Abstract

In March, 2017, Avenue Supermarkets Limited, the parent company of D-Mart, raised Rs 18.7 billion through an initial public offering of its equity shares on the National Stock Exchange (NSE) of India. The company had plans to use Rs. 10.8 billion for debt repayment, Rs. 3.6 billion for opening new stores, and the remaining for corporate purposes. Part A of the case discusses Damani’s journey from an investor to businessman, the initial days of the company, its business model, and the challenges it could face in the retail sector in future. The case ends with the time when the company was preparing for the IPO. Analysts had varying views about the success of the IPO as the last IPO in the retail sector was in 2007. Part B of the case presents the facts after the IPO was launched. The unprecedented success of the IPO was a subject of analysis by investors and industry experts. The cases have been developed to understand the significance of IPOs from a capital structure perspective.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Identify the objectives of the IPO
• Perform a cost benefit analysis of debt of D-Mart before it was listed
• Analyze D-Mart’s decision to raise equity to repay its debt
• Evaluate the capital structure of D-Mart

Keywords

D-Mart, Avenue Supermarts, IPO, Capital Structure, Retail, Radhakishan Damani, Debt repayment, Modiglani Miller Irrelevance Theory, Traditional Theory, Pecking Order Theory, IPO Objectives