Centrum wealth Research has come out with its report on Avenue Supermarts Ltd. The research firm has recommended to "Subscribe " the IPO in its research report as on March 08 , 2017.
Avenue Supermarts Ltd (ASL) is one of the largest and most profitable food & grocery retailer in India promoted by Mr.RK Damani. It operates under the brand “D-Mart” having 118 stores in 45 cities spanning over 3.59 million sq. ft. of retail space. It has a dominant presence in west, southwest and central India. Business verticals for the company include food (53% of 9MFY17 revenue), non-food (19%) and general merchandise & apparel (28%).
Objects of the issue:
The company aims to raise ₹1,870 crore which would be mainly used to repay/pre-pay debt (₹1,080 crore), store expansion capex (₹366 crore) and general corporate purposes.
At the higher price band of ₹299, the offer is valued at 36x P/E and 1.6x M.Cap/sales on 9MFY17 annualized basis (post dilution). While there are no direct comparable, companies like V-Mart (40x P/E on FY17E), Trent (49x) and Future Retail (34x) having significant retail presence are trading at higher valuations. Given ASL’s strong fundamentals, high growth, focussed approach to cluster based expansion with ownership model and robust supply chain management, the offer seems to be at reasonable valuations. Hence, we recommend Subscribe to the IPO.
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