DMart to follow up QIP with up to $500 mn OFS2 min read . Updated: 06 Feb 2020, 10:55 PM IST
- Offer for sale will see promoter offload more than 2% of his stake
- The funds from the QIP will be used for strategic investments or acquisitions and also to repay loans
MUMBAI : Avenue Supermarts Ltd, which runs the popular supermarket chain DMart, will soon launch another share sale that will see the company’s promoter Radhakishan Damani offload more than 2% of his stake in the company, two people aware of the plans said on condition of anonymity.
The proposed stake sale, which will take place through the so-called offer for sale (OFS) route, is an extension of the qualified institutional placement (QIP) offering launched by the retailer on Wednesday, which saw DMart sell shares worth ₹4,098 crore to institutional investors.
Collectively, the two share sales are aimed at reducing promoter stake to meet Securities and Exchange Board of India (Sebi) norms on minimum public shareholding, which mandate companies to reduce promoter shareholding to 75% within three years of listing.
For DMart, which went public in March 2017, that deadline expires next month.
Post Wednesday’s QIP, promoter stake in the company stands at around 77.3%, down from 79.73% as of 31 December.
“The OFS is expected to be launched within this month. It will involve the sale of at least 2.3% stake of the promoter, which could mean a share sale of anywhere between $450-500 million," said one of the people cited above.
An email sent to Avenue Supermarts did not elicit a response.
The QIP will allow Damani to pare his stake, while helping DMart raise growth capital to fund the expansion of its store network.
“Our company proposes to utilize the Net Proceeds to augment long-term resources for financing our future 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," the company said in a prospectus for the QIP offering filed with the stock exchanges on Wednesday.
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," according to the prospectus.
As of 31 December, DMart had 196 stores with retail floorspace of 7 million sq. ft. across 72 cities and towns with Maharashtra contributing the biggest chunk of the portfolio at 74 stores, followed by Gujarat at 35 stores.