Retail · investment research
Avenue Supermarts
DMART
Verdict
WATCHLIST
low confidence · 3-5 years
Composite score
66/100
Weighted across all eight pillars
Business quality
75/100
Moat, returns, balance sheet, cash, management
Valuation score
30/100
At 56.5x against a sector median of 56.5x, the price embeds roughly 40% earnings growth. Anything less has to come out of the multiple.
Decision intelligence
Every conclusion states what would make it wrong
WHAT
Good business, wrong price. Track it and wait for a better entry.
WHY
- • Profitability & returns scores 100/100 (improving) — ROCE was 26.5% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- • Balance sheet scores 95/100 (deteriorating) — Leverage is serviceable from current cash generation.
- • Valuation scores 30/100 (stable) — At 56.5x against a sector median of 56.5x, the price embeds roughly 40% earnings growth. Anything less has to come out of the multiple.
- • Management & governance scores 67/100 (deteriorating) — Whether management historically delivered what it promised.
WHERE
Retail · Mid cap · position sized to at most 0% of an equity portfolio.
WHEN
Revisit if the price approaches ₹7,557 or earnings catch up with the multiple.
WHAT IF WRONG
- • The thesis is wrong if ROCE falls below 27% or cash conversion stays under 70% for two straight quarters.
- • Valuation support fails below ₹7,557 of fair value — a drawdown to that level is a re-underwrite, not automatically a buy.
- • Watched risk: Promoter pledge — 13.8% of promoter holding is pledged.
WHAT NEXT
- • Read the latest quarterly cash-flow statement alongside the P&L.
- • Check GDP growth — it moves the earnings base independently of execution.
- • Compare against the sector peers listed below before sizing anything.
Avenue Supermarts is a competitively exposed retail business compounding revenue at 6.0% and profit at 14.6%, earning 30.9% on capital. Quality scores 75/100 and valuation 30/100 at 56.5x. The decision is therefore watchlist with low confidence — this is analysis for learning, not investment advice.
What does this business actually do?
Business understanding before ratios
Avenue Supermarts operates in the Indian retail sector with a mid-cap footprint and a listed market value of about ₹251k Cr.
Revenue is earned across 4 reported segments; profitability is driven by realisations, mix and operating leverage rather than one-off items.
Revenue drivers
- • Volume growth in the core segment
- • Realisation / pricing power
- • Mix shift toward higher-margin lines
- • Capacity utilisation
Cost drivers
- • Raw material and input costs
- • Employee cost inflation
- • Depreciation from recent capex
- • Distribution and marketing spend
Moat · 39/100
No durable moat identified
Competition is largely on price; returns depend on execution and the cycle.
Segment mix
Growth -0.1% · margin 25.5% — Flat to declining; drags the consolidated growth rate.
Growth 24.5% · margin 29.8% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 24.3% · margin 15.7% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 28.3% · margin 30.3% — Fastest growing part of the mix — watch whether margins hold as it scales.
Analysis pillars
Score, trend and the drivers behind each — no bare numbers
Business & moat
49/100Trend: stable · weight 14%
- MoatNo durable moat identified
Competition is largely on price; returns depend on execution and the cycle.
- Segment concentrationStandalone stores is 36.7% of revenue
Revenue is spread across segments, which softens single-market shocks.
- EBITDA margin23.0%
Margin moved from 23.0% to 23.0% year on year.
Profitability & returns
100/100Trend: improving · weight 16%
- ROCE30.9%
ROCE was 26.5% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- ROE30.9%
Return on equity after leverage — read alongside debt levels.
- Net margin12.0%
Share of every rupee of revenue that reaches reported profit.
Growth quality
51/100Trend: improving · weight 15%
- Revenue CAGR (4y)6.0%
Top-line compounding over the reported history.
- Profit CAGR (4y)14.6%
Profit is compounding faster than revenue — operating leverage is working.
- Growth sourceCapex-led (organic)
Capex is 11.0% of revenue this year.
Balance sheet
95/100Trend: deteriorating · weight 12%
- Debt / EBITDA0.17x
Leverage is serviceable from current cash generation.
- Debt / equity0.10x
Capital structure relative to shareholder funds.
- Working capital95 days
Long cycle: each rupee of growth locks up more cash.
Cash conversion
66/100Trend: stable · weight 13%
- OCF / PAT98%
Reported profit is backed by operating cash.
- Free cash flow₹731 Cr
Cash left after maintaining and expanding the asset base.
Management & governance
67/100Trend: deteriorating · weight 14%
- Guidance delivery73% of last 8 quarters
Whether management historically delivered what it promised.
- Promoter holding70.2% (-0.45 y/y)
Promoter ownership is stable or rising.
