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Annual Report Review: Avenue Supermarts (D-Mart)

Here is my review of the FY17 annual report of India’s leading value retailer, Avenue Supermarts, which owns and operates the D-Mart brand of stores.

Click here to download the PDF review (4 MB file), or read it in the panel below.

Let me know your thoughts and questions on this review in the Comments section of this post, plus any additional thoughts from your own review of Avenue Supermarts’ FY17 annual report.

Statutory Warning: This is NOT an investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. I do not own the stock, but my analysis may be biased, and wrong. I have been wrong many times in the past. I am a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014 (Registration No. INH000000578).

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.


  1. Superb analysis once again! Thank you Vishal for making annual report reading so lucid and interesting for us folks.I will try to analyze an annual report this way and send you for feedback. 🙂 Cheers!

  2. Loved your analysis Vishal. I especially liked the comparison with Walmart on the valuations front, and your last para on DMart being like a beautiful woman but one not many can afford 😉 😉 Keep them coming.

  3. Thank you for your analysis. I do believe that people would still like to do offline shopping especially for daily items. I do not see bigbasket or amazon pantry as threat for dmart. Hence, keeping the lot that I got in IPO for longterm.

  4. Thanks. I wish I could have such clarity of thought. Great.

  5. Venkatesh says:

    Hi Vishal. All is good, only Valuation front seems to be a concern. Last month in ‘Wealth Insight” i read somewhere, that at the current valuation, each D-Mart store is valued at 300 crores, which is a concern. Thanks for this article. Regards, Venkatesh.

  6. Shiv Kumar says:

    On my watch list. I guess I will have to wait for the next bear market to buy this. But then there will be others which are cheaper and with more compelling rationale to buy.

  7. Rakesh Gulati says:

    Hi Vishal

    PDF very well captures the past history of D Mart from 1 to 133 stores and so is the valuation. However few negatives which need to be considered are

    1. Expansion based growth is all factored in, expansion in Food growing regions of india (Punjab,Haryana, UP, Bihar) will be tough. Major revenue for Dmart is staples, and this region has a very strong local sourcing model for staples. Only few tier-1, tier-ii cities like NCR/Chandigarh offer some expansion scope. D mart will have to increase its footprint in existing region to achieve efficiency and economy

    2. Amazon has big investment chest, and it has got approval from GOI, it won’t be having the foreign tag. Technology based efficiency will be higher for Amazon. DMart is still taking baby steps to handle the amazon threat.

    Disc: Not holding, and waiting since ipo for valuation to cool down 🙁

  8. Good analysis Vishal. I would only add if the runway for growth allows you to consider a quadrupling of earnings in 4 years due to both store expansion and margin expansion hopefully, due to some more economies of scale, then the current price would translate to a PE of 30 (120 PE div. by 4) but that means 4 years of no price growth for it to happen. So, the right time to buy this stock in my view is during a general market correction where this PE can be brought down to 60 or so within the next couple of years, at which time, this could be a great buy.

    Btw, good notes on Buffett’s experience with Wal*Mart in 1988. I have analyzed this decision few years ago and it is a fascinating case. Though there are parallels to D-Mart, the big difference is PE 30 for Wal*Mart vs. PE 120 for D-Mart now, which makes Wal*Mart a far less riskier decision in 1988 vs. D-Mart today. Despite such errors of omission, Buffett is mega-successful. This gives us all hope that you don’t have to hit sixers in investing to retire wealthy. It’s all about live and learn, right?

  9. Being from an FMCG background, I know this business a little. There is always a push and pull between what we called ‘modern’ retail and Brands. This will always cap the margins of organised retail. While GST maybe an enabler, the big joker in the pack is e-commerce. The deep pockets of Amazon and (maybe) Flipkart will also have to be factored in while analyzing the long term prospects of retail. While Avenue maybe one of the best amongst the retailers currently, we cannot rule out a ‘kodak’ moment in the future where an Amazon could become the retailer of choice. (E.g. Whole Foods).

    Its a very interesting space. But one thing is for sure – the stock is heavily overpriced.

  10. Hi Vishal,
    Thanks for a good analysis, and the valuation comparison with Wal Mart was very interesting.
    I also read up about the CMD who’s spent quite a bit of time with the company, which is encouraging. The website does not seem to have an investor page currently.
    It’s evident that there’s a lot of growth potential. Any thoughts on which companies in the retail segment are worth investing in? Of course, given that the industry is changing so fast (and possible threat from further proliferation of online as well), it would be interesting to hear your thoughts on what’s a good P/E to buy this stock at.

  11. Nabil Arridho says:

    What a insightful review sir!

    I personally want to thank you for giving us a free education about reading annual report. I have been following your posts since this year and your website is the most beneficial for me in learning value investing.

    According to your review about Dmart, I saw that Dmart has just issued their rights to public and they are planning on expanding more. We can see in the cashflow statement that the free cash flow is negative if we calculate it. My question sir, what should we do in analyzing this kind of company that has a good performance but has a negative cash flow in the current year? We know that it will eventually becomes positive as you stated the top managements are value people like us.

    I really appreciate if you can give us some advice on this issue.

    Thank you sir.

  12. Murali Krishna says:

    Dear Vishal, an excellent review. I am new to reading annual reports. The way you have reviewed the AR of this company itself is an education as to how to read an AR. Thank you.

  13. Wonderful analysis .Almost a primer on how to analyse. Just feel its too overpriced without doing all this analysis. Also I have seen lot of retailers in Chennai come and gi but still the local guys are beating them. More,Reliance,FoodWorld(Spencers) all have collapsed, only a few remain and that too unprofitable.Walmart’s main advantage was the China sourcing model,low pay(almost zero benefits) which doesnt hold here.I remember Sun Pharma where everybody was recommending and buying and Suzlon before that so kind of the “All buy recommendation” is a putoff

  14. dev golchha says:

    I think businesses like D-Mart will always trade at high P/E. I have bought the stock and holding on to it. The price is reflection of the expectations and the consumption story which will unfold in next 5-10 years.The convenience and clarity in dmart stores has no competition(Reliance and Big-Bazar somehow do not have that clarity, thats what I have experienced).Dmart has NCR and east (Kolkata and Guwahati) to occupy which has a very large population which will convert into revenues.Plus its doing backward integration on products like sugar=-tea and salt. As far as online is concerned,I dont think groceries and low value non-fmcg is where online is a threat. We as a country like looking at options(price-wise and feel wise) and atleast the next 10 years looks good for Dmart.

  15. Thanks for the wonderful analysis. Definitely worth adding to the watchlist.
    A few unusual things I noticed which you may comment.
    As per Screener, the company has negative cashflow (discounted with IPO money), which is however getting better.
    As per VRO, RONW has drastically come down from 23 to 18. Its net margin is just around 4% which is way too less. It’s also not clear how they plan to invest the IPO money.

    BTW, as per NSE report, they are #1 in market cap, net profit and assets – way behind Future retail.

  16. SNEHASHIS DAS says:

    Really great analysis – a job well done. You guys have taken this to a different level altogther.
    Thanks and keep up the great work. Looking forward to similar analysis of Annual reports of other fantastic businesses.

  17. Dear Mr Vishal,
    Got an opportunity for reading your analysis for the first time. Very systematic and researched article. Kudos from my heart.
    I have been in the market for quite sometime and had occasion to be intimately friends with Harshad Mehta era type deeply connected individual/s( no need to elaborate!)..
    Radhakrishna & Ramesh are deep hands in this business of taking care of the stock at different phases of the market.. Maybe this is one vehicle which has got them directly in to the market. earlier they had to research and find stocks like TCI, Blue dart etc etc . Ramesh has matured into a value investor over time. So despite high valuations etc with their TREMENDOUS insight into pricing of stock/s and moving the market, they will already be having a detailed blue book on the course of the stock. The milking has just begun….!

  18. Kunal shah says:

    Excellent analysis , much needed in current markets. Really love your insights and PDF annotations really help us focus on the right areas.

    Just saw this is the first one in 2017. Can you pls do more of them..

  19. Pankaj pant says:

    Hi Vishal.
    Great perspective . I thought let me bring to your knowledge the grandfather of vishal mart. V2Retail ,which has risen from the ashes . Though the share prices has risen many fold last 4 quarters , is the business model sustainable? Is there value at current prices?
    Will wait for your analysis

  20. ALso can you do a check a comparative study against v2 retail. That stock has gone from 60 rs to 400 in no time. So any analysis will
    Be helpful

  21. Nitin Sood says:

    Vishal, loved it!!

  22. Thanks Vishal for one more great Post!
    Only the doubt on valuations remains.
    May be its similar to See’s Candy that happened with Buffet. Great Business run by Great People but at a tall price.
    Need to understand if it is somehow possoble to find what is the reasonable price for the businesses.

  23. Stock4Life says:

    As usual excellent analysis Vishal. your posts are very valuable for starter like me.
    Thanks for taking time and posting this analysis.

  24. Sandeep Shejwalkar says:

    Hello Vishal

    Beautiful analysis! Especially Last Paras!!!

    Sandeep Shejwalkar


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