Group 14: Meet Mehta Umang Kumar Ayushi Jaiswal Ayon Das

GROUP 14
MEET MEHTA
UMANG KUMAR
AYUSHI JAISWAL
AYON DAS
SUBMITTED TO DR. M SRIRAM

• 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
organised 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
ECONOMIC 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
ANALYSIS • The stock price has appreciated around 13% since the announcement of the recent
corporate tax rate cut as the benefit of higher free cash flows probably can be passed on
through price cuts to consumers
to boost revenue growth.
• 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 organised
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
INTRODUCTION: About The
Company
•'DMart' is a supermarket chain across India owned by 'Avenue Supermarkets.

•DMart started its journey from 2 stores in the state of Maharashtra and has 176
stores across 12 states in India by FY20.
•'Avenue Supermarts,' the owner company of DMart supermarkets, was a
privately held company till 2016.
•In the year 2017, the company came up with an IPO of Rs.1,870 Cr.
•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.
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
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 2,52,334.00
DCF Model ₹
Discounted cash flow (DCF) is a PV of Fade period 2,71,304.00
valuation method used to estimate the value ₹
of an investment based on its future cash Terminal Value 53,56,828.00
flows. DCF analysis attempts to figure out the ₹
value of an investment today, based on PV of terminal value 6,97,826.00
projections of how much money it will
generate in the future. ₹
Enterprise Value 6,97,826.00
₹
Equity Value 10,41,069.00
No. of shares(in million) 624
₹
Value per share 1,668.38
₹
Current Share Price 2,240.00
Decision Sell the share
Year Mar 20 Mar 19 Mar 18
Ratio Analysis Key Ratios
Ratio analysis is a quantitative method of
Debt-Equity Ratio 0.06 0.11 0.23
gaining insight into a company's liquidity, Long Term Debt-Equity
operational efficiency, and profitability by Ratio 0.02 0.04 0.14
studying its financial statements such as the
Current Ratio 2.11 1.96 2.84
balance sheet and income statement.

Turnover Ratios
Fixed Assets 4.72 5.18 5.14
Inventory 15.52 16.06 15.85

DU-PONT Analysis 2020 2019 2018
• A DuPont analysis is used to evaluate the

component parts of a company's return Net Margin 0.05 0.05 0.05
on equity (ROE). This allows an investor to
determine what financial activities are
contributing the most to the changes in
Asset Turnover 2.23 3.32 3.07
ROE..
Financial Leverage 17.20 9.65 7.85
ROE 2.01 1.45 1.29

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.

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GROUP 14

SUBMITTED TO DR. M SRIRAM

•'DMart' is a supermarket chain across India owned by 'Avenue Supermarkets.

• Purchasing power • Political Uncertainty and Regulatory

Fixed Assets 4.72 5.18 5.14

Inventory 15.52 16.06 15.85

• A DuPont analysis is used to evaluate the

Financial Leverage 17.20 9.65 7.85

ROE 2.01 1.45 1.29

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