D-Mart now the most expensive retailer in the world

Mumbai: Radhakishan Damani may shun the limelight, but investors in his firm Avenue Supermarts, the owner of D-Mart chain of retail stores, have no such qualms. On Monday, they bought heavily into Avenue shares, boosting its market cap past the Rs 50,000-crore mark and its share price to a new high of Rs 806.80. The shares rose 7% initially before ending the day 3.3% up.

Investors' fervour for Avenue has shown no signs of easing since March 21 when its shares listed at more than 100% premium to offer price of Rs 299. The shares are up 160% as of Monday , making Avenue the most expensive brick-and-mortar retail stock in the world on key financial parameters.

While giants such as Wal-Mart, Costco, Tesco, Target, Metro and Carrefour among others are trading at a market cap-to-sales ratio of below 1, Avenue is trading at nearly 5.6 times. The market capto-sales ratio measures the premium that investors are willing to pay for future sales.

D-Mart's eye-popping valuation and the stock surge have forced analysts and fund managers to warn about irrational exuberance.Though investors don't mind paying a premium for the fastest-growing and most-profitable retail stock in the country, they are finding it difficult to justify the 96 times FY17 multiple for the stock.

“The stock with low float is getting into bubble territory“ said Sanjiv Bhasin, EVP-markets, IIFL. “We are extremely cautious.“

The FY18 numbers discount the current market price by 65 times compared with 16.8 times for WalMart, 30.05 times for Costco and Target's 13.33 times.

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