Mark the date- 21 March 2017. It will go down as a red-letter day in the history of markets. Why? On this day, the stock of Avenue Supermarket - promoter of retail supermarket chain D-Mart - listed at Rs. 604.4 on the Bombay Stock Exchange (BSE), witnessing a jump of 102% over its issue price of Rs. 299. This made the initial public offering (IPO) of Avenue Supermarket a stellar success. In fact, it is the biggest IPO success, since PNB Housing Finance made its debut in October last year.
The Rs. 1,870-crore public issue of Avenue Supermarkets was open for subscription from 8 March 2017 to 10 March 2017. The price band on the offering was Rs. 295–299 per share. The issue received 1.38 lakh crore bids, meaning it was oversubscribed by 104.59 times. On listing, the stock generated huge returns. An investor who bid for a tranche of 50 shares of the issuance, would have paid about Rs. 14,950 at the lower end of the price band, i.e. Rs. 295 per share. With the listing price of Rs. 610, the value of his investments would have risen to Rs. 30,500, giving him a profit of Rs. 15,500.
Related: All about IPOs in India
What is an IPO?
Some may wonder why there is such a fuss over Avenue Supermarket. If you’re wondering what an IPO is in the first place, here are the basics.
Why did Avenue Supermarket list at a premium?
That the stock of Avenue Supermarkets listed at a premium comes as no surprise. It was a highly anticipated public offering from the start. After all, the founder of Avenue Supermarkets is serial investor Radhakrishna Damani. His is often considered the Warren Buffet of India, and is mentor to Rakesh Jhunjhunwala. But there is more. In the fiscal year 2016, Avenue Supermarkets made a net profit of Rs. 300.21 crore, on a revenue of Rs. 8,600 crore. Here’s how it compared to two other retail chains.
D-Mart, the retail chain of Avenue Supermarkets, has scored with its buyers. It has focussed purely on value retailing in the food and grocery business. In contrast, its rivals have diversified into other segments. These include home, apparel, and electronic goods. The listing of Avenue Supermarket at a premium is recognition by the markets. It is indeed the most profitable supermarket in India, currently.
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