Avenue Supermarts To Invest Rs 350 Crore In Online Business This Fiscal

Avenue Supermarts Ltd., the operator of DMart hypermarket chain, seeks to further invest Rs 350 crore in its loss-making online grocery unit this financial year. The proposed investment is up for shareholder approval. 

The investments will be made from funds earmarked by the company to support Avenue E-Commerce Ltd. for expanding the online business based on valuation received from registered valuers, according to the company's latest annual report.

"No indebtedness will be incurred for making investment in the shares of AEL," it said, adding that the online subsidiary will utilise the funds for its operational and working capital requirements.

The Radhakishan Damani-led Avenue Supermarts has invested Rs 712.89 crore in its e-commerce subsidiary that started operations six years ago, the annual report said. The parent’s incremental investment in Avenue E-Commerce rose to Rs 220 crore in FY23 from Rs 130 crore a year ago.

The company would require shareholder approval for the proposed additional investment by way of an ordinary resolution since the aggregate value of transactions with Avenue Ecommerce is expected to exceed the threshold limit of Rs 1,000 crore during the year.

However, the online business arm has continued to make losses, which Avenue Supermarts said indicated impairment in the investment.

Sales of DMart Ready—the online business—rose 32% to Rs 2,022 crore in fiscal 2023, while its net loss widened to Rs 194 crore. A year ago, it had posted a loss of Rs 142 crore on sales of Rs 1,667 crore. The online arm has accumulated losses worth nearly Rs 600 crore since it began operations.

DMart Ready expanded its service coverage to include 10 more cities—Chandigarh, Jaipur, Sanand, Anand, Belagavi, Chennai, Vishakhapatnam, Bhilai, Raipur and Ghaziabad, taking the total footprint to 22 cities.

Analysts at Kotak Institutional Equities said that the company's revenue growth was "disappointing" in the context of 10 new cities added in FY23. DMart Ready's Ebitda loss also expanded to Rs 76.3 crore from Rs 39.6 crore, possibly on account of the addition of new cities.

Avenue E-Commerce also operates a small format grocery store under the brand name, DMart miniMAX. Until FY22, it had just two such stores. However, it added 13 more last fiscal.

Overall, Dmart Ready forms 5.3% of Dmart’s standalone revenue.

The e-tailer operates a hybrid model, unlike the likes of Amazon and BigBasket, with delivery centres in areas where it has stores, allowing customers to pick up the products they have ordered online. It also gives customers the choice of getting their orders delivered at the doorstep.

DMart currently runs the fourth largest number of convenience stores in the country with 327 stores. Its retail store network is also supported by its 49 distribution centres and 10 packing centres. The low-cost value retailer's annualised sales per square feet stood at Rs 31,096 in FY23.

Avenue Supermarts, valued at Rs 2.41 lakh crore, is four times bigger than its closest competitor Tata Group's Trent, the parent company of Zudio, which has a market capitalisation of Rs 60,230 crore.