1. D-Mart stock can underperform in medium term given its stretched valuations: Experts

D-Mart stock can underperform in medium term given its stretched valuations: Experts

Stock market maverick R K Damani-led Avenue Supermarts, commonly known as D-Mart, made a rocking debut on the bourses today with whopping 100% listing gains, which made stock market analysts bullish on the market as well as the stock.

By: | Published: March 21, 2017 2:11 PM
According to market experts, more than anything else, this is a tribute to its promoter Radhakishan Damini.

Stock market maverick R K Damani-led Avenue Supermarts, commonly known as D-Mart, made a rocking debut on the bourses today with whopping 100% listing gains, which made stock market analysts bullish on the market as well as the stock.

“We can certainly describe today as “D-Day”. This listing will certainly qualify as the biggest listing of recent times in subscription and listing gains terms,” said Jimeet Modi, CEO, SAMCO Securities.

According to market experts, more than anything else, this is a tribute to its promoter Radhakishan Damini. “While the industry went through a turbulent time with various big and high-profile players like Reliance, Future Group and Walmart struggling to retain their turf and burning cash, the low-profile RK Damani made silent but huge strides with his maiden retail venture. Not only is his enterprise profitable, it has grown and prospered without any of the noise and rhetoric surrounding other retail ventures. Even at these lofty valuations, the buzz on the street is that there is still significant upside to this scrip. A classic case of wealth creation for not only the promoter, but also institutions and millions of small investors,” said Ashish Kapur, CEO, Invest Shoppe India Ltd.

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From the market point of view, this is certainly positive as this establishes that well-planned and executed businesses continue to attract big capital. Also, retail interest in stocks does get traction when there are mammoth and sustainable listing gains in large IPOs. “Sectoral-wise this is also likely to rerate the entire retail and consumer space. At a market capitalisation of around 37 K crore, this is certainly a great success story from an extremely humble and remarkably successful entrepreneur,” said Kapur.

Thus, it can be concluded after looking at the facts of this IPO that broader trend of the market is very much intact and more northwards, and investors are ready to pay premium for quality. “As we know after drought of IPOs, Wonderala Holidays was the first entrant and after that many companies made their presence on Dalal Street. In a way, it’s not a very good sign for equity investors as IPOs suck liquidity out of secondary markets. However, we’re in a firm structural bull market and it will last for some more years. So investors need not worry much,” said Modi.

Modi, however, suggests that medium and short-term investors/ traders should at least book partial profits as in the medium term the D-Mart stock can underperform given its stretched valuations and also the market is consolidating after making a fresh high. Long-term portfolio investors are advised to held on to their positions.

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It may be noted that D-Mart is a very well-run retail store chain with 118 outlets on pan-India basis with a PAT growth of nearly 50%. Many investors piled on to it and its Rs 1,870-crore IPO issue got subscribed 104 times.

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