- Pledge13.8% pledged
Pledged promoter shares add forced-selling risk in a drawdown.
- Institutional flowFII +2.95 · DII +1.2
Direction of institutional ownership over the last year.
- Capital allocationMost operating cash is reinvested into the core …
Most operating cash is reinvested into the core business.
Industry & macro
51/100Trend: stable · weight 8%
- Demand trendstable
Retail (India) demand is stable.
- StructureFragmented
Fragmented — share shifts are possible but price competition is real.
- Competitive intensitymedium
How hard it is to keep pricing and share.
- Macro driversGDP growth, Inflation, Interest rates
Variables that move the earnings base regardless of company execution.
Valuation
30/100Trend: stable · weight 8%
- P/E vs sector56.5x vs 56.5x
At 56.5x against a sector median of 56.5x, the price embeds roughly 40% earnings growth. Anything less has to come out of the multiple.
- Growth-adjusted3.87 (PE/growth)
Below ~1.5 the multiple is supported by growth; above ~2.5 it depends on the market staying optimistic.
- FCF yield0.29%
Cash return on the current market value, before any growth.
Financial history
Profit, cash and returns over five reported years
| Year | Revenue | EBITDA | PAT | OCF | FCF | ROCE |
|---|---|---|---|---|---|---|
| FY2022 | ₹80,449 Cr | ₹15,285 Cr | ₹7,031 Cr | ₹6,328 Cr | ₹-2,521 Cr | 30.6% |
| FY2023 | ₹85,698 Cr | ₹24,852 Cr | ₹10,438 Cr | ₹9,603 Cr | ₹-1,538 Cr | 32.4% |
| FY2024 | ₹90,947 Cr | ₹16,370 Cr | ₹9,331 Cr | ₹8,771 Cr | ₹-3,962 Cr | 38.4% |
| FY2025 | ₹96,197 Cr | ₹22,125 Cr | ₹8,850 Cr | ₹8,496 Cr | ₹800 Cr | 26.5% |
| FY2026 | ₹1.01 L Cr | ₹23,333 Cr | ₹12,133 Cr | ₹11,890 Cr | ₹731 Cr | 30.9% |
- ⚠ Working capital cycle is long; growth consumes cash.
Ownership & management
Who owns it, and have they delivered?
Promoter
70.2%
-0.45 y/y
Pledge
13.8%
Forced-selling risk
FII
12.8%
+2.95 y/y
DII
21.8%
+1.2 y/y
Guidance delivered in 73% of the last eight quarters; average leadership tenure 9 years.
Most operating cash is reinvested into the core business.
No governance flags raised by the sample dataset.
Industry & macro context
Retail (India)
Demand trend
stable
Cyclicality
high
Competition
medium
Regulatory pressure
low
Fragmented — share shifts are possible but price competition is real.
Macro drivers: GDP growth · Inflation · Interest rates
Valuation
fair versus the sector
P/E
56.5x
Sector median P/E
56.5x
P/B
3.50x
Earnings yield
1.77%
FCF yield
0.29%
PE / growth
3.87
Estimated fair-value band ₹7,557 – ₹9,657 , built on FY2026 EPS of ₹186.6. Gap to the current price: +123%. Ranges are a modelling output, not a target price.
At 56.5x against a sector median of 56.5x, the price embeds roughly 40% earnings growth. Anything less has to come out of the multiple.
Risk register
What can break the thesis, and how it is monitored
- Promoter pledgemedium
13.8% of promoter holding is pledged.
Monitor: Pledge disclosures with each shareholding filing.
- Cyclicalitymedium
Retail (India) earnings swing with the cycle, so trailing numbers flatter the peak.
Monitor: GDP growth
- Accounting qualitymedium
Working capital cycle is long; growth consumes cash.
Monitor: Cash-flow statement versus P&L each quarter.
Ongoing thesis monitoring
The thesis is a living position, not a one-time verdict
| Metric | Currently | Thesis holds if | Thesis breaks if |
|---|---|---|---|
| ROCE | 30.9% | stays above 28% | falls for two consecutive years |
| Cash conversion | 98% | stays above 80% | drops below 70% while revenue grows |
| Revenue growth | 6.0% CAGR | tracks the 40% priced in | slows for two quarters with no margin offset |
| Promoter holding | 70.2% | stable or rising | falls sharply or fresh pledge appears |
Peers in the same sector
Compare before sizing anything
Data quality 58/100
Stated openly, as required by the product principles
- • Fundamentals in this build come from a deterministic sample dataset, not licensed exchange filings.
- • Segment, ownership and management figures are illustrative and must be verified against annual reports.
- • Educational analysis only — not a recommendation to buy or sell any security.
- • Accounting flags reduce the reliability of the reported profit base.