DMart enters Top 15
on October 13, the share price of Avenue Supermarts Ltd - the parent company of DMart, crossed ₹5,000 for the first time. it went on to hit an intra-day high of ₹5,599/share before settling a bit lower at the close of the day’s trading. this came just a day after the stock crossed a market capitalisation of ₹3 lakh crore and entered the list of top 15 most valued Indian companies.
is its spot well-deserved?
while the final audit is still to be completed, DMart announced on October 4 that its standalone revenue from operations for the July to September quarter stood at ₹7,650 crore. this is a 46.6% jump over the corresponding period last year, and 28.6% higher than in the pre-pandemic period in 2019. perhaps as a result, its stock has soared from its then-price of ₹4,250/share.
there’s plenty happening in the retail space, what with the Amazon-Future-Reliance tangle and pandemic-accelerated innovation infused into the networks. DMart, however, is in a position where it can shut out all external noise and focus on itself. unlike most other retail chains, it is debt-free and has plenty of cash on hand. it has continued its focus on opening new stores through the pandemic, and owns most properties on which they are located.
thus, it enjoys the benefits of both capital appreciation (i.e. increase in property values) as well as returns on the capital employed. its e-commerce model, DMart Ready, also relies on a physical presence in strategic locations from where customers can pickup their online orders.
but perhaps its most important advantage is its business model. Avenue Supermarts has an excellent distribution network, helping it efficiently move products from factory/farm to DMart to consumer. this helps it offer deep discounts, which might become an extremely important factor for a large percentage of India’s population as inflation begins to bite. the K-shaped recovery from the pandemic means that many are still out of a job or struggling to raise their incomes.
as noted in a recent analyst report, “during inflationary times, hard-discount retailers are likely to do well as they are likely to attract more customers due to squeeze in personal disposable income”. if that does pan out, DMart is in a good position to capitalise.
the Avenue Supermarts stock is fast becoming a darling of the markets, and has gained over 200% from its March 2020-low of ₹1,820/share. it’s certainly here to stay.