GROUP 14

MEET MEHTA
UMANG KUMAR
AYUSHI JAISWAL
AYON DAS

SUBMITTED TO DR. M SRIRAM

 ECONOMIC ANALYSIS
• The Trailing 12 months revenue from its 189 stores is around $3 Billion.
• As per current numbers, size of total retail sector is $1 Trillion and 9% share is of
organized retail. 9% of $1 Trillion= $90 Billion. And out of this $90 Billion, just $3
Billion is currently contributed by Avenue Supermarts. It indicates the how big
opportunity is present for the company’s future growth.
• D-Mart reported strong revenue growth of 22% YoY to Rs.5,949, driven by healthy
store addition pace in Q2 FY20. While the net profit  increased by 47.34% YoY to
Rs.333 Cr. Lower tax rates (22% vs 36%) boosted the PAT growth despite lower PBT in
Q2 FY20
• The stock price has appreciated around 13% since the announcement of the recent
corporate tax rate cut the benefit of higher free cash flows probably can be passed
on through price cuts to consumers
to boost revenue growth.
• .
 ECONOMIC ANALYSIS
• Higher operating expenses restricted profitability, due to which operating profit
margin % has reduced to 8.7% in Q2 FY20 from 10% in last quarter Q1 FY20.
• As per the management, revenue growth was slightly below its expectations. But,
owing to a favorable product mix, gross margins improved.
• Avenue Supermarts is expected to grow with a very high CAGR from current market
contribution of $3 Billion to contribute in this $880 Billion market size by 2030. This
also shows how big is the opportunity present for Avenue Supermarts and the other
organized retail players in the coming 10 years to grow.
• Currently, Avenue Supermarts is tackling only the Tier-1 and Tier-2 cities. And
according to its market study, the company may enter in the online retail business
also in near future.
• Also, with the help of efficient supply chain management strategies employing,
Avenue Supermarts is planning to open Mini D-Mart stores like small kirana stores to
improve their presence and penetrate the unrealised market also
 INDUSTRY
ANALYSIS
• Indian Retail sector has emerged as one of the most dynamic and
fast-growing sectors due to entry of several new players in the
recent times along with rising income levels, growing aspirations,
favorable demographics and easy credit availability.
• Globally, India is fourth-largest global destination in the retail
space after US, China and Japan.
• Current Valuation of Indian Retail sector is close to $1 Trillion i.e..
Rs.70 Lakh Crore in FY2019-20. And as per the estimations
provide by Ministry of Commerce, retail sector would be around
$1.1 Trillion by 2021.
• Currently, the Indian retail market continues to be dominated by
the unorganized retail (traditional kirana stores) accounting for
about 88% of the total retail market.
• Organised Retail : On the other hand, organized retail like Big
Bazaar, D’Mart, Walmart, Malls, Showrooms etc. is contributing
only about 9% of the total retail market.
• Online Retail : Online retail players like Flipkart, Amazon, Big
Basket etc. accounts for only 3% of the total retail market in India
 COMPANY ANALYSIS

•Avenue Supermarts doing business as Dmart – Indian chain of hypermarkets

in India.
•Founded by Radhakrishnan Damani in the year 2002.
•DMart started its journey from 2 stores in the state of Maharashtra and has 176
stores across 12 states in India by FY20.
•Aims at offering wide range of basic home and personal products under one
roof.
•'Avenue Supermarts,' the owner company of DMart supermarkets, was a
privately held company till 2016.
•D-Mart follows a cluster-based expansion approach. Company’s focus is on
deepening their penetration in the areas where they are already present, before
expanding to newer regions.
•D-Mart has shored up its store addition by adding 13 stores in first half of
FY2019-20 Thus, the total store count is 189.
 DMart has a
consistently
growing presence
across India
KEY PERFORMANCE INDICATORS
Company’s Key Financial Performance: (in Crores)
Key Product
Categories
& Revenue (Foods )Dairy, staples, groceries, snacks, frozen products,
Non-Foods
(Generalprocessed
Merchandise
(FMCG) Home
footwear,
& care
foods
toiletries
utensils
Apparel)
products,
Bed
and fruits
andand
other
home
&personal
bath, toys,
& vegetables
products
care
appliances— 28.42%
—-20.03%
garments,
products,
—   51.55%

(%)
 SWOT ANALYSIS
STRENGTH WEAKNESS

• Purchasing power • Political Uncertainty and Regulatory

• Population Demographics Requirements
• Low Retail Penetration • Poor Infrastructure and Supply Chain
Management

OPPORTUNITY
THREAT
• Innovation: R&D and innovation capacity, • Availability of land and real estate
Technology investments
• Human Capital
• Digital Strategy
   Year Mar 20  Mar 19  Mar 18 

Key Ratios      
Ratio Analysis
Debt-Equity Ratio 0.06 0.11 0.23
Ratio analysis is a quantitative method of
gaining insight into a company's liquidity, Long Term Debt-Equity Ratio 0.02 0.04 0.14
operational efficiency, and profitability by
studying its financial statements such as the Current Ratio 2.11 1.96 2.84

balance sheet and income statement. 

 ROE   18.9   21  22.9

ROCE   27   26.2   23.8

Fixed Assets 4.72 5.18 5.14

Inventory days 29 29 28
 March 20 March 19 March 18

Asset Turnover 3.9 3.5 2.9

Receivable Days 1 1 1

Payable Days 9 9 8
DU-PONT Analysis   2020 2019 2018

• A DuPont analysis is used to evaluate the

component parts of a company's return Net Margin 5.2% 5.4% 5.4%
on equity (ROE). This allows an investor to
determine what financial activities are
contributing the most to the changes in
Asset Turnover 2.9 3.5 3.9
ROE..

Financial Leverage 1.2 1.1 1.1

ROE 18.9% 21% 22.9%

VALUE DRIVERS
• Revenue Growth
• Operating Margins
•  Risk Profile
• Increased investment and steady foot-
print expansion
•  Tax Reduction
• Strong Management Team and Human
Capital
• Integration with technology
•  Barriers to Entry
 Valuation

PV of free cash flows 19891.69

DCF Model
Terminal Value 485233.42
PV of Terminal Value 115301.26
Value of Equity 132627.82
•Discounted cash flow (DCF) is Number of shares (In million) 664084486
a valuation method used to
estimate the value of an Number of shares 66.408486
investment based on its future
cash flows. DCF analysis Value per share 1997.15
attempts to figure out the value
of an investment today, based Current Market Price 2240
on projections of how much Decision Sell the share(Overvalued)
money it will generate in the
future. Overvalued by 242.85
 Aditya Birla Fashion &
  Future Retail Retail
P/E Ratio 22.17 78.12
Relative Valuation    
A relative valuation model is a  EPS of Avenue Supermart 20.84
business valuation method that compares a Average P/E Ratio of
comparable firms 50.15
company's value to that of its competitors or
Intrinsic Value 1045.02
industry peers to assess the firm's financial Current MPS 2242.00
worth. Overvalued by 1196.98
Decision Sell
   
PEG of Avenue Supermart  
P/E of Avenue Supermart 136.42
Growth (ROE *Retention) 5.78%
PEG 23.60
CONCLUSION
• With the expansion in the market share of
organised retail, Indian Retail sector will
achieve the estimated projections in next 2-3
years.
• Avenue Supermarts needs to stick to its
value retailing strategy, steadily expand its
footprint and integrate its brick and mortar
business with the e-commerce model.
• Improving economy, changing demographic
profile, increasing disposable incomes in
hands of the middle class, brand awareness
and growing urbanization along with rising
discretionary spends are the main growth
drivers in the organized retail market in India.