Finding the right location at the right price is a challenge, Neville Noronha, chief executive officer and managing director of Avenue Supermarts, operator of retail chain D’Mart, told FE’s Jharna Mazumdar in an interview. The company is finding it challenging to expand rapidly, as its focus continues to be on owning the real estate its stores are housed in, or entering into long-term leases for such spaces. In the nine month of FY18, the company has opened 10 stores and plans to open a few more before the fiscal ends. In 2016-17, the company had opened 21 new stores. Excerpts of the interview:

Your revenue was below expectations in Q3FY18. Why was this and what is your expectation of future growth?

We had a very high base in revenue in Q3FY17, driven by high demand post demonitisation. Because of this, our growth in Q3FY17 was significantly higher than the growth of Q3FY18. Sales were very high in Q3FY17, as consumers preferred using cards and didn’t have cash to buy from smaller stores. We don’t give forward looking statements, but expect demand will continue to remain strong in the next financial year as well.

How have you utilised the IPO proceeds?

The company, at present, has debt of around Rs 422 crore after repaying Rs 864 crore in the last one year, post the initial public offering. Another Rs 540 crore in cash is left from the IPO, from which we will repay debt of around `216 crore in the next couple of years.

How have you managed to maintain the margins?

The gross margin increased due to improvement in sales mix and efficiency of centralised procurement. Our margins have been maintained as we have increased our focus on apparels and general merchandise, which fetch higher margins compared to food and groceries. Also our strict focus on controlling costs and lower finance costs in the quarter helped us to report strong profits. The company’s EBITDA margin has improved from 8.6% in Q3FY17 to 10.3% in Q3FY18.

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 141 stores with retail business area of 4.4 million sq ft across Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, the NCR, Chhattisgarh and Punjab. The company needs to focus on speeding up opening of new stores. In 2016-17, the company opened 21 stores and will continue to open a similar or more number of stores in 2018-19. However, finding the right location at right price is difficult. We will primarily focus on our strategy of company-owned stores and may look at some long-term leases also. We will continue to expand in the existing markets and have no plans to enter other markets in near future.a