The company was looking to raise around Rs 1,800 crore for a stake sale of 10 per cent.
Whenever investor Rakesh Jhunjhunwala meets his mentor Radhakishan Damani, reports say, his favourite question is: “When are you listing your company?”
As Avenue Supermarts, the company that operates the supermarket chain DMart, opens for an IPO on March 8, Jhunjhunwala’s wait will come to an end.
It’s not only Jhunjhunwala who is looking forward to the listing of the company. Many other market players, too, are keenly watching it.
There is a natural reverence amid market players about Damani. And for good reasons. For years, many fund managers and seasoned traders have followed the investments of “Mr White and White”, a nickname Damani earned due to his penchant for wearing white shirts and white trousers.
Unlike the Bollywood director duo Abbas-Mustan, who are always spotted in similar attire at film functions or in media interviews, Damani has stayed away from the spotlight.
For the uninitiated, Damani, 61, is one of the biggest names in the Indian stock market and ranked 98th on the Forbes India Rich List 2015 with a net worth of $1.15 billion.
Much before Dmart happened, Damani was an ace stock market investor and mentor to Big Bull Jhunjhunwala.
Kisan R Choksey, chairman of KRChoksey group, said: “Damani is known to look at fundamentals first as an investor and he chooses companies after proper due-diligence.”
His strategy has been to identify and invest substantially in stocks that become multi-baggers, and he has the patience to wait for five to 10 years. Damani’s best investments include Gillette, VST Industries, CRISIL and 3M India.
There are many stories to keep that legend intact. Two incidents specifically merit mention: In the early 1990s, when the original Big Bull, Harshad Mehta, kept taking the stock market to new heights on a daily basis, Damani had short positions in the market.
Mehta and Damani kept on going in opposite directions till it was revealed that Mehta was siphoning off money from banks, and the markets crashed. Damani kept his nerve and came out on top.
Just a few years later, he locked horns with Mehta again. This time, Mehta, in his new avatar as advisor, helped push shares of select companies like BPL, Videocon and Sterlite. Damani was again in the way. He shorted these stocks till the prices came crashing down.
However, he wasn’t happy just winning. As Deena Mehta, managing director of Asit C Mehta Investment Intermediates and an industry veteran since 1984, said: “Even during this crisis, Damani was very helpful to traders in trouble. Even though he was heavily short in these shares, he allowed exit to brokers and traders who were long on these shares and sought his help.”
Damani and Jhunjhunwala have taken many long-term bets together. Both have sizeable holdings in Aptech, CRISIL and Delta Corp.
Recalls Arun Kejriwal of Kris Securities and a seasoned investor: “Initially, when there was only one DMart shop in Malad (a Mumbai suburb), I would regularly visit it to buy and compare latest brands and trends.
Often, there would be some salesperson who would stand behind me while I was comparing. When I met Damani once, I told him that I felt a little stifled being watched like that. I never saw anyone around me since then.”
Market players said the company was looking to raise around Rs 1,800 crore (Rs 18 billion) for a stake sale of 10 per cent. According to these numbers, the valuation would be 40 times the FY18 earnings, which seems rich, but the company has the numbers to justify the valuation.
It had a return on capital employed of 24.2 per cent in FY16, while the next best company in the retail space - Trent - was only at 3.6 per cent. And it was the only company with a three-digit net profit figure of Rs 318.9 crore (Rs 3.19 billion).
The grey market is already buzzing on expectations of hefty listing gains despite the steep expected valuation.
Given that the Damani family will own a 90 per cent stake in the company, their stake in the company would be over Rs 16,000 crore (Rs 160 billion). Clearly, Damani will rise several notches higher on the Forbes rich list soon.