Avenue Supermarts Limited — Q1 FY26 earnings call

Call held 30 Jul 2025

Management summary

DMart delivered resilient FY25 results with 16.7% revenue growth and 50 new stores despite intense competition from quick commerce. Management strongly signaled accelerated store expansion as the primary strategic priority, with Neville Noronha personally focusing on North India/UP real estate while transitioning CEO responsibilities. E-commerce arm DMart Ready grew 21% with improving delivery times (65% orders in 12 hours, 11% in 3 hours) but losses widened. The CEO transition to Anshul Asawa is proceeding smoothly.

Highlights

  • FY25 standalone revenue ₹57,790 Crore with 16.7% growth; EBITDA margin 7.9%; PAT ₹2,891 Crore (excl. tax gain), PAT margin 5.1%

  • Opened 50 stores in FY25; total store addressable market estimated at ~2,200 stores (1,800 gap remaining)

  • Like-for-like growth of 8.4% for 24-month+ stores (vs 9.9% in FY24); 35.3 Crore bill cuts in FY25

  • Avenue E-Commerce (DMart Ready) grew 21% but loss widened to ₹247 Crore (7% of sales)

  • Consolidated revenue ₹59,358 Crore; consolidated PAT ₹2,707 Crore at 4.6% margin

  • ROCE 17.8% and RONW 14.1%, slight moderation from prior year; fixed asset turnover 3.4x

  • Management transition underway: CEO-designate Anshul Asawa (ex-Unilever) joined; Neville Noronha MD until Jan 2026

  • Strong commitment to accelerate store expansion, especially in North India/UP; Neville personally focusing on real estate

Key financials

  1. Revenue from Operations (Standalone) ₹57,790 Cr +16.7%YoY
  2. EBITDA Margin (Standalone) 7.9%
  3. PAT excl. tax gain (Standalone) ₹2,891 Cr +7.3%YoY
  4. PAT incl. tax gain (Standalone) ₹2,927 Cr
  5. Revenue (Consolidated) ₹59,358 Cr
  6. PAT (Consolidated) ₹2,707 Cr
  7. Revenue per sq ft 34,000 Rs per sq ft
  8. Bill Cuts ₹35.3 Cr
  9. Like-for-Like Growth (24M+ stores) 8.4%
  10. ROCE 17.8%
  11. RONW 14.1%

What they filed

Q1 FY27: revenue up 15.1%, net profit up 12.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue14,050 15,565 14,462 15,932 16,219 +15%17,613 +13%17,204 +19%18,343 +15%
EBITDA1,105 1,235 981 1,313 1,230 +11%1,481 +20%1,231 +25%1,527 +16%
Net profit710 785 620 830 747 +5%923 +18%725 +17%936 +13%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Standalone (DMart Stores)
    ₹57,790 Cr Revenue10.8% EBITDA Growth
  • Avenue E-Commerce (DMart Ready)
    21% Sales Growth₹-247 Cr Loss
  • Align Retail (Packaging)
    19% Sales Growth13% PAT Growth
  • Food Plaza
    28% Sales Growth

Guidance & targets

Store Expansion

  • Annual store openings Store Expansion · FY26+ · High confidence At least 50, aiming higher
    it won't be less than 50... we will double down on our investments on store additions

    — Neville Noronha

  • Total addressable stores Store Expansion · Long-term · Medium confidence ~2,200 stores
    2,200 is approximately the number of stores, out of which 400 something is what we already have. So, 1,800 approximately is the opportunity

    — Neville Noronha

E-Commerce

  • DMart Ready delivery target E-Commerce · Medium-term · Medium confidence All orders within 6 hours
    Our vision is to deliver almost all our orders in six hours... already have around 11% of our orders being delivered in three hours. We have 65% of our orders being delivered in 12 hours

    — Neville Noronha

Margins

  • Gross margin cap Margins · Long-term · High confidence ~15%
    we are very clear, we'll not earn more than 15% or thereabouts

    — Neville Noronha

Balance Sheet

  • Debt tolerance Balance Sheet · FY26+ · Medium confidence Reasonable debt acceptable

    Previously Zero net debt → Reasonable debt acceptable

    Reasonable debt is fine... if we get great opportunities from a real estate acquisition standpoint, we are happy to raise that, but limited, under control

    — Neville Noronha

Risks & concerns

  • Quick commerce intensifying competition in metros

    medium

    LFL growth declined from 9.9% to 8.4%, with QC-intense cities showing impact during discount waves. Management acknowledges ~1.5% SSS impact from QC but believes it's manageable.

