Investors across segments queued up for the initial public offering (IPO) of Avenue Supermarts, which operates the successful retail chain D-Mart, mainly in Maharashtra and Gujarat.
The Rs 1,840-crore offering, which closed on Friday, saw 104 times more demand than the shares on offer. The issue generated bids worth Rs 1.38 lakh crore — the most since Coal India’s IPO
The so-called qualified institutional buyer (QIB) portion of the IPO
was subscribed 146 times, high-networth individual (HNI) segment was subscribed 281 times and retail investor portion saw seven times more demand than the shares on offer.
Investors applied for 4.6 billion shares in the IPO, where only 44.37 million shares were being offered. D-Mart
had already raised Rs 534 crore from anchor investors by allotting them 18.76 million shares.
Market experts say investors were enthused by the company’s financial track record, attractive valuations, compared to peers and strong growth prospects.
“Given the euphoria surrounding this issue, we were expecting this kind of demand. The success of the issue is a thumbs up to India’s retail sector, where D-Mart
is one of the best company,” said Dharmesh Mehta, managing director & chief executive officer, Axis Capital.
Added Narayanan Sadanandan, group head–investment banking, SBI Capital Markets, “The IPO
had generated a lot of enthusiasm among investors during the roadshows. D-Mart
is a well-known brand with superior business model and good earnings visibility.”
and SBI Capital Markets
were bankers to the issue, along with Kotak Mahindra Capital and five others. D-Mart
is promoted by one the country’s ace capital market investor Radhakishan Damani. Along with his family, Damani — no longer on the board or management — will own 82.2 per cent stake in the company after listing, which will be valued at Rs 15,338 crore at the IPO
price. The company will be valued at Rs 18,660 crore. The IPO
is likely to be priced at the top end of the price band of Rs 295 to Rs 299 per share. D-Mart
will mobilise Rs 1,840 crore (9.2 per cent dilution) from the IPO
— around Rs 1,080 crore will be used to retire outstanding debt and Rs 367 crore will go towards setting up of new stores.
Between FY12 and FY16, D-Mart
had shown compounded annual growth rate of 40 per cent and profit growth of 52 per cent. In the first nine months of FY17, the company had posted a profit of Rs 387 crore on sales of Rs 8,784 crore. On an annualised basis, the stock commands an enterprise value (EV) to sales of 1.7 times; EV to Ebitda (earnings before interest, tax, depreciation and amortisation) of 19.5 times, and price to earnings of 35.6 times.
The issue also saw nearly two million applications — one of the highest in recent times. Processing such a high number of applications will be a strain on the system, said bankers. Around Rs 79,000 crore worth of HNI
bids are riding on the issue D-Mart
will have to list at a premium of 50 per cent, if leveraged investors have to make money. However, the grey market premium suggests the listing gains could be even more.
The total application amount for the D-Mart IPO
is the seven-most in the history of capital markets
— highest being Reliance Power and Reliance Petroleum IPO
in 2008 and 2006, respectively. The figures are not strictly comparable, as prior to 2010 QIBs could apply with just 10 per cent margin money. On the flip side, these days over 90 per cent of retail investors apply with minimum application amount of Rs 15,000, compared to earlier where average application amount was around Rs 1 lakh.