V-Mart jumps to a record high ahead of DMart’s public offer

MUMBAI: Shares of V-Mart Retail have witnessed an upsurge in investor interest ahead of the initial public offering of Avenue Supermarts which operates retail supermarket chain DMart. The stock has jumped 53% to hit a record high of Rs 759.85 on Thursday.

Analysts said stocks of retailers are drawing interest as DMart is likely to command a high valuation of about Rs 18,000 crore. DMart, a leading retailer, is expected to hit the market with its IPO over the next couple of weeks.

Shares of V-Mart ended up 7.7% at Rs 720.45 on the BSE on Thursday. The stock has outperformed the BSE Smallcap index, which gained a little over 5% in the last one month.

“Whenever a public issue comes, peer group stocks witness a rally. Retailers are rallying based on the upcoming DMart IPO,” said AK Prabhakar, head of research at IDBI Capital.

According to independent advisor SP Tulsian, investors have realised that business model of e-commerce firms are not sustainable and therefore, they are shifting focus again to brick-and-mortar model, which is also drawing investors towards retailers.

The Delhi-based firm V-Mart Retail reported a net profit of Rs 21.2 crore in the quarter ended December 2016, up 81% from a year ago, while revenue rose 23.4% to Rs 327 crore.

Some analysts advised avoiding V-Mart as it has become expensive after the recent surge. The stock trades at a price-to-earnings ratio of 37.2, higher than the five-year average P/E of 26.2.