Best Retail Stock: Vishal Mega Mart vs Dmart vs V-Mart

The Indian retail industry is one of the fastest-growing markets globally.

It also one of the most crucial industries for India as it accounts for almost 10% of the gross domestic product (GDP) and 8% of the employment.

With over 90% of unorganised retail, the industry is a unique blend of traditional and modern retail chains.

The industry was valued at over US$ 1 trillion in 2023 and is set to grow at a compound annual growth rate (CAGR) of 10% by 2030 driven by rising disposable incomes and urbanisation.

In this fast-growing industry, value-retail chains such as Vishal Mega Mart, DMart and V-Mart Retail are grabbing a huge market share among the middle-income groups.

Let's compare these three companies across various parameters to see which is a better retail stock.

Business Overview

#Vishal Mega Mart

Incorporated in 2001, Vishal Mega Mart is a hypermarket chain catering to middle and lower-middle-income groups in India.

It offers a wide range of products, including apparel, general merchandise, and fast-moving consumer goods (FMCG).

The company has both in-house brands and other brands across all its product categories.

Over the years, it has developed 26 brands across the three product categories, which contribute over 70% of the revenue.

The company uses a hub and spoke distribution model to support its store network all over the country, enabling timely, cost-effective delivery across India.

#Avenue Supermarts (DMart)

Avenue Supermarts operates a national supermarket chain under the name Dmart. The primary focus of the company is on value-retailing and hence caters to middle and low-middle income group.

It sells food, non-food FMCG products, general merchandise, and apparel in all its stores.

The company also has an online presence and is engaged in online and multi-channel grocery retail under the brand name Dmart Ready.

Dmart follows 'Everyday Low Cost - Everyday Low Price' strategy focusing on competitive procurement, operational efficiency, and cost-effective distribution to offer value-for-money pricing to customers.

This made the company one of the favourite retailers among the lower-income groups in India.

#V-Mart Retail

V-Mart Retail is engaged in the business of value retailing through a chain of stores located across the country.

The company is mainly involved in the retailing of apparel, with a minor presence in non-apparel products.

Its stores are mainly located in tier II, III and IV Indian cities to cater to the lower income groups.

The company has five business divisions to cater to different apparel needs for different occasions and customers.

V-Mart Aspire caters to the Gen X, V-Mart Plus is for all age groups, V-Mart Corporate is for working professionals, V-Mart Values is for basic apparel needs, and LimeRoad is an online marketplace which is a facilitator for third party apparel vendors and buyers.

The company has significant investments in technology, data analytics, ERP, supply chain management systems, and inventory management to manage its store network efficiently.

Particulars	Vishal Mega Mart	Avenue Supermarts (DMart)	V-Mart Retail
Market Cap (in Rs billion)*	470.7	2249.2	77.1
Store network	645	400	467

Source: Equitymaster|*24th December 2024

Between the three companies, Avenue Supermarts has the highest marketcap of Rs 2,219 billion (bn), followed by Vishal Mega Mart with Rs 455.9 bn, and V-Mart Retail with Rs 75 bn.

However, in terms of the store network, Vishal Mega Mart is leading with 645 stores across India, followed by V-Mart Retail with 467 stores, and DMart with 400 stores.

Vishal Mega Mart is among the top three offline-first, diversified retailers by retail space in India. Its stores are majorly located in North and East of India. However, it has a small presence in the South and West of India as well.

For DMart, 70% of the stores are located in Maharashtra, Gujarat, Telangana, Andhra Pradesh, Karnataka, and Tamil Nadu. The rest 30% are located in the North.

V-Mart has majority of its stores in Tier II, III, and IV cities with strong presence in Bihar, Uttar Pradesh, Tamil Nadu, and Jharkhand.

Among the three companies, DMart has a more pan India presence, even though it has a lower store count compared to the others.

In terms of stock performance, V-Mart Retail is leading with a 90% return in the last year. DMart's shares have fallen by 13% during the same period.

