Net profit of Avenue Supermarts Ltd., the operator of retail chain D-Mart, grew at its fastest pace in three quarters but it earned lower on every incremental sale.
The Radhakishan Damani-promoted retailer's net profit margin fell to 4 percent—the lowest in two years—due to cost pressures. Focus on competitive pricing and higher depreciation because of expansion led to lower profit margin in the fourth quarter of the financial year ended March.
Maintaining margin while expanding will be tough as the competitive intensity in the grocery retail space is increasing, Credit Suisse said in its earnings note.
Avenue Supermarts—one of India's largest food and grocery retailer—has faced intense competition from Reliance Retail, Big Bazaar, Big Basket, Amazon and Flipkart.
Its revenue and earnings before interest, tax, depreciation and amortisation in the March quarter, however, grew 32 percent and 28 percent, respectively, over last year. That was mainly on the back of 12 new stores added by the company during the period.
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