ECONOMIC OVERVIEW
The Indian economy is expected to grow by an estimated 7% in FY 2022-23
(Source: Ministry of Statistics & Programme Implementation) led by supportive
government policies and strong private consumption. This was facilitated by near-universal
vaccination coverage post COVID-19 outbreak, the normalisation of growth in
contact-intensive sectors to pre-pandemic levels, and the continued consumer spending on
the back of pent-up demand.
However, inflation remained high almost throughout the year, prompting
the regulator to raise the repo rate cumulatively by 250 basis points from May 2022 to
February 2023. The effectiveness of the monetary policy response became evident in March
2023 when headline retail inflation slowed down to a 15-month low of 5.66%. Despite high
interest rates and a slowdown in global growth, the Indian economy showed resilience and
strong growth across sectors.
Outlook
Globally, there are concerns of slowdown in growth due to uncertainty
in the financial markets. Geo-political risks also continued to remain heightened in some
regions. In India, inflation continues to be the key economic indicator for regulators.
However, the domestic economy remains resilient led by several inherent factors such as
growing urbanisation, stable geo-political environment and favourable demographics.
INDUSTRY OVERVIEW
FY 2022-23 is estimated to have seen full resumption of activities post
the COVID-19 pandemic which impacted the previous two years. The overall retail industry
is estimated to have grown at 15% to 84 trillion in FY 2022-23. Organised retail is
estimated to have grown at 20% to 9 trillion (~11% of the overall retail industry) while
E-retail is estimated to have grown at 24% to 3 trillion (~3.7% of the overall retail
industry). Of the total organised retail industry, the food and grocery segment accounts
for about 25% (in value terms) as of FY 2022-23.
Retail industry is estimated to grow at a compounded annual growth rate
of 10-11% between 2023 and 2028 as economic activity picks up and inflation remains in a
low to moderate range. Consumption revival, coupled with economic growth, is expected to
boost consumer sentiment and drive discretionary spends. (Source: CRISIL Research)
BUSINESS OVERVIEW
Avenue Supermarts Limited (DMart) is a national supermarket chain, with
a focus on value-retailing. We offer a wide range of products with a focus on the Foods,
Non-Foods (FMCG) and General Merchandise & Apparel product categories. Since launching
our first store in 2002 in Mumbai, Maharashtra, we have grown to 324 stores with a retail
business area of 13.4 million sq. ft. spread across Maharashtra (99), Gujarat (55),
Telangana (36), Andhra Pradesh (29), Karnataka (29), Madhya Pradesh (19), Tamil Nadu (19),
Rajasthan (12), Punjab (11), NCR (8), Chhattisgarh (6) and Daman (1). We remain focussed
on our strategy of offering our customers good quality products at great value, based on
the Everyday Low Cost/Everyday Low Price (EDLC/EDLP) principle. Our store offerings
provide our customers with a distinctive shopping experience, comprising of a wide range
of everyday value retail products sold in a modern ambience and with the feel of a large
retail mall. We believe our endeavour to facilitate one-stop shop convenience for our
customers everyday shopping needs, along with our competitive pricing due to our
local market knowledge, careful product assortment and supply chain efficiencies, has
helped us achieve steady growth.
Key Performance Indicators
Over the years we have seen steady growth in the number of stores and
consequently our retail business area.
| Financial Year |
No. of Stores |
Retail Business Area |
|
|
(mn sq. ft.) |
| FY 2022-23 |
324** |
13.4 |
| FY 2021-22 |
284 |
11.5 |
| FY 2020-21 |
234* |
8.8 |
| FY 2019-20 |
214 |
7.8 |
| FY 2018-19 |
176 |
5.9 |
*22 New Stores were added in FY 2020-21 and two of our older stores
were converted in fulfillment centre for Avenue E-Commerce Limited
**During FY23, 1 location was reconverted from Fulfilment Centre to
DMart Store
Our operations are ably supported by a network of distribution centres
and packing centres. As of 31st March, 2023 we had 49 distribution centres and
10 packing centres. Our total number of bill cuts, was 25.8 crore in FY 2022-23 as
compared to 18.1 crore during FY 2021-22. Our annualised revenue from sales per retail
business area sq. ft. was 31,096 in FY 2022-23 and 27,454 in FY 2021-22.
