Everyone on the Street wants a big bite of the DMart Pie

MUMBAI: Retail chain DMart's owner Avenue Supermarts' IPO scripted history on Friday garnering nearly `2 lakh crore, or 1.63% of India's GDP , as its offer sparked a massive rush from investors enamoured of India's still-booming consumption story .
By 10:30 pm on Friday , Avenue's `1,870-crore issue became the second-biggest `1,000-crore-plus IPO in Indian capital markets on the basis of subscription after Adani Ports' in 2007. The offer was oversubscribed 105.93 times behind Adani Ports' oversubscription of 115 times.

The IPO, the biggest so far in 2017, received applications worth nearly `2 lakh crore from investors. In terms of amount collected, it is the fifth-biggest in India after Anil Ambani group's Reliance Power which secured bids worth `7.19 lakh crore in 2008. Reliance Petroleum in 2006 collected `4.14 lakh crore making it the second-biggest in this category .

“It is a bet on the Indian retail and consumption story . The company has strong fundamentals and good governance so the listing is on expected lines,“ said Dharmesh Mehta, managing director at Axis Capital, one of the book running lead manager to the issue.

Most of the `2 lakh crore will be returned to investors and DMart will only get to keep the `1,870 crore. The amount collected and the oversubscription only underlines the extent of investor interest in DMart.

Growth in India has hovered at around 7-8% and corporate earnings have been spotty in the past three years, but fund raising by Indian companies has been quite strong. Qualified institutional placement (QIPs) was the best since 2009 in 2014 when `31,684 crore was raised. Many companies continue to suffer from high debt and poor earnings but a host of new companies belonging to healthcare, consumer and renewable energy sectors have entered the market in recent times bolstering IPO collections. Indian companies raised `26,494 crore through initial public offerings in 2016, the best since 2010. In 2017 so far, three companies have raised `3,533 crore.

“The IPO pipeline is strong, but investors are extremely discer ning and will opt only for those issues that are priced correctly , combined with strong fundamentals and high growth prospects. We estimate IPO deals worth around $5-6 billion to be completed in 2017 versus $4 billion 2016,“ said V Jayasankar, senior ED, Kotak Investment Banking.

DMart's portion reserved for qualified institutional buyers and high net-worth individuals was subscribed 144.62 times and 277.74 times, respectively , while the retail portion got subscribed 7.25 times.

Analysts now expect the company , promoted by famed investor Radhakishan Damani, to witness a strong listing as well. In the unofficial grey market, the stock quotes at about `550 versus the price band of `295-299. “It has value up to `450. If it lists at a price above that, it could be because of the frenzy associated with it,“ said SP Tulsian, founder, Premium Investments.

“Given the strong demand, the listing will also be good. The premium valuations after listing are likely to sustain as there are not many good companies in the retail space,“ said Siddhartha Khemka, head-equity research (wealth), Centrum Broking.

For the nine months ended December, Avenue Supermarts posted a consolidated net profit of . 387.4 crore on a consolidated reve` nue of ` . 8,803.2 crore. In FY 16, the company posted a consolidated net profit of `. 318.7 crore, up 50.6% from a year ago while consolidated revenue rose 33.3% to ` . 8,606.1crore.