Bargain Hunting By Wives Turns D-Mart Owner Radhakishan Damani A Billionaire
D-Mart IPO could take Radhakishan Damani’s fortune to $2.7 billion.
Housewife Raji Nair wades through Mumbai’s bumper-to-bumper traffic once a week to shop. The destination’s always the same: the neighbourhood D-Mart supermarket store.
“I go there, I buy in bulk for a week,” Nair, 38, a resident of the city’s Navi Mumbai suburb, said. “Like anybody else, I am also a price-sensitive customer. I have done umpteen comparisons and D-Mart turns out to be the place to buy at the cheapest price.”
Such loyal customers and cut-rate prices have helped the retail chain store succeed in India’s $1.3-trillion household consumption market, making its stock broker-turned-entrepreneur-owner Radhakishan Damani, 61, a billionaire.
Damani has been profitable for 15 years selling biscuits, groceries and ice creams at the lowest prices. His success has also spawned competitors like Mukesh Ambani’s Reliance Retail and Kumar Mangalam Birla’s More.
Rivals will test Damani’s ability to sustain lowest prices. Deep discounts by other brick-and-mortar and online retailers will be a risk for D-Mart, said a report by Indian brokerage Centrum Wealth Management.
It hasn’t been an easy ride for retail companies in India. Wal-Mart Stores Inc. came in with dreams of a supermarket empire, but has had to settle for a scaled-down operation that’s been burning cash in each of the last seven years. Carrefour SA came in 2010, opened five stores, then left in 2014. Germany’s Metro AG’s losses have also persisted, 13 years after it opened its first store, Bloomberg News reported last year.
With 440 million millennials and 390 million Gen Z – or those born after the year 2000 – in India hungry to be catered to, Damani on Wednesday turned to the capital markets to give him the funds needed to expand.
Avenue Supermarts Ltd., 91.36 percent owned by Damani and the parent of D-Mart, started offering shares at Rs 295-299 per share on Wednesday. His company plans to raise Rs 1,870 crore through an initial public offer (IPO). The money will primarily be used to pare debt and open more stores. Axis Bank Ltd., Edelweiss Financial Services Ltd., HDFC Bank Ltd., ICICI Securities Ltd. and Kotak Mahindra Bank Ltd. are managing the IPO.
The offering was fully subscribed on the first day. Avenue has a good business model and better management and the IPO subscription on day one was on expected lines, said Sageraj Bariya, vice-president and analyst at brokerage East India Securities.
The retail chain’s maiden offering could take the valuation of Damani’s investments in listed companies to Rs 18,000 crore or $2.7 billion, according to data compiled by BloombergQuint. Damani is not on the board of Avenue Supermarts.
The retailer has 117 D-Mart stores compared to 794 Big Bazaar outlets of rival Kishore Biyani’s Future Retail Ltd. Its revenue per square feet is nearly twice and profit per square feet nearly four times Future Retail, according to data compiled by BloombergQuint.
Also Read: How D-Mart Stacks Up Against Peers
A Single Store, And Then Some More
After 10 years as a stock broker, Damani bought a property in suburban Mumbai in 2002 and found it ideal for a retail store, investment banker Vallabh Bhansali said. “It became so successful that he opened more such stores, and created a huge business out of it.”
Damani refused to be interviewed for this story.
The billionaire-investor had barely completed his first year in college when his father’s death forced him to take charge of family businesses. He started with the ball-bearing unit and moved on to stock broking, making speculative bets and diverting most of his gains toward long-term investments, Bhansali said.
Damani has staked a lot on multinational companies, said Madhusudan Kela, chief investment strategist at Reliance Capital Ltd., India’s largest mutual fund. He takes large long-term bets on solid managements and earns 15-18 percent compounded returns rather than taking a lot of risks, Kela said. Funds managed by Reliance Capital have subscribed to the Avenue Supermarts’ IPO as one of the anchor investors.
When the country allowed foreign investments in the early 1990s, Damani backed several Indian firms, Bhansali said. Damani holds more than 1 percent in over 10 companies including cigarette maker VST Industries Ltd. and logistics company Blue Dart Express Ltd., according to their stock exchange filings.
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He took a large bet on the TV18 group and has been very bullish on hotels, media and entertainment, said Kela.
Raghav Bahl, who founded Quintillion Media Private Ltd., a joint venture partner in BloombergQuint, was the managing director of the TV18 group when Damani invested in the company.
Damani has stayed away from betting on technology, said Kela. “I have not seen him make investments in the new economy or buy into disrupting technologies or startups.”
(Corrects to remove an erroneous reference to a community in the 14th paragraph of the story that was published on March 9)