Financial Performance
|
|
Standalone |
|
Consolidated |
|
|
| Particulars |
FY 2023 |
FY 2022 |
Increase/ (Decrease)% |
FY 2023 |
FY 2022 |
Increase/ (Decrease)% |
| Revenue from Operations |
41,833.25 |
30,352.50 |
37.82% |
42,839.56 |
30,976.27 |
38.30% |
| Other Income |
163.09 |
140.87 |
15.77% |
129.34 |
117.49 |
10.09% |
| Finance Cost |
48.07 |
39.60 |
21.39% |
67.41 |
53.79 |
25.32% |
| Profit Before tax |
3,231.16 |
2,181.73 |
48.10% |
3,060.09 |
2,064.12 |
48.25% |
| Profit After Tax |
2,556.40 |
1,616.17 |
58.18% |
2,378.34 |
1,492.40 |
59.36% |
| EPS - Basic (in ) |
39.46 |
24.95 |
58.16% |
36.72 |
23.04 |
59.38% |
| EPS - Diluted (in ) |
39.22 |
24.75 |
58.46% |
36.49 |
22.86 |
59.62% |
Key Financial Ratios
|
FY 2023 |
FY 2022 |
| (i) Operating Profit Margin (%) |
7.84% |
7.32% |
| (ii) Net Profit Margin (%) |
6.11% |
5.32% |
| (iii) Interest Coverage Ratio |
68.22 |
56.09 |
| (iv) Debtors Turnover |
128.20 |
138.92 |
| (v) Inventory Turnover (Based on sales) |
14.83 |
12.77 |
| (vi) Current Ratio* |
4.00 |
3.06 |
| (vii) Debt Equity Ratio |
0.03 |
0.03 |
| (viii) Return on Net Worth* |
16.80% |
12.32% |
*Notes :
1. Current Ratio increase is due to the bank fixed deposits held last
year reclassified to current assets this year. 2. Return on Net Worth Ratio increase is on
account of increased earnings in the current year.
Human Capital
Our employees are critical to our business. We internally assess our
employees to periodically identify competency gaps and use development inputs (such as
skill upgradation training) to address these gaps. We have implemented staff training
policies and assessment procedures and intend to continue placing emphasis on attracting
and retaining motivated employees. We plan to continue investing in training programmes
and other resources that enhance our employees skills and productivity. We will
continue to help our employees develop understanding of our customer-oriented corporate
culture and service quality standards to enable them to continue to meet our
customers changing needs and preferences.
At the end of FY 2022-23, we had a total of 12,108 permanent employees
and 48,793 employees were hired on contractual basis.
Information Technology (IT)
Our deep understanding of local needs and our ability to adapt quickly
to changing consumer preferences has helped our performance driven growth. Our robust IT
systems have significantly aided this growth by simplifying complex processes throughout
our operations. Our IT systems are equipped with an array of data management tools
specific to our business needs and support key aspects of our business. IT has enabled our
cash management systems, in-store systems, logistics systems, human resources, project
management, maintenance, and other administrative functions. This implementation has
contributed positively towards minimising product shortage, pilferage, out of stock
situations etc., and has increased overall operational efficiency
Internal Control Systems and their Adequacy
We have put in place internal control systems and a structured internal
audit process vested with the task of safeguarding the assets of the organisation and
ensuring reliability and accuracy of the accounting and other operational data. The
internal audit department reports to the Audit Committee of the Board of Directors.
Similarly, we maintain a system of monthly review of the business as a
key operational control, wherein the performance of units is reviewed and corrective
action is initiated. We also have in place a capital expenditure control system for
authorising spend on new assets and projects. Accountability is established for
implementing the projects on time and within the approved budget.
The Audit Committee and the Senior Management Team are regularly
apprised of the internal audit findings and regular updates are provided of the action
taken on the internal audit reports. The Audit Committee reviews the quarterly, half
yearly and the annual financial statements of the Company. A detailed note on the
functioning of the Audit Committee and of the other committees of the Board forms part of
the section on corporate governance in the Annual Report.
During the year, we carried out a detailed review of internal financial
controls. The findings were satisfactory and suggestions for improvement have been taken
up for implementation. Policy guidelines and Standard Operating Procedures (SOPs) continue
to be updated where required, to keep pace with business requirements.
Risks and Concerns
The Board of Directors reviews the Companys business risks and
formulates strategies to mitigate those risks. The Senior Management team, led by the
Managing Director, is responsible for proactively managing risks with appropriate
mitigation measures and ensuring their implementation thereof.
Below are some of the key risks and concerns in our business:
If we are unable to continue to offer daily low prices pursuant to our
EDLC/EDLP pricing strategy, we risk losing our distinct advantage and a substantial
portion of our customers, which will adversely affect our business, financial condition,
and results of operations
Availability of commercially viable real estate properties at suitable
locations for our new stores, timely execution of sale deeds/leave and license
registrations and getting regulatory approvals for these properties
Our ability to attract, hire, train and retain skilled employees
Our inability to maintain an optimal level of inventory in our stores
may impact our operations adversely
Our continued understanding and prediction of consumers changing
needs and preferences and timely customising of our offerings
Effective management of our store expansion and operations in newer
locations/cities/states
Any breach of our cyber security measures could potentially result in
disruption of our business operations
The outbreak of new variants of COVID-19 or any other pandemic could
materially and adversely affect our business, financial condition, and results of
operations
Climate Change may result in lower sales, lesser profits and / or
increased investments in the short to medium-term. Further, any potential change in
Climate related regulations may lead to higher cost of compliance.
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