The most successful story of D-Mart an Indian Company!
Hello, friends in this video we are going to discuss a very interesting case study about the most talked-about company in India today, which is D-Mart. where other supermarket chains are struggling to survive struggling to make profits. D Mart is consistently making profits and growing each year at a rapid growth rate. Now how is D-Mart doing that? That secret we are going to find out in today's article and let's get started.
D-Mart is a supermarket chain started in 2002 by Mr. Radhakishan S. Damani in Mumbai, as of now, D-Mart is located at more than 200 locations. When the company came out with its IPO its valuation was around 40,000 crores right now it is over 1.5 lakh crores and the projected growth rate at the time of the IPO was about 40%. D-Mart is a one-stop-shop for all our regular needs like groceries, apparel, footwear, and a lot of other small products. What is the overall strategy? Let us discuss first and then we will get into the details. D Mart always believes in offering its customer the best price and it keeps all products of all the major brands. It is generally located in high-traffic areas. And D Mart has three sizes of stores. By default, D Mart opens very big stores in the big sizes itself. There are three categories of hyper stores, express stores and super ones are the largest Express is the smallest, and hyper are the mid-sized stores of D-Mart. D-Mart targets mainly middle-class customers and 90% of the stores of demand are cell phones. D Mart owns a property of maximums of its stores to avoid the monthly rentals and this increases the asset value of the company every year. D-Mart makes the vendors faster payments and D-Mart invests less when compared to other competitors in the marketing costs. So this is the overall strategy. Now let us get into the details and understand how is the market better than other companies. And in this case, study not just from an investment perspective. From a business perspective. Also, you will get to learn a lot of things and you can implement in your own business.
The secret's of D-Mart's success
1. long term vision.
Mr. Radhakishan S. Damani is a value investor like Warren Buffett. He believes in investing and having a long-term strategy. That is why he has chosen a very unique model in running his business where all the other brands and stores generally take property on rent and open their shops. D-Mart believed in buying the properties having a long-term vision for seeing where they want to open the store in the future buying that property right now. for cheap and in future opening stores at prime locations. Mr. Radhakishan S. Damani believes that there are no shortcuts to growth. That is why he has grown slowly in the beginning but profitably, so he always had a long-term vision.
2. slow and steady.
The other companies believe in taking loans and growing fast as soon as they become successful in one or two stores. But D-Mart consistently open the stores only when the earliest store was profitable. They started small with a fewer number of branches and they were not hiring in the expansion and they made a profit in every store and they have been consistently profitable in all the stores which they are growing in their expansion phase.
3. value of relationships
D-Mart has maintained a healthy relationship with all its vendors. That is why the vendors offer D-Mart, faster service, better service, and a lot better price when compared to its competitors. It also values customer relations and that is why it tries to offer the best service and the least possible cost. They also value their employee and other stakeholders relations.
4. Buy low sell cheap.
D-Mart sells daily used products at heavy discounts. It always tries to sell all its products below the MRP and it pays its vendors faster than its competitors, even if the vendors have a normal credit period of one month D-Mart pays its vendors faster in just about a few days or a maximum a week. So, they had faster payments builds a lot of credibility in their vendors and the vendors are happy to offer the products to demand at very cheap prices. So, this makes the purchase cost less in retail what happens all the products are MRP-based and that is why everybody is selling at the same MRP price. So, there are only there is only one way of increasing your profit margins that are by reducing your cost. So D Mart excels in this by reducing their cost, how are they reducing their cost by buying from vendors at very cheap prices by avoiding rentals and by lowering the marketing costs, they have increased their profit margins despite giving discounts to the customers. The next secret here is to focus on local markets. Generally, the other supermarket chains focus on big brands which are popular across India. But along with those big brands D Mart focuses on the local requirements also of the customers of that particular city or state. Initially, they opened stores only in the western part of the country, and gradually as and when they are developing better relationships with the vendors and better customer understanding they are gradually expanding to the other parts of the country. So they also keep regional brands rather than national brands. Some brands are popular locally in that particular city or state. T Mart makes a point to keep those retail brands also so that the customer doesn't have to go to this mall Kirana stores for making any purchase.
