaba are also eyeing a slice of the offline retail pie. Let’s look at these competitors.

D-Mart has the least number of stores in the above sample set but clocks the maximum revenue per store at Rs 105.1 crore (~$14.5 million). Compared to this, Reliance Retail, the largest retailer in terms of number of stores and revenue, generates Rs 9.75 crore (~$1.4 million) on each store, almost 11 times lower than D-Mart.

D-Mart’s operator company, Avenue Supermarts, had a unique listing as well. The stock opened at Rs 604.40/share ($8.37/share), a gain of 102% over its offer price of Rs 299/share ($4.14/share). A record debut on the bourses for an offer of its size.

Dalal street also values the company uniquely. From its offer price, the stock has rallied over 400% and is trading at levels of Rs 1523/share ($21/share), with a market cap close to Rs 1,00,000 crore (~$13.9 billion). At current levels, the price to earnings ratio stands at 111, and for financial years 2019 and 2022, it is estimated at 90 and 63 times respectively, as per brokerage firm HSBC Global Research.

Looked at through the lens of earnings and cash flow, D-Mart’s valuation in the market makes it the most expensive retail company in India. But is there another perspective from which one could value it?

Also, to what extent do potential competition from e-commerce giants and the ground reality really affect D-Mart’s valuation?

But first, how did D-Mart get here at all?

Slow and steady to the top

There is nothing fancy about my neighbourhood D-Mart store, never has been.


Sidhartha Shukla

In his earlier stint at Moneycontrol, the website owned by the Network18 group, Sid wrote on cryptocurrencies, cybersecurity, business, and finance. Born in Raipur, Chhattisgarh, Sid has spent most of his life in Jalandhar, Punjab. He has a BSc in Mathematics from St Xavier’s College, Mumbai. Sid is a comic book nerd and a big fan of Alan Moore, Neil Gaiman and Brian Azzarello. He can be reached at sidhartha at the rate the-ken.com

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