Published on 4/03/2017 11:24:26 AM | Source: HDFC Securities Ltd

IPO Note - Avenue Supermarts Ltd - HDFC Sec

Posted in IPO Reports | #IPO #Retail Sector #HDFC Securities # Avenue Supermarts Ltd


Background & Operations:

Avenue Supermarts Ltd (ASL) is an emerging national supermarket chain, with a focus on valueretailing. It offers a wide range of products with a focus on the Foods, Non-Foods (FMCG) and General Merchandise & Apparel product categories. Its business approach is to retail quality goods at competitive prices. The majority of products stocked by ASL are everyday products forming part of basic rather than discretionary spending. It opened its first store in Mumbai, Maharashtra in 2002. As of January 31, 2017, it had 118 stores with Retail Business Area of 3.59 million sq.ft, located across 45 cities in Maharashtra (59), Gujarat (27), Telangana (13), Karnataka (7), Andhra Pradesh (4), Madhya Pradesh (3), Chhattisgarh (1) and NCR (1) Daman (1) and Rajasthan (2). At the end of the nine months period ended December 31, 2016 and Fiscals 2016, 2015 and 2014, it had 117, 110, 89 and 75 stores with Retail Business Area of 3.57 million sq. ft., 3.33 million sq. ft., 2.66 million sq. ft. and 2.14 million sq. ft., respectively. For nine months period ended December 31, 2016, Maharashtra contributed a majority of its Revenue from Sales (58.84%) followed by Gujarat (18.08%), Telangana (11.45%), Karnataka (7.01%) Andhra Pradesh (2.52%), Madhya Pradesh (1.35%), Chhattisgarh (0.50%), NCR (0.12%), Daman (0.09%) and Rajasthan (0.05%). ASL plans to deepen its store network in southern and western India and gradually expand its network in other parts of India pursuant to its clusterfocused expansion strategy. It opened its first store in Mumbai, Maharashtra in 2002.

 

ASL operates and manages all its stores predominantly on an ownership model (including longterm lease arrangements, where lease period is more than 30 years and the building is owned by ASL) rather than on a rental model. It opened new stores using a cluster approach on the basis of adjacencies and focusing on an efficient supply chain, targeting densely-populated residential areas with a majority of lower-middle, middle and aspiring upper-middle class consumers. ASL operates distribution centres and packing centres which form the backbone of its supply chain to support retail store network. As of January 31, 2017, it had 22 distribution centres and six packing centres in Maharashtra, Gujarat, Telangana and Karnataka. Its business approach is to retail quality goods at competitive prices. The majority of products stocked by it are everyday products forming part of basic rather than discretionary spending. Its store offerings provides its 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. ASL classifies its products under the following categories:

 

Foods:

This category includes staples, groceries, fruits & vegetables, snacks & processed foods, dairy & frozen products, beverages and confectionery.

 

Non-Foods (FMCG):

This category includes home care products, personal care and toileteries and other over the counter products.

 

General Merchandise & Apparel:

This category includes bed & bath products, home appliances, furniture, crockery, utensils, plastic goods, garments and footwear.

 

Its stores are supported by IT and operational management systems specific to its business needs. These systems streamline many of its functions including procurement, sales, supply chain and inventory control processes and daily produce updated information to support its business. As a result, ASL is able to procure its merchandise from its distribution centres or directly from its suppliers and manage inventory levels efficiently to better respond to its customers changing preferences and needs.

 

Objects of Issue:

The following are the objects of the issue:

* Repayment or prepayment of a portion of loans and redemption or earlier redemption of NCDs availed by the Company

* Construction and purchase of fit outs for new stores

* General corporate purposes

 

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