At a Glance: Avenue Supermarts (DMart) has scaled revenue from ₹30,976 Cr in FY22 to ₹59,358 Cr in FY25 — nearly doubling in 3 years. But margins have flatlined, the P/E remains nosebleed-high at 97x, and capex is on steroids. Is this the cost of domination or a bubble in aisle 3?
1. 🛒 Business Overview: The House That Radhakishan Damani Built
- Avenue Supermarts operates DMart, a pan-India value retail chain focused on low-margin, high-volume grocery-led sales.
- Product mix:
- Food & FMCG: >50% of sales
- General Merchandise & Apparel: High-margin, low-contribution (and under pressure)
- Model: Buy land, own stores, avoid rental costs → superior unit economics
- Strategy: “Everyday Low Cost, Everyday Low Price” — aka, desi Costco with less kharcha and no membership cards
2. 💸 FY25 Snapshot: Big Numbers, Tight Margins
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | ₹42,840 Cr | ₹50,789 Cr | ₹59,358 Cr |
| Net Profit | ₹2,378 Cr | ₹2,536 Cr | ₹2,707 Cr |
| OPM (%) | 8% | 8% | 8% |
| ROCE | 20% | 19% | 18% |
| EPS (₹) | 36.69 | 38.97 | 41.61 |
- Sales CAGR (3Y): 24% | Profit CAGR: 15%
- Margin and return metrics are plateauing, not improving
3. 🏗️ Capex Expansion: Growth at What Cost?
- Fixed Assets: ₹9,260 Cr (FY22) → ₹16,206 Cr (FY25)
- Borrowings up from ₹647 Cr to ₹820 Cr
- Operating Cash Flow (FY25): ₹2,463 Cr — but capex = ₹2,185 Cr, so FCF nearly zero
- DMart is playing the long game, but the cost is visible on the balance sheet
4. 🏬 Store Network: Bigger, Not Always Better
- Store count as of May 2025: 420 stores
- Expansion = mostly tier 2–3 cities, where ASP per bill is lower
- General Merchandise sales hit by:
- Online competition (Amazon/Flipkart)
- Apparel inflation
- Changing customer preferences (higher-end formats winning)
5. 📉 Margin Story: Flat Like a Roti
- OPM stuck at 8% since FY22
- Competitive intensity rising in grocery space (JioMart, Tata, Reliance Smart)
- In-house brands struggling to break into high-margin categories
6. 🌐 Online Ambitions: DMart Ready… or Not?
- DMart Ready (E-commerce arm) is live in major metros
- But:
- Still <2% of total sales
- Lacks deep discounting muscles vs. BigBasket, Blinkit
- Logistics-heavy model hurting profitability
7. 📊 Valuation: P/E = 97x… Are We Mad?
- Current Price: ₹4,052
- EPS: ₹41.61 → P/E = 97.4x
- Book Value: ₹329 → P/B = 12.3x
- Fair Value Range:
- EPS FY26E: ₹47–50
- P/E Band (40x–55x, justified for high quality retail)
- Fair Value = ₹1,880 – ₹2,750
- CMP is nearly 2x above upper bound → valuation is priced for perfection
8. 🧠 Edu Take: What’s Going Right
- Market leadership in offline grocery
- Efficient cost structure
- Zero dividend = reinvestment machine
- ROCE of ~18% despite heavy capex
9. ⚠️ What’s Going Wrong
- No margin expansion in years
- Online biz isn’t scaling
- Store maturity taking longer
- ROCE slipping slowly
- High P/E = no room for error
10. 👨👩👧 Shareholding Snapshot
| Category | Mar 2025 |
|---|---|
| Promoters | 74.64% |
| FIIs | 8.18% |
| DIIs | 9.08% |
| Public | 8.04% |
- FIIs have reduced stake vs 2022
- DIIs rising gradually — but still small vs peers
11. 🔍 Peer Watch: Vishal MegaMart Catching Up
| Company | Sales (FY25) | Net Profit | ROCE | P/E |
|---|---|---|---|---|
| DMart | ₹59,358 Cr | ₹2,707 Cr | 18% | 97x |
| Vishal Mega Mart | ₹10,191 Cr | ₹460 Cr | 13% | 91x |
| V-Mart | ₹3,119 Cr | ₹78 Cr | 8% | 334x |
- DMart still dominant — but peers are leaner and growing faster
12. 🧾 Final Word (No Buy/Sell)
DMart remains the poster child of value retailing — but value for customers ≠ value for shareholders.
At 97x P/E, flat margins, and stretched FCF, it’s a retail Ferrari priced like a space shuttle.
Unless there’s a sudden margin jump or DMart Ready turns into Amazon 2.0 — this might just be a beautiful, boring compounding machine.
Tags: Avenue Supermarts, DMart Stock, Retail Sector India, FMCG Retail, Value Retailing, High PE Stocks, EduInvesting, Radhakishan Damani, DMart Ready
✍️ Written by Prashant | 📅 14 June 2025
