Avenue Supermarts, the parent of the D-Mart chain of food and grocery supermarkets, on Wednesday announced a price band of Rs295-299 per share for its initial public offering (IPO). According to Neville Noronha, MD & CEO, Avenue Supermarts Ltd, a significant portion of the funds being raised will be deployed towards debt repayment and balance for expansion and other general expenses. Approximately Rs 1,080 crore from the net proceeds will be for reducing debt, which is currently at Rs 1,400 crore. Of the balance, Rs 366 crore will be utilised for funding expansion including construction and fit outs for new stores and Rs 424 crore for general corporate purposes, the company said in its draft red herring prospectus (DRHP).
The issue will open on March 8th and will be open for couple days, closing on March 10th, 2017. Avenue Supermarts has reserved 50 percent portion of public issue for qualified institutional buyers 60 percent of the 50% may be allocated to anchor investors. The company has also reserved 15% portion of the entire issue for non- institutional investors and the remaining 35% for retail investors.
According the livemint.com Radhakishan Damani, owns 91.34% of Avenue Supermarts.“Mr Damani was very actively involved in the company until 2011,” Neville Noronha, CEO of Avenue Supermarts, said, adding, “assortment is his speciality and he acts as the guide to our assortment team.” “For us, the food business is what brings footfalls,” Noronha said. “But we also try to ensure consumers stay to buy some of our higher margin goods.”
“For us, business is a science, but assortment is an art,” Noronha said. “We usually have lower SKUs (stock-keeping units) than the industry average, about 40-60% (of the average). We don’t give customers all that they want, and feel we may know more than the customer. It is very counter-intuitive.”
Despite going to the market for funds, Avenue Supermarts is not planning to speed up its expansion plans. “We are likely to be in states where we are already present, and 70-75% of sales will come from existing cities,” Noronha said
D-Mart operates close to 120 stories, the company’s stores are located across 45 cities viz. Maharashtra (59), Gujarat (27), Telangana (13), Karnataka (7), Andhra Pradesh (4), Madhya Pradesh (3), Chhattisgarh (1), NCR (1), Daman (1) and Rajasthan (2) and as of March 31st this year the company generated revenue of Rs 8,600 crore and a net profit of about Rs 320 crore. However, the profit margin of D-Mart is less, it makes money from the low margin food business.
The company intends on using Rs 1,080 crore for repayment of loans and Rs 300.6 crore to purchase and construct new stores. The company will announce use of the remaining funds once the share price is finalised. The company also shared financial numbers for the nine months that ended on 31st December.
