February 2017


Since the days of Harshad Mehta, RadhaKrishna Damani is known to be the man of Midas touch.

He is the big Bull Rakesh Jhunjhunwala’s Guru and a Ace Investor.

RadhaKrishna Damani started his own venture D-mart Retail 17 years back in 2000 and D-Mart is expected to be listed at 18,000 Crores of Valuation next month. The Current Grey Market Premium on this issue is 50% or 150 per share,In next 3 mins, you will definitely learn what makes D-mart so special.

Introduction to D-Mart – D Mart is third largest in the sector after Reliance Retail and Kishore Biyani’s Future Group. D Mart is one of the few profit making grocery retailers, known for low-priced products and a low-cost business model. 53% of D-Marts revenue comes from Food, 21% from FMCG and 26% General Merchandise and Apparel. Business model is easy i.e. to retail quality goods at competitive prices. The majority of products stocked by them are everyday products forming part of basic rather than discretionary spending. D-Mart had 112 Stores at End of FY2016 with presence in 8 States and 41 cities, Maharashtra contributed 63% of revenue whereas Gujarat contributes 19%

Why is D-Mart so Successful? (Moat Around the Business)

#Factor 1- Ownership of all Properties – Avenue Supermarts currently owns all its properties which eliminates rental cost. Rental costs typically account ~ 3 % – 8% for peers.  It operates predominantly on an ownership model (including long-term lease arrangements, where lease period is more than 30 years and the building is owned by it) rather than on a rental model.


#Factor 2- Revenue Per Square Feet –  This is the real big difference between a great business and a mediocre one. A Great business sweats its assets a lot more than the mediocre one. D-mart, Reliance Retail and Future Retail (Big Bazaar) have broadly the same product portfolio but D-mart does sales of 28,136 per Sq. feet whereas Reliance and Future do half of that at 13,901 Per Sq Feet and 12,914 Respectively.



#Factor 3 – Inventory Turnover – If there was one Ratio that we could have looked at and judged a Retail franchise, that would be Inventory Turnover. D-mart kills competition here, its like the Zara of FMCG Retail.  D-mart Inventory Turnover is 14.18 (26 days) v/s 4.9x (75 Days) for Future Retail.


#Factor 4 – Shift from Unorganized to Organized – We expect a very large shift from unorganized sector to organized sector, Organized retail is expected to grow at 21% whereas unorganized retail is expected to grow at 11.7%. We believe post GST, the pace of shift from unorganized to organized will be faster which will benefit D-Mart.



#Factor 5 – Growth led by Same Store Growth Plus Expansion – D-Mart’s Same store growth in last 3 years has been an astonishing with 26%, 22% and 21% for FY 2014,2015, and 2016. They plan to add 2.1 Million Square feet or about 70 new stores by 2020 (Assuming every story is 30-35k Sq Feet). D-mart has been the fastest growing retailer and increased revenues from 2200 Crores in 2012 to 8,600 crores in 2016


#Factor 6 – Employee Cost – D-Mart has the Least number of Employees per square foot i.e. 1 employee for 800 Square feet whereas competitors have 1 employee for every 400-500 Sq. Feet (you don’t need someone to help you buy Maggi, do you?).  This makes D-mart far more efficient compared to competition.


#Factor 7 – Return on Equity – By now i am sure you understood D-mart’s business model,You might be thinking that D-mart is a asset heavy business as it doesn’t rent properties rather it buys them, but D-mart has shown that even after having a very heavy asset base it has managed to deliver 20%+ Return on equity.



#Factor 8 – Comparison with Global Peers – D-Marts model is similar to that of Walmart, with a lot of owned stores, very high inventory turnover and low debt on balance sheet.Costco a members only wholesaler which has created immense value in last decade also a model of Economies of Scale. Zara and Walmart have proven that the only way to great value in retail is sell cheap and increase your Inventory turnover.



Stallion’s View – D-Mart is a Consumer facing business who has cost leadership as it pays all his suppliers within 15 days against a cash discount this helps sustain high Gross margins of 15%. D-Mart has been Smart with its cost management compared to its peers, and even after being a asset heavy business model its ROE is more than 20%+ .D- Mart is Expected to come with a Valuation of 18,000 or about 40x FY2017 PE. D-mart has a strong Business model, Longevity and Growth on its side. The organized Retail is expected to grow at 21% for next 10 years, which ensures D-Mart won’t trade at cheap valuations for a long long time.



We Recommend a Subscribe on Avenue Supermart IPO (D-mart) and Believe it will list at 400/Share plus at least.



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Housing Finance as a Theme has been on Fire, this is no secret that we at Stallion Asset are bullish on NBFC Space. Vijay Kedia, in his latest Tweet stated that Housing Finance’ sector could be the next market leader. In His Interview on Budget day on ET Now he said that he is long on LIC housing and wants to enter CanFin Home as well.Vijay Kedia Tweet Housing FinanceThe First person to buy the Housing Finance theme was Basant Maheshwari, (Big Fan of him) way back in 2014. Our understanding from his Interviews is that he is long on PNB Housing and Can Fin Homes. Rakesh Jhunjhunwala, the big Bull is backing


Lets Understand the Housing Finance Space in the next 3 mins.

