IIFL on D-Mart IPO

Below is the verbatim transcript of Sanjiv Bhasin & SP Tulsian's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal.

Sonia: I want to understand from you what kind of growth this can eke out over the next couple of years because it has already quadrupled its revenues over the last five years and in that sense how much do you think is already in the initial public offering (IPO) price and what kind of value would it offer to investors?

Bhasin: It is coming at a time when Nifty is making new highs, there is a lot of hype and it will be hugely oversubscribed. However, I agree that it has already been priced to perfection and growth from here will be a little bit tedious but given the atmosphere where we have seen huge expansion on their margins and the volume going ahead, you could still a bit of an upside.

However, 77 percent of the business comes from Maharashtra and Gujarat. It's been a low key kind of a retail player and now there will be an impetus for expansion and also a huge part of the proceeds will be used in reducing debt which over a period of time will improve the return on equity. However, as a caveat, if you recall, we had a very big buy on Future Lifestyle Fashions around Rs 125 level and in the space of six months that stock is up 70 percent and from a marketcap of below Rs 2,000 it is almost Rs 3,800 crore.

D-Mart would list at a marketcap of close to Rs 17,000-18,000, which will mean that at least the marketcap will be difficult to budge immediately but given that there is a paucity of good stocks, I think investors will be rewarded but we have to be only careful about the subscription ratio. So going ahead market performs with an initial pop which may not be able to be sustained at higher levels.