5. focus on the USP
D-Mart always focused on providing the best price to its customers on an everyday basis for all the products. So the focus was completely on the USP and that is why they did not encourage much of show off or any kind of decoration in any of their stores. The next secret is they did not follow the crowd. Mr. Radhakishan S. Damani focused on their own business, they did not worry about how their competitors are progressing. A lot of companies that came before and after or together with D-Mart they grow they grew very rapidly by taking a lot of loans and having great expansion plans. But D-Mart took to its business model. And it grew at a very stable place. There were a lot of companies who jumped into e-commerce and made losses and even now they are making losses. But D Mart until unless they were very sure they did not enter into e-commerce and now very recently they are steadily getting into e-commerce.
6. Slotting fees
not just for demand for other brands also, but this is an additional advantage to D-Mart whenever somebody wants to sell anything to the big supermarkets, since the supermarkets have a lot of stores, it's a chain concept. The brand which wants to sell any product in the supermarkets has to pay fees like an entry fee called slotting fees. So, when it pays that then only they allow those products of that brand to be sold across the country in all the branches of that supermarket. So, this gives an advantage and additional profit to D-Mart despite getting the discounts and another advantage this becomes an additional earning base which gives the mart a bigger advantage when compared to its competitors. So, these are the secrets to which D-Mart success is defined. Now, coming to the stock fundamentals D-Mart presently called a venue supermart is trading at a price of about 2300 despite the market crash it is trading very high. The 52 weeks high and low is about 1200 to 2500 rupees the market capitalization has grown to one lakh 56,000 crores of rupees the P e ratio is very high at now at 122. Industry P/E at 86. The earnings per share are at 19.54 and the price-book ratio is 27.77. Revenue as of March 2019 is 21,827 crores which is a good number and the company is profitable and is Earning sufficient profits if you see it has earned 936 crores of profit in the year ending March 2019. So, the company has very strong fundamentals. Another advantage is a promoter stake is 77%. Mr. Radhakishan S. Damani owns a majority stake in the company even now, the track record of the promoters is very strong as Mr. Radhakishan S. Damani itself is a brand in the market. new companies like Flipkart are approaching D-Mart to have collaborations and partnerships to grow their business. Mr. Radhakishan S. Damani is the only tycoon whose wealth has grown up even the conditions of the market going down the other competitors like the future group has about 1300 stores and other competitors like reliance have much higher stores when compared to D-Mart. But per store profit if you see D Mart is earning much much more than its competitors and a lot of competitors before D Mart started like Subhiksha and all they have come and shut down in this kind of market D-Mart has come up recently and it has been earning a lot of profit and growing steadily. faster growth in the future as more cash flows coming in for more stores since D-Mart is going very fast it has opened a lot of stores, all these stores will earn a lot more cash flow and this cash flow will help in growing the company even faster as the company goes forward. So, there is a double advantage or a very unique strategy of D-Mart if you have observed the least price for the customers plus the highest profit for the D-Mart. Generally, if there come any companies offering heavy discounts to the customers or least price they cut down their margins and offer but D-Mart is offering least price despite earning good sufficient margins. That is why D Mart's model is very unique.
Now, after studying this case study I leave a question in your mind and I want you to answer in the comments can D-Mart become the Walmart of India by looking at the case study by look understanding the uniqueness by looking at the fundamentals of the company and their growth plans? I want you to come up with an answer and comment below and let us discuss whether D-Mart can become the Walmart of India. So this company has huge potential and a bright future and there is going to be a good scope of appreciation if you invest in this company. This is not a recommendation but this is a case study that we are discussing. Based on our case study you can take your own decision whether or not to invest in this company.
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