Avenue has not disclosed the final details of the qualified institutional placement.
Out of the 25 brokerages that cover Avenue Supermarts, 11 have a ‘buy’ rating, while 9 have a ‘sell’ call.
Avenue Supermarts – the firm that controls supermarket chain DMart – crossed Rs 1.50 lakh crore in market capitalisation on Monday, surpassing Nestle and Bajaj Finserv to become India’s 18th most valuable company. The company listed on March 21, 2017 at a market capitalisation of Rs 39,988 crore. Since then, the stock has risen 290 per cent.
Avenue shares rose 8.6 per cent to close at an all-time high of Rs 2,484.15 on Monday after the company announced a share sale for institutional investors on February 5. The company planned to raise up to Rs 4,000 crore at Rs 2,049 apiece. Avenue has not disclosed the final details of the qualified institutional placement.
The stock has jumped 35 per cent so far this year. If an investor received shares worth Rs 1 lakh crore during the initial public offer of Avenue Supermarts in March 2017, it would have become Rs 8.31 lakh crore on Monday. After the run-up in the share price, Avenue’s founder Radhakishan Damani, also considered an astute stock market participant, is now India’s sixth richest person with a net worth of $11.9 billion, wealthier than Gautam Adani ($10.8 billion) and Sunil Mittal ($9.6 billion).
Currently, the stock is trading at a market capitalisation of more than that of Wipro, ONGC, UltraTech Cement and HDFC Life Insurance.
Analysts and investors have criticised Avenue for being expensively valued, but that has not hurt the stock’s performance so far.
Out of the 25 brokerages that cover Avenue Supermarts, 11 have a ‘buy’ rating, while 9 have a ‘sell’ call. The average target price on the stock by analysts is Rs 1,897, 24 per cent lower than the current market price of Rs 2,483. Brokers said low floating stock and relatively stronger profitability have ensured that Avenue Supermarts has been a Dalal Street favourite.
D-Mart delivered strong growth in net profit in October-December 2019 quarter but revenues were under pressure because of a consumption slowdown. For the quarter ended December 31, Avenue Supermarts had reported a 53.3 per cent year-on-year rise in standalone profit at Rs 394 crore compared with Rs 257 crore last year.
High capex and moderating revenue growth could crimp return ratios, according to analysts.
“Its consistent superlative performance has ensured strong valuation rerating in the last three years since its listing and resulted in massive outperformance versus the market and other retail peers,” said Aliasgar Shakir, analyst, Motilal Oswal Financial Services.
“Valuation at 86 times FY21 PE is expensive and provides no margin of safety.”
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