DMart, the nearly ₹2 trillion Indian retailer, may post strong earnings ⁠— watch out for the progress on e-commerce

• Radhakishan Damani's DMart is aware of the rising influence of e-commerce in India's grocery sector. Still, it was only in October 2020 that it finally took some serious steps to go online.
• And its third-quarter earnings will reflect whether it has managed to make any inroads into the e-commerce sector.
• DMart is facing increasing challenges from India's richest man Mukesh Ambani's JioMart, and the e-commerce giants Amazon, Flipkart, BigBasket, and Grofers.
• However, analysts are bullish on DMart and its expertise in the offline FMCG segment, which would boost sales in the festive season.

DMart, one of India's big success stories in retail, knows that it faces rising competition from India's richest man Mukesh Ambani's JioMart, Walmart-owned Flipkart, the world's biggest e-commerce player Amazon and that it can't shy away from e-commerce.

A Goldman Sachs report from November 2020 pegs that India's online grocery segment is set to grow 18 times over the next five years to reach $37 billion in GMV by FY25E. Damani's DMart is also aware of the rising influence of e-commerce in India's grocery sector.

At the end of its last quarter earnings in October, DMart finally gave in to the needs of e-commerce. DMart geared up to take on the next phase of growth with small steps in its e-commerce offering – DMart Ready.

The company had said that it would be shutting down two stores in Mumbai and turning them into fulfillment centers for its e-commerce operations. "One each in Mira Road and Kalyan. Both these locations have an alternate DMart store within 4 km," Neville Noronha, CEO & Managing Director, Avenue Supermarts Limited, had said in a statement.

And now its third-quarter earnings will reflect whether it has managed to make any inroads into the e-commerce business.

However, analysts are bullish on DMart and its expertise in the FMCG segment, which would have increased its sales in the festive season. "We expect Avenue Supermarts to report double-digit revenue growth in the third quarter of the financial year. The management had indicated that its core' food & FMCG' segment reverted to a positive growth trajectory whereas GM & apparel categories are nearing their pre-Covid levels owing to strong demand in the festive season," said a report by ICICI Securities.

Analyst source: ICICI Securities

Another factor to watch out for would be DMart's footfalls in stores. During its second-quarter earnings, the company had said that footfalls continue to be 'significantly lower', but basket values are increasing.

According to reports, DMart’s Damani is also set to acquire an 8-acre plot from Mondelez India for as much as ₹250 crore.

Meanwhile, India's second-richest man Radhakishan Damani has been having a strong run in the stock market. DMart's share price has risen by 27% in the last six months, scaling the ₹2 trillion market cap for a few hours, on January 6, 2021.

And now, DMart will have to prove its mettle.

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