The spectacular debut of Avenue Supermarkets Ltd., which owns and operates the food and grocery retail chain D-Mart, has brought into the limelight its low profile promoters and the unique business model the company operates.
While D-Mart has been around since 2002, it took 15 years to catch the fancy of investors who overwhelmingly subscribed to its IPO. The share sale was sold out 104 times and on the day of its listing the stock debuted at more than double its issue price. Soaring to ₹604 as against the allotment price of ₹299 a share, the debut reflected the robustness of the firm’s business model.
It quietly built a formidable presence in the Western, Central and parts of South India due its focused product offerings at great value to middle-class customers. D-Mart was incorporated in 2002 by Mumbai based stock broker Radhakrishan Damani, who is not known beyond the stock market circuit and developers’ community as he maintains a low profile.
The first D-Mart store opened in Mumbai in 2002-03 and now it has grown to 118 stores operating in 45 cities spread across 9 states and one union territory.
While others forayed into all lines of retail, Mr. Damani confined himself to food and grocery. Besides, D-Mart owns most of its stores to keep costs under control.
“They created an Indian model adapted to Indian consumers and once they got the model right, they expanded it,” said B.S. Nagesh, an industry veteran and founder of TRRAIN.
The company’s business philosophy is different as it focuses on value retailing to a well-defined target consumer base from the middle class. It offers products that are generally purchased by customers and does not operate a high inventory. It makes early payments to suppliers and thus gets products at cheaper rates and stays away from brands which do not fit the requirement of its target customers.
Besides efficient store management, the company has a cluster-based approach in expansion to ensure better logistics and cost reduction. Most of its stores are in the suburbs which ensures larger foot-falls than peers.
College dropout
D-Mart’s promoter Mr Damani (61), might have dropped out from college, but he has strong acumen to identify new business opportunities and spot talent. Besides, he is an ace stock market investor and never allowed ego to overpower him. In 2001 he made a bid to acquire cigarette maker VST Industries, a subsidiary of British American Tobacco but when he faced steep opposition, he did not peruse it at any cost.
He is known to be an investor in MNC stocks and considered as a guru of big bull Rakesh Jhunjhunwala.
In 2004, he hired Ignatius Neville Naronha, an executive who used to work with Hindustan Unilever and often met Mr. Dalmia to supply products to D-Mart. Today Mr. Naronha is D-Mart’s managing director and after listing of the stock his worth is more than Rs 900 crore. Like Mr Naronha, several D-Mart executives have become millionaires as they were provided with stock options.
The listing of D-Mart has catapulted Mr. Damani to be among the top 20 billionaires of India surpassing several top industrialists. Today he is worth over $5 billion and suddenly D-Mart has assumed a market capitalization of ₹39,916 crore based on Wednesday’s closing price of ₹639.60 a share.
