Shares of Avenue Supermarts Ltd., the parent of Mumbai-based supermarket chain D-Mart, recorded its biggest intraday drop since listing after billionaire founder Radhakishan Damani announced a plan to sell stake in the retailer.
Damani will offload up to 1 percent stake, aggregating to 62.4 lakh shares, worth over Rs 800 crore between May 21 and June 14, India’s largest retailer by market value said in an exchange filing. The sale is to comply with the Securities and Exchange Board of India’s minimum public shareholding norm, it said.
Avenue Supermarts is 82.2 percent owned by the Damani family. Under SEBI norms, a listed company needs to maintain a minimum public shareholding of 25 percent. The promoter group will have to sell over 7.2 percent stake to bring public holding to that level.
Shares of the retailer declined as much 8 percent after the announcement, eroding its market value by Rs 5,000 crore. The company has gained 299 percent since its blockbuster listing last year that turned Damani into a billionaire.
About 53 percent of the analysts tracked by Bloomberg have a ‘Sell’ rating on the stock, while the rest recommend ‘Buy’ or ‘Hold’. Citigroup’s research arm, which initiated coverage with a ‘Sell’ last week , pointed out high valuations and increasing threat from the online retail. “Like many other countries, concerns of possible disruption for brick-and-mortar retail businesses in the longer term due to e-commerce cannot be ruled out.”
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