DMart looks to raise up to ₹4,098 crore through QIP to fund business expansion

Avenue Supermarts Ltd, which runs the popular supermarket chain DMart, on Wednesday launched a qualified institutional placement (QIP) offering to raise up to ₹4,098 crore.

The company will use the money to expand its store network, invest in supply chain and repay loans.

In a stock exchange filing, the company said it will sell as many as 20 million shares through the QIP, at a floor price of ₹1,999.04 apiece. Avenue Supermarts’ shares closed at ₹2,249.3, up 4.35% on BSE on Wednesday.

According to a term sheet seen by Mint, the company is offering shares at a price of ₹2,049 per share.

“Our company proposes to utilize the net proceeds to augment long-term resources for financing our expansion plans, which include funding expenditure towards implementation of our strategy on expanding our store network and increasing the efficiency of our supply chain network, including warehousing facilities and related acquisition of land,” Avenue Supermarts said in a prospectus filed with the stock exchanges.

The funds will also be used for strategic investments or acquisitions as well as to repay loans.

“We intend to further enhance our position in the retail supermarket business in Maharashtra, Gujarat, Telangana, Andhra Pradesh and Karnataka by increasing our market penetration and expanding our store network in these states. We also intend to strengthen our store network in Madhya Pradesh, Chhattisgarh, Tamil Nadu, Rajasthan, Punjab and NCR,” the prospectus said.

As of 31 December, DMart had 196 stores with a retail floor space of 7 million sq. ft, across 72 cities and towns.

Investment banks Axis Capital, BofA Securities and others are advising DMart on the share sale.

While the company is eyeing growth capital through this fundraise, the share sale was also necessitated by Sebi norms that require listed companies to reduce their promoter shareholding to 75% within three years from listing. For Avenue Supermarts, that deadline ends in March. The company went public in March 2017.

The QIP will result in promoter shareholding coming down to 77.3% from 79.73% currently.

The QIP will be followed by a secondary share sale, a so-called offer for sale (OFS), by the promoter to further bring down shareholding to 75%.