Avenue Supermarts issue OFS at Rs 2,049 per share

The shares of Avenue Supermarts (DMart) have been the street’s darling stock and its returns, as its listing depicts the fact. Since its listing in 2017, it has delivered tremendous return of 700 per cent. The stretched valuation of the stock does not seem to bother the investors.

The stock is trading at 130 times of its H2FY20 earnings and 26 times of its book value.  Such high valuations usually would make investors think many times before making investment in the company. Here, the high valuations can be justified by its strong fundamentals and financial performance over the last few years. One of the important parameter for retail store companies is the same store sales growth, which registered a growth rate of 18 per cent at the end of FY19. The parameter throws light on the revenue growth in already operational stores for at least 24 months. Strong growth here shows that the company’s growth is due to the currently operational stores as well as the new addition of stores.

The stock is in focus recently after its Offer for Sale (OFS). The promoters are likely to sell nearly 2.27 per cent of the holding to comply with regulators and minimum shares holding of 75 per cent after three years of listing. The sales would add Rs 3,500 crore to promoters’ pockets. The floor price is decided to be Rs 2049 per share.

At 12.30 pm on Friday, the stock traded down by nearly three per cent at Rs 2,462 per share on BSE.