10 reasons why you should invest in DMART after its listing

Subscription to D-Mart's IPO will be starting from March 8, extending to March 10; and the listing will be done on March 21, 2017. D-Mart is planning to raise Rs 1800 crore by selling 6,23,93,631 equity shares via this IPO. The issue will be in the range of Rs 290-299.

1.Defined target consumer base: D-mart's business model is based on the concept of offering value retailing to the customers using the Every Day Low Cost/ Every Day Low Price strategy, which offers low prices on an everyday basis by achieving low procurement and operations cost.

2. Increasing Urbanisation: Urbanisation began after India was independent. The factors such as better standard of living, educational opportunities, etc., lead people to migrate to towns and cities.

3. Young demographics and reducing dependency ratio: India is a country with Young population where 65 per cent of the population is below 35 years of age and approximately 78 per cent of the population is below 45 years of age.

4.Retail consumption trends in India: The food and groceries (F&G) segment constitutes a majority share of the retail market, standing at 67 per cent.

5. Penetration in organised retail: Jewellery and Watches, Apparel & Accessories and CDIT have contribution of 27 per cent, 22 per cent and 25 per cent respectively.

6. Strong promoter background and an experienced and entrepreneurial management team: The business is consumer-driven with strong promoter background and an experienced senior management team that have helped to offer high standards of customer service and a pleasant shopping experience.

7. IPO proceedings: The company is going to prepay a portion of loans and will resort to redemption or earlier redemption of NCDs of Rs 1080 crore. It will construct and purchase fit outs for new stores using Rs 366 crore and the remaining proceeds will be used for general corporate purposes.

8.Diversified store locations: The company started diversifying store locations across various states and now has 10 state locations.

9. Financials: The company is delivering strong financials. It has posted consistent growth in RoE despite spending on ownership of real estate underlying several stores.

10. Attractive Valuations: The company looks attractive, as its EPS is 5.72; and its upper price band PE is 52.27x, which is much lower than its peers like Future Retail (40.92x) and Trent (81.37x).