Avenue Supermarts hits trillion crore jackpot; Market cap of D-Mart's parent company crosses 15 digits as shares surge

Last Updated: Mon, Jun 11, 2018 14:28 hrs
Avenue Supermarts (D Mart)

A stock market surge for Avenue Supermarts Ltd, the parent company holding D-Mart resulted in a whopping Rs 1 trillion market capitalization.

20 minutes after the start of trading session on the Bombay Stock Exchange, the share price zoomed by as much as 1% to quote a price of Rs 1608.50. This resulted in the market capitalisation to touch a 15 digit mark or Rs 100,171.80 crores.

With this, the company joins a list of marquee companies such as TCS, Reliance Industries Limited, HDFC Bank, Sun Pharma, ICICI Bank, Aditya Birla, Mahindra and Mahindra, Wipro, HIndustan Unilever, HCL Technologies, Vedanta, Bajaj Group, etc in the over Rs 1 trillion market-capitalisation.

In April, software consultancy firm TCS became the second company after RIL to cross the $100 billion market-cap. At that time, the market-cap of TCS was over Rs 6.5 lakh crores.

Avenue Supermart's over 1% intra-day gain at the start of the trading session has however been in stark contrast to its own performance during the past month. News of Damani's divestment from the company had caused the stock to tumble right up to Rs 1347.95 by 21st May.

Investor and Founder Radhakishan Damani was reported of selling as many as 62 lakh shares or nearly 1% from his portfolio. This, the company clarified in its regulatory filing to the exchange houses, was to meet compliance norms. According to SEBI norms, 25% shareholding must be owned by the public within three years from an IPO (initial public offering). According to data from the BSE and analysts, Avenue Supermarts's promoters together hold over 82% of shares and the promoter group may have to sell another 6.2% by 2020.

The share has come a long way from its IPO that opened in March 2017. During its IPO, the company announced a price band of Rs 295-299 per share, and planned to raise Rs 1870 crore from the issue.

In terms of financial performance, the group's flagship retail stores have so far met the financial expectations. Net-profit posted by D-Mart during the March quarter was Rs 167 crore, up by 73% from a year ago. The total revenue was up by 22.5% from a year ago to Rs 3,810 crore.

But in terms of newer store addition, D-mart, reportedly added 24 stores during the past fiscal year. Although, this was the highest number of store additions in a year since 2012, it fared below the management expectation of 30 stores to be added during 2017-18.

Ever since the Walmart-Flipkart deal, stocks of D-mart have received a mixed response from analysts. 53% analysts on Bloomberg, who've been tracking the stock regularly, gave a 'Sell' rating while 13.3% suggested a 'Hold'.

The recent Walmart-Flipkart deal and the subsequent speculation of a deal between Amazon and Kishore Biyani led Future group also led to speculations on the possibility of an e-commerce entity partnering with D-Mart. A combination of synergies between the World's largest physical retailer- Walmart and India's largest e-commerce company by Gross Merchandise Volume, sparked off talks of soaring competition.

But, Neville Noronha, the CEO of Avenue Supermarts, was quoted in a news report saying that new players may not threaten companies with superior business models and consumer affinity in the long term. With over 140 stores, good profits, and a customer affinity that goes far beyond discounts, offers and value for money, D-Mart's story has been referred to as built on frugal innovation.

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