Avenue Supermarts, the owner and operator of D-Mart supermarket stores, hits the markets today with an IPO in a bid to raise as much as Rs 1,870 crore. Ahead of the public issue, the company yesterday raised Rs 561 crore by issuing 1.87 crore shares at the top end of the price band to 35 anchor investors, including General Atlantic Singapore, Fidelity, Franklin Templeton, Goldman Sachs, JP Morgan, HSBC, Motilal Oswal and UTI, among others.
Several analysts have recommended subscribing to issue given the company’s strong financial and operational profile, and its promising growth record over the years. TV news channels report that the street is abuzz with high interest into the issue from institutional and high-networth investors, with the QIB portion of the issue expected to receive 75-100 times subscription.
D-Mart, India’s most profitable supermarket chain, is looking to raise the money to retire part of its debt, redemption of non-convertible debentures, purchase of fit-outs for new stores and general corporate purposes.
The company is promoted by Radhakishan Damani, the veteran stock market trader and investor who had been in the Forbes list of wealthiest people. Damani and his family own 91.34% equity stake in Avenue Supermarts (pre-issue).
D-Mart has a strong presence in Maharashtra and Gujarat, and also operates stores in Telangana, Karnataka, Andhra Pradesh, Madhya Pradesh, Chhattisgarh, NCR, Daman and Rajasthan.
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Most analysts have praised the company’s business model, and hence the growth it offers to the investors. The company maintains low-cost operations, owns the stores rather than renting them and thus saving on rental costs, keeps improving product assortment based on its own data analytics, and seems to saturate the territory and then achieve profitability. Analysts say it follows the same business approach as Wal Mart of the US.
The public issue, which is open for subscription at Rs 295-299 per share, closes on Friday, March 10. 50% of the shares are reserved for qualified institutional buyers (QIB), 15% for high net-worth individuals (HNIs) and 35% for retail investors.
For the nine-month ended December 2016, Avenue Supermarts posted a net profit of Rs 387.4 crore. For the year ended March 31, 2016, the company posted a net profit of Rs 318.75 crore, against Rs 211.6 crore in the previous year.
Kotak Mahindra Capital, Axis Capital, Edelweiss Financial Services, HDFC Bank, ICICI Securities, JM Financial Institutional Securities, Inga Capital, SBI Capital Markets and Motilal Oswal Investment Advisors are managing the IPO.