Regarding reduction in promoter holding via ESOP, company has got special approval in sept itself and certainly promoter holding came down with this.
You may recalculate EPS dilution, as seems you took shares ONLY in DEMAT form. As per Sept SHP, total share was 624084486.
I have no interest in D-Mart given the stratospheric valuations. Came across this extremely brave SELL call on HDFC Securities research report (publicly accessible) - hence sharing a snapshot from the same
Avenue Supermarts (SELL)
Rising competition to hit margins, valuations
Target Price Rs 1,250 (25x Sep-21E EPS)
CMP Rs 1,926, MCap Rs 1,207bn
WHY
ļ§ Select e-grocers closing in on D-MARTās key proposition ā Pricing: While D-MART continues to remain cost/price leader in F&G, E-grocers have been closing in. Interestingly, this doesnāt come at the expense of deteriorating economics (trading margins for the latter have improved). Online biggies getting battle-ready too: Amazon/Flipkart have bumped up their authorized capital significantly in FY19 to Rs.35/18.5bn. We reckon most of these investments will find their way in supply chain and pricing as
both aggressively acquire customers. D-MART will have to defend turf. We are building in flat EBITDA margins over FY19-22E despite rising scale
ļ§ Expansion target seems on track, there is a need to rev up run-rate: DMART is on track to add 27 stores in FY19. However, more needs to be done on this front as key peers have stepped up expansion. Our analysis on 460+ districts suggests that achieving/maintaining sales velocity in new
stores may be a challenge
ļ§ Stock supply to weigh on performance: Per SEBI regulations, the promoter group needs to reduce stake to 75% by end FY20 (currently ~80%). With a QIP on the cards, supply will challenge already punchy valuations.
ļ§ Valued to the moon and back: At 39x Sept-21 EV/EBITDA, there is just too much implied growth and its longevity, especially as competitive intensity rises in F&G. We build in revenue/EBITDA/APAT CAGR of 25/28/28% CAGR over FY19-22E. We assign a DCF-based TP of Rs. 1,250/sh (implying 25x
Sep-21 EV/EBITDA)
WHY NOT
ļ§ Big peers such as Amazon/Walmart (via Flipkart) may struggle with assortment selection, trading margins and cost structures in the medium to long term.
ļ§ With low float, the stock can command high valuation premium.
Link to report - https://www.hdfcsec.com/hsl.research.pdf/New_Year_Picks_2020_HDFC_sec.pdf
Surprising move from management where they raised fund (100 Cr) using commercial paper despite having approvals for NCDs (1500 Cr) & QIP (>5000 Cr at current prices). I am aware that commercial paper is for very short duration and small amount but still they must plan NCD & QIP as they got approvals long back.
My two cents reflecting DMartās efficiency.
Check the Cost and WC Structure. It is amazing.
Disclosure: Invested and opinions may be biased.
Since the raw material cost of v Mart and big Bazar is much lower than D Mart, doesnāt it mean that they re either selling inferior material or their selling price is much higher?
Do you find any positive in v Mart compared to D Mart. I find too much of fluctuations in V Mart figures.Are they reliable?
To my understanding, Since capex in D Mart is much higher due owned stores, FCF is negative.
Gaining scale in hyper competitive segments is not everyoneās ball game. Specially maintaining disciplined WC cycle as you can see the Sales to Inventories & receivable figures compared along with higher other costs. (Vmart to Dmart)
If a business A with 1/20 th of sales and not the same WC discipline sell cheaper by only 30 odd percent to the business B with 20 times comparative sales , 3 times more ITR and much disciplined WC management, i would definitely prefer business B.
Btw 73 times PE compared to 105 PE for 1/20 of sales is actually much more expensive. Also consider the free float and WC efficiency.
Current SHP shows promoters have already shed 0.48% (via ESOP) and they need another 4.73% before March second week.
Small retailers continue to get lured and above 16000 have become proud owner of this buzzing scrip in current quarter itself. The total no of retail share holder has gone upto 191376.
Its not only retailers but others including corporate bodies & FIIs have increased their holding. Mutual Fund houses have shed their holding by .09%
As per livemint report, DMart, is expected to launch a ā¹7,000-crore QIP in February, with the intention to bring down promoter stake to comply with Sebiās norms of public shareholding in listed companies, said two people aware of the development, also requesting anonymity.
But I feel that they may NOT need 7000 Cr through QIP because promoter holding can go below 75% with lesser value itself.
Short Answer: i) Intent ii) Culture which results in Governance
i) In 2019 too, household consumption in India was 59+% -->> which again made it the largest component of GDP.
Source: Wiki
ii) In hard times, discount retails business grows.
Source: Economic Cycles
iii) Labour Force is on decline ā and on other hand these people are shifted to either lower-middle or middle-middle class
Source: Employment to population ratio, 15+, total (%) (national estimate) - India | Data
And people are still procrastinating over PE 
Keep Investments as simple as possible.
Sorry, i missed this, can i have the link or news article where Goldman Sachs mentions this
Hi
Thanks for sharing.
I was looking at which mutual funds hold Dmart. Out of the top 5 fund which hold Dmart by value 2 of them happen to be from the HDFC stable. One of them is HDFC Equity which one of the largest multicap funds.
HDFC Equity, HDFC Focused 30 plus a few more from HDFC hold ~600 crs in Dmart.
Aside, seeing what Ambit has to say in their valuation exercise on Dmart I am confused as to how much optimism can go into a model perhaps. No room for error and no margin of safety leaves one uncomfortable.
Regards
Deepak
Disc: invested
This is current holding in Dāmart by 10 Mutual Funds
Let us not get carried away by the results. Year on year it is basically 30% PBT growth which is on expected lines. However one is paying around 200 times free cash for this enchantment.
Its great results, Margins are good, the profits are higher because of the Tax cuts and base effect, the performance has been amazing even in this not favorable conditions. As the economy recovers they will be back with higher number(hoping). they are very much focused on the stores additions as well. My opinion the valuations going to go higher and some people stay away and miss and some add more to make more in predictable businesses.
Disc: Invested
Thanks,
Kumar
