Following implementation of the GST, supply chain disruption has stabilised and business is almost back to normal, Neville Noranha, chief executive officer, Avenue Supermarts, told FE’s Jharna Mazumdar. On ambush marketing done by online player Amazon India in modern retail outlets, Noranha said it is unethical and unacceptable, and hopes that the e-commerce player will not repeat it in future. The company has managed to pare its debt to Rs 422 crore by the second quarter of this financial year from Rs 1,103 crore at the end of FY17. Avenue Supermarts, which operates retail chain Dmart, reported a 65.2% year-on-year growth in its net profit to Rs 191 crore in Q2FY18, driven by higher other income and lower finance costs. Excerpts:
Has the GST roll-out been smooth?
In the first two weeks, there were a lot of disruptions, with the supply chain getting impacted and stores lacking stocks. While our business has more or less stabilised, two months is too short a period to get all the systems and technology right. The GST transition has been smooth and has settled across Avenue Supermarts and our partner network’s commercial and IT systems.
A host of consumer majors, including Hindustan Unilever and ITC, have reduced prices of FMCG products such as soaps, shampoo, detergents, biscuits and savoury snacks. This has resulted in a 3-8% decline in prices of goods across modern retail outlets. Have you passed on benefits of the GST to your customers?
Whatever discounts or price cuts have been given by the brands, we have passed it to customers. As it is our strategy to provide customers the cheapest possible rate while maintaining our margins, we have successfully managed to do so while maintaining our margins and profitability.
How have you utilised your IPO proceeds and how much of it is left with the company?
We raised around Rs 1,870 crore. Most of the funds have been utilised to reduce debt, expansion, designing and fit-out of new stores. At the end of FY17, the company had debt of Rs 1,103 crore, which has been reduced to Rs 422 crore by the end of Q2FY18.
What is your take on ambush marketing done by Amazon in recent past, which most brick-and-mortar modern retailers opposed tooth and nail?
Amazon India did ambush marketing a few months back as it bundled gift coupons with ITC, Nestle and Coca-Cola products for sale in retail chains, including Dmart. We had spoken to all the brands and asked them to remove the products from our shelves as we didn’t want to encourage the move as the e-commerce player was trying to acquire our customers. Principally, the brands should have spoken to us. However, we have given the benefit of doubt for the first time and hope it won’t be repeated.
What are your expansion and investment plans?
The company opened its first store in Mumbai in 2002. As of September 30, 2017, the company had 136 stores with retail business area of 4.2 million sq ft across Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab. We continue to look for opportunities for opening stores by acquiring land or through long-term lease. We will continue to expand in the existing markets and have no plans to enter other markets in near future. We can’t share our exact expansion and investment plans as we don’t comment on forward-looking business.