My 2 cents based on observations on US and Indian retail/eCommerce industry.
Amazon bought whole foods in USA as they cannot grow beyond a point with pure eCommerce. The whole reason amazon bought whole foods is for increasing their home delivery of fresh groceries foot print which cannot be grown beyond a point in eCommerce model.
Now, walmart is trying with a new strategy of click and pick/collect which means buy online and pick it up in local online store. I personally like this model as I know I get better prices in this model as a customer as I am avoiding the delivery part. This is not a new strategy but they are putting more efforts for this model. Not just walmart, lot of other companies are trying this model.
If I am not wrong, amazon is also piloting a pick-up and return in collaboration with kohls in USA. Amazon has started physical books stores in some universities in USA. Amazon is also piloting a check-out less grocery stores in USA and they are called Amazon Go stores.
The reason I am telling these is to make a point that eCommerce can only grow to a extent without retail store presence and in India, the extent of growth of pure eCommerce may be much smaller than what we have seen in USA because of several India specific challenges. For all those who say that eCommerce can kill DMart, what is stopping DMart to start home delivery within certain miles from their stores or even offer click and pick facility? This is a low hanging fruit for DMart.
Having said that, for all those skeptics who think that owning a store comes with several challenges should read about McDonald’s. McDonald’s own the real estate for most of its stores and there are tons of articles on this on the internet and they are very successful in doing this. I think DMart is adopting this methodology. If DMart doesnt own the stores, Irrespective of their growth lease prices will go up by certain value every year and these ever increasing lease prices may not go well for their profitability and keeping the prices down for the customer.
DMart or for that matter all retail companies have humongous opportunity in front of them with a very very long runway and so far only DMart got the strategy right in India. There is scarcity premium for less floating stock, scarcity premium for being the only company that got the strategy right and on top of everything, its growing at a pace very few companies in India can match and it is growing in a consistent, predictable and financially responsible manner.
Please check P/E of some quality companies command in India and their growth. Asian Paints is growing at 10% roughly and commands a PE of 60 and there are numerous example like that. Everyone talk about PB of Gruh Finance for a lot of time and it only keeps going up. Everyone did DCF of Page Industries and how many got it right and how many are able to hold the stock based on their DCF calculation? Only reason I am comparing these (Asian Paints, Gruh Finance, Page Industries) with DMart is under my assumption that DMart is fundamentally as good as Asian Paints, Gruh Finance, Page Industries.
In my view, most of the quality companies which rely on domestic consumption story in India always remain expensive.