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D-Mart’s financial figures are impressive, with its total income and net profit substantially outperforming those of Vishal Mega Mart.
Vishal Mega Mart or D-Mart, which is better?
The retail sector is witnessing a significant shift as Vishal Mega Mart (VMM) enters the stock market, drawing intense comparisons with Avenue Supermart (D-Mart), a well-established leader in the industry. Both companies operate under a similar business model, offering groceries and everyday essentials at discounted prices. However, despite the similarities, a glaring question arises: How can Vishal Mega Mart, with a market capitalisation of Rs 35,200 crore, compete with D-Mart’s massive market cap of Rs 2.2 lakh crore?
Vishal Mega Mart’s debut on the stock market has sparked significant interest, especially as the company follows a strategy akin to that of Avenue Supermart. However, the size disparity between the two players is striking. D-Mart, with a dominant market cap of Rs 2.2 lakh crore, has long been a major force in the retail sector, while Vishal Mega Mart is still carving its niche with a relatively modest market cap.
D-Mart’s financial figures are impressive, with its total income and net profit substantially outperforming those of Vishal Mega Mart. However, Vishal Mega Mart has managed to attract attention due to its remarkable growth trajectory. In the first half of the fiscal year ending September 30, 2024, VMM recorded higher revenue growth compared to D-Mart, which is notable for a company still establishing its market presence.
Furthermore, Vishal Mega Mart demonstrated a superior EBITDA margin compared to its listed counterparts, hinting at its operational efficiency. These performance indicators led several brokerage firms to issue a “subscribe” rating for its initial public offering (IPO).
As of September 30, 2024, Vishal Mega Mart operates 645 stores across the country, compared to D-Mart’s 377 stores. While D-Mart’s stores are typically larger, averaging 41,910 square feet, Vishal Mega Mart’s more extensive network provides it with greater reach. This geographical spread is a critical advantage for Vishal Mega Mart, enabling it to tap into a diverse range of consumer markets, including smaller towns and cities.
One of the key differentiators between the two companies lies in their revenue composition. Vishal Mega Mart generates a significant portion of its revenue from general merchandise (GM) and apparel, which together contribute around 72.5% of its total sales. In contrast, Avenue Supermart derives only 23.5% of its revenue from these high-margin segments.
General merchandise and apparel items typically offer higher profit margins compared to groceries, food, and other fast-moving consumer goods (FMCG) products. This revenue mix suggests that Vishal Mega Mart could potentially enjoy more favorable margins, which could be a significant factor driving its future profitability.
In contrast, D-Mart’s focus on FMCG and food products, particularly its private-label offerings, contributes to its higher net worth and margins. While both companies target value-conscious consumers, their operational focuses differ substantially.
Vishal Mega Mart’s IPO is drawing attention for its attractive valuation. Many experts believe that the company’s IPO is priced relatively lower than that of its competitors, offering a unique investment opportunity. Analysts are particularly optimistic about the company’s future, citing its impressive 50% compound annual growth rate (CAGR) in earnings per share (EPS) – a strong indicator of its growth potential.
However, the financial metrics between the two companies still reveal a clear advantage for D-Mart. D-Mart boasts a return on net worth (RoNW) of 13.56%, reflecting its more established position in the market. On the other hand, Vishal Mega Mart’s RoNW stands at 8.18%, which, while respectable, is still lower than that of its more mature peer.
A critical factor in D-Mart’s success has been the leadership of Radhakishan Damani, one of the most respected investors and business minds. Damani’s strategic vision and conservative management style have played a significant role in the company’s long-term success, creating immense investor confidence. This strong leadership track record has made D-Mart a preferred choice for many retail investors.
Vishal Mega Mart, on the other hand, is still in the early stages of building its leadership reputation in the public eye. While the company’s growth is promising, it has yet to establish the kind of leadership stability and recognition that D-Mart enjoys.
As investors weigh their options, the debate between Vishal Mega Mart and D-Mart boils down to growth potential versus stability. Vishal Mega Mart offers an attractive entry point with its rapid growth and favourable valuation, especially for those looking for a high-risk, high-reward investment in the retail sector. The company’s expanding store network, higher EBITDA margins, and revenue mix focused on higher-margin general merchandise and apparel make it an intriguing player in the space.
However, D-Mart’s established market dominance, impressive return on equity, and trusted leadership make it a safer, more stable bet for investors seeking consistent long-term returns. The retailer’s robust financial performance and large-scale operations offer strong investor confidence, even if its stock might not offer the same rapid upside as Vishal Mega Mart.