Vishal Mega Mart's shares were listed on 19th December 2024 at a premium of 33% from its IPO price.

#Revenue

The primary source of revenue for Vishal Mega Mart is apparel (43%) followed by general merchandise (28%), and FMCG (27%).

Moreover, the company's own brands contribute to the majority of its revenue.

In the last five years, its revenue grew at a CAGR of 11% on account of growing store network, and steady increase in same store revenue.

For DMart, the foods category contributes to 56% of the revenue, followed by general merchandise and apparel at 23%, and the non-foods (FMCG) category at 21%.

In the last five years, its revenue grew at a CAGR of 15.2% on account of higher store footfall. Hence the company has a higher revenue per square feet than other retailers.

For V-Mart Retail, the apparel segment contributes to 82% of the revenue, followed by non-apparel and foods at 9% each.

In the last five years, the company's revenue grew at a CAGR of 10.9% on account of consistent expansion of its retail network, healthy brand presence, and recall value in the domestic value fashion retail.

Among the three companies, DMart is leading in terms of revenue and revenue growth.

Revenue

Net Sales (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
Vishal Mega Mart	52,922	44,524	55,885	75,860	89,119	11.00%
Avenue Supermarts (DMart)	2,24,923	2,19,033	2,80,398	3,85,288	4,56,835	15.20%
V-Mart Retail	16,620	10,755	16,662	24,648	27,856	10.90%

Data Source: Equitymaster

#Profitability

The profitability of a company can be assessed through earnings before interest tax depreciation and amortisation (EBITDA) and net profit growth and margins.

The EBITDA and net profit of Vishal Mega Mart grew at a CAGR of 14.1% and 59.1%, respectively, in the last five years. Strong growth in revenue, along with the company's hub and spoke model for delivery, has helped the company manage its costs and grow its profits.

For DMart, the EBITDA and net profit grew at a CAGR of 14.2% and 14.3% respectively. Strong procurement abilities, low priced products, and high cost control have aided the profit growth.

In case of V-Mart, the EBITDA grew at a CAGR of 1.6% in the last five years. But the company's losses expanded and currently stand at Rs 968 million (m) due to high raw material costs.

However, in recent quarters, the loss has narrowed down, indicating a positive momentum.

Profitability

EBITDA (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
Vishal Mega Mart	6,777	7,414	8,878	10,768	13,081	14.10%
Avenue Supermarts (DMart)	21,883	19,393	26,160	37,664	42,502	14.20%
V-Mart Retail	2,233	1,561	2,231	2,915	2,419	1.60%
PAT (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
Vishal Mega Mart	453	1,186	2,028	3,213	4,619	59.10%
Avenue Supermarts (DMart)	13,010	10,994	14,924	23,783	25,356	14.30%
V-Mart Retail	493	-62	116	-79	-968	-214.40%
Gross Profit Margin (%)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Vishal Mega Mart	12.80%	16.70%	15.90%	14.20%	14.70%
Avenue Supermarts (DMart)	9.70%	8.90%	9.30%	9.80%	9.30%
V-Mart Retail	13.40%	14.50%	13.40%	11.80%	8.70%
Net Profit Margin	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Vishal Mega Mart	0.90%	2.70%	3.60%	4.20%	5.20%
Avenue Supermarts (DMart)	5.80%	5.00%	5.30%	6.20%	5.60%
V-Mart Retail	3.00%	-0.60%	0.70%	-0.30%	-3.50%

Data Source: Equitymaster

#Debt Management

It is important to assess the debt levels of a company to understand its fixed financial obligations.

All three companies are debt-free and do not have any long-term debt obligations.

Vishal Mega Mart has debt on its books until financial year 2022. However, it paid of its debt in full in financial year 2023.

It also has strong cash reserves indicating sufficient liquidity to fund all its growth plans. The company plans to expand its store count with an estimated capex of Rs 2.5 bn in the next few years.

Avenue Supermarts, on the other hand, has cash reserves of Rs 16.7 bn at the end of financial year 2024. It plans to open 40-50 stores annually, with a goal of increasing it to 60-70 stores per year.

