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Profit Matters

Dmart needs to expand to maintain its growth momentum

Profit Matters

Radhakrishna Damanis mantra of setting up stores in mid-market localities, owning his stores as opposed to taking them on lease and not having long credit cycles with his suppliers has helped him make Dmart the most profitable Indian retail chain.

High profitability has earned him superlatively high valuations in the stock market. But as his profit and EBITDA margins shrink in a highly competitive market, the stock market is considering a correction in stock prices. To maintain its growth momentum, Dmart needs to expand.

The retailer continues to woo consumers by offering low prices, despite margins coming under pressure. It isn't opening as many stores as required and is evidently not chasing valuations. Damanis philosophy is clear. He won't chase growth at the expense of profitability, so what if profit margins are dipping.

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