DMart Maintains Solid Growth Amid Margin Pressures and Fierce Retail Rivalry

DMart Maintains Solid Growth Amid Margin Pressures and Fierce Retail Rivalry

Avenue Supermarts Limited

Company Overview

Avenue Supermarts Ltd., the parent company of DMart, continues to hold a significant position in India’s organized value retail market. Guided by its EDLC–

EDLP (Everyday Low Cost – Everyday Low Price) strategy, the company delivered a robust revenue growth of 16.7% in FY25, reaching ₹57,790 crore, while expanding its store base to 415 outlets. Despite strong top-line

performance, EBITDA margins compressed due to inflationary pressures, wage hikes, and intensifying competition in the FMCG segment. The company remains committed to expanding its digital footprint through DMart Ready and broadening its geographic reach. However, evolving market dynamics and operational costs present headwinds for near-term profitability.

Founded by veteran investor Mr. Radhakishan Damani in 2000, Avenue Supermarts has scaled rapidly while adhering to a cost-conscious retail model. Under the leadership of Mr. Neville Noronha, the company has become synonymous with operational efficiency and value pricing. DMart’s operations are divided across:

• Foods – 56% of revenue
• Non-food FMCG – 21%
• General Merchandise & Apparel – 23%

As of March 2025, DMart operated 415 stores, covering 17.2 million sq. ft. of retail space. The company’s tight control over its

supply chain and pricing strategy supports high inventory turnover and strong customer loyalty.

Industry Overview

India’s organized retail segment is on a growth trajectory, projected to expand at a CAGR of 9–10% over the next five years. DMart’s focus on grocery and daily essentials gives it a stable market foundation. However, this space is being rapidly reshaped by e-commerce entrants like JioMart, Amazon Fresh, Blinkit, and Swiggy Instamart, which are eroding traditional retailers’ margins through deep discounting and convenience-based offerings. Rising input costs, wage inflation, and urban rental expenses further add to industry-wide margin pressures

Financial Performance Overview

During FY25, Avenue Supermarts Ltd. reported a healthy 16.7% year-on-year growth in revenue, increasing from ₹49,533 crore in FY24 to ₹57,790 crore. This growth was largely driven by strong traction across existing stores and supported by aggressive store expansion during the year. However, profitability growth was comparatively moderate. EBITDA for the year stood at ₹4,543 crore, registering a 10.8% increase over the ₹4,101 crore reported in FY24. Despite this absolute growth, EBITDA margins experienced a contraction of 40 basis points, declining from 8.3% in FY24 to 7.9% in FY25. This margin pressure is primarily attributed to rising wage costs, higher operational expenses, and increased competitive intensity in the FMCG segment, which constitutes a significant share of DMart’s revenue.

Net profit for FY25 rose by 8.6%, moving from ₹2,695 crore in FY24 to ₹2,927 crore, in line with the EBITDA trajectory. Correspondingly, the net profit margin narrowed by 30 basis points, dipping from 5.4% in FY24 to 5.1% in FY25. The earnings per share (EPS) increased from ₹41.43 to ₹44.98, reflecting the modest growth in net income. On the operational front, the company added 50 new stores during the year, bringing the total count to 415 stores, up from 365 in FY24. The total retail area expanded from 15.7 million square feet to 17.2 million square feet, marking an addition of 1.5 million square feet. This store network expansion aligns with the company’s strategy of increasing its physical footprint in both established and emerging urban centers across India.

Q4 FY25 Performance Snapshot

In the fourth quarter of FY25, Avenue Supermarts reported a 16.6% year-on-year increase in revenue, rising to ₹14,462 crore from ₹12,409 crore in Q4 FY24. This robust top-line growth was primarily driven by sustained consumer demand and the incremental revenue contribution from new store additions over the past year. Despite the revenue uptick, operating profitability faced pressure during the quarter. EBITDA declined by 3.9% to ₹981 crore, compared to ₹1,021 crore in the same quarter last year, indicating margin headwinds amid rising wage costs and elevated operating expenses, especially in the core FMCG category. Consequently, EBITDA margins contracted on a year-over-year basis.

Net profit for Q4 FY25 came in at ₹620 crore, reflecting a modest 1.6% growth from ₹610 crore in Q4 FY24. However, the PAT margin saw a decline of 60 basis points, dropping from 4.9% to 4.3%. This margin compression underlines the growing cost pressures and heightened competitive environment, which are weighing on the company’s profitability metrics. Despite these challenges, Avenue Supermarts managed to sustain its bottom-line growth, albeit at a slower pace, demonstrating operational resilience in a competitive retail landscape.

In FY25, Avenue Supermarts showed marginal improvements in its financial efficiency and stability. Return on Equity (ROE) edged up to 17.2% from 17.0%, and Return on Capital Employed (ROCE) increased to 18.5% from 18.2%, indicating slightly better capital utilization. The current ratio improved from 1.4x to 1.5x, reflecting stronger short-term liquidity. While the debt-to-equity ratio remained extremely low at 0.02x, suggesting minimal leverage, inventory days rose from 30 to 32, implying a slightly slower inventory turnover. The company’s market capitalization also increased from ₹2.31 lakh crore to ₹2.49 lakh crore, showcasing positive investor sentiment.

Recent Developments

• Store Network Expansion: Added 50 new stores in FY25, surpassing FY24’s 40-store addition.
• E-commerce Growth: DMart Ready is now operational in 23 cities, growing at 21.8% YoY in H1 FY25.
• Geographic Reach: Entered Gurugram, expanding presence in northern India.
• Leadership Change: Mr. Anshul Asawa is set to take over as CEO from Mr. Neville Noronha by FY26, ensuring continuity.

Investment Risks

• Margin Compression: Competitive pricing in FMCG and grocery is limiting profitability.
• Cost Pressures: Higher wage, rental, and input costs threaten operating leverage.
• E-commerce Uncertainty: Profitability timeline for DMart Ready remains unclear.
• Valuation Sensitivity: The current valuation leaves little room for earnings disappointment or macroeconomic headwinds.

Final Thoughts

Avenue Supermarts continues to be a structurally strong player in India’s organized retail ecosystem. Its disciplined cost management, customer-first pricing, and expanding omni-channel presence are long-term positives. However, elevated input costs and competitive pressures in its core segments demand close monitoring. As the company enters a new leadership phase and accelerates its digital and geographical expansion, execution and margin resilience will be the key factors determining its performance in the coming quarters.

The image added is for representation purposes only