D-Mart to raise Rs 600 cr via NCDs

D-Mart, the third largest grocery retailer by revenues, plans to raise up to Rs 600 crore through non-convertible debentures to fund expansion and its foray into e-commerce.

Avenue Supermarts, D-Mart's parent company, is looking to open 20-25 stores in the coming financial year in north India and expand in Maharashtra, Gujarat, Karnataka, Madhya Pradesh and Chhattisgarh, where it is already present, said a source in the know. Currently, the chain has 98 stores.

The 16-year-old supermarket chain is also looking to borrow funds to fuel its growth. It is seeking shareholders' nod to increase its borrowing limits from Rs 1,500 crore to Rs 1,800 crore, according to Avenue's notice for its upcoming extra ordinary general meeting. The chain has around Rs 1,000 crore debt on the books.

"D-Mart would continue to open its no-frills stores and stick to basics," said the source cited above. The chain operates stores of 10,000-50,000 sq ft in neighbourhood areas and standalone locations, which carry lower lease rents than malls. D-Mart management executives could not be contacted for comments.

The company is also looking to pilot its e-commerce services in Mumbai. It has hired Vikram Dasu, an executive from HomeShop18 to head its e-commerce operations. It has also set up an entity called Avenue E-commerce Ltd.

Both Reliance Retail and Tata's Trent Hypermarkets have pilots for online grocery retail in Mumbai.

Avenue Supermarts posted a profit of Rs 211 crore in 2014-15, in comparison with Reliance Retail's Rs 159 crore and Future Retail's Rs 153 crore, Bloomberg said in a recent report.

Its sales in FY15 rose 38 per cent to Rs 6,450 crore, and would likely show another 29 per cent growth when the current year's figures are calculated, Bloomberg said.

Revenue at Reliance Retail, the largest retailer, grew 21.2 per cent to Rs 17,640 crore in the financial year ended March 31, 2015. Future Retail posted Rs 10,158 crore as net sales in FY15.

According to experts, D-Mart does certain things different from its peers. The chain offers prices that are six to seven per cent lower than its competition, no matter where it operates, which are a huge draw among its customers, say retail consultants.

"We sell at a price lower than others as we keep our costs low and run the business efficiently," explained a executive in the company.

What lets it achieve such pricing tactics is its operational style. It owns majority of its stores, saving substantially on rent, which constitutes six to 10 per cent of retailers' sales.