Housing Finance is an easy business to understand, the company borrows at a Rate, lends at a higher rate, the difference is the gross profit. There are two main cost 1) Operating Cost and 2) Credit Cost (NPA)

Modi Government has been pushing for reforms in Housing finance space with interest subsidy of 4% for loans upto 9 Lakh and 3% on loans upto 12 Lakh. They have also given infrastructure status to affordable housing projects.

Housing Finance has clear tailwind and has an expected growth rate of 20-22% till FY 2020. In Particular the governments push towards affordable housing, reduction in interest rates and rising income level are expected to contribute towards increased housing demand.

Banks or NBFC?

If Money is an commodity, the one with the lowest cost of money should ideally win. Out of the total housing mortgages of 16.6 Lakh Crores in 2016, Housing Finance companies were 6.2 Lakh cr. or 37.5% of market Size. The Share is expected to increase further to 39% by 2020 as per Crisil. The competition is high in High ticket size Loans where banks are big players, whereas NBFC dominate the low ticket size space in the mortgage business. Historically banks have been inefficient on the collection side and have had higher NPA.



HFC to Bank



In Fiscal Year 2017, the estimated gross NPA level for HFCs in the housing loan sector is estimated at 0.50-0.7% while it is slightly higher for banks, at 1.60% clearing showing that NBFC’s have managed their portfolio a lot better than banks.

Which NBFC Should i choose?

We have identified 7 Factors that affect the Valuations of Housing Finance companies.

valuation Housing FinanceWe are now doing peer comparison of housing finance company for Various Factors.

#FACTOR 1 – Growth in AUM – Higher the expected growth in AUM, higher the valuation. PNB housing is the fastest growing HFC, Basant Maheshwari loves growth and hence he has invested there.

Loan Growth Housing Finance

#FACTOR 2 – Gross NPA – Higher the NPA, Lower the Valuation. NPA is affected with asset quality of companies. It is perceived by the market that salaried class doesn’t default as their income is very stable and where self-employed individuals may get affected due to business volatilityCanFin homes has superb asset quality with Gross NPA of just 0.24% and has given 84% loans to Salaried class.

Gross NPA

#FACTOR 3 – NET INTEREST MARGIN – In a commodity business, the one with the highest margin wins, in the housing finance business, money is a commodity. Higher the Net Interest margin, Higher the Valuation.

NIM Housing Finance

Net Interest Margin is a factor of cost of borrowing and price of lending. Indiabulls has the highest NIM’s due to its corporate lending loan book and Loan Against Property. Repco and Gruh have higher NIM because of their presence in lowest income group where competition is lowest from banks. LIC housing finance is the lowest cost borrower, but gives out loans only to salaried class where competition is high.

#FACTOR 4 – Average Ticket Size 

Average Ticket Size Housing Finance

Gruh is the lowest with an average ticket size of only 7 Lakhs as its rural focused whereas PNB has the highest average ticket size due to its Urban Focus. Higher the Average ticket size, higher the competition from banks. NBFC cannot compete with banks on the pricing front as banks have low cost of capital. DHFL has an edge in the low income housing finance as it has immense amount of experience of dealing with the needy.

#FACTOR 5 – Return on Equity – Higher the ROE, Higher the valuation of a housing finance company. Gruh Finance backed by HDFC has the highest ROE of 31.5%, followed by Indiabulls who has high exposure in Corporate loan book.

ROE Housing Finance

Valuation – Housing Finance companies also have perceived character of the Promoter Premium or Discount in their valuation. The Price to Book Ranges from 1.5x Book to 12.3x Book. PE Ratio ranges from 10 to 46. DHFL has the lowest P/B and PE whereas Gruh has the Highest.

valuation Housing Finance

Stallion Asset Take -There is no doubt that Housing Finance is in a multiyear bull market, There is strong Sector tailwind, 2-3x GDP Growth, NBFC as a class has been a leader in this bull market and we continue to believe that the story is far from over. How will we come to know that NBFC bull market is over? When Reliance capital goes up 100-200% in 2-3 month period, that would be the end of the NBFC bull. In every bull market the horse leads from the start, but in the last phase of the bull market the pigs run the fastest. When the pigs start running, we will be cautious on the sector. 

Conclusion –  The big boys are backing it with Rakesh Jhunjhunwala in DHFL, Vijay Kedia in Canfin Homes and LIC Housing, Basant Maheshwari in Can Fin Homes and PNB Housing, Motilal Oswal has Invested 600 Crores in Aspire (affordable Housing Finance).

Incase your looking for the full Excel of housing finance data, feel Free to Mail us at and we will provide you for free.


Disclosure– Amit Jeswani and Family have  Vested Interest in Housing Finance Companies. This is not a recommendation and use this for Education Purpose Only. Stallion Asset is a SEBI Registered Equity Advisory Company (INH000002582). The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.


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