    Analyst acknowledged

  • EBITDA margin moderation from multiple headwinds

    medium

    EBITDA margin at 7.9% pressured by higher employee costs (service level investment, warehouse wage inflation), new store drag, and competitive FMCG pricing. PAT growth 7.3% lagged revenue growth 16.7%.

    Analyst acknowledged

  • CEO transition execution risk

    medium

    Neville Noronha transitioning out as MD by Jan 2026. Anshul Asawa (ex-Unilever) taking over. Neville to focus on real estate/store expansion. Transition seems well-planned but founder-led culture change risk exists.

    Analyst acknowledged

  • DMart Ready losses widening

    medium

    E-commerce losses at ₹247 Crore (7% of sales), widened from prior year. Home delivery transition increasing transport costs. Breakeven expected in 'couple of years' but no firm timeline.

    Analyst acknowledged

  • Return on capital declining

    low

    ROCE declined to 17.8%, RONW to 14.1% from higher levels. Attributed to accelerated property acquisitions (pre-opening capex) and rising real estate costs. Management not concerned, focusing on long-term.

    Analyst downplayed

Areas of evasion (4)

  • Private label percentage not disclosed
  • DMart Ready breakeven timeline vague
  • No specific store opening number guidance
  • Dividend policy deferred to board

Q&A highlights

3 direct
Quick Commerce impact and DMart's strategic response Direct
one of the best ways to counter quick commerce is not actually really digital. One of the best ways to counter quick commerce is to have more and more DMart stores... the moat for DMart is its gross margin

Management's definitive response to the QC threat is accelerating physical store expansion rather than competing digitally, reflecting deep confidence in the brick-and-mortar value model

Asked by Vivek Maheshwari

Private label strategy and 20-20-20 principle Direct
20-20-20 principle: do we have an opportunity to gain 20% share? Can it be delivered at 20% lower price? Can I make 20% more margin than the main brand?

First detailed disclosure of private label decision framework; reveals disciplined, long-term approach that will take a decade to fully play out

Asked by Percy Panthaki

DMart Ready economics and competitive positioning Direct
this is a business that can be broken even in a couple of years... we don't believe in the long tail, even in the e-commerce format... 11% of orders delivered in 3 hours, 65% in 12 hours

DMart Ready breakeven timeline visibility plus operational delivery improvements showing path to viability without competing on immediacy

Asked by Avi

2 min read 5 chapters

Detailed narrative

Store Expansion Acceleration is the Definitive Strategy

Management made the strongest-ever commitment to accelerate store expansion. Neville Noronha will personally handle North India real estate while transitioning CEO responsibilities. Opened 50 stores in FY25 and committed to 'not less than 50' going forward, with aspiration for significantly more. TAM estimated at 2,200 stores (1,800 remaining). Management is even open to 'reasonable debt' to fund expansion, a notable shift from the historically debt-free approach.

Quick Commerce Response: More Stores, Not Digital Matching

Management firmly positioned physical store expansion as the primary QC counter-strategy, not matching digital delivery speeds. LFL growth moderated from 9.9% to 8.4% with QC-intense cities showing localized impact. Zero QC impact seen in non-metro markets where DMart stores offer 'pleasure and value'. Management views DMart's operating cost structure as an enduring moat vs QC's higher costs.

DMart Ready Pivot to Home Delivery Showing Results

DMart Ready grew 21% despite shutting pickup points and consolidating to home delivery model. Now in 24 cities. 65% of orders delivered within 12 hours, 11% within 3 hours, with vision of all orders within 6 hours. Losses at ₹247 Crore but management sees breakeven 'in a couple of years'. Customer stickiness described as 'an order of magnitude much larger than others'. CEO Vikram Dasu noted they're ramping up outreach/marketing efforts.

Profitability Under Pressure but Strategically Accepted

EBITDA margin at 7.9% with PAT growth (7.3%) significantly lagging revenue growth (16.7%). Key pressures: employee cost increases for store service levels, unprecedented warehouse wage inflation, rising real estate costs, and competitive FMCG pricing. Management explicitly stated they 'will not be bothered so much about gross margins or expenses' and that 'few basis points here and there' deterioration is acceptable in pursuit of growth.

CEO Transition Well-Planned but Culture Preservation Key

Anshul Asawa (30 years Unilever, 10 years overseas) joined as CEO-designate with structured 4-month transition. Neville Noronha remains MD until Jan 2026 and will continue focusing on real estate and store expansion. Key message: DMart fundamentals and culture don't need to change, but execution capabilities need scaling for larger store count. Minimax format discontinued; focus narrowed to DMart stores + DMart Ready only.

This is an AI-generated summary of a publicly available earnings call transcript.
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