On a day when the benchmark equity indices lost marginal ground, Avenue Supermarts, which operates supermarkets under the brand name D Mart, made an impressive listing on the bourses with the share price gaining over 100% compared to its issue price.
On BSE, the shares opened at ₹604.40, which is more than double its issue price of ₹299. It touched a high of ₹650 during the last hour of the trading session before settling the day at ₹640.75, a 114.30% rise over its issue price.
At the current market price, the company's market capitalisation is nearly ₹40,000 crore that makes it much bigger than older listed entities like Future Retail (₹12,000.39 crore) and V2 Retail (₹562.01 crore). V2 Retail was earlier known as Vishal Retail.
On the National Stock Exchange (NSE), the shares opened at ₹600, before touching a high of ₹648.90. It ended the day at ₹642.05. The benchmark Nifty lost a marginal 5.35 points to close at 9,121.50 on Tuesday.
Market participants say that while investors with a short-term horizon can book profits at current levels, long-term investors can rely on the robust business model that has kept the company margins better than its peers in the retail segment.
“Though, medium and short-term investors/traders should at least book partial profits as in medium term D-Mart stock can underperform given its stretched valuations and also the market is consolidating after making a fresh high,” said Jimeet Modi, CEO, SAMCO Securities. “Long term portfolio investors are advised to hold on to their positions.”
Brokerages had been quite bullish on the offering based on factors like strong margins and growth in stores and business.
IIFL, in its IPO note, had said that the company has become one of the largest and most profitable food & grocery retailers and its business model is such that it is able to offer low prices to attract more customers.
“Optimum usage of resources, efficient racking system and store ownership led to significant long-term competitive advantage on the back of stringent control over fixed costs per store,” it said.
The company's unique blend of offbeat, efficient and effective business model has resulted into revenue CAGR of 40% and PAT CAGR of 52% over FY12-16 with operating margin of 7.7% in FY16, it added.
The listing of the company was highly awaited after the initial public offer (IPO) of the retail supermarket was subscribed nearly 105 times with all categories of investors showing keen interest.
Data from the NSE showed that the offer received bids for 463.62 crore shares, as against 4.44 crore shares on offer in the price band of between ₹295 and ₹299.
The ₹1,870 crore issue opened for subscription on March 8. The company plans to use the issue proceeds for various purposes including repayment of debt.
While the company opened its first store in Mumbai in 2002, as on January 31, it had a total of 118 stores located across 45 cities in India.