- India’s most efficient retailer- Avenue Supermarts have macro factors turning in their favor. With the recent cut in the corporate tax rates, negligible debt, falling property prices, and weakening competition, the owner of the DMart retail chain are perfectly placed to expand its store count.
- The shares of Avenue Supermart have risen up 17 percent, the highest among consumer and retail stocks, since the announcement of a cut in corporate tax rates by finance minister Nirmala Sitharaman and have a hit record.
India’s most efficient retailer- Avenue Supermarts have macro factors turning in their favor. With the recent cut in the corporate tax rates, negligible debt, falling property prices, and weakening competition, the owner of the DMart retail chain are perfectly placed to expand its store count.
The shares of Avenue Supermart have risen up 17 percent, the highest among consumer and retail stocks, since the announcement of a cut in corporate tax rates by finance minister Nirmala Sitharaman and have a hit record.
The company overtook Titan Industries in terms of the market capitalization. At Tuesday’s price, DMart market capitalization is Rs. 1.18 lakh crore while Titan Industries is valued at Rs. 1.14 lakh crore.
The earnings growth of DMart is directly linked to store additions, something which company can now do given the position they are in. The low tax will leave more cash in the hands of the retailer and will reduce the payback period for its investments.
CEO of DMart, Neville Noronha said that this is a fantastic development for value retailers like them. The tax cut allows them to go up in the market, create jobs, build new stores and provide customers with the services which they otherwise wouldn’t.
Generally, Avenue Supermarts have always preferred buying properties instead of leasing. Owning the property gives the retailer a cost advantage over its competition in the long term. The slump in property prices presents a better opportunity also for such entities which are looking to expand brick and mortar stores. Now, with a very strong and clear balance sheet company can now look at investing in spaces. The company’s debt to EBIDTA is less than 0.1 as compared with about 0.8 times before the IPO four years ago.
The current EBDITA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of the company is more than three times the debt. This indicates that the company’s balance sheet is stronger than ever before to fund an aggressive expansion.
Noronha said that the entity is ready to buy and ready to lease and it had a total of 188 stores end-July. DMart has clocked sales of Rs.5815 crore which is 27 percent higher than the previous year, and net profit of Rs. 323 crore, 32 percent higher. The EBDITA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin for the quarter was 10.2 percent, 100 basis points higher than in the previous year.
D-mart is a chain of hypermarket and supermarkets in India which was first started in 2002 in Mumbai by Mr. Radhakishan Damani.
The supermarket chain of D-Mart stores is owned and operated by Avenue Supermarts Ltd. (ASL). The brands D Mart, D Mart Minimax, D Mart Premia, D Homes, Dutch Harbour, etc are brands owned by ASL
