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D-Mart Shares See Blockbuster Listing, Investors Wealth Doubles

D-Mart shares surged as much as 117 per cent to Rs 648.8 on the first day of listing against the issue price of Rs 299.
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D-Mart shares were in huge demand as many applicants did not get allotment in the IPO.
D-Mart shares were in huge demand as many applicants did not get allotment in the IPO.

Highlights

  1. D-Mart Shares surged over 100% on the Day 1 of its listing
  2. D-Mart IPO saw huge interest from investor community
  3. It is among the most profitable food and grocery retailers in India

Shares Avenue Supermarts, the owner of supermarket chain D-Mart, made a strong listing on the exchanges today. For 'lucky' investors who managed to get an allotment of D-Mart shares, their wealth more than doubled, as shares of the retail chain surged as much as 117 per cent to an intraday high of Rs 648.90 against the issue price of Rs 299. The D-Mart's Rs 1870 crore IPO, the biggest since PNB Housing Finances' Rs 3,000 crore offer in October last year, was subscribed more than 104 times earlier this month. The portion set aside for qualified institutional buyers (QIBs) was oversubscribed 144.6 times and that of non-institutional investors 277.74 times. Retail investors' category was also oversubscribed 7.36 times.

(Read: D-Mart seen by analysts as a potential market leader)

The price band for the public issue of Avenue Supermarts, controlled by billionaire Radhakishan Damani, was fixed at Rs 295-299 and the IPO was open for subscription during March 8-10. Proceeds of the issue would be utilised for various purposes, including loan repayment.



(Read Also: D-Mart Shares Now Listed. Should You Buy If You Missed Allotment?)

Incorporated in 2002, Mumbai-based Avenue Supermarts is amongst the largest and the most profitable food and grocery retailer in India. It offers wide range of food and non-food products. D-Mart operates total 118 stores.

Analysts say the retail sector is expected to grow at a CAGR of 12 per cent over FY2016-20, within which the organised segment is expected to grow at a faster pace than the unorganized segment. The share of organised players is expected to improve from 9 per cent to nearly 12 per cent by fiscal year 2020.

The blockbuster listing of D-Mart shares did not come as a surprise to many analysts. Kaustubh Pawaskar of Sharekhan said, "It was expected. In terms of financial performance, D-Mart stands out among its peers. There has been a consistent improvement in its financial performance over the past five years."

Mr Pawaskar believes that D-Mart will be able to sustain its performance in the future. Deven Choksey, MD of KR Choksey Securities, is also optimistic that D-Mart will be able to sustain profit growth in the future. But after the sharp run-up, the valuation of D-Mart looks slightly expensive, Mr Choksey says, adding that new investors can look to buy the stock on dips for the long term. 



Avenue Supermarts has a steady expansion track record. Its store count has increased from 45 in FY2011 to 118 by December 31, 2016. The focus on maintaining profits at the store level have proved to be a very successful strategy for Avenue Supermarts, say analysts. Its net profit has grown from Rs. 161 crore in FY2014 to Rs. 319 crore in FY2016 while its sales has grown from Rs. 4,686 crore to Rs. 8,588 crore during the same period. In the first nine months of current fiscal, it has reported a net profit of Rs. 387 crore on sales of Rs. 8,784 crore.

The public issue of D-Mart was managed by nine merchant bankers Kotak Mahindra Capital, Axis Capital, Edelweiss Financial Services, HDFC Bank, ICICI Securities, Inga Capital, SBI Capital Markets, JM Financial Institutional Securities and Motilal Oswal Investment Advisors.

Avenue Supermarts shares closed 114.58 per cent higher at Rs 641.60. (With Agency Inputs)



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