V-Mart Retail has around Rs 300 bn in cash reserves and plans to utilise them for its store expansion and working capital requirements.

Debt Management

Debt to Equity Ratio (x)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Vishal Mega Mart	0.2	0.2	0.1	0	0
Avenue Supermarts (DMart)	0	0	0	0	0
V-Mart Retail	0	0	0	0	0

Data Source: Equitymaster

#Financial Efficiency

We can measure the financial efficiency of a business by checking its return on equity (RoE) and return on capital employed (RoCE) numbers.

These return ratios indicate a company's ability to generate returns from the equity and capital invested. A high and consistently growing ratio is considered better.

The five-year average RoE for Vishal Mega Mart, DMart, and V-Mart Retail is 4.5%, 12%, and -0.5%, respectively, whereas the five-year average RoCE is 9.9%, 16.6%, and 12.4%, respectively.

The RoE and RoCE of all Vishal Mega Mart and DMart has grown consistently over the last five years on account of rising profits and margins.

However, for V-Mart Retail, strong downward pressure on margins due to rising raw material prices has affected the return ratios.

Clearly, DMart is leading the race when compared to the other companies.

Financial Efficiency

Return on Equity (RoE)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Vishal Mega Mart	1.10%	2.60%	4.20%	6.30%	8.30%
Avenue Supermarts (DMart)	11.80%	9.00%	10.90%	14.80%	13.60%
V-Mart Retail	10.90%	-0.80%	1.40%	-0.90%	-13.10%
Return on Capital Employed (RoCE)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Vishal Mega Mart	6.80%	7.50%	9.30%	11.80%	14.20%
Avenue Supermarts (DMart)	16.40%	12.60%	15.50%	19.50%	18.90%
V-Mart Retail	28.50%	6.50%	11.00%	13.30%	2.70%

Data Source: Equitymaster

#Dividend

All the three companies do not pay dividends to their shareholders. This is primarily because all of them are actively investing in expanding their store network.

#Valuation

Valuation ratios help us estimate the intrinsic value of a company and help us analyse whether a company's shares are overvalued or undervalued compared to its peers.

The two popular valuation ratios are price to earnings (P/E) and price to book value (P/B). A high ratio indicates the shares are overvalued, a low ratio indicates the shares are undervalued.

The PE ratios of Vishal Mega Mart and DMart are 101x, and 82.9x respectively. In terms of PE, shares of Vishal Mega Mart are relatively overvalued.

The PB ratios of Vishal Mega Mart, DMart and V-Mart Retail are 3.6x, 11x, and 10.6x, respectively. In terms of PB, DMart shares are highly overvalued compared to those of its peers.

When compared to the industry average, all three companies are highly overvalued.

Valuations	Vishal Mega Mart	Avenue Supermarts (DMart)	V-Mart Retail
P/E (x)	101	82.9	NM
P/B (x)	3.6	11	10.6

Data Source: Equitymaster

Which Retail Stock is Better: Vishal Mega Mart or Dmart or V-Mart?

In terms of revenue, revenue growth, profit, gross profit margin and financial efficiency, DMart is leading.

However, in terms of net profit growth and profit margins, Vishal Mega Mart is leading.

The company plans to invest around Rs 2.5 bn in the next few years to expand its store network. Since the company has presence in North and East of India, it plans to expand in South and West of India.

DMart, on the other hand, plans to open 40-50 stores annually, with a goal of increasing it to 60-70 stores per year. It also plans to expand its online presence through its brand, DMart Ready.

V-Mart Retail also plans to expand its stores. It also invests in technology, data analytics, ERP, supply chain management systems, and inventory management to reduce costs and improve efficiency.

Growing population, rising disposable incomes, urbanisation, and availability of a wide variety of products under one roof will drive the growth of these retail stores in the medium term.

However, it is important to thoroughly access the fundamentals, of each company before adding them to your watchlist and also consider corporate governance.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...