D-Mart hits bull's eye on debut; founder Damani leapfrogs in rich list

Rs 40,000 cr market cap on listing day is more than the combined value of the next 3 retail giants

Avenue Supermarts, owner of retail chain D-Mart, made a historic market debut on Tuesday, with its stock gaining 114 per cent over the issue price of Rs 299 to close at Rs 641 — one of the best listing-day performances. 

The stellar debut saw the supermarket chain’s market value soar to Rs 39,988 crore, more than the combined market capitalisation of the next three big listed retailers — Future Retail, Aditya Birla Fashion and Trent.

Its founder and ace investor, Radhakishan S Damani, and his family, own an 82 per cent stake in the company after the initial public offering (IPO). 

The value of their holding soared to Rs 32,790 crore, leapfrogging Damani into the country’s billionaire list and even surpassing stalwarts such as Rahul Bajaj and Anil Ambani. 

Damani, known to maintain a low profile, made a rare appearance at the listing ceremony, along with his family and close aides. 

Some stock market veterans, including Enam group founders Nimesh Shah and Vallabh Bhansali, had gathered to support him.

“Damani’s success has come from three factors — humility, business acumen and India’s growth. He has a tremendous amount of honesty and humility. Damani has demonstrated how one can be successful by doing things in a simple way and not get carried away with glamour. Also, he has demonstrated that growth can be endless, if you are able to address the bottom of the pyramid,” said Bhansali.

Analysts said D-Mart was one of the best players in the domestic retail sector, estimated to double in size to about $115 billion (organised sector) in the next three years.

“D-Mart is a unique player with a sustainable business model, tailor-made for Indian consumers. It offers great quality even in terms of management and growth potential,” said Motilal Oswal, chairman, Motilal Oswal Financial Services.

In the run-up to the D-Mart IPO, some of its listed peers such as Future Retail, Trent and V-Mart had seen their stock prices surge. Industry players said the domestic consumption theme was a big story and was finally getting its due.

“The markets are recognising the retail sector. Consumption is a big theme in the country. Every generation will consume more than the previous one. There is opportunity for everyone. It is all about building the right models,” said Kishore Biyani, group chief executive officer at Future Group.

The listing-day gains follow a tremendous response for the company’s IPO, subscribed 105 times. 

Market players expect the demand for the stock might continue, as there wasn’t much free-float. The company promoters had diluted around a 10 per cent stake in the IPO to raise Rs 1,870 crore. Assuming all the pre-IPO shares would be locked in, only 10 per cent equity, worth around Rs 4,000 crore, would be readily available for trading.

D-Mart, which is focused on value-retailing, derives the bulk of its revenues from Maharashtra and Gujarat. The company had opened its first store in Mumbai in 2002, and had expanded to 118 stores as of January 31. Unlike other retail chains, D-Mart owns most of its stores. Some are on a long lease.  

For the nine months ended December 2016, the company reported revenues of Rs 8,803 crore and net profit of Rs 387 crore.