Stock specific angle for Dmart's success


First of all, I would congratulate you all for taking first step by coming to this blog to check my analysis of Avenues Supermart, i.e Dmart.

 For somewhat experienced people; you can directly go to the bottom of the page to read the finer points responsible for Dmart's success; and for newbies you can go through the introduction.

 What is Dmart?

Dmart is the brand name of supermarket chain Avenue Supermart: founded by Radhakishan Damani Ji. Dmart with ts 140 branches has its presence in Maharashtra, Gujarat, AP, Telangana, Karnataka, MP, Chhattisgarh, Rajasthan, NCR, Tamil Nadu, Daman-Diu & Punjab.

 It is one of the largest & most profitable supermarket chain in India.

 Now coming straight to stock specific angle - The floor price for Dmart IPO was Rs. 295-299, and it it got listed on 21st March 2017 with massive gain of Rs. 349.5 (awesome 117% - just in 11 days); and as of dt 8/12/2017 stock is trading at 1130.

 Why such a humongous success with a massive returns of 831/stock just in 265 days???? 

 Those who are tracking the stock or have heard about the stock know that: Dmart is based on the model of Wallmart Inc. of USA. But apart from that, I am going to list down points which have contributed massively in the success of Dmart - to be precise Avenue Supermart's stock.

*** Below points are not in specific order ***

- Brand of Promoters - their business acumen is idolized

- Vendor payment in 10 working days: This is the major reason for minimum 5% discount on every item

- Direct purchase from manufacturers & primary vendors

- Owned Real Estate: 85% Self, 15% on Long Term Lease of 30 years. Stats as per 131 stores

- No central logistics vendor - vendors are local

- 40% sourcing is central

- Variable employee model - 70% staff on daily/weekly wages

- Food items account for 54% of revenue, merchandise & apparel account for 26% revenue & FMCG give 20% of revenue.

- States where Dmart is present account for 55% of total retail spend

- Input or Appraisal Rating Metric's is very different for its managers - it totally depends on pilferage, empty shelves & idle cash counters

- Cluster Approach - this gives them edge in better understanding of local preferences

- Revenue per square feet is Rs. 29,019; and due to this low pilferage - major reason: knowledge of local preferences

- Only targeting Lower Middle Class, Middle Class & Upper Middle Class

- 41 pick up points in Mumbai - volume growing humongous

- Promoter holding at 82%

 *** Above are the points which I found during my analysis - in fact: I am sure there are many other too. So, please provide your comments with the addendum or your much appreciated critique or your likes. ***

 Bye for now - would come again with analysis on some other stock.

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