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Dmart.ppt (2018)
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- 3. Country Private consumption(2015)Private consumption (2016) India 1.1 2.0 US 12.3 13.9 China NA 10.0 Brazil 1.1 2.4 Germany 1.8 1.21 UK 1.8 1.7 France 1.3 1.5 Italy 1.1 1.1 Retail forms around 30% of India’s GDP currently India is a consumption-led economy with private consumption forming – 60% of the GDP
- 4. 386 616 960 27 55 115 0 200 400 600 800 1000 1200 FY12FY16 FY20 CAGR (2016-20) USD bn Overall retail organised brick & mortor retail ORGANISED RETAIL SHARE 7% 9% 12% Over all retail : 11.7% Organized brick & mortar retail: 20.2% Retail forms around 50% of private consumption in India
- 5. Food & Groceryforms the largest share of organized B&M retail (2016) category 2016 2020 Food & Grocery 3% 5% Apparel & Accessories 22% 32.5% Footwear 40% 30% Jewelry & Watches 27% 30% Pharmacy & Wellness 10% 12% Consumer Electronics 25% 32% Home living 10% 12% Others 12% 14% pharmacy & wellness 4% home & living 6% footwear 6% CDIT 20% jwellery & watches 29% food & grocery 30% others 5% Low penetration provides huge potential for growth category wise (modern retail penetration category wise )
- 6. Retail sector: InvestmentScenario • The Indian retail trading has received Foreign Direct Investment (FDI) equity inflows totalling US$ 1.42 billion during April 2000–June 2018, according to the Department of Industrial Policies and Promotion (DIPP). • With the rising need for consumer goods in different sectors including consumer electronics and home appliances, many companies have invested in the Indian retail space in the past few months.
- 7. Government Initiatives • TheGovernment of India may change the Foreign Direct Investment (FDI) rules in food processing, in a bid to permit e-commerce companies and foreign retailers to sell Made in India consumer products. • Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online retail of goods and services through the automatic route, thereby providing clarity on the existing businesses of e-commerce companies operating in India.
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- 9. Road Ahead • E-commerceis expanding steadily in the country. Customers have the ever increasing choice of products at the lowest rates. • E-commerce is probably creating the biggest revolution in the retail industry, and this trend would continue in the years to come. India's e-commerce industry is forecasted to reach US$ 53 billion by 2018. Retailers should leverage the digital retail channels (e-commerce), which would enable them to spend less money on real estate while reaching out to more customers in tier-2 and tier-3 cities.
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- 11. States TOTAL INDIARETAIL SPENDING (USD Bn) Maharashtra 94 Tamil Nadu 49 Karnataka 40 Gujrat 39 Rajasthan 26 AP 25 Telangana 24 Punjab 23 Haryana 23 M.P 19 REST OF INDIA 261 D’MART STATES 355 Break up of retail spending by states (2016) Growth in retail spending across Key D- MART States (2012-2016 CAGR) 10% 11% 11% 14% 12% Maharashtra Gujrat AP/Telangana Karnataka M.P growth in retail spending
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- 14. Growth Strategy • Thecompany focuses on improving sales velocity by stocking the best-selling SKUs and brands in each product category that it identifies based on local preferences, and offering them at a minimum discount of 6%. Popular products at relatively low prices helps improve footfalls, leading to increased velocity in sales and lower pilferage • DMART makes upfront payment to suppliers and logistics providers, which helps it to maintain strong relationships and achieve lower costs. Our interaction with a logistics service provider highlighted that though the revenue offered per km is lower in case of DMART, the turnover offered is higher and payment is immediate. This also leads to consistency in sourcing without any risk of stock-outs. • DMART follows a dual system for its manpower requirement: (1) it hires key employees on its own payroll, and (2) obtains employees in job roles where attrition is high on contract basis. Currently, it has 4,200 employees on its payroll. A large part of its floor staff and security staff is on contract basis, which also helps to keep costs low. DMART’s employee cost has consistently been below 2% of sales.
- 15. Cluster based expansionstrategy
- 16. Virtuous cycle ofgrowth
- 17. Operating & financialsummary
- 18. Overview of Financials Standalone financials(Rs Crore) June 2018 June 2017 YoY Net Sales 4559.4 3598.1 26.7% Gross Profit 712.1 556.1 28.0% GROSS PROFIT MARGIN 15.6% 15.5% 16bps EBITDA 422.7 303.2 39.4% EBITDA MARGIN 9.3% 8.4% 84bps Depreciation 40.3 33.7 19.6% Interest 10.02 24.33 -58.8% Profit after tax 250.6 174.8 43.4% Profit after tax margin 5.5% 4.9% 64bps Earnings per share 4.02 2.80 43.4% • Expected it to deliver 31% revenue CAGR and 41% PAT CAGR over FY17-21. EBITDA margin is likely to expand 60bp to 8.8% by FY21, which along with savings on interest cost, would drive up PAT margin from 4% to 5.4%. With higher asset turns, ROCE and ROE is likely to improve from 14% and 18% in FY17 to 27.5% and 27.4% respectively in FY21
- 19. Future expansion • AvenueSupermarts is planning to add around 50 to 60 stores over the next two years, of which more than 75% of the stores will be located in the existing clusters. • Dmart plans to continue to remain a low-cost retailer albeit competition has intensified since the launch of every day low prices by rival Big Bazaar. This would be achieved by passing on cost savings to customers. Food comprises 51.55%, non-food FMCG 20.03% and General merchandise and apparel make for 28.42% of the company’s revenue.
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