In a surprising turn of events, DMart Stock plunged by 9% on Monday, wiping off ₹20,800 crore from the wealth of Radhakishan Damani and other DMart promoters. This dramatic drop comes after analysts pointed to weak revenue growth and rising competition from online grocery platforms, putting significant pressure on the retail giant’s stock.
DMart Stock Plummets 9%, Radhakishan Damani and Promoters Lose ₹20,800 Crore in Minutes: Here’s Why?
DMart’s Weakest Quarter Yet
ICICI Securities flagged that DMart’s Q2 revenue growth of 14% year-on-year (YoY) marked the company’s lowest-ever quarterly growth rate. The like-for-like (LFL) growth stood at just 5.5%, a noticeable dip from the high-single-digit growth DMart had previously enjoyed. Footfalls also declined by 1% sequentially, contrasting the 4% growth seen in the same quarter last year.
The sluggish growth raised alarm bells among investors, leading to a steep 9.37% plunge in DMart’s share price, bringing it down to ₹4,143.60 at its lowest point during the day. As a result, the market value of shares owned by DMart promoters, including Radhakishan Damani’s family, dropped from ₹2,22,112 crore on Friday to ₹2,01,284 crore — a loss of ₹20,827 crore within minutes.
Competition from Online Grocery Platforms
One of the key factors behind DMart’s disappointing performance is the intensifying competition from online grocery platforms, particularly quick commerce services, which have gained significant traction in metro cities. Consumers seeking the convenience of online shopping appear to be overlapping with DMart’s traditional customer base, impacting footfalls and store productivity.
As a result, several brokerages have revised their earnings estimates for DMart for FY25 and FY26. Analysts expressed concerns about DMart’s ability to sustain its growth trajectory in the face of increasing competition from online platforms like BigBasket, Blinkit, and Swiggy Instamart.
Analysts’ Take on DMart’s Stock
ICICI Securities downgraded DMart stock from ‘Add’ to ‘Reduce,’ lowering its target price to ₹4,100. They attributed this downgrade to flat YoY revenue throughput per store, a 30 basis point dip in EBITDA margins due to operational deleverage, and weaker store productivity.
Prabhudas Lilladher, while maintaining a ‘Hold’ rating, revised its target price to ₹4,748 from ₹5,168 and expressed cautious optimism ahead of the upcoming festive season sales. The firm stated it would closely monitor sales trends during this period to assess DMart’s future performance.
Centrum Broking also highlighted the effects of subdued discretionary spending and competitive pressures on DMart’s muted Q2 results. Despite tweaking its earnings estimates, the brokerage upgraded the stock to ‘Buy’ following the recent price correction and set a revised target price of ₹5,655.
What Lies Ahead for DMart?
Although the short-term outlook appears challenging for DMart, long-term growth potential remains. Motilal Oswal Financial Services (MOFSL) acknowledged the impact of inflation moderation and rapid growth in quick commerce on DMart’s LFL growth. However, they believe DMart can accelerate its expansion by adding new stores in the coming years. MOFSL projects 40 store additions in FY25, 45 in FY26, and 50 in FY27.
While DMart’s revenue growth remains tied to its ability to expand store space, analysts expect the company to pick up pace starting from the second half of FY25. With a potential increase in capital expenditure (capex), DMart may find a path to recovery despite the current headwinds.
Conclusion
The 9% plunge in DMart Stock has sparked concern among investors, particularly given the mounting competition from online grocery platforms and slowing revenue growth. While analysts have cut earnings forecasts for FY25 and FY26, there remains optimism that DMart can bounce back by expanding its store network and adapting to the evolving retail landscape.
As DMart navigates these challenges, all eyes will be on how the retail giant responds to the growing threat of online competition and its strategy for driving long-term growth.
