DMart

/ April 26, 2020

DMart is an emerging national supermarket chain, with a strong focus on value retailing. Its mission is to provide the best value for its customers so that every rupee they spend on shopping gives them more value for money than they would get anywhere else. It opened its first store in 2002. Click here to read the rest.

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13 thoughts on “DMart”

    • Hi Dilip,

      My goal to share this post is to explain the business model of DMart. I like their business model and see it becoming stronger over the years. I am not making any buy, sell, or hold recommendation.

      Regards,
      Jana

  4. Jana, excellent analysis. As a former CEO of a large organised retail chain, I feel comparison with Wall Mart is not valid. Any retailer with a limited footprint will take a very long time to produce consistently outstanding profitability and ROE/ROCE. New outlets continuously dilute profits produced by the earlier established stores. If they slow down new additions , they will not grow and
    will stagnate at a sub-optimal scale. Thus almost all brick and mortar retail companies in India are not ideal investment for years to come. You may be better off investing in their vendors like NESTLE, HUL, Colgate, , who are available at relatively better valuation than the outrageously high valuation of companies like D-mart. What do you think?

  5. I always like reading your post and everytime i came to know new perspective of business / physcology. I just have query what will be effect of jiomart or similar amazon tie up with mom and pops shop in our neighbour. Will it affect gross sales of Dmart.

    • Thanks, Ravi. Too early to tell JioMart’s impact on DMart. I think multiple players will do well as the pie is too big and organized retail penetration is still in low teens.

      Regards,
      Jana

  6. Many brands and package sizes are not available in DMart. Replenishment is based on the employees mood and not monitored properly. The stores are increasingly becoming lower middle class.
    Suggest DMart take feedback from customers and launch a mystery customer feedback system

  7. Hi Jana, I am Ramu from Chennai and you may recall me as we met in a coffee shop in California with my son-in-law and you had recommended me a life changing book, “Obesity Code”. Your D mart analysis is fabulous. However, I have a doubt to ask you to clarify my thought process. In your arrival of IRR, in a DCF model, the figure you had arrived for future revenue (Rs 155413) and future profit (Rs 8382) are just 10th year figures. Is it not necessary to add each year revenues and each year profits and the discount to net present value to find IRR? I am not expert at DCF. However, by cursory look, it seems to me that you have considered only the 10th year instead of cumulative 10 years. If I am wrong, plesae be magnonimus about it. Thanks. 9884384425

    • Yes, sir, I remember our conversation in Starbucks.

      In a normal DCF, you would discount profits from each year at some discount rate, add them up, and arrive at intrinsic value. Then compare the intrinsic value with the current price and decide if it’s worth a buy.

      The challenge I have with that is to do some more work to arrive at the IRR. My model still uses DCF. However, I directly calculate the IRR using the current market capitalization and expected market capitalization after ten years. In DMart’s case, there is no free cash flow, as I am assuming a 100% reinvestment rate.

      To see it yourself, run a DCF using your approach at a 10% discount rate. You will see that the intrinsic value will be below the current stock price. That’s why the IRR is ~7%.

      If the intrinsic value is the same as the current stock price, then the IRR will be 10%, the same as your discount rate. If the intrinsic value is higher than the current stock price, then the IRR will be more than 10%.

      I hope it helps.

      Regards,
      Jana

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