DMart Damani's Contrarian Bet

While DMart founder Radhakrishna Damani's peers chased growth, he focused on cash flow and profitability. And that strategy has made him the most valued retailer in India

- Ajita Shashidhar

The modern retail industry has seen umpteen experiments over the last decade. Most have failed. Even the retail king, Kishore Biyani of Future Group, has admitted to making several mistakes, especially his aggressive expansion, for which he had to sell his most profitable retail venture, Pantaloons, to the Aditya Birla Group. Similarly, Mukesh Ambani has made innumerable tweaks to Reliance Retail’s business model, and still continues to do so.

Amid this action, and confusion, one man, stock market investor Radhakrishna Damani — mostly unnoticed — went about making some of the most astute moves in business with his food and grocery retail company, Avenue Supermarts, better known as DMart. The result was that unlike peers, DMart  became profitable within the first three years of starting operations in 2002. It is, in fact, the most profitable Indian retail company. Its revenue has risen over 40 per cent since 2011/12 to ₹8,800 crore, while net profit has risen over 50 per cent to ₹387.5 crore. This when its peers were bleeding and neck deep in debt.

The company, and its investors, have been handsomely rewarded for this feat. The stock made a stellar debut in March, rising 114 per cent over the issue price of ₹229 on the first day. The market valued the company at ₹40,000 crore; all other retail companies put together are valued at ₹20,000 crore. So, what has Damani done differently than the rest? Several things, it turns out.