DMart is continuing to do what it knows best but the street wants more

• DMart is among the top 15 companies in terms of valuation as it crossed market cap of ₹3 lakh crore last week.
• However, the company’s shares noticed a sharp 7% dip on Monday after the company announced its September quarter results on Saturday.
• Analysts have cited lack of fundamental changes in DMart’s business as one of the reasons why investors are trying to take a step back.

DMart has added 43 stores in 2021, the revenue has hit a new record between July and September and the profit has grown too — well above its pre-pandemic level — but the stock took a 7% dip in trade on Monday after the second quarter earnings report came out Saturday. The street’s concern is the lack of strength shown by India’s largest retail chain (by market value) in the online space.


Stock broking firm JM Financial highlighted that DMart Ready’s ⁠— the ecommerce front of Avenue Supermarts ⁠— revenue declined 8% between July and September compared to the previous quarter. This was despite the soft launch in two new cities — Surat and Vadodara.


Shares of Avenue Supermarts have risen 76.4% this year on hope that India’s fourth richest man will take a bigger leap towards digital sooner than later. However, from the looks of it, he is taking very careful steps into the online retail world.

“The stock’s recent run-up and valuation have happened without any fundamental change in the business prospects,” highlighted a report by Edelweiss Securities. The stock broking firm further highlighted that the massive opportunity in the brick-and-mortar stores have been factored in but the further re-rating would now depend on “significant strides” in the online grocery operations or a step up in store addition.

Take for instance, its online competitor JioMart is already serving customers in over 200 cities.

Even within the areas where DMart has an online presence, the only thing that is driving growth are big discounts.

DMart Ready is currently among the cheapest online stores and has been trying its best to take on the biggest e-grocer in the country BigBasket, which is now owned by Tata Digital.

According to a recent report by Jefferies, JioMart has the highest discounts in packaged foods, beverages and home care whereas JioMart is best suited for dairy, basic staples and personal care.

Watch More: DMart and JioMart are offering deep discounts to catch up with BigBasket

The expansion of physical stores on the other hand has been strong over the last couple of years but even that has slowed in the last two quarters. However, this expansion is coming at a very low cost.

Between September 2020 and September 2021 quarters, DMart’s other expenses have grown 3.2% despite nearly 11.8% increase in the store front. This indicates a “significant cost control” and “operating leverage”, as per a report by stock broking firm Prabhudas Lilladher.

Source: Avenue Supermarts’ financial statement

Right now, investors seem to be demanding a clearer promise of the future and what DMart’s chief executive Ignatius Navil Noronha’s strategy is going to be. In the meantime, analysts are cautious with their recommendation on the stock.


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