Billionaire Radhakishan Damani’s discount supermarket chain, DMart, plans to expand its store count fivefold as it seeks to increase market share and defend against aggressive expansion by Mukesh Ambani’s Reliance Retail Ltd.
Avenue Supermarts Ltd, which currently runs the fourth-largest number of convenience stores in India, could expand the chain known for its bargain prices on everything from lentils to washing powder to 1,500 out of 284 supermarkets, chief executive Neville Noronha has said. in an interview. . He declined to give a timeline or estimate the investment needed.
“Great actors can function happily without caring about each other,” Noronha said. “There’s no need to worry about that for another 20 years – the room for growth is impressive.”
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The company opened its highest number of 50 stores in the year to March, its highest ever, and aims to tap into India’s burgeoning middle class, which some researchers say could account for up to half of the country’s nearly 1.4 billion people. Against a backdrop of rising inflation, this segment is also on the hunt for bargains – something DMart is known for. Apart from adding stores, DMart is also trying to grow its unprofitable e-commerce business.
“The sky’s the limit for any brick and mortar retailer in the country,” Noronha said. “You need to focus on opening more and more stores” as India’s organized grocery market was far from saturated, he said.
Damani, the 68-year-old self-made billionaire and founder of DMart who steered his supermarket empire to a successful listing in 2017. The stock has jumped 1,370% since listing, giving Damani a net worth of 22.1 billion, according to the Bloomberg Billionaires Index.
Nascent stage
India’s organized retail market is still in its infancy and, according to estimates by the government’s export promotion agency, it is growing at 20-25% annually. Avenue Supermarts is expected to add 135 DMart outlets by March 2024, according to a report released this month by Mumbai-based brokerage firm Motilal Oswal.
The company’s net profit for the June quarter rose more than sixfold to Rs 640 crore from the same period last year as the local economy recovered from pandemic-related drags. Revenues also nearly doubled.
Its online business, however, remained a weak spot, which drove its stock down.
Avenue Supermarts shares are down 5.8% this year, lagging the S&P BSE Sensex which has risen 3.4%. Its e-commerce business, spread across 12 Indian cities, recorded a loss of Rs 142 crore in the last quarter amid intense competition.
Noronha admitted that breaking into the online retail market has been “difficult”, but that DMart plans to add more online distribution centers to the current two in Mumbai.
DMart has also experimented with a few smaller store formats in Mumbai and Hyderabad, where real estate is expensive.
‘Comfort food’
He also started selling pizza in one of his supermarkets as he takes on Domino’s Pizza Inc.
“As the economy grows, people have less time, they want comfort food,” Noronha said. “We believe we can offer the same high quality at significantly lower prices.”
Noronha said increased inflation would be a boost for the discount chain.
“In times of inflation, the general understanding is that people are looking for more deals,” he said. “People want products available at cheaper prices, so that helps a business like ours.”
