Avenue Supermart: a compounding machine?

A couple of cents For folks who are trying to model the earnings:

1. Dmart has a very special currency to spend for its growth, Its equity.
   They are smart enough to utilize this in 2020 by raising 4kcr via QIP, by diluting just around 3% equity they have increased the Networth by 60%.
   Please note that their networth is hardly 15k cr today, terminal potential could be in lakhs of crs.

2. Dmart has a history[even before IPO] of funneling 1.5-2x of yearly free cashflows into store expansion, the additional cash requirement is funded with debt & when the time it right- they go for equity dilution.

3. Their inventory turnover ratio has been sliding downward from 14.5 to 12.5 levels, despite them still being the best- terminal inventory turnover numbers could be far lower- Which means more money requirement for incremental growth.
   So, I’d suggest modeling that number to trend downward and settling at 8-9x on a terminal number while computing the free cashflow number.

4. Simply putting the terminal P/E at 50x doesn’t make much sense, it all depends on the growth & longevity of growth. – In 10 years a lot can change for instance, a coupe of years back Quickcommerce didn’t even, exist now people are projecting it to be 5bill$ by 2025.
   Putting more reasonable estimates in line with Walmarts of the world removes any element of surprise.

Disclosure: No holdings.