Featured IPOs - DMart-Avenue Supermarts Limited

D-Mart is an emerging national supermarket chain, with a focus on value retailing. In fiscal 2016 D-Mart was one of the largest and the most profitable F&G retailers in India. D-Mart offers a wide range of products with a focus in the Foods, Non Foods (FMCG) and General Merchandise & Apparel product categories. D-Mart opened its first store in Mumbai, Maharashtra in 2002. As of September 15, 2016, we had 112 stores with Retail Business Area of 3.40 million sq.ft, located across 41 cities in Maharashtra (58), Gujarat (26), Telangana (13), Karnataka (7), Andhra Pradesh (3), Madhya Pradesh (3), Chhattisgarh (1) and NCR (1). Company plan to deepen our store network in southern and western India and gradually expand our network in other parts of India pursuant to our cluster-focused expansion strategy.

For Fiscal 2016, Maharastra contributed a majority of their Revenue from Sales (62.57%) followed by Gujarat (18.83%), Telangana (10.15%). Company direcctly operates and manages all their stores. We operate predominantly on an ownership model (including long-term lease arrangements, where lease period is more than 30 years and the building is owned by us) rather than on a rental model.

D-Mart opens new stores using a cluster approach on the basis of adjacencies and focusing on an efficient supply chain, targeting densely-populated residential areas with a majority of lower-middle, middle and aspiring upper-middle class consumers. Also they have 21 distribution centres and six packing centres in Maharashtra, Gujarat, Telangana and Karnataka.

Below are the different categories of products they have:

Foods: This category includes staples, groceries, fruits & vegetables, snacks & processed foods, dairy & frozen
products, beverages and confectionery. In Fiscals 2014, 2015 and 2016, this category constituted 53.28%, 52.84% and 53.06% , respectively of our Revenue from Sales.

Non-Foods (FMCG): This category includes home care products, personal care and toileteries and other over the
counter products. In Fiscals 2014, 2015 and 2016, this category constituted 21.49%, 21.22% and 20.58%,
respectively of our Revenue from Sales.

General Merchandise & Apparel: This category includes bed & bath products, home appliances, furniture, crockery, utensils,plastic goods, garments and footwear. In Fiscals 2014, 2015 and 2016, this category constituted 25.23%, 25.94% and 26.36%, respectively of our Revenue from Sales.

Issue Detail of Avenue Supermarts Limited

Issue Opens: 8 Mar 2017
Issue Closes: 10 Mar 2017
Issue Size: 6,23,93,631 Equity Shares aggregrating to approx Rs. 2000 Crores
Face Value: Rs 10 Per Equity Share
Issue Price: Rs 290 - Rs 299 Per Equity Share
Market Lot: Yet to be decided
Minimum Order Quantity: Yet to be decided
Minimun Investment Amount: Yet to be decided
Listing At: BSE, NSE

Objective of Issue

The net proceeds of the IPO are proposed to be used as set forth below:
1. Repayment or prepayment of a portion of loans and redemption or earlier redemption of NCDs availed by the Company;
2. Construction and purchase of fit outs for new stores;
3. General corporate purposes.

Key Strengths of D-Mart

1. Ability to offer our customers value-retailing and daily low prices and consequently greater daily savings. This has been possible in part due to strong supplier and vendor relationships and our pricing strategies.

2. Business model is based on the concept of offering value retailing to customers using the EDLC/EDLP strategy. The EDLC/EDLP strategy is based on offering low prices on an everyday basis by achieving low procurement and operations cost rather than as special promotion limited to certain products or to a particular day, week or any other specific period in the year.

Consistent Revenue Growth

3. Business has grown rapidly in recent years, primarily through expansion of store network from one store in 2002 to 112 stores as of September 15, 2016 across eight states in India, concentrated in western and southern India.

4. Deep knowledge and understanding of optimal product assortment and strong supplier network enabling procurement at predicable and competitive pricing, leading to an overall efficient cycle.

5. High operating efficiency and lean cost structures through stringent inventory management using IT systems.

Excellent Growth Graph

Major Risk Factor

Majority of D-Mart's sales are from stores in Maharashtra and Gujarat and any adverse developments affecting the operations in these two states could have an adverse impact on their revenue and results of operations.