Forbes Asia — May 2017

24 | FORBES ASIA MAY 2017

FORBES ASIA

PAYDAY

Shopping Frenzy

DMart’s founder Radhakishan Damani: the unlikely retail billionaire.

I

n March, Avenue Supermarts, the

holding outfit of DMart, an Indian

supermarket chain, made its stock

market debut with a bang. As in-

vestors flocked to get a piece of the

company, its $290 million IPO was over-

subscribed 105 times. On listing day on

the Bombay Stock Exchange, shares of

Avenue Supermarts more than doubled,

and they have risen even more since.

With a recent market cap of $7.6 billion, it

is India’s most valuable retailer.

The IPO marked a big payday for

DMart’s founder, Radhakishan Damani,

who along with his brother owns 82%

of the company. Better known as a stock

market veteran and a guru to billion-

aire investor Rakesh Jhunjhunwala, Dam-

ani was ranked No. 896 with a net worth

of $2.3 billion in Forbes’ Billionaires list

this year. Following the IPO his wealth has

soared more than twofold to $6.4 billion.

A Mumbai stockbroker’s son, the low-

profile Damani, 62, trades, like Jhunjhun-

wala, on his own account. His notable

holdings include a 26% stake in cigarette

maker VST Industries, an affiliate of Brit-

ish American Tobacco. With DMart’s

IPO, he’s snatched the title of India’s re-

tail king from retailing pioneer Kishore

Biyani, who had featured among India’s

richest until 2011. Biyani’s holding in his

Future Group empire (which he shares

with family) is worth an estimated

$1.2 billion.

While Biyani’s moves always hogged

the headlines, Damani went about build-

ing DMart completely under the radar. He

entered the ranks of India’s richest in 2014

based on his portfolio of blue-chip invest-

ments, real estate holdings and his retail

venture. When Forbes Asia contacted Da-

mani at the time, he insisted that “I don’t

qualify” but didn’t offer any details. The

rising value of DMart, which filed for an

IPO last September, propelled Damani,

who shares his fortune with his brother,

onto the Billionaires list this year.

Damani started DMart in 2002 with a

single store in suburban Mumbai. Indus-

try watchers say that in the initial years,

Damani would visit wholesalers and work

on striking long-term relationships with

them. He is believed to have made several

trips to China to personally source appar-

el and other goods. “It is the food offering

that brings in the footfalls, and it is the rest

that brings in the margin,” explained Nev-

ille Noronha, DMart’s managing director,

at a press conference to launch the IPO.

Damani, who oversaw the compa-

ny until 2011, is said to have handpicked

much of the top team and instilled in

them an entrepreneurial mind-set. (He

also gave some of them generous stock op-

tions. Noronha’s stake is now worth $16

million.) “There was no magic elixir to

DMart’s success. They kept a sharp eye on

costs and didn’t waste money on bells and

whistles,” says Vinita Bali, the former CEO

of consumer goods firm Britannia Indus-

tries, known for its cookies.

The retailer’s high valuation—it trades

at 55 times forward March 2018 earn-

ings—is partly due to the scarcity of the

stock; only 10% is available to the pub-

lic. But the main attraction is DMart’s

track record of sizzling growth. Revenue

and net profit have been growing over

the past five years at compounded an-

nual rates of 40% and 50%, respectively.

Still, it’s anybody’s guess whether DMart’s

stratospheric valuation is sustainable. The

shares were listed at a time when the stock

market was at its two-year peak and trad-

ing at 22 times earnings.

Arvind Singhal, chairman of manage-

ment consulting firm Technopak, says

the investor frenzy for DMart defies logic:

“Sometimes just doing the right things, as

DMart has consistently done, is a virtue.”

Rather than attempt to become a nation-

al player, DMart concentrated on its home

base of western India. It shunned expen-

sive downtown locations in favor of stores

on city outskirts and expanded into small

towns. Singhal estimates that to match

future growth expectations, the 130-store

retail chain will need to add new stores

at a much faster pace than it has done in

the past.

Another factor that investors seem to

have overlooked is that with cellphone data

rates tumbling, consumers could move

away from brick-and-mortar retailers and

do their grocery shopping with e-tailers.

Bali says such concerns are overblown:

“India is a hugely underserved market.

The runway for growth is long.”

Adapted from Forbes India, a licensee

of Forbes Media.

F

Damani is more of a quiet equities buyer.

BY SAMAR SRIVASTAVA AND NAAZNEEN KARMALI