According to Madhu Kela, D-Mart is still a huge success story despite some consolidation

 According to Madhu Kela, D-Mart is still a huge success story despite some consolidation

In the second quarter of FY24, Avenue Supermarts recorded a combined net profit of Rs 623.35 crore, a 9.09 percent year-over-year (YoY) decrease. Over the same time, the company's sales increased by 18.66 percent year over year to Rs 12,624.37 crore.

The shares of Avenue Supermarts, the parent company of D-Mart, have dropped 8% over the last year due to margin challenges, rich valuation, and competition, yet seasoned investors like Madhusudan Kela and N Jayakumar are still highly optimistic about the situation.

In the Indian capital market, D-Mart stands as one of the greatest success stories. In an interview with Moneycontrol, Kela said, "One would have made tons of money if they had bought the stock in the IPO and post listing."

He continued by saying that it would be incorrect to draw the conclusion that D-Mart is a bad firm based just on its performance during the last 12 months. "Every company goes through a period of reorganization and muted returns and D-Mart might be facing the same period."

Consolidation, in the opinion of N Jayakumar of Prime Securities, is an excellent moment to invest in such fantastic companies. "D-Mart can very well turn into a big patakha (cracker) next year," he said. "Every The retailer store is a success story as well as the company is seeing increasing footfalls in the country."

Why the poor performance lately?

Avenue Supermarts' margins have been squeezed as a result of a decline in the contribution of high-margin items like clothing and general commodities. The firm still has competition in the garment market from companies like Trent, the owner of Zudio. Since 2017, the company's operational profit margins have stayed around 7–9%.

The creator and market strategist of Indiacharts, Rohit Shrivastava, said, "D-Mart is not showing any relative dominance or momentum, but should it does, probably then we can pay respect to the stock."

The extended narrative

Over the last five years, D-Mart's compounded sales growth has been 23 percent, and its compounded profit growth has been 25 percent. The firm, controlled by Radhakishan Damani, has increased the number of its shops from 214 in FY20 to 336 in H1FY24. It just established its 338th store in Katargram, Gujarat.

"It's a fantastic tale, and we're honored to have known Bhai Saab (Damani) so well on a personal level. The greatest wealth creation in such a short amount of time, in my opinion, and the finest run firm in India," Kela said.

In Q2FY24, Avenue Supermarts had a combined net profit of Rs 623.35 crore, a 9.09 percent decrease from the previous year. At Rs 12,624.37 crore during the same time last year, the company's sales increased 18.66 percent YoY. The shares have produced gains of more than 500 percent since launching in 2017.