fundamental research

2. Industry
Overview

3. Country Private consumption(2015) Private consumption (2016)
India 1.1 2.0
US 12.3 13.9
China NA 10.0
Brazil 1.1 2.4
Germany 1.8 1.21
UK 1.8 1.7
France 1.3 1.5
Italy 1.1 1.1
Retail forms around 30% of India’s GDP currently
India is a consumption-led economy with private consumption forming – 60% of the GDP

4. 386
616
960
27 55 115
0
200
400
600
800
1000
1200
FY12 FY16 FY20
CAGR (2016-20)
USD bn
Overall retail organised brick & mortor retail
ORGANISED
RETAIL SHARE
7% 9% 12%
Over all retail : 11.7%
Organized brick & mortar
retail: 20.2%
Retail forms around 50% of private consumption in India

5. Food & Grocery forms the largest share of
organized B&M retail (2016)
category 2016 2020
Food & Grocery 3% 5%
Apparel &
Accessories
22% 32.5%
Footwear 40% 30%
Jewelry &
Watches
27% 30%
Pharmacy &
Wellness
10% 12%
Consumer
Electronics
25% 32%
Home living 10% 12%
Others 12% 14%
pharmacy &
wellness
4%
home &
living
6%
footwear
6%
CDIT
20%
jwellery &
watches
29%
food &
grocery
30%
others
5%
Low penetration provides huge potential
for growth category wise (modern retail
penetration category wise )

6. Retail sector: Investment Scenario
• The Indian retail trading has received Foreign Direct Investment (FDI)
equity inflows totalling US$ 1.42 billion during April 2000–June
2018, according to the Department of Industrial Policies and
Promotion (DIPP).
• With the rising need for consumer goods in different sectors including
consumer electronics and home appliances, many companies have
invested in the Indian retail space in the past few months.

7. Government Initiatives
• The Government of India may change the Foreign Direct Investment
(FDI) rules in food processing, in a bid to permit e-commerce
companies and foreign retailers to sell Made in India consumer
products.
• Government of India has allowed 100 per cent Foreign Direct
Investment (FDI) in online retail of goods and services through the
automatic route, thereby providing clarity on the existing businesses of
e-commerce companies operating in India.

8. Peer Analysis

9. Road Ahead
• E-commerce is expanding steadily in the country. Customers have the
ever increasing choice of products at the lowest rates.
• E-commerce is probably creating the biggest revolution in the retail
industry, and this trend would continue in the years to come. India's
e-commerce industry is forecasted to reach US$ 53 billion by 2018.
Retailers should leverage the digital retail channels (e-commerce),
which would enable them to spend less money on real estate while
reaching out to more customers in tier-2 and tier-3 cities.

10. BUSINESS
OVERVIEW

11. States TOTAL INDIA RETAIL
SPENDING (USD Bn)
Maharashtra 94
Tamil Nadu 49
Karnataka 40
Gujrat 39
Rajasthan 26
AP 25
Telangana 24
Punjab 23
Haryana 23
M.P 19
REST OF INDIA 261
D’MART STATES 355
Break up of retail spending by states
(2016)
Growth in retail spending across Key D-
MART States
(2012-2016 CAGR)
10%
11% 11%
14%
12%
Maharashtra Gujrat AP/Telangana Karnataka M.P
growth in retail spending

12. Key product categories

14. Growth Strategy
• The company focuses on improving sales velocity by stocking the best-selling SKUs and brands in
each product category that it identifies based on local preferences, and offering them at a minimum
discount of 6%. Popular products at relatively low prices helps improve footfalls, leading to
increased velocity in sales and lower pilferage
• DMART makes upfront payment to suppliers and logistics providers, which helps it to maintain
strong relationships and achieve lower costs. Our interaction with a logistics service provider
highlighted that though the revenue offered per km is lower in case of DMART, the turnover
offered is higher and payment is immediate. This also leads to consistency in sourcing without any
risk of stock-outs.
• DMART follows a dual system for its manpower requirement: (1) it hires key employees on its
own payroll, and (2) obtains employees in job roles where attrition is high on contract basis.
Currently, it has 4,200 employees on its payroll. A large part of its floor staff and security staff is
on contract basis, which also helps to keep costs low. DMART’s employee cost has consistently
been below 2% of sales.

15. Cluster based expansion strategy

16. Virtuous cycle of growth

17. Operating & financial summary

18. Overview of Financials
Standalone
financials (Rs
Crore)
June 2018 June 2017 YoY
Net Sales 4559.4 3598.1 26.7%
Gross Profit 712.1 556.1 28.0%
GROSS PROFIT
MARGIN
15.6% 15.5% 16bps
EBITDA 422.7 303.2 39.4%
EBITDA MARGIN 9.3% 8.4% 84bps
Depreciation 40.3 33.7 19.6%
Interest 10.02 24.33 -58.8%
Profit after tax 250.6 174.8 43.4%
Profit after tax
margin
5.5% 4.9% 64bps
Earnings per
share
4.02 2.80 43.4%
• Expected it to deliver 31% revenue CAGR
and 41% PAT CAGR over FY17-21.
EBITDA margin is likely to expand 60bp to
8.8% by FY21, which along with savings on
interest cost, would drive up PAT margin
from 4% to 5.4%. With higher asset turns,
ROCE and ROE is likely to improve from
14% and 18% in FY17 to 27.5% and 27.4%
respectively in FY21

19. Future expansion
• Avenue Supermarts is planning to add around 50 to 60 stores over
the next two years, of which more than 75% of the stores will be
located in the existing clusters.
• Dmart plans to continue to remain a low-cost retailer albeit
competition has intensified since the launch of every day low prices
by rival Big Bazaar. This would be achieved by passing on cost savings
to customers. Food comprises 51.55%, non-food FMCG 20.03% and
General merchandise and apparel make for 28.42% of the company’s
revenue.

